More to come from Melorio

Training and assessment group Melorio has been quite a remarkable growth story since it was listed in October 2007. The growth is all the more remarkable because the group has grown out of a business serving the construction industry, which has gone into meltdown since Melorio floated.

The key to Melorio's success in the face of adversity in its end markets, which include logistics and IT as well as construction, is its focus on areas showing strong underlying growth. Take construction, for example, which accounts for about 56 per cent of turnover. Demand for training has been buoyed by a new industry card scheme whereby workers have to achieve a minimum level of qualifications to obtain a card that allows them to work on site. What's more, the training that Melorio provides is often paid for by third parties such as the construction industry's main association, the Construction Confederation, and government training initiatives which include Train to Gain and Apprenticeship schemes. And management has proved adept at targeting stronger parts of the construction market, such as infrastructure, to offset weakness in areas such as housebuilding. So, despite the dire conditions in the construction market and worries that government-funded projects could also come under pressure, Melorio was still able to report 30 per cent organic growth from its Construction Learning World (CLW) business in its last full-year results.

The group's second-biggest contributor to revenues is IT training business Zenos. Although this recent acquisition only traded as part of Melorio for four months of the last financial year, its contribution was impressive - higher-than-expected achievement and course completion rates resulted in pro-forma year-on-year sales growth of 40 per cent. And Melorio's directors have an impressive record when it comes to bedding down acquisitions, while key shareholder Marwyn Capital specialises in backing buy-and-build vehicles focused on industries where regulation is driving growth.

The group has not only been diversifying through acquisition, it has also used the CLW infrastructure to set up a similar on-site training business for the logistics industry, which is also subject to regulated qualifications. In business for just one year, Logistics Learning World is the already number one training provider in its area and, while it only accounts for 8 per cent of revenues at the moment, it is a clear example of the growth opportunities available to Melorio.

Funding of training by the government has recently received a big push thanks to the 2006 review of UK skills by Lord Leigh, which is driving a political consensus behind the idea of 'up-skilling' the UK workforce. What's more, the recession seems to be playing to this agenda due to the distressingly sharp increase in youth unemployment. Both Zenos and CLW have very high success rates in finding work for the young people that train with them. The proportion of young people that went into work or further education after completing training with Zenos was 86 per cent, while 68 per cent that completed training with CLW went into full-time employment.

The encouraging progression of Melorio's younger students is mirrored in impressive attainment rates across the group, a vital component of any training group's success. Zenos is currently rated as 'outstanding' or grade 1 by OFSTED, while Leaning World has a 'good' or grade 2 rating.