Marlowe lifts profit expectations as sales jump by two-thirds – but software firm’s shares tumble on downgrades
- Marlowe declared revenue of £222.9m in the six months ending September
- Turnover was heavily bolstered by numerous recent acquisitions by the group
- The firm’s shares tumbled on Wednesday after brokers lowered their EPS outlook
Marlowe expects full-year trading to be marginally better than anticipated following solid organic sales growth.
The AIM-listed company, whose largest shareholder is Conservative Party donor Lord Ashcroft, declared revenue of £222.9million in the six months ending September, a 66 per cent jump on the equivalent period last year.
Turnover was heavily bolstered by recent acquisitions, which have included health and wellbeing business Optima Health and compliance-based software provider EssentialSkillz.
Takeovers: Marlowe’s turnover was bolstered by numerous recent acquisitions, including the £135million purchase of health and wellbeing business Optima Health
Underlying organic sales grew by 8 per cent, but the firm’s fire safety (TIC) and health & safety (GRC) divisions still outperformed the broader industry thanks to strong volumes of new deals and increasing market share.
Marlowe observed significant growth in its employment law and human resources businesses, partly because the abolition of employment tribunal fees has generated a rise in demand for its services.
The company also saw continually buoyant demand for its software-as-a-services activities and occupational health arm, which now contributes more than £110million of run-rate revenue.
Expansion in its higher-margin GRC division, combined with effective cost management, helped the group more than double operating earnings to £5.7million.
Having traded in line with expectations during the opening half of the fiscal year, Marlowe said it was on track to see full-year trading ‘slightly ahead’ of forecasts, supported by organic growth in the high single digits.
It additionally anticipates hitting run-rate targets of £500million in revenue and adjusted underlying earnings of £100million by March 2024.
Alex Dacre, the firm’s founder and chief executive, said: ‘We are pleased to report another strong performance that demonstrates the resilience of our business and the attractiveness of the compliance software and service growth markets that we serve.’
However, Marlowe shares tumbled by 13 per cent on Wednesday after brokers downgraded their earnings per share outlook for the group due to the impact of rising interest rates on servicing its debts.
The Bank of England has hiked the UK’s base rate on eight consecutive occasions since December last year in response to surging inflation primarily caused by soaring energy and food prices.
This has made it more expensive to borrow money, which Marlowe has done in order to fund its extensive spree of acquisitions.
Since being founded seven years ago, Marlowe has expanded by buying dozens of companies, including £44million during the current year on ten firms, such as Northampton-based TP Health.
‘We use acquisition as a tool to deepen our presence in our current compliance verticals and broaden into new ones,’ the business remarked.
‘Marlowe is set up favourably to source deals, complete in-house due-diligence and execute on attractive multiples with large dedicated corporate development, strategy and integration planning teams.’