Full Year Results and Trading Update

RNS Number : 2666C

Marlowe PLC

27 June 2016

 

27 June 2016

Marlowe plc

Full Year Results and Trading Update

Marlowe plc ("Marlowe" or the "Group"), the support services group focused on acquiring and developing companies that provide critical asset maintenance services, today issues its full year results for the 12 month period to 31 March 2016 and a trading update for the period since the start of the new financial year. 

Marlowe plc was incorporated on 14 January 2016. On 30 March 2016 Marlowe plc merged with Marlowe Holdings Limited and, on 1 April 2016, its shares were admitted to trading on AIM. As the acquisitions described below were completed after 31 March 2016, no financial results of the acquired businesses have been included in these financial statements.

Summary of events since the start of the new financial year:

-       Admission to AIM on 1 April 2016;

-       Completion of the acquisition of Fire & Security Group Limited ("Swift"), one of the UK's leading fire and security systems businesses;

-       Acquisition of WCS Environmental ("WCS"), a provider of integrated water treatment, hygiene, testing and engineering services;

-       Acquisition of Fire Alarm Fabrication Services ("FAFS"), a provider of fire protection services, further extending Marlowe's fire activities in the strategically-important London market;

-       Acquisitions performing in line with expectations;

-       Integration plans well-advanced; and

-       A well-developed and attractive pipeline of further opportunities to support Marlowe's acquisition-led growth strategy.

Trading update

We have made strong progress in implementing our strategy to acquire and develop businesses in the outsourced business services sector with a focus on those that provide critical asset maintenance services.  We are now focused on fire protection, security systems and water treatment services - complementary activities which are essential to our customers' operations and invariably governed by regulation and where customers require a single specialist outsourced provider with nationwide coverage.

In April 2016 we completed the acquisition of Swift, one of the UK's leading providers of fire protection and security systems installation and maintenance services. Later that month we acquired WCS, a leading provider of integrated water treatment, hygiene, testing and engineering services and in May 2016 we acquired FAFS, a London-based provider of fire protection services.

Each of the acquisitions is performing in line with our expectations and their integration is proceeding to plan. As part of the integration process, we are currently implementing initiatives to increase the operational efficiency of the combined businesses and to take advantage of cross-selling opportunities across the Group. Alongside this, our acquisitions team continues to develop an attractive pipeline of further opportunities to support Marlowe's acquisition-led growth strategy.

Alex Dacre, Chief Executive of Marlowe plc, commented:

"The new financial year has started well and in line with management's expectations. We are encouraged by the strong progress we have made in implementing our strategy of building a leading support services group focused on critical asset maintenance and we look forward to delivering a strong performance in our first full year of trading as a Group".

For further information:

Marlowe plc	www.marloweplc.com
Alex Dacre, Chief Executive	Tel: [phone]
Derek O'Neill, Group Finance Director	[e-mail]
Cenkos Securities plc (Nominated Adviser and Broker)
Nicholas Wells, Elizabeth Bowman, Camilla Hume	Tel: [phone]
FTI Consulting
Nick Hasell	Tel: [phone]
Alex Le May

The Company's annual report and accounts will be available on the Marlowe website (www.marloweplc.com) and posted to shareholders later today.

About Marlowe plc

Marlowe is an AIM-listed company formed to create sustainable shareholder value through the acquisition and development of businesses that provide critical asset maintenance services in the UK.  It is focused on fire protection, security systems and water treatment services - which are essential to its customers' operations and invariably governed by regulation, and where customers require a single specialist outsourced provider with nationwide coverage. Our customers can be found on most high streets, in office complexes and industrial estates, and include SMEs, local authorities, facilities management providers, multi-site NHS trusts and FTSE 100 companies.

Summarised Audited Accounts for the period ended 31 March 2016

Statement of Comprehensive Income

For the period ended 31 March 2016

		2016
	Notes	£'000
Administrative expenses	4	(128)
Operating loss		(128)
Gain on merger of Marlowe Holdings Limited Impairment of Marlowe Holdings Limited	15 15	7,574 (7,574)
Loss before taxation		(128)
Taxation	6	-
Net loss for the period		(128)
Other comprehensive income		-
Total comprehensive income for the period		(128)
Loss per ordinary share
- Basic (pence)	7	-
- Diluted (pence)	7	-

Statement of Financial Position

As at 31 March 2016

		2016
	Notes	£'000
ASSETS Non-current assets
Intangible assets Property, plant and equipment	8 9	3 4
		7
Current assets
Trade and other receivables	10	18
Cash and cash equivalents	11	10,619
		10,637
Total assets		10,644
LIABILITIES Current liabilities
Trade and other payables	12	(178)
Subscription received in advance	13	(3,000)
		(3,178)
Total liabilities		(3,178)
Net assets		7,466
Equity
Share capital	13	7,292
Retained earnings		174
Equity attributable to the owners of the company		7,466

Statement of Changes in Equity

For the period ended 31 March 2016

	Share Capital	Merger Relief Reserve	Retained Earnings	Total equity
	£'000	£'000	£'000	£'000
Balance at 14 January 2016	-	-	-	-
Loss for the period	-	-	(128)	(128)
Total comprehensive income for the period	-	-	(128)	(128)
Issue of share capital	7,292	302	-	7,594
Liquidation of Marlowe Holdings Limited	-	(302)	302	-
Transaction with owners	7,292	-	302	7,594
Balance at 31 March 2016	7,292	-	174	7,466

Statement of Cash Flows

For the period ended 31 March 2016

		2016
	Notes	£'000
Cash flows from operating activities
Cash flows from operations	14	-
Net cash generated from operating activities		-
Cash flows from investing activities
Cash received on acquisition of Marlowe Holdings Limited		10,619
Net cash generated from investing activities		10,619
Net increase in cash and cash equivalents		10,619
Cash and cash equivalents at start of period		-
Cash and cash equivalents at end of period		10,619
Cash and cash equivalents shown above comprise:
Cash at bank	11	10,619

Notes to the Financial Statements

For the period ended 31 March 2016

1.         General information

Marlowe plc (the "Company") is a strategic investment company incorporated in the United Kingdom (no. 09952391) on 14 January 2016.

The Company's primary objective is to acquire and develop businesses in the outsourced business service sector with a focus on those that provide critical asset maintenance services in the United Kingdom.

The Company's issued share capital is traded on the Alternative Investment Market of the London Stock Exchange ("AIM"), a market operated by the London Stock Exchange plc in the United Kingdom (ticker symbol MRL).  The address of the registered office is Fifth Floor, 55 King Street, Manchester, M2 4LQ

2.         Summary of significant accounting policies

The principle accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied, unless otherwise indicated.

Basis of preparation

The financial statements of the Company have been prepared in accordance with EU endorsed International Financial Reporting Standards ("IFRS"), IFRIC interpretations, and the Companies Act 2006 applicable to companies reporting under IFRS.

The financial statements have been prepared on a going concern basis under the historical cost convention, as modified in connection with certain financial instruments.  The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company's accounting policies.  The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in this note.

Going concern

After reviewing the Company's forecasts and projections, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. The Company therefore continues to adopt the going concern basis in preparing its financial statements.

Functional and presentational currency

All amounts in these financial statements are presented in thousands of United Kingdom pounds sterling, the Company's presentational and functional currency, unless otherwise stated. 

Currency translation

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign currency assets and liabilities are translated into the functional currency using the exchange rates prevailing at the statement of financial position date. Foreign exchange gains and losses arising from translation are included in the statement of comprehensive income.

Intangible assets

Intangible assets are recognised when they are controlled through contractual or other legal rights, or are separable from the rest of the business, and their fair value can be reliably measured.

Intangible assets that are regarded as having indefinite useful lives are not amortised.  Intangible assets that are regarded as having limited useful lives are amortised on a straight-line basis over those lives.  Assets with indefinite lives are reviewed for impairment annually and other assets are reviewed for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable.  The recoverable amount is the higher of value in use or fair value less costs to sell.  Amortisation and any impairment write downs are recognised in profit or loss.

Website development costs

Website development costs recognised as assets are amortised on a straight-line basis over their estimated useful lives (expected to be up to five years).  Residual values and useful lives are reviewed each year.

Property, plant and equipment

Property, plant and equipment is stated at historical cost, less accumulated depreciation and accumulated impairment losses.  Depreciation is provided on a straight line basis.

	% per annum
Office equipment, fixtures and fittings	20%

Trade and other receivables

Trade receivables, classified as loans and receivables in accordance with IAS 39 "Financial Instruments: Recognition and Measurement", are recorded initially at fair value and subsequently measured at amortised cost.  A provision for impairment of trade receivables is established when there is evidence that the Company will not be able to collect all amounts due according to the original terms.  The amount of the provision is the difference between the assets' carrying amount and the present value of future cash flows discounted at the effective interest rate.  The movement in provision is recognised in profit or loss.

Other receivables and prepayments are recognised at fair value plus transaction costs, if any, which are directly attributable to their acquisition or origination.  These are subsequently measured at amortised cost using the effective interest method, less provision for impairment. Given the nature of other receivables and prepayments, however, and the short time involved between their origination and settlement, their amortised costs are not materially different to their fair value at the date of origination.

Cash and cash equivalents

Cash and cash equivalents as defined for the Statement of Cash flows comprise cash in hand, cash held at bank with immediate access, other short-term investments and bank deposits with maturities of three months or less from the date of inception and bank overdrafts.  Bank overdrafts are shown in current liabilities in the statement of financial position.

Trade and other payables

Trade payables, classified as other liabilities in accordance with IAS 39, are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method. Given the nature of trade payables, however, and the short time involved between their origination and settlement their amortised cost is not materially different from their fair value at the date of origination.  Other payables are stated at amortised cost.

Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

Current tax

The tax currently payable is based on taxable profit for the period.  Taxable profit differs from accounting profit as reported in the Statement of Comprehensive Income because it excludes items of income or expenses that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.  The Company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted at the reporting date.

Deferred tax

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and accounted for using the balance sheet liability method.  Deferred tax liabilities are generally recognised for all taxable temporary difference and deferred tax assets are recognised to the extent it is probable that taxable profits will be available against which deductible temporary differences can be utilised.  Such assets and liabilities are not recognised if the temporary differences arise from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profits nor the accounting profit.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised based upon tax rates that have been enacted or substantively enacted at the reporting date.  Deferred tax is charged or credited in profit or loss, except when it relates to items charged or credited directly to other comprehensive income and equity, in which case the deferred tax is also dealt with in other comprehensive income and equity.

Equity

Ordinary shares are classified as equity.  Transaction costs directly attributable to the issue of new shares are reported, net of tax, in shareholder's equity.

Critical accounting estimates and judgements

The preparation of the Company's financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the reporting date.  However, the uncertainty about these assumptions and estimates could require a material adjustment to the carrying amount of the asset or liability affected in the future. 

On 30 March 2016, in accordance with the provisions of Part VII of the International Business Companies Act, 1990 of Belize (the "IBCA"), Marlowe Holdings Limited merged with Marlowe plc so that Marlowe plc became the surviving Company resulting from the merger and all rights and obligations of Marlowe Holdings Limited vested with the Company.

As Marlowe Holdings Limited was not considered to be a business, the merger is not within the scope of IFRS 3 Business Combinations and the directors have accounted for the merger as a share purchase of all assets and liabilities as at 30 March 2016.

Subsequent to the period end the Company has made a number of significant acquisitions.  The assessment of the fair values of the assets and liabilities is inherently judgemental.  Where these are still being assessed and until information is received, the amounts disclosed in the financial statements are included as provisional.

Adoption of new and revised standards

(a) New standards, amendments and interpretations issued and effective during the financial period commencing 14 January 2016:

There are no standards, interpretations or amendments to existing standards that are effective for the first time for the financial period beginning 14 January 2016 that would be expected to have a material impact on the Company.

(b) Standards, amendments and interpretations, which are effective for reporting periods beginning after the date of these financial statements which have not been adopted early:

New standards, amendments to standards and interpretations have been issued as detailed below but are not effective for the year ended 31 March 2016.  The Company has not early adopted any of these standards and is currently assessing the impact of their adoption.

IFRS 9, 'Financial instruments', addresses the classification, measurement and recognition of financial assets and financial liabilities. An updated version of IFRS 9 was issued on 19 November 2013. It replaces the parts of IAS 39 that relate to the classification and measurement of financial instruments. IFRS 9 requires financial assets to be classified into two measurement categories: those measured as at fair value and those measured at amortised cost. The determination is made at initial recognition. The classification depends on the entity's business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. For financial liabilities, the standard retains most of the IAS 39 requirements. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity's own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. The Company is yet to assess IFRS 9's full impact and intends to adopt IFRS 9 no later than the required accounting period beginning on or after 1 January 2018, the date advised by the IASB.

A number of other new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 April 2016, and have not been applied in preparing these financial statements. None of these are expected to have a significant effect on the financial statements of the Company.

3.   Financial and capital risk management

The overall objective of the financial risk management of the Company is to minimise risks that may have an adverse impact on the Company's results, cash flows and financial position.  The Company is subject to market (interest rate) and credit risks on its cash and cash equivalents.

Interest rate risk arises from the effects of fluctuations in the prevailing levels of markets interest rates on the fair value of financial assets and liabilities and future cash flow.  The majority of the Company's financial assets and liabilities are non-interest bearing.  As a result, the Company is not subject to significant amount of risk due to fluctuations in prevailing levels of market interest rates.

The credit risk is mitigated by banking with reputable and well established financial institutions, whose performance and credit worthiness is reviewed at least annually by the Directors.

4.   Administrative expenses

	2016
	£'000s
Legal and professional	43
Audit fee	10
Other expenses	75
Total administrative expenses	128

5.   Operating leases

The Company leases an office under an operating lease.  The future minimum lease payments are as follows:

	Minimum lease payments due
	within 1 year £'000s	1 to 5 years £'000s	After 5 years £'000s	Total £'000s
31 March 2016	20	-	-	20

6.   Taxation

	2016
	£'000s
Current tax
United Kingdom corporation tax on loss for the current period	-
Total current tax	-
Deferred tax Origination and reversal of timing differences	-
Total tax charge	-

The charge for the year can be reconciled to the loss per the statement of financial position as follows:

	2016
	£'000s
Loss before taxation	(128)
Expected tax charge based on the standard rate of corporation tax rate in the United Kingdom of 20%	26
Tax effect of expenses that are not deductible in determining taxable loss	(13)
Taxable losses carried forward	(13)
Tax expense for the year	-

7.   Loss per ordinary Share

Basic loss per ordinary share have been calculated on the loss for the period after taxation and the weighted average number of ordinary shares in issue during the period.

	2016
Weighted average number of shares in issue	14,584,999
Total loss for the period	(£127,716)
Total basic loss per ordinary share (pence)	(0.9)
Share issue contingent on acquisition of Fire and Security (Group) Limited	3,000,000
Weighted average fully diluted number of shares in issue	17,584,999
Total fully diluted loss per share (pence)	(0.9)

8.   Intangible assets

	Website development costs £'000s	Total £'000s
Cost
14 January 2016	-	-
Balances transferred from Marlowe Holdings Limited	3	3
31 March 2016	3	3
Accumulated amortisation and impairment
14 January 2016	-	-
Balances transferred from Marlowe Holdings Limited	-	-
31 March 2016	-	-
Carrying amount
31 March 2016	3	3

9.   Property, plant and equipment

	Office Equipment £'000s	Total £'000s
Cost
14 January 2016	-	-
Balances transferred from Marlowe Holdings Limited	5	5
31 March 2016	5	5
Accumulated Depreciation
14 January 2016	-	-
Balances transferred from Marlowe Holdings Limited	(1)	(1)
31 March 2016	(1)	(1)
Carrying amount
31 March 2016	4	4

10.  Trade and other receivables

	2016 £'000s
Other receivables	10
Prepayments and accrued income	1
VAT receivable	7
Total Trade and Other Receivables	18

The carrying amounts of trade and other receivables are denominated in United Kingdom pounds sterling.  The fair values of trade and other receivables approximate to their book values.

11.  Cash and cash equivalents

	2016 £'000s
Cash at bank	10,619
Total cash and cash equivalents	10,619

12.  Trade and other payables

	2016 £'000s
Other payables	46
Other taxation and social security	3
Accruals and deferred income	129
Total	178

The carrying amounts of trade and other payable are denominated in United Kingdom pounds sterling.  The fair values of trade and other payable approximate to their book values.  During the year 99,999 redeemable preference shares of £0.50 each, classified as liabilities, were issued and redeemed.

13.  Called up share capital

	2016 £'000s
Authorised:
28,113,332 ordinary shares of 50p each	14,057
Allotted, issued and fully paid;
14,584,999 ordinary shares of 50p each	7,292

The issued ordinary share capital is as follows:

Date	Number of ordinary shares	Issue price
14 January 2016	1	0.5
30 March 2016 - Acquisition of Marlowe Holdings Limited	14,584,998	0.5
31 March 2016	14,584,999

£3.0 million was received prior to the period end in advance of a contingent share issue to be executed upon completion of the acquisition of Swift.  The shares were issued on 1 April when the transaction was completed.

14.  Cash inflow from operations

	2016 £'000s
Loss before tax	(128)
Increase in trade and other receivables	-
Increase in trade and other payables	108
Expenses paid by Marlowe Holdings Limited	20
Net cash flow from operations	-

15.  Investments

On 30 March 2016, the Company merged the assets and liabilities of Marlowe Holdings Limited, a strategic investment company incorporated in Belize, for an equity consideration of £7.3 million (14,584,998 shares of 50p).  The fair values are as follows:

	Fair value at acquisition £'000s
Property, plant and equipment	4
Intangible assets	3
Cash	10,619
Trade and other receivables	38
Subscription received in advance	(3,000)
Trade and other payables	(70)
Net assets	7,594

Marlowe Holdings Limited's net assets included a £20,000 receivable from Marlowe plc. This was subsequently eliminated following the merger along with the corresponding payable in Marlowe plc's statement of financial position.  As a result, net assets of £7.574 million were transferred upon the merger.  A gain of £302,000 arose on merger and was recognised in the Merger Relief Reserve.  Subsequent to Marlowe Holdings Limited's liquidation following acquisition this was transferred to Retained Earnings.

16.  Financial instruments

The Company's financial instruments comprise cash at bank and various other receivable and payable balances that arise from its operations.  The main purpose of these financial instruments is to finance the Company's operations. 

Carrying value of financial assets and (liabilities)	2016 £'000s
Trade and other receivables	17
Cash and cash equivalents	10,619
Trade and other payables	(48)
Subscription received in advance	(3,000)

17.  Directors and employees

The directors who served during the period did not receive any remuneration in respect of their services to the Company.  No wages and salaries were incurred during the financial period.

18.  Related party transactions

There were no related party transactions during the financial period.

19.  Post balance sheet events

Subsequent to the period end the company made the following acquisitions:

On 1 April 2016 the Company acquired the business and assets of Fire and Security (Group) Limited ("Swift"), a fire protection and security solutions business, for a total consideration of £13.0 million, satisfied by the payment of £8.5 million in cash on completion, £1.0 million in cash on 31 May 2016 and £3.5million satisfied by the issuance of 3.5 million ordinary shares in the Company.  The provisional fair values are as follows:

Provisional fair value at acquisition	£'000s
Trade and other receivables	6,554
Intangible assets - customer relationships	3,116
Property, Plant and Equipment	875
Inventories	615
Cash	544
Intangible assets - order backlog	143
Trade and other payables	(6,453)
Deferred tax liabilities Tax liabilities	(652) (211)
Net assets acquired	4,531
Goodwill	8,469

One hundred percent of the equity of Swift was acquired in this transaction.

In connection with the acquisition £3.0 million in cash was raised through the issuance of 3,000,000 ordinary shares of the Company at an issue price of £1 per share.

On 15 April 2016 the Company acquired the business and assets of WCS Environmental Group Limited ("WCS"), a provider of integrated water treatment, hygiene, testing and engineering services, for a total consideration of £2.5 million, satisfied by the payment of £2.025 million in cash and £0.475m satisfied by the issuance of 287,878 ordinary shares of the Company.  The provisional fair values are as follows:

Provisional fair value at acquisition	£'000s
Trade and other receivables	1,380
Intangible assets - customer relationships	699
Property, Plant and Equipment	243
Inventories	36
Trade and other payables	(505)
Deferred tax liabilities Tax liabilities	(162) (55)
Net Cash	(43)
Net assets acquired	1,593
Goodwill	907

One hundred percent of the equity of WCS was acquired in this transaction.

On 11 May 2016 the Company acquired the business and assets of Fire Alarm Fabrication Services Limited, a provider of fire protection services, for a total consideration of £2.5 million, satisfied by the payment of £2.4 million in cash on completion and £0.1 million in cash payable subject to the achievement of certain performance targets by the acquired business in the period ending 11 May 2017.  A purchase price allocation exercise has not yet been performed.

One hundred percent of the equity was acquired in this transaction.

 

END

 

 

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