Preliminary results-MARLOWE PLC

Preliminary results-MARLOWE PLC

Preliminary unaudited results for the year ended 31 March 2023

Strong trading performance and strategic progress

Marlowe plc ("Marlowe", the "Group" or the "Company"), the leader in business-critical services and software which assure safety and regulatory compliance, announces its unaudited results for year ended 31 March 2023 ("FY23").

Financial performance

ADJUSTED RESULTS

FY23

FY22

Change

Revenue

£465.7m

£315.9m

47%

EBITDA1,2

£82.7m

£54.4m

52%

Divisional EBITDA margin1,2,3

19.0%

18.7%

30bps

Operating profit2

£64.3m

£42.0m

53%

Profit before tax2

£53.6m

£38.1m

41%

Earnings per share - basic2

45.3p

37.7p

20%

Net debt (excluding lease liabilities)

£160.8m

£108.8m

 

 

STATUTORY RESULTS

FY23

FY22

Revenue

£465.7m

£315.9m

EBITDA1

£48.8m

£37.8m

Operating profit

£6.4m

£10.5m

(Loss)/profit before tax

£(6.9)m

£5.9m

Earnings per share basic

(3.9)p

0.8p

Net cash generated from operations

£74.3m

£34.0m

Net debt

£188.9m

£133.3m

Marlowe is holding a full year results presentation for investors and analysts at 09:00 BST today. A

link to this event is here.

An on-demand version of the presentation will subsequently be made available on the Marlowe plc website.

1 Earnings before interest, taxes, depreciation and amortisation ("EBITDA")

2 Explanation of non-IFRS measures are contained within the Chief Financial Officer's review

3 Divisional EBITDA margin does not include central costs

Financial highlights

Strong and resilient performance as we continue to execute our compliance strategy and achieve our medium term financial targets

·      Group revenue increased 47% to £465.7 million

·      Adjusted EBITDA increased 52% to £82.7 million

·      We have now surpassed our target of generating £500 million run-rate revenue by the end of FY24 and continue to expect to exceed our c.£100 million run-rate adjusted EBITDA target organically by the same date

 Current annualised run-rate revenue £505 million

 Current annualised run-rate EBITDA £93 million

·      Statutory EBITDA increased 29% to £48.8 million

·      Statutory loss before tax was £6.9 million reflecting the non-cash increase in amortisation of acquisition intangibles, significant integration investment and material movement in contingent consideration provisions

Record levels of organic growth across service & software

·      Organic revenue growth of 10%, ahead of previous guidance, with both divisions delivering strong growth in excess of market (GRC growth of 8%; TIC growth of 11%)

·      Organic growth driven by good levels of new business and increasing market share, up-sell and cross-sell and increasing client lifetime value, supported by pricing

·      Approximately 85% of revenue was recurring (either SaaS, consultancy subscription or service contracts) and is underpinned by regulatory compliance

·      Software Annual Recurring Revenue ("SaaS ARR") of over £43 million approximately 10% of Group revenues

·      Software activities generate approximately £20 million of Group annualised run-rate adjusted EBITDA

·      Continued attractive structural growth across our markets

Strong balance sheet and operating cash flow 

·      Net cash generated from operations increased by 119% to £74.3 million (FY22: £34.0 million), free cash flow conversion of 90% in line with our medium-term target

·      Net cash generated from operating activities after interest, tax and acquisition and restructuring costs increased by 291% to £33.6 million (FY22: £8.6 million)

·      Net debt (excluding leases) for year ended 31 March 2023 was £160.8 million (£156.2 million at 30 September 2022), lower than previous guidance. The H2 movement in net debt reflects the £18 million settlement of deferred consideration from previous acquisitions and the £9 million acquisition of PCS Consultancy in February 2023. This was largely offset by strong cash generation in the second half of the year

·      Working capital increases in the first half due to adverse timing unwound as expected in the second half:

 Free cash flow conversion in the second half of the year of 127%

·      Net debt/adjusted EBITDA leverage ratio was just below 2.0x as at 31 March 2023 (2.1x as at 30 September 2022), within our target range of 1.5x to 2.5x  

Margin expansion

·      Divisional adjusted EBITDA margin increased by 30bps to 19.0% driven by

 Integration programmes and operational improvements and the benefits of our increased scale in the context of margin dilutive M&A

 Successful use of price to maintain margins in the context of the inflationary but manageable cost pressures we have seen during the year

Successful execution of M&A and integration programme

·      £56 million of capital invested1 during FY23 across 11 bolt-on acquisitions, for an average multiple of 6.5x adjusted EBITDA

·      Integrations on-track and acquisitions performing in-line with pre-acquisition expectations

 Strong progress made with Occupational Health integration programme and eLearning integration now complete

 New divisional GRC organisational structure in place driving further revenue & cost synergies

·      Pipeline of earnings enhancing acquisitions is well-developed

1Based on enterprise value of £56 million which includes expected deferred consideration of £11m

Current trading and outlook

·      The new financial year has started well, with continued organic momentum, and we expect to continue to deliver strong financial performance with at least high single digit organic growth complemented by selective earnings enhancing acquisitions

·      We have completed four bolt-on acquisitions since the start of the new financial year for a total consideration of £15.3 million

·      Continued strong levels of demand across Marlowe's client base, supported by attractive market growth and the non-discretionary nature of our services & software which are driven by regulatory requirements

Commenting on the results Alex Dacre, Chief Executive, said:

"We are pleased to report another strong underlying financial performance in the year in which we saw excellent growth in organic revenues, profits and earnings per share, compounded by selective acquisitions across our service and software business streams. As expected, cash flow was strong in the second half with £74.3 million of cash generated from our operations during the year, up 119% on the prior year.

We delivered record levels of organic growth during the year at 10% and are now a business with over £500 million run-rate revenues, exceeding our end of FY24 medium term target. Run-rate EBITDA is £93 million, and we continue to expect to reach our £100 million EBITDA target organically by the end of FY24. Divisional EBITDA margins have continued their consistent upward trend and increased by 30bps to 19.0% as we leverage operational and integration efficiencies.

Following a highly acquisitive FY22 during which we deployed over £320 million, we focused strongly on integration programmes in FY23. These programmes are on track and largely complete, and we expect integration costs to significantly decrease into FY24. Alongside this, we have continued to selectively deliver on our acquisition programme, deploying a further £56m during the financial year.

We have made a positive start to the new financial year, with strong levels of organic growth. We have completed a further four bolt-on acquisitions post year-end deploying £15.3 million of capital. Our acquisition pipeline is well-developed, and we expect to use our attractive cash-flow characteristics to selectively execute upon these opportunities whilst appropriately managing leverage."

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