Software provider Marlowe expects annual trading to be ‘slightly ahead’ of forecasts
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Marlowe raises earnings expectations as sales rise by two-thirds – but software company shares tumble from downgrades
- Marlowe declared a turnover of £222.9m in the six months ended September
- Sales were strongly supported by numerous recent acquisitions by the group
- Shares of the company plummeted Wednesday after brokers lowered their earnings-per-share outlook
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Marlowe expects full year trading to be slightly better than expected after solid organic revenue growth.
The AIM-listed company, of which Conservative Party donor Lord Ashcroft is the largest shareholder, reported a turnover of £222.9m in the six months ended September, up 66 per cent on the same period last year.
Sales were strongly boosted by recent acquisitions, including health and wellness company Optima Health and compliance-based software provider EssentialSkillz.
Acquisitions: Marlowe’s sales have been bolstered by a host of recent acquisitions, including the purchase of health and wellness company Optima Health for £135m
Underlying organic sales grew 8 percent, but the company’s fire safety (TIC) and health and safety (GRC) divisions continued to outperform the broader industry thanks to strong new deal volumes and growing market share.
Marlowe has seen significant growth in its employment law and human resources business, in part because the elimination of labor court fees has led to an increase in demand for its services.
The company also saw continued resilient demand for its software-as-a-services business and occupational health business, which now contribute more than £110 million in current revenue.
Expansion in the higher margin GRC division, combined with effective cost management, helped the group more than double its operating profit to £5.7m.
Trading in line with expectations during the first half of the fiscal year, Marlowe said it was on track to see full-year trading “slightly ahead” of forecasts, supported by high-single-digit organic growth.
It also expects to meet run-rate targets of £500m in revenue and adjusted underlying revenue of £100m by March 2024.
Alex Dacre, the company’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 services growth markets we serve.”
However, Marlowe shares fell 16 percent on Wednesday after brokers downgraded their earnings-per-share outlook for the group due to the impact of rising interest rates on paying down its debt.
The Bank of England has raised UK key rates eight times in a row since December last year in response to rising inflation, mainly driven by rising energy and food prices.
This has made it more expensive to borrow money, which Marlowe has done to fund his extensive string of acquisitions.
Since its formation seven years ago, Marlowe has expanded by buying dozens of companies, including £44 million in the current year from ten companies, such as Northampton-based TP Health.
“We use acquisition as a tool to deepen our presence in our current compliance verticals and expand into new ones,” the company noted.
“Marlowe is well positioned to find deals, complete internal due diligence and execute attractive multiples with large dedicated teams for business development, strategy and integration planning.”