Specialist safety and compliance firm Marlowe (MRL:AIM)  delivered another set of impressive full year results to 31 March 2019.

A mixture of solid organic progress has been effectively combined with a handful of small but well-judged acquisitions. Revenues for the period rose 59% to £128m while earnings before interest, tax, depreciation and amortisation (EBITDA) grew 53% to £11m, on an adjusted basis.

That the share price has only managed a 2% rise today to 426p needs to be balanced against the stock's 135% rally over the past three years.

That underlying growth is accelerating is thanks to improving cross-sales, where the firm's property management customers are taking more of its services. This has been particularly true in risk-management and compliance fields, where Marlowe’s proprietary software platform Meridien is proving a big hit and bolstering both repeat business and retention rates.

Complementing this underlying growth, Marlowe made a series of small acquisitions last year which brought several large firms onboard. These business have been successfully integrated and in a couple of cases, notably in fire safety and water treatment, margins have been increased from next-to-nothing to in line with the group average.

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Following the end of the financial year the firm bought Clearwater, a water treatment and hygiene business with 2,400 customers and £27m of revenues, most of which are recurring.

This gives it much greater critical mass in the water sector and brings in a range of new customers as well as new technical capabilities. It also takes group revenues to around £175m annually.

Marlowe estimates that its total addressable market is £4bn per year so even with the Clearwater deal there is plenty of scope to increase its size and presence in health and safety, fire safety, water treatment and air quality through more bolt-on acquisitions.

Analysts at Berenberg rate Marlowe a buy with a 12-month price target of 620p implying 44% upside from today’s share price.

Marlowe is one of Shares running Great Ideas from June 2018.


Issue Date: 18 Jun 2019