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Marlowe pounces on Covid opportunities

The group has added new service lines in response to the pandemic and believes there will be increased focus on health and safety moving forward
July 8, 2020

Safety and regulatory compliance specialist Marlowe (MRL) is known for its buy-and-build approach to drive growth. The group made eight acquisitions in the year to 31 March, which helped push adjusted pre-tax profit up almost 50 per cent to £13.2m. Statutory earnings were weighed down by higher administrative expenses and finance costs.

IC TIP: Buy at 527p

That’s not to say all growth is simply bought in – organic revenue rose by 7 per cent last year, aided by improved customer retention and cross-selling of services. Some 23 per cent of revenue came from customers receiving more than one service, up from 20 per cent a year earlier.

Covid-19 has impeded access to client sites since the March year-end, although Marlowe expects this will abate over the summer. The essential nature of its services – underpinned by regulation – means work cannot be deferred for too long. In response to the pandemic, the group has added new service lines in its ‘health, safety and compliance’ division – including Covid-19 risk assessments and audits – which generated £2m of revenue in the first quarter of this year.   

Net debt (excluding lease liabilities) jumped from £20m to £32m last year, although this has since come down thanks to £40m secured from a placing in June. This capital was raised partly to fund the acquisition of management software and services provider Elogbooks, as well as to pursue further M&A.

Broker Stifel anticipates adjusted pre-tax profit will rise to £14.5m this year, although projects EPS will fall to 21.8p, down from 22.9p in 2020.  

MARLOWE (MRL)   
ORD PRICE:527pMARKET VALUE:£ 266m
TOUCH:524-530p12-MONTH HIGH:548pLOW: 316p
DIVIDEND YIELD:NILPE RATIO:NA
NET ASSET VALUE:192p*NET DEBT:48%**
Year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2016nil-0.1-0.9nil
201746.80.71.1nil
201880.6-0.4-2.2nil
20191292.03.8nil
20201850.5-0.8nil
% change+44-75--
Ex-div:na   
Payment:na   
*Includes £123m in intangible assets or 244p a share, **Includes £14.3m in lease liabilities