Safety and compliance firm Marlowe (MRL) looks well set to achieve its ambitious three-year revenue and earnings targets after posting a solid set of results for the year to the end of March.

Revenues were up 15% to £192 million thanks to underlying growth and a series of small acquisitions, while EBITDA (earnings before interest, taxes, depreciation and amortisation) was up 30% to £28.7 million, consistent with the firm’s recently-raised guidance.

More importantly, thanks to strong trading since the end of March the monthly revenue run rate has risen to an annualized £280 million, of which 83% is recurring, while the 12-month EBITDA run rate has hit £44 million, which puts it closer to its three year targets of £500 million of revenues and £100 million of EBITDA.

BROADER AND DEEPER

The firm recently raised £100 million for more acquisitions in an oversubscribed placing and has a net cash pile of £43.3 million against a net debt load of £32.3 million a year ago.

Chief executive Alex Dacre was positive on the outlook: ‘We have made a strong start to the new financial year, with good levels of organic growth, and look forward to delivering further profitable growth.

‘This progress underpins our confidence to continue executing our strategy and to achieve our medium-term targets through deepening our market share across our sectors, broadening our activities across the business-critical arena, strengthening our business via operational improvements and delivering on our digital strategy to reach compliance software revenues of c£50 million.’

GROWTH POTENTIAL

The firm believes its target addressable market in the UK alone is worth £6.8 billion, led by the fire and safety sector which is estimated at a chunky £1.7 billion but is fairly low-growth.

However, of more interest are the employment law, HR and occupational health sectors, which are worth a combined £1.8 billion and are growing at around 6% per year.

The firm has already made several small acquisitions since the end of March and says it has a strong pipeline of 'earnings-enhancing acquisitions to add further scale and breadth to our platform for growth across service and software'.

Analysts at investment bank Berenberg rate the stock a buy with a price target of £11.60. Following today's results they have upped their revenue and EBITDA forecasts by low double-digits to account for the increased run-rate and say the Marlowe investment case 'is in a great position'.

READ MORE ABOUT MARLOWE HERE

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Issue Date: 23 Jun 2021