Half Year Results

RNS Number : 1139U

Marlowe PLC

01 December 2021

 

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 as amended by regulation 11 of the Market Abuse (Amendment) (EU Exit) Regulations 2019/310. Upon the publication of this announcement via Regulatory Information Service, this inside information is now considered to be in the public domain.

1 December 2021

Marlowe plc

Half Year Results FY2022

Strong first half performance and recent raising of full year guidance

Marlowe plc ("Marlowe", the "Group" or the "Company"), the leader in business-critical services and software which assure regulatory compliance, announces its unaudited results for the six-month period ended 30 September 2021 ("Interim Report").

Financial performance

ADJUSTED RESULTS - Continuing operations	H1 FY2022	H1 FY2021	Change
Revenue	£134.5m	£83.3m	+61%
Software annual recurring revenue ("ARR") 1	£35.0m	£6.0m	+483%
Adj. EBITDA 2	£21.8m	£11.5m	+90%
Divisional EBITDA2,3 margin	17.8%	14.8%	+300bps
Operating profit3	£16.4m	£7.4m	+122%
Profit before tax3	£15.2m	£6.7m	+127%
Earnings per share - basic3	16.0p	10.7p	+50%
Net debt 4	£42.3m	£1.6m

STATUTORY RESULTS - Continuing operations	H1 FY2022	H1 FY2021
Revenue	£134.5m	£83.3m
Operating profit	£2.8m	£1.3m
Profit before tax	£1.6m	£0.6m
Earnings per share - basic	1.7p	0.8p
Net debt	£61.7m	£17.2m

¹ Software Annual Recurring Revenue is estimated as the total revenue generated from customer subscriptions to SaaS licenses across the Marlowe group, stated on a pro-forma, full-year basis, including the post-half-year acquisitions

² Earnings before interest, taxes, depreciation and amortisation ("EBITDA")

³ Explanation of non-IFRS measures are contained within the Chief Financial Officer's review below

⁴ Excluding IFRS 16 lease liabilities

Commenting on the results Alex Dacre, Chief Executive, said:

"We are pleased to report significant strategic, financial and operational progress in the period across the highly attractive compliance service and software markets that Marlowe serves.

We have delivered on each of the four key strands of our strategy, deepening and broadening our presence across our markets via strong organic growth and completing twelve acquisitions during the first half, adding significant scale and additional compliance capabilities. We have further strengthened our operations by delivering effective integration programmes and organic investments whilst expanding our adjusted EBITDA margin by 300 bps. We have delivered major progress in our Digitalise strategy to become the market leader in compliance software with over 20% of our current profits now generated from software.

Marlowe's business model continues to benefit from increasingly stringent regulations and increased ESG requirements on businesses. Much of what we do is non-discretionary, and over 85% of our revenues are recurring, as a result of the business-critical requirement for our services, and the regulation that underpins everything we do. 

Progress during and following the period underpins our confidence in materially overachieving against the financial targets we set in February 2021 to reach Group run-rate revenues of c.£500 million and adjusted EBITDA of c.£100 million by the end of FY2024.

We have made a strong start to the second half, with good levels of organic growth, and as a result we announced last week that we expect to trade ahead of market expectations for the full year."

Financial highlights

· Strong first half performance

o  Group revenue up 61% to 134.5 million. Current annualised run-rate revenue of c. £335 million

o  Adjusted EBITDA^2,3 of £21.8 million, up £10.3 million, and current annualised adjusted EBITDA ^2,3 of c.£60 million

o  Adjusted operating profit ³ of £16.4 million, up £9.0 million

o  Adjusted profit before tax³ up 127% to £15.2 million

o  Adjusted EPS³ up 50% to 16.0p

o  Governance Risk and Compliance (GRC) division annualised adjusted EBITDA ^2,3 now accounts for over half of Group adjusted EBITDA ^2,3

· Subscription and Software revenues:

o  Over 20% of Group annualised adjusted EBITDA ^2,3 now arises from software

o  Software annual recurring revenues: c.£35 million

o  85% of total Group revenues are recurring

· Margin expansion :

o  H1 Divisional adjusted EBITDA^2,3 margin increased 300bps to 17.8%

o  Current run rate Divisional adjusted EBITDA^1,2 margin c.19%

· Strong balance sheet & operating cash flow: 

o  Underlying cash conversion of 96%⁵ for the last 18-month period

· Medium-term growth strategy:

o  Materially overachieving against FY2024 target run rate revenue of c.£500 million and adjusted EBITDA^2,3 of c.£100 million

o  Since Capital Markets Day in February 2021 Group has deployed c.£200 million of capital into 19 earnings-enhancing acquisitions in line with Deepen, Broaden & Digitalise compliance strategy

Strategic and operational highlights

· Organic revenue growth⁶ :

o  8% underlying, 15% reported

· M&A across software & service:  

o  Sixteen acquisitions completed so far this financial year with twelve completed during H1 FY2022 for an total initial consideration of £76.5 million, adding approximately £11.4 million of adjusted EBITDA^2,3 .

o  Acquisitions expected to achieve a return on invested capital of at least 15% within 12 months of acquisition

o  Three software acquisitions contributed to increasing our SaaS revenues to c.£35 million ARR in line with our Digitalise strategy

o  Nine service acquisitions in line with our Deepen and Broaden strategy to build leading positions and broaden our activities to address more of our clients' business-critical compliance requirements

o  Four acquisitions completed so far in H2 FY2022, deploying total initial consideration of £95.5 million

· Digitalise:

o  Carve-out acquisition of UK's leading EHS compliance intelligence platform Barbour EHS from Informa plc for £32 million

o  Acquisition of leading GRC SaaS platform CoreStream for £18 million 

o  Post-period end acquisitions of:

§ VinciWorks, the leading regulatory compliance eLearning and software solution, for an initial consideration of £39 million

§ EssentialSkillz, a leading provider of eLearning and compliance SaaS, for £25 million

o  Launch of Prosure 360, Marlowe's own new supply chain assurance software product

· Deepen & Broaden:

o  Acquisition of Healthwork for £17.2 million and bolt-on Integral Occupational Health, significantly deepening scale in occupational health, mental health, well-being and health compliance within GRC

o  Cater Leydon and CQC Compliance acquisitions broaden GRC capabilities into mid-market employment law consultancy and care quality compliance markets respectively   

o  Acquisition of ACL for £7 million in fire safety and post-period end acquisition of Hydro-X for £30 million contribute materially to safety and compliance services strategy across Testing, Inspection and Certification ("TIC") division.

· Strengthen:

o  Significant, margin-enhancing (+300 bps) operational improvements in productivity and efficiency

o  Current Divisional run rate adjusted EBITDA^1,2 of 19% approaching FY2024 margin target of 20%

o  Major integration progress across each division and newly launched WorkNest brand, consolidating legacy brands within GRC, delivering subscription-based consultancy and software across employment law, HR and health & safety markets

Current trading and outlook

· Guidance for full year to 31 March 2022 raised on 24 November 2021. Strong start to second half with continued high single digit growth across GRC and TIC divisions

· Strong pipeline of earnings-enhancing acquisitions to add further scale and breadth to our platform for growth across service and software

⁵ Underlying cash conversion calculated over the trailing 18 month period to take account of the normalisation of working capital position after COVID-19 impact in prior year

⁶ Organic revenue growth % on a like-for-like basis is defined as the year-on-year growth of our entire business. The includes the growth or decline of acquisitions from the day of completion, by including their performance for the corresponding prior period. Underlying organic growth is adjusted by an estimated (7) ppts to reflect the COVID impact on TIC division in prior year - minimal impact was experienced in GRC division.

Half Year Results Presentation

Marlowe is holding a half year results presentation for investors and analysts at 09:00 GMT today. A link to this event is here .

An on-demand version of the presentation will subsequently be made available on the Marlowe plc website.

For further information:
Marlowe plc
Alex Dacre, Chief Executive Adam Councell, Chief Financial Officer Julian Wais, Head of Investor Relations		www.marloweplc.com 0203 813 8498 [e-mail]
Cenkos Securities (Nominated Adviser & Joint Broker)		0207 397 8900
Nicholas Wells Ben Jeynes
Joh. Berenberg, Gossler & Co. KG, London Branch (Joint Broker) Mark Whitmore Ben Wright Dan Gee-Summons		0203 207 7800
FTI Consulting		0203 727 1340
Nick Hasell
Alex Le May

CHIEF EXECUTIVE'S REVIEW

Group Results

We deliver services and software across our divisions, GRC and TIC, which help our clients to stay in control and in compliance with the constantly evolving regulatory issues and operational risks that they face across their organisations. Our business lines cover areas such as risk & compliance, health & safety, employment law & HR and occupational health within GRC through to fire safety, security and water hygiene compliance testing & inspection services within TIC.

The Group performed strongly during the first half with substantial organic and acquisition-led growth in revenue, adjusted operating profits and adjusted earnings per share. We realised margin enhancements of 300bps and have delivered underlying cash conversion of 96% 1 over the 18-month period to 30 September 2021. Over 85% of the group's revenues are recurring. This financial performance was delivered alongside further progress in our strategy to deliver recurring, sustainable, end-to-end services and software which reduce risk and assure regulatory compliance, safety, efficiency and governance.  

For the half-year ended 30 September 2021, adjusted earnings before interest, tax, depreciation, amortisation and exceptional items increased 90% to £21.8 million (H1 FY2021: £11.5 million), adjusted profit before tax was up 127% and adjusted earnings per share were up 50% to 16.0p (H1 FY2021: 10.7p) on revenues up 61% to £134.5 million (H1 FY2021: £83.3 million).

The Group Divisional adjusted EBITDA margin rose to 17.8% (H1 FY2021: 14.8%) following extensive progress delivering integration programmes, such as the integration of our employment law, HR and safety businesses. This followed the Ellis Whittam acquisition completed in November 2020 and the subsequent integration of the seven other businesses forming this operation. We have subsequently relaunched the brand as WorkNest, delivering a one-stop solution of subscription-based Employment Law, HR and Safety consultancy and software. Ellis Whittam employed 98 people upon acquisition, WorkNest now employs 405.

We have experienced substantial growth in our software activities during H1 and since the period-end. Software as a Service Annual Recurring Revenues ("SaaS ARR") currently stands at circa £35 million. Software is a core part of the service we deliver, a key competitive differentiator and a central part of our future growth strategy. As a result, over 20% of Group annualised adjusted EBITDA currently arises from SaaS.

We expect SaaS revenue as a proportion of our total revenue to continue to grow as we benefit from the fast growth software markets we occupy and the organic growth benefits that our cross-sales strategy and large client database create. The deployment of our software significantly improves our clients' compliance standards and customer experience and creates high switching costs for the customer. Additionally, the relatively low incremental cost for each additional customer subscription leads to attractive organic drop-through to profit. We are positioned favourably to benefit from the further digitalisation of the compliance landscape and we see a long-term opportunity to transform our compliance markets through greater adoption of software and digital applications. The Group now employs over 100 software developers supported by numerous additional technology focused professionals.

Group organic revenue growth for the period was 15%. Adjusting for prior period effects of COVID-19, H1 organic revenue growth was estimated to be 8%. This accounts for the low like-for-like comparison figures in the prior year within our TIC activities resulting from the limited COVID-19 disruption related to temporary site access issues in H1 FY2021. We have seen organic revenue growth accelerate during the period as a result of our high service levels and the achievement of enhanced compliance KPI's leading to greater client retention and spend. We have also seen increased levels of new business from our cross-selling strategy which allows us to address more of our clients' compliance requirements as well as benefiting from the structural growth of our markets.

1 Underlying cash conversion calculated over the trailing 18 month period to take account of the normalisation of working capital position after COVID-19 impact in prior year

Strategy

Our Group's strategic vision is to deliver a comprehensive one-stop approach to our clients' regulatory compliance needs, from software and digital applications, assurance and consultancy, through to the full implementation of recurring testing, inspection and compliance programmes.

All of our activities, whether service or software, are bound by the same mission of assuring business-critical compliance. This could be innovative eLearning to outline the latest regulatory compliance standards, providing online access to regulatory data and information, delivering risk and compliance software, providing compliance advice on an employee dispute or implementing improved HR governance processes, auditing or advising on health & safety standards or certifying fire safety or water hygiene compliance - all are underpinned by a legislative requirement.

At our Capital Markets Day ("CMD") in February 2021, we set out a new three-year strategy to achieve this vision whilst doubling Group revenues to c.£500 million and almost tripling Group adjusted EBITDA to c.£100 million, which would lead us to achieve a 20% adjusted EBITDA margin and deliver in excess of 90% cash conversion. We said that we targeted a software ARR of at least 10% of overall Group revenues. Our Deepen, Broaden, Strengthen and Digitalise plan is delivering this vision, by:

· Deepening our presence in our existing markets organically and through further M&A, building leading, scale positions across our markets

· Broadening our capabilities and coverage across the compliance and business-critical service and software landscape

· Strengthening our Group by through organic investment initiatives, cross-sell, and expanding our margins through effective integration programmes

· Digitalising our compliance proposition by building the leading compliance software group to help our customers monitor and control their risk, compliance and performance   

In the ten months since the CMD, we have made major progress on each of these fronts achieving our cash conversion and SaaS ARR targets, approaching our 20% EBITDA margin target and making major progress towards our FY2024 revenue and profit targets.

Digitalise

Our Digitalise strategy has moved forward swiftly during the first half and both acquisition and organic investment have helped to deliver this. Within GRC the £32 million carve-out acquisition of Barbour, the EHS intelligence software platform, from Informa plc significantly progressed our digital ambitions and broadened our capabilities such that we can now deliver access to regulatory compliance data, advice and insights to our customers on a subscription basis to ensure they remain fully abreast of regulatory developments. Barbour is trading ahead of pre-acquisition expectations and has recorded both its record sales month and record sales contract value since the acquisition in July. Additionally, retention rates are improving with 88% renewal rates, a 3ppts improvement on the prior year.

The acquisition of CoreStream, the leading governance, risk and compliance SaaS platform, further strengthens Marlowe's position in the risk and compliance software market. In combination with our existing compliance software products, CoreStream's platform enables us to offer clients a complete GRC risk management solution to improve corporate governance and control, reduce risk and enhance compliance. It also strengthens our ability to support clients with their ESG objectives. CoreStream supports large organisations with their corporate compliance and risk management needs and is a leader in the UK's attractive risk and compliance software market, which is experiencing significant growth as clients seek to implement improved governance and risk management procedures to address their increasing exposure to new, expanding and increasingly enforced regulation. The business has recorded continued strong growth in the period since acquisition with SaaS ARR currently ~25% higher than the prior period.

The post-period end acquisition of VinciWorks for an initial consideration of £39 million and the £25 million acquisition of EssentialSkillz represent further major progress. A key focus of our digital strategy has been to develop the scale and capabilities of the Group's eLearning compliance SaaS offering as our clients' compliance training requirements become ever more complex in response to new legislation and workplace standards. VinciWorks and EssentialSkillz majorly progress this digital workstream. Both products offer cross-sell potential with other Marlowe Group customers who are obliged to ensure their workforces are properly trained across their high-risk compliance areas such as GDPR, cyber security, tax evasion, health & safety and code of conduct.

VinciWorks is the UK's leading regulatory compliance eLearning and software solution and provides compliance eLearning SaaS and compliance management software. Safety and compliance eLearning is a highly attractive part of the compliance landscape with SaaS operational and financial characteristics in a fast growth segment of the compliance market. Vinci's Israel-based software team is sector-leading and provides the Group with an additional pool of software talent and expertise.

The acquisition of EssentialSkillz is a further key step in our strategy to become the compliance software market leader. EssentialSkillz is a leading compliance SaaS and eLearning business of scale. The business delivers a SaaS product that comprises numerous customisable eLearning courses with a built-in compliance platform, learning management system, authoring and risk assessment tools. The platform is aimed at ensuring the compliance of an organisation's workforce and minimising its people risk and is therefore highly synergistic with our GRC activities. Its planned integration into our new WorkNest platform will further strengthen our one-stop-shop regulatory compliance offering for clients and provides another example of how we add value to acquired businesses through effective integration and subsequent organic investment. EssentialSkillz is expected to benefit significantly from our well-invested WorkNest sales and marketing capability, consisting of 60 people, and well-developed marketing engine covering content, SEO, campaigns and telemarketing. WorkNest's automated lead generation (which converts 1 in every 2.3 qualified sales opportunities) will be applied to the EssentialSkillz business so we can deliver its eLearning to WorkNest customers, thereby accelerating our organic growth and enhancing margins by insourcing work that was previously outsourced.

One of Marlowe's key competitive advantages and differentiators is that we e deliver software alongside our services - for example, we might deliver health & safety consultancy alongside software as a bundled solution, or compliance eLearning alongside HR compliance consultancy.

Taken as a whole, our SaaS platforms - Meridian, VinciWorks, CoreStream, Elogbooks, EssentialSkillz, DeltaNet and YouManage - are increasingly providing an almost end-to-end solution to our clients' governance, risk and compliance, environmental, health & safety, risk and performance management strategies.

As we continue to invest in software and our Digital strategy, both organically and inorganically, we see major future opportunities to improve compliance for our customers as the leader in compliance software and to create significant value for our shareholders. We expect software to continue to grow as a proportion of our overall revenues.

Deepen & Broaden

Alongside organic growth and investment, M&A is a key enabler for our compounding growth strategy and we completed three strategic platform acquisitions and nine bolt-ons during the first half. We deployed £76.5 million of capital into these acquisitions which added a cumulative £50.5 million of revenue and £11.4 million adjusted EBITDA to the Group and brought further scale and capabilities. Since the period-end, we have completed a further four acquisitions, deploying £95.5m of initial consideration and adding an additional £32.4m of revenue and a further £9.4m of adjusted EBITDA.

Since 2016, we have been the leading consolidator within UK safety and compliance markets, investing approximately £450 million across 64 acquisitions. Our M&A activity is delivering on the significant roll-up opportunity in our existing markets, as well as identifying complementary, adjacent markets for our well-developed acquisition-led model. We have built leading businesses of scale   enhancing the Group's one-stop-shop compliance proposition and expanding our capacity for further organic and inorganic growth.

The acquisition of Healthwork has added further significant scale to our GRC consulting services. Healthwork is a leading national provider of occupational health services. The acquisition adds significant scale to Marlowe's current occupational health offering of employee mental health, well-being and health surveillance services and offers synergies with Marlowe's GRC division.

We have made strong progress with both deepening and broadening our activities in Employment Law, HR & Safety with the acquisition of two employment law consultancies. The acquisition of CQC has broadened our capabilities into care quality compliance and Cylix transaction has added new digital capability in diversity and inclusion eLearning.

Within TIC, the post-period end £30 million acquisition of Hydro-X has significantly deepened our scale in water compliance, adding c.£20 million of revenue and c.£3.5 million of adjusted EBITDA, before synergies. We expect the synergies to increase profits from this business by about 30% as the business is integrated into the WCS Group, removing duplicated costs and benefiting from enhanced route densities. In the period we completed four additional Water & Air bolt-on acquisitions for a total consideration of £9 million and added an additional £19 million of revenue, building on our position in this market. Within fire safety we completed the £7 million acquisition of ACL, adding a further £10 million of revenue in this attractive safety compliance market.

Strengthen

We maintain the pace of our growth due to our well-designed organisational structure which is focused on divisional entrepreneurial autonomy and agility. This structure gives our managers the resources and responsibility to deliver their strategic plans whilst driving integration programmes at pace. Each of the six business lines within our divisions have autonomous leadership teams. Each are supported by dedicated integration resources and a well-developed integration playbook. This structure enables us to integrate acquired businesses efficiently, with an integration programme within one business line being largely discrete from that within another - so that we can integrate multiple businesses concurrently without straining management bandwidth.

The integration programmes of all acquisitions, particularly including the significant deals within Occupational Health and Employment Law, HR & Safety, remain on track, with synergies in line with expectations. The performance of each acquisition has been in line with, or in some cases significantly ahead of, pre-acquisition expectations.

An example of the strengthen and integration strategy in action is evident in our recently launched WorkNest brand. This now makes up just under half of our GRC division. It brings together the eleven acquisitions that make up our leading employment law and safety business arising from the platform acquisition of Ellis Whittam completed last year. Ellis Whittam was generating revenues of £16 million and adjusted EBITDA of £4 million on acquisition. Following the combination with our Law At Work activities, this increased to c.£21 million and c.£6 million respectively and, through a further eight bolt-on acquisitions over the past year and organic growth in excess of 10%, the integrated business has grown to revenues of c.£40 million.

Our markets are closely aligned with key ESG objectives

Marlowe's business model benefits from increasingly stringent regulations and increased ESG requirements on businesses. Much of what we do is non-discretionary, and over 85% of our revenues are recurring, as a result of the business-critical requirement for our services, and the regulation that underpins everything we do.  

Increasing corporate and societal focus on ESG; public expectations around safety, compliance and well-being; and corporate brand and reputational concerns drive the need for Marlowe's services. Our clients' budgets and our markets continue to grow at attractive rates because of heightened focus on the environmental, social and governance issues inherent in business. The risks of non-compliance with these standards significantly outweigh the costs of compliance. We help to ensure the safety of people, to improve governance, to protect assets and to optimise client operating costs, and our services and software products are highly valued by our clients. In short, the areas that we address are becoming more and more important in the eyes of our clients.

ESG is aligned with all our business lines. Our strategy helps provide a sustainable future by delivering software products and services which:

· Assure our clients' compliance

· Enhance corporate governance standards

· Test and improve water & air quality to meet environmental standards

· Improve and protect employee health, well-being and mental health

· Train people via eLearning in areas such as diversity and inclusion, anti-money laundering or bribery and corruption

· Manage workplace risk through regular audits & assessments

· Protect life and property from risks such as fire

· Safeguard employee legal rights

 Our services and software align closely with UN Sustainable Development Goals:

UN Sustainable Development Goal	Marlowe Proposition
3 - Good health and well-being	Health & Safety, Occupational Health, Mental Health & Wellbeing, Employee Assistance Programme, EHS Software, Fire Safety, Security, Healthcare Compliance
5 - Gender Equality	Safety & compliance eLearning in diversity and inclusion, sexual harassment in the workplace etc
6 - Clean Water and Sanitation	Water Hygiene, Wastewater & effluent, water treatment chemicals
8 - Decent Work and Economic Growth	HR, Employment Law consultancy & Software
11 - Sustainable Cities and Communities	EHS SaaS & Contractor Compliance Software, Remote Monitoring, Water Reuse
16 - Peace, Justice and Strong Institutions	GRC services, GRC Software, regulatory compliance SaaS and eLearning

We also recognise that we also have a responsibility to manage our business with all our major stakeholders in mind. Accordingly, we commenced a Group-wide project at the end of the half year to identify gaps in our own ESG practice and disclosure. As a result of this exercise, we will define and create a system for greater disclosure. We plan to report on the progress of this project at the year end.

Divisional Review

Governance, Risk & Compliance

£ million	H1 FY 2022	H1 FY 2021	Change
Revenue	34.4	11.3	+204%
Adjusted EBITDA	10.6	3.7	+186%
Adjusted operating profit	9.5	3.5	+171%
EBITDA margin	30.8%	32.7%	-190 bps

GRC encompasses our consulting and software solutions across governance, risk, compliance and EHS Software, Health & Safety, Employment Law & HR, Occupational Health and compliance eLearning. Our compliance software platforms are used by clients to implement governance frameworks and to manage, monitor, audit and control risk, compliance and performance throughout their organisations. The majority of the compliance services we deliver in the GRC division revolve around clients' employees and organisational risks. Our consultancy services are delivered largely under 3 or 5-year contracts with subscription-based revenues. We provide a full range of business-critical services from health & safety support, advice and risk assessments, governance advice on employment law, HR or occupational health compliance. We deliver services from those that protect the well-being of our clients' employees through to the training of their people in relevant regulatory compliance standards via eLearning.

The division performed strongly during the first half and recorded adjusted EBITDA of £10.6 million (H1 FY2021: £3.7 million), up £6.9 million, and revenues of £34.4 million (H1 FY2021: £11.3 million). This growth reflects the benefit of acquisitions in the year together with the full year contribution from those made in FY2021 and strong organic growth of 11%, driven by software demand and its inherent scalability.

The adjusted EBITDA margin was 30.8% (H1 FY2021: 32.7%), reflecting the revised make up of business streams within the enlarged division following significant acquisition activity in occupational health which the acquired businesses operate at a lower margin. There is potential to expand this margin through adding scale, whilst maintaining the cost to manage, or adding software licenses with low incremental cost to deliver. An example of this potential is the improvement in our health & safety consultant utilisation by 110 bps to 88.6%. We continue to execute integration programmes to drive synergies, such as the integration of the ESP HR, HRSP and YouManage acquisitions which were completed towards the end of last financial year.

An example of GRC's success has been the growth of our Occupational Health offering. The transformative acquisition of Healthwork is a clear example of the value that can be created through implementing the Marlowe model. We identified the market as attractive and complementary to our health & safety and employment law consulting business and broader GRC activities. The decision maker usually responsible for procuring health & safety, employment law and HR is often also responsible for occupational health. Having identified this common channel to market along with the significant potential this market offered, the substantial synergy with our strategy and the highly attractive investment characteristics, we took the decision to build a business of scale.

In March 2020, we acquired Managed Occupational Health, and have subsequently acquired and integrated five further bolt-ons: Caritas, Black & Banton, Wrightway Health, NOSS and Integral. The acquisition of Healthwork in June has made us a major player in this highly attractive market. Our investment thesis in acquiring Healthwork was to use the business as a platform into which we would integrate our existing activities and provide a platform for fast-paced growth whilst deepening and broadening our capabilities. The scale and breadth of capability that we now have allows us to improve the efficiency with which we can manage each client and reduce the cost to acquire new clients. We expect to see continued strong organic growth in this highly attractive market. The early benefits of effective integration can be clearly seen in the year-on-year increase in annual revenue per fee earner from £226,000 to £289,000 this September.

In Employment Law and HR we acquired employment law specialist Cater Leydon Millard for £2.25 million which has been integrated into WorkNest. The business provides specialist employment law advice to companies across the UK and deepens Marlowe's employment law compliance offering whilst offering attractive synergies with WorkNest, our leading platform in the provision of recurring, fixed-fee employment law, HR and safety services and software.

The £2 million acquisition of CQC Compliance in June broadened our compliance capabilities into the care compliance arena: CQC provides retained consulting services to care homes, surgeries and pharmacies to ensure compliance with health and social care regulations. The acquisition adds a new adjacent capability to Marlowe's GRC division, broadening the Group's regulated compliance services offering whilst offering synergies with WorkNest's employment law and safety businesses .  

The quality of the service that we provide within our Employment Law consulting activities is concisely illustrated by the following statistics:

· There were 109,706 Employment Tribunal claims made against UK employers in the 12 month period up to 1 October 2021

· The Employment Tribunal found in favour of the employee in 91% of these cases (with the average award being £14,500)

· In the cases where WorkNest represented their client, the Employment Tribunal found in favour of the employee in 12% of cases. We successfully defended 88% of Employment Tribunal claims against our clients

It is as a result of this high quality of service that our retention rates continue to improve and currently stand at 95% across WorkNest and our new business per sales head has improved by 27% during the period.

As alluded to earlier in this report, we continue to make major organic investments in our software development roadmap, continuing with our core strategy of digitalising our compliance offering, recognising that customers require scalable and flexible cloud-based SaaS solutions to monitor, track and control their key organisational risks. An example of this investment is the launch of Prosure 360, a new supply chain verification platform which allows clients to monitor the compliance of their contractor supply chain to improve quality, safety and performance.

Testing, Inspection & Certification

£ million	H1 FY2022	H1 FY2021	Change
Revenue	100.1	72.0	+39%
Adjusted EBITDA	13.4	8.6	+56%
Adjusted operating profit	9.2	4.8	+92%
EBITDA margin	13.4%	11.9%	+150 bps

TIC includes our Water & Air Hygiene, Fire Safety & Security, and Contractor Compliance propositions. The majority of the services in TIC are focused on clients' business premises and properties.  They include services such as testing and inspecting water and air systems to ensure efficiency, hygiene and compliance or testing, inspecting and certifying fire safety and security systems. A large portion of the services we deliver within TIC are subscription-like in nature, essential to our customers' operations and stipulated by regulation.

The division performed strongly during the first half and recorded adjusted EBITDA of £13.4 million (H1 FY2021: £8.6 million), up £4.8 million, and revenues of £100.1 million (H1 FY2021: £72.0 million). The growth reflects the combination of the COVID-19 impacted comparator, the benefit of current and prior year acquisitions and strong organic growth of 16% per cent. Adjusting for this COVID-19 impact, we estimate the organic growth figure for TIC at 6%.

TIC's organic revenue growth has been supported by good cross-selling momentum. As a result of introductions from the fire safety sub-division, our water & air subdivision recently won two large national contracts from a national telecommunications provider and a large high street pharmaceutical business, together worth c £2 million annually. We continue to invest in our cross-selling function team to realise the incremental revenue available to the group by offering complementary compliance services via shared customer channels.

The adjusted EBITDA margin increased 150bps to 13.4% (H1 FY2021: 11.9%), reflecting continued efficiency and productivity enhancements as we pursue integration programmes such as that of WPL and Hadrian Technology which was completed towards the end of the last financial year. This has further enhanced our revenue per fee earner where we now benefit from enhanced route density and are achieving higher revenue per day per fee earner which has improved by a further 2.5% during the past six months. We are confident that we can expand margins further through adding further scale, and route density whilst driving further operational efficiencies. We also benefit from a well-invested and scalable back-office infrastructure, which can support further expansion and generates attractive operational gearing. This back-office infrastructure has enabled us to exit fifteen properties during the period, generating an annualised saving of over £0.8 million which will support future profit and margin growth.

We have seen some limited wage inflation in the period within this division, which we continue to manage and monitor to ensure that it does not impact our profit margins.

Outlook  

Following our strong performance in the first half, we have continued our momentum into the second half, with good levels of organic growth resulting in the recent upgrade of market expectations for the full year.

The combination of our organic growth, further margin expansion and M&A strategy underpin the Board's confidence in achieving its target of c.£100 million run rate adjusted EBITDA materially ahead of the original end of FY2024 target.

Alex Dacre

Chief Executive

Chief Financial Officer's Review

Revenue

Revenue for the period was £134.5 million (H1 FY2021: £83.3 million) representing a year-on-year increase of 61%. This reflects continued strong organic growth, including a return to normal levels of trade within our TIC division following the impact of COVID-19 in the prior year, in addition to the contribution from acquisitions.

Organic growth in the period was 15%. However, underlying organic growth is estimated to be 8%, after an adjustment for the COVID-19 impact on TIC in the prior year.

Adjusted EBITDA and adjusted operating profit

Our key measures of profitability for the Group are adjusted EBITDA and adjusted operating profit. Adjusted EBITDA for the period increased by 90% to £21.8 million (H1 FY2021: £11.5 million) and adjusted operating profit increased by 122% to £16.4 million (H1 FY2021: £7.4 million). The material increase in profit is a direct result of acquisitions made in both the current and prior year complementing organic revenue and operating margin growth from the underlying portfolio of businesses.

The Group divisional adjusted EBITDA margin increased to 17.8% (H1 FY2021 14.8%).

Interest

The Group's net interest charge was £1.2 million (H1 FY2021: £0.7 million). The Group entered the period with net cash following the £100 million equity placing in March 2021. During the period, the Group completed 12 acquisitions and this deployment of capital is the main driver of the increase in interest costs.

Profit before tax

On a statutory basis, profit before tax from continuing operations was £1.6 million (H1 FY2021: £0.6 million). The increase primarily reflects the improvement in adjusted operating profit already noted.

Due to the nature of acquisition and other costs in relation to each acquisition and the non-cash element of certain charges, the Directors believe that adjusted EBITDA and adjusted measures of operating profit, profit before tax and earnings per share provide shareholders with a useful representation of the underlying earnings derived from the Group's businesses and a more comparable view of the period-on-period underlying financial performance of the Group.

A reconciliation between statutory profit and the adjusted performance measures noted above is shown below:

Six months ended 30 September 2021 Continuing operations	Profit Before Tax £m	Operating profit £m	EBITDA £m
Statutory reported	1.6	2.8	13.6
Acquisition costs	2.0	2.0	2.0
Restructuring costs	3.4	3.4	3.4
Amortisation of acquisition intangibles	5.4	5.4	-
Legacy long-term incentives	1.2	1.2	1.2
Movements in contingent consideration	1.6	1.6	1.6
Adjusted results	15.2	16.4	21.8

Six months ended 30 September 2020 Continuing operations	Profit Before Tax £m	Operating profit £m	EBITDA £m
Statutory reported	0.6	1.3	7.6
Acquisition costs	0.6	0.6	0.6
Restructuring costs	2.4	2.4	2.4
Amortisation of acquisition intangibles	2.2	2.2	-
Legacy long-term incentives	0.9	0.9	0.9
Adjusted results	6.7	7.4	11.5

Acquisition costs include legal fees, professional fees and staff costs incurred as part of the acquisitions.

Restructuring costs, being the costs associated with the integration of acquisitions, remain the key component of acquisition and other costs and increased to £3.4 million (H1 FY2021: £2.4 million) in the period, in the context of the major M&A investment the Group has delivered. Restructuring costs as a percentage of adjusted EBITDA reduced by 560bps to 15.4%.

Restructuring costs primarily consist of:

· The cost of duplicated staff roles during the integration and restructuring period;

· The redundancy cost of implementing the post completion staff structures; and

· IT costs associated with the integration and transfer to Group IT systems.

The majority of these costs are incurred in the 12 months following an acquisition.

The year-on-year increase in acquisition and restructuring costs reflects the deployment of capital during the year and the ongoing integration of acquisitions made in both the current and prior financial year.

Amortisation of intangible assets for the period was £5.4 million (H1 FY2021: £2.2 million) with the increase attributable to the higher carrying value of intangible assets.

Certain legacy long term incentive schemes were established to incentivise key members of the Group's senior management to create shareholder value through the successful acquisition, restructuring and integration of businesses in chosen service sectors. As such, the charge associated with these legacy schemes is considered to be part of "Acquisition and other costs" as the strategy continues to be executed. Legacy long term incentive costs increased to £1.2 million (H1 FY2021: £0.9 million) during the period. The cost of all other share-based incentives for management are shown separately in the income statement but are not treated as adjusting items.

Taxation

The Group's overall tax charge was £0.3 million (H1 FY2021: £0.1 million), including a £0.5 million credit on items excluded from adjusted profit. The adjusted tax charge was £2.8 million (H1 FY2021: £1.2 million) resulting in an effective tax rate of 19.0 per cent (H1 FY 2021: 19.0%).

Earnings per share

Basic adjusted earnings per share ("basic adjusted EPS") is calculated as adjusted profit for the period less a standard tax charge divided by the weighted average number of shares in issue in the period.

Basic adjusted EPS increased by 50% to 16.0p (H1 FY2021: 10.7p) primarily due to the factors set out in adjusted operating profit above, partially offset by the higher interest and tax charge and an increased in the weighted average number of shares. In addition, basic EPS increased to 1.7p (H1 FY2021: 0.8p), also reflecting the impact of the acquisition and other costs set out above.

The weighted average number of shares in issue during the period was 77.1 million (H1 FY2021: 50.1 million), primarily reflecting equity placings carried out in the prior year. A further equity placing was completed post period-end, in October 2021, raising approximately £50 million before expenses.

Cash flow

Cash conversion across the Group continued to be good on an underlying basis. The first half of the financial year reflected an unwind of several timing differences in the prior year. These primarily revolved around the additional time to pay rules put in place by HRMC as a result of COVID-19 and the temporary reduction in working capital in the TIC division in the prior year which normalised in the period.

Therefore, to properly assess the performance of the Group it is necessary to look at the 18-month period ending 30 September 2021. This eliminates many of these timing differences and shows the level of underlying cash generated relative to the profitability of the Group. Cash conversion (being the ratio of cash generated from operations, excluding IFRS 16 and any acquisition related flows, to adjusted operating profit) was 96% over this 18-month period, ahead of our 90% medium-term target.

As a result of the timing differences noted above, net cash inflow from operating activities before acquisition and restructuring costs in the period was £8.5 million (H1 FY2021: £18.8 million). Working capital continues to be closely managed with net working capital 4% of revenue and debtor days of 52 both performing in line with our expectations.

Capital expenditure in the period totalled £3.3 million (H1 FY2021: £2.0 million) reflecting ongoing investment in the business.

Net debt and leverage

Net debt at 30 September 2021 was £61.7 million (H1 FY2021: £17.2 million). Excluding IFRS 16 lease liabilities net debt was £42.3 million (H1 FY2021: £1.6 million).

The largest driver of the movement in net debt during the period was the continued execution of the acquisition strategy. Total acquisition payments were £47.2 million (H1 FY2021: £18.4 million), net of cash acquired.

Following the period end, the Group has continued to deploy capital as part of its acquisition strategy, including on Vinciworks, Hydro X and Essentialskillz.

One of the key aims of the Board is to maintain a strong balance sheet, while executing the Group's growth agenda. As a result, Marlowe successfully raised approximately £50 million before expenses through an equity placing in October 2021.

Following the recent acquisitions and equity placing the current run rate leverage for the Group is estimated to be 1.6x proforma adjusted EBITDA. The Group also increased its debt facilities with its existing lending syndicate in October 2021 to £130 million.

Statement of financial position

Net assets at 30 September 2021 were £266.3 million (30 September 2020: £138.2 million). The Group has now successfully deployed the £100 million of equity capital raised prior to the start of the financial year on earnings accretive acquisitions.

Non-IFRS measures

The Interim Report includes measures which are not defined by generally accepted accounting principles such as IFRS. We believe this information, along with comparable IFRS measures, is useful as it provides investors with a basis for measuring the operating performance of the Group on a comparable basis. The Board and our managers use these financial measures to evaluate our operating performance. Non-IFRS financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with IFRS. Similarly, non-IFRS measures as reported by us may not be comparable with similar measures reported by other companies. For further information on the reconciliation between IFRS and non-IFRS measures refer to Note 2 and 4 of the Notes to the Consolidated Interim Report.

Adam Councell

Chief Financial Officer

Consolidated Statement of Comprehensive Income
For the six months ended 30 September 2021
			Unaudited six months ended 30 September 2021		Unaudited six months ended 30 September 2020		Audited year ended 31 March 2021
	Note		£'m		£'m		£'m
Revenue	2		134.5		83.3		192.0
Cost of sales			(75.2)		(47.3)		(108.7)
Gross profit			59.3		36.0		83.3
Administrative expenses excluding acquisition and other costs			(42.9)		(28.6)		(63.6)
Acquisition costs	2		(2.0)		(0.6)		(2.2)
Restructuring costs	2		(3.4)		(2.4)		(5.6)
Amortisation of acquisition intangibles	2		(5.4)		(2.2)		(6.5)
Legacy long term incentives	2		(1.2)		(0.9)		(4.2)
Movements in contingent consideration	2		(1.6)		-		(0.2)
Total administrative expenses			(56.5)		(34.7)		(82.3)
Operating profit			2.8		1.3		1.0
Finance costs			(1.2)		(0.7)		(2.6)
Profit/(loss) before tax			1.6		0.6		(1.6)
Income tax charge	3		(0.3)		(0.1)		(0.1)
Profit/(loss) and total comprehensive income for the period from continuing operations			1.3		0.5		(1.7)
Profit/(loss) attributable to owners of the parent			1.3		0.5		(1.7)
Earnings per share attributable to owners of the parent (pence)
Total
- Basic	4		1.7p		0.8p		(3.1)p
- Diluted	4		1.7p		0.8p		(3.1)p

Consolidated Statement of Changes in Equity
For the six months ended 30 September 2021
	Share capital	Share premium		Merger relief reserve	Other reserves	Retained earnings	Total  equity
	£'m	£'m		£'m	£'m	£'m	£'m
Balance at 1 April 2020	22.9	66.5		5.4	1.0	0.9	96.7
Profit for the period	-	-		-	-	0.5	0.5
Total comprehensive income for the period	-	-		-	-	0.5	0.5
Transaction with owners
Issue of share capital	4.5	37.7		-	(0.1)	-	42.1
Issue costs	-	(1.3)		-	-	-	(1.3)
Share-based payments charge	-	-		-	0.2	-	0.2
	4.5	36.4		-	0.1	-	41.0
Balance at 30 September 2020 (unaudited)	27.4	102.9		5.4	1.1	1.4	138.2
Balance at 1 October 2020	27.4	102.9		5.4	1.1	1.4	138.2
Profit for the period	-	-		-	-	(2.2)	(2.2)
Total comprehensive income for the period	-	-		-	-	(2.2)	(2.2)
Transaction with owners
Issue of share capital	10.9	118.1		-	(1.0)	-	128.0
Issue costs	-	(3.6)		-	-	-	(3.6)
Acquisition	0.2	1.7		0.8	-	-	2.7
Share-based payments charge	-	-		-	0.3	-	0.3
	11.1	116.2		0.8	(0.7)	(2.2)	125.2
Balance at 31 March 2021 (audited)	38.5	219.1		6.2	0.4	(0.8)	263.4
Balance at 1 April 2021	38.5	219.1		6.2	0.4	(0.8)	263.4
Profit for the period	-	-		-	-	1.3	1.3
Total comprehensive income for the period	-	-		-	-	1.3	1.3
Transaction with owners
Issue of share capital	-	-		-	-	-	-
Issue costs	-	-		-	-	-	-
Acquisition	0.1	1.0		-	-	-	1.1
Share-based payments charge	-	-		-	0.5	-	0.5
	0.1	1.0		-	0.5	-	1.6
Balance at 30 September 2021 (unaudited)	38.6	220.1		6.2	0.9	0.5	266.3

Consolidated Statement of Financial Position
At 30 September 2021
			Unaudited 30 September 2021		Unaudited 30 September 2020		Audited 31 March 2021
	Note		£'m		£'m		£'m
ASSETS
Non-current assets
Intangible assets	6		337.1		146.2		246.1
Trade and other receivables	8		2.5		3.9		3.8
Right of use assets			10.2		15.5		18.8
Property, plant and equipment			19.1		6.8		7.3
Deferred tax asset			1.5		0.6		1.5
			370.4		173.0		277.5
Current assets
Inventories			5.8		4.2		4.6
Trade and other receivables	8		72.8		53.0		56.0
Held for sale property			1.3		1.3		1.3
Cash and cash equivalents			58.8		9.4		44.2
			138.7		67.9		106.1
Total assets			509.1		240.9		383.6
LIABILITIES
Current liabilities
Trade and other payables			(80.1)		(60.8)		(73.4)
Financial liabilities - lease liabilities			(6.6)		(5.5)		(6.3)
Current tax liabilities			(0.7)		(0.7)		(1.5)
Provisions			(0.4)		(0.2)		(0.4)
			(87.8)		(67.2)		(81.6)
Non-current liabilities
Trade and other payables			(18.7)		(7.6)		(7.7)
Financial liabilities - borrowings	10		(100.0)		(10.0)		-
Financial liabilities - lease liabilities			(13.9)		(11.1)		(13.6)
Deferred tax liabilities			(21.5)		(6.3)		(16.5)
Provisions			(0.9)		(0.5)		(0.8)
			(155.0)		(35.5)		(38.6)
Total liabilities			(242.8)		(102.7)		(120.2)
Net assets			266.3		138.2		263.4
Equity
Share capital	11		38.6		27.4		38.5
Share premium account			220.1		102.9		219.1
Merger relief reserve			6.2		5.4		6.2
Other reserves			0.9		1.1		0.4
Retained earnings			0.5		1.4		(0.8)
Equity attributable to owners of parent			266.3		138.2		263.4

Consolidated Statement of Cash Flows
For the six months ended 30 September 2021
			Unaudited six months ended 30 September 2021		Unaudited six months ended 30 September 2020		Audited Year ended 31 March 2021
	Note		£'m		£'m		£'m
Cash flows from operating activities
Net cash generated from operations	12		12.4		20.3		32.0
Net finance costs			(0.7)		(0.5)		(1.2)
Income taxes paid			(3.2)		(1.0)		(2.5)
Net cash generated from operating activities before acquisition and restructuring costs			8.5		18.8		28.3
Acquisition and restructuring costs			(5.4)		(3.0)		(7.9)
Net cash used in operating activities			3.1		15.8		20.4
Cash flows from investing activities
Purchases of property, plant and equipment	2		(3.3)		(2.0)		(4.5)
Disposal of property, plant and equipment			0.4		0.1		0.6
Purchase of subsidiary undertakings net of cash acquired			(47.2)		(18.4)		(68.0)
Net cash flows used in investing activities			(50.1)		(20.3)		(71.9)
Cash flows from financing activities
Proceeds from share issues	11		-		40.0		169.8
Cost of share issues	11		-		(1.3)		(4.9)
Repayment of bank borrowings			-		(38.5)		(118.5)
Repayment of debt upon purchase of subsidiary undertaking			(34.3)		(0.3)		(30.6)
New bank loans raised			100.0		10.0		80.0
Lease repayments			(4.1)		(3.2)		(7.3)
Net cash generated in financing activities			61.6		6.7		88.5
Net increase/(decrease) in cash and cash equivalents			14.6		2.2		37.0
Cash and cash equivalents at start of period			44.2		7.2		7.2
Cash and cash equivalents at the end of period			58.8		9.4		44.2
Cash and cash equivalents shown above comprise:
Cash at bank			58.8		9.4		44.2

Notes to the Consolidated Interim Report

For the six months ended 30 September 2021

1  Basis of preparation

Basis of preparation

The consolidated interim financial information of the Group for the six months ended 30 September 2021 was approved by the Board of Directors and authorised for issue on 30 November 2021.  The disclosed figures are not statutory accounts in terms of Section 434 of the Companies Act 2006.  Statutory accounts for the year ended 31 March 2021, on which the auditors gave an audit report which was unqualified and did not contain a statement under section 498(2) or (3) of the Companies Act 2006, have been filed with the Registrar of Companies.  The annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union.

The comparative figures for the financial year ended 31 March 2021 and the six months ended 30 September 2020 are consistent with the Group's annual financial statements and interim financial statements respectively.

Going concern

Based on the Group's cash flow forecasts and projections, the Directors are satisfied that the Group has adequate resources to continue in operational existence for the foreseeable future.  While the Group has seen some disruption from COVID-19, the impact has been manageable and, given the regulations that govern the requirement for its essential services, the business model has demonstrated resilience.  In the event of further disruption to the business in the future as a result of COVID-19 the Directors are confident additional cost reduction and cash preservation measures could be utilised in conjunction with the Group's existing debt facility to reduce costs and preserve cash. They continue to adopt the going concern basis of accounting in preparing these interim financial statements.

Accounting policies

This interim report has been prepared on a basis consistent with the accounting policies expected to be applied for the year ending 31 March 2022.

There were no new relevant Standards or Interpretations to be adopted for the six months ended 30 September 2021.

All other accounting policies and methods of computation applied are consistent with those applied for the year ended 31 March 2021.

Critical accounting estimates and judgements continue to be applied to the identification of separable intangibles on acquisition and rate of customer attrition, acquisition and other costs, valuation of separable intangibles on acquisition, impairment of non-financial assets, impairment of trade receivables and recoverability of amounts due from contract assets.

2  Segmental information

The Group is organised into two main operating segments, Governance, Risk & Compliance ("GRC") and Testing, Inspection & Certification ("TIC").  Services per segment operate as described in the Chief Executive's review.  The key profit measures are revenue, adjusted operating profit and adjusted EBITDA and are shown before acquisition and restructuring costs, amortisation of acquisition intangibles, movements in contingent consideration and legacy long term incentives. The vast majority of trading of the Group is undertaken within the United Kingdom. Segment assets include intangibles, property, plant and equipment, inventories, receivables and operating cash.  Central assets include deferred tax and head office assets. Segment liabilities comprise operating liabilities. Central liabilities include deferred tax, corporate borrowings and head office liabilities.  Capital expenditure comprises additions to computer software, property, plant and equipment and includes additions resulting from acquisitions through business combinations. Segment assets and liabilities are allocated between segments on an actual basis.

REVENUE

The revenue from external customers was derived from the Group's principal activities primarily in the UK (where the Company is domiciled) as follows:

Six months ended 30 September 2021
Unaudited		GRC				Head Office
				TIC				Total
		£'m		£'m		£'m		£'m
Revenue		34.5		103.3		-		137.8
Inter-segment elimination		(0.1)		(3.2)		-		(3.3)
Revenue from external customers		34.4		100.1		-		134.5
Segment adjusted operating profit/(loss)		9.5		9.2		(2.3)		16.4
Acquisition costs								(2.0)
Restructuring costs								(3.4)
Amortisation of acquisition intangibles								(5.4)
Legacy long term incentives								(1.2)
Movements in contingent consideration								(1.6)
Operating profit								2.8
Finance costs								(1.2)
Profit before tax								1.6
Tax charge								(0.3)
Profit after tax								1.3
Segment assets		74.4		96.2		338.5		509.1
Segment liabilities		26.9		63.2		152.7		242.8
Capital expenditure		1.4		1.9		-		3.3
Depreciation and amortisation		1.1		4.2		5.5		10.8

Six months ended 30 September 2020
Unaudited		GRC				Head Office
				TIC				Total
		£'m		£'m		£'m		£'m
Revenue		11.4		74.9		-		86.3
Inter-segment elimination		(0.1)		(2.9)		-		(3.0)
Revenue from external customers		11.3		72.0		-		83.3
Segment adjusted operating profit/(loss)		3.5		4.8		(0.9)		7.4
Acquisition costs								(0.6)
Restructuring costs								(2.4)
Amortisation of acquisition intangibles								(2.2)
Legacy long term incentives								(0.9)
Operating profit								1.3
Finance costs								(0.7)
Profit before tax								0.6
Tax charge								(0.1)
Profit after tax								0.5
Segment assets		14.7		68.0		158.2		240.9
Segment liabilities		10.5		55.0		37.2		102.7
Capital expenditure		0.3		1.6		0.1		2.0
Depreciation and amortisation		0.2		3.8		2.3		6.3
Year ended 31 March 2021
Audited
		GRC		TIC		Head Office		Total
		£'m		£'m		£'m		£'m
Revenue		34.7		165.0		-		199.7
Inter-segment elimination		(0.1)		(7.6)		-		(7.7)
Revenue from external customers		34.6		157.4		-		192.0
Segment adjusted operating profit/(loss)		10.3		12.1		(2.7)		19.7
Acquisition costs								(2.2)
Restructuring costs								(5.6)
Amortisation of acquisition intangibles								(6.5)
Legacy long term incentives								(4.2)
Movements in contingent consideration								(0.2)
Operating profit								1.0
Finance costs								(2.6)
Profit before tax								(1.6)
Tax charge								(0.1)
L oss after tax								(1.7)
Segment assets		32.9		76.0		274.7		383.6
Segment liabilities		19.6		60.5		40.1		120.2
Capital expenditure		1.2		3.1		0.3		4.6
Depreciation and amortisation		1.0		7.8		6.7		15.5

Reconciliation of segment adjusted operating profit to adjusted EBITDA

		GRC		TIC		Head Office		Unaudited six months ended 30 September 2021 Total
		£'m		£'m		£'m		£'m
Segment adjusted operating profit/(loss)		9.5		9.2		(2.3)		16.4
Depreciation		1.1		4.2		0.1		5.4
Adjusted EBITDA		10.6		13.4		(2.2)		21.8

		GRC		TIC		Head Office		Unaudited six months ended 30 September 2020 Total
		£'m		£'m		£'m		£'m
Segment adjusted operating profit/(loss)		3.5		4.8		(0.9)		7.4
Depreciation		0.2		3.8		0.1		4.1
Adjusted EBITDA		3.7		8.6		(0.8)		11.5
		GRC		TIC		Head Office		Audited year ended 31 March 2021 Total
		£'m		£'m		£'m		£'m
Segment adjusted operating profit/(loss)		10.3		12.1		(2.7)		19.7
Depreciation		1.0		7.8		0.2		9.0
Adjusted EBITDA		11.3		19.9		(2.5)		28.7

The above tables reconcile segment adjusted operating profit/(loss), which excludes separately disclosed acquisition and other costs, to the standard profit measure under International Financial Reporting Standards (Operating Profit).  This is the Group's Alternative Profit Measure used when discussing the performance of the Group.  The Directors believe that adjusted EBITDA and operating profit is the most appropriate approach for ascertaining the underlying trading performance and trends as it reflects the measures used internally by senior management for all discussions of performance and also reflects the starting profit measure when calculating the Group's banking covenants.

Adjusted EBITDA is not defined by IFRS and therefore may not be comparable with other companies' adjusted operating profit measures.  It is not intended to be a substitute, or superior to, IFRS measurements of profit.

3  Tax

The underlying tax charge is based on the expected effective tax rate (19%) for the year ending 31 March 2022 applied to taxable trading profits for the period.

4  Earnings per ordinary share

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

	Unaudited six months ended 30 September 2021	Unaudited six months ended 30 September 2020	Audited year ended 31 March 2021
Weighted average number of shares in issue	77,124,522	50,096,407	55,601,787
Total profit/(loss) after tax for the period	£1.3m	£0.5m	£(1.7)m
Total basic earnings per ordinary share (pence)	1.7p	0.8p	(3.1)p
Weighted average number of shares in issue	77,124,522	50,096,407	55,601,787
Share options	1,290,498	1,869,509	888,604
Weighted average fully diluted number of shares in issue	78,415,020	51,965,916	56,490,391
Total fully diluted earnings per share (pence)	1.7p	0.8p	(3.1)p

The Directors believe that adjusted basic earnings per share provide a more appropriate representation of the underlying earnings derived from the Group's business.  The adjusted items are shown in the table below:

	Unaudited six months ended 30 September 2021	Unaudited six months ended 30 September 2020	Audited year ended 31 March 2021
	£'m	£'m	£'m
Profit before tax for the period	1.6	0.6	(1.6)
Adjustments:
Acquisition costs	2.0	0.6	2.2
Restructuring costs	3.4	2.4	5.6
Amortisation of acquisition intangibles	5.4	2.2	6.5
Movement in contingent consideration	1.6	-	0.2
Legacy long term incentives	1.2	0.9	4.2
Adjusted profit before tax for the period	15.2	6.7	17.1

The adjusted earnings per share, based on weighted average number of shares in issue during the period, is calculated below:

	Unaudited six months ended 30 September 2021	Unaudited six months ended 30 September 2020	Audited year ended 31 March 2021
Adjusted profit before tax (£'m)	15.2	6.7	17.1
Tax at 19%	(2.8)	(1.2)	(3.3)
Adjusted profit after taxation (£'m)	12.4	5.5	13.8
Adjusted basic earnings per share (pence)	16.0	10.7	25.0
Adjusted fully diluted earnings per share (pence)	15.8	10.3	24.6

5  Dividends

The Company has not declared any dividends in respect of the current or prior period.

6  Intangible assets

	Goodwill	Customer relationships	Applications software	Total
	£'m	£'m	£'m	£'m
Cost
1 April 2020	96.2	31.8	3.4	131.4
Arising on acquisition of subsidiaries	16.5	5.2	1.6	23.3
Additions	-	-	0.4	0.4
30 September 2020	112.7	37.0	5.4	155.1
1 October 2020	112.7	37.0	5.4	155.1
Arising on acquisition of subsidiaries	45.5	51.7	5.4	102.6
Additions	-	-	1.9	1.9
31 March 2021	158.2	88.7	12.7	259.6
1 April 2021	158.2	88.7	12.7	259.6
Acquired with subsidiary	64.5	25.2	5.7	95.4
Additions	-	-	1.6	1.6
30 September 2021	222.7	113.9	20.0	356.6
Accumulated amortisation and
impairment
1 April 2020	-	6.3	0.3	6.6
Charge for the period	-	2.1	0.2	2.3
30 September 2020	-	8.4	0.5	8.9
1 October 2020	-	8.4	0.5	8.9
Charge for the period	-	3.7	0.9	4.6
31 March 2021	-	12.1	1.4	13.5
1 April 2021	-	12.1	1.4	13.5
Charge for the period	-	4.8	1.2	6.0
30 September 2021	-	16.9	2.6	19.5
Carrying amount
30 September 2020 - Unaudited	112.7	28.6	4.9	146.2
31 March 2021 - Audited	158.2	76.6	11.3	246.1
30 September 2021 - Unaudited	222.7	97.0	17.4	337.1

7  Business Combinations

During the period ending 30 September the Group made 12 acquisitions. The provisional fair values are as follows:

	Division		Cash consideration		Contingent consideration		Total		Net assets acquired		Intangible assets - customer relationships		Intangible assets - software		Goodwill
			£'m		£'m		£'m		£'m		£'m		£'m		£'m
Agriteck	TIC		0.2		0.3		0.5		(0.1)		0.3		-		0.3
One Price	TIC		0.1		-		0.1		-		-		-		0.1
Integral	GRC		2.7		0.2		2.9		0.3		1.3		-		1.3
Cylix	GRC		1.1		0.2		1.3		(0.3)		0.8		-		0.8
Musketeer	TIC		4.3		0.3		4.6		1.4		1.6		-		1.6
ACL	TIC		7.0		0.1		7.1		(0.4)		4.4		-		3.1
Healthwork	GRC		16.0		3.0		19.0		1.1		8.9		-		9.0
Cater Leydon	GRC		2.0		0.5		2.5		(0.5)		1.0		-		2.0
CQC	GRC		0.6		1.4		2.0		(0.2)		0.5		0.5		1.2
Corestream	GRC		10.1		9.4		19.5		0.7		5.2		5.2		8.4
Barbour	GRC		1.0		-		1.0		1.0		-		-		33.7*
Santia	TIC		1.7		0.3		2.0		(2.2)		1.2		-		3.0
Total			46.8		15.7		62.5		0.8		25.2		5.7		64.5

*Includes Goodwill acquired with the business

8  Trade and Other Receivables

	Unaudited 30 September 2021	Unaudited 30 September 2020	Audited 31 March 2021
	£'m	£'m	£'m
Trade receivables	51.3	37.7	41.0
Less: provision for impairment of trade receivables	(2.2)	(1.8)	(1.9)
Trade receivables - net	49.1	35.9	39.1
Other receivables	1.4	0.8	1.2
Amounts due from contract assets	11.4	6.3	6.1
Prepayments	7.4	5.0	4.2
Contingent consideration receivable in less than one year	3.5	5.0	5.4
	72.8	53.0	56.0
Non-current
Contingent consideration receivable in more than one year	2.5	3.9	3.8
	2.5	3.9	3.8

Trade receivables are provided for based on estimated irrecoverable amounts, determined by reference to past payment history and the current financial status of the customers.

As at 30 September 2021, trade and other receivables includes amounts due from customer contracts of £11.4m (2020: £6.3m). Revenue is recognised based on contracted terms with customers, in accordance with a contract's stage of completion, with any variable consideration estimated using the expected value method as constrained if necessary. If a contract is in dispute, management use their judgement based on evidence and external expert advice, where appropriate, to estimate the value of accrued income recoverable on the contract. Actual future outcome may differ from the estimated value currently held in the financial statements. The outcome of any amounts subject to dispute is not anticipated to have a material impact on the financial statements.

9  Net debt

Analysis of net debt
	Unaudited 30 September 2021	Unaudited 30 September 2020	Audited 31 March 2021
	£'m	£'m	£'m
Cash at bank and in hand	58.8	9.4	44.2
Bank loans due after one year	(100.0)	(10.0)	-
Leases due within one year	(6.6)	(5.5)	(6.3)
Leases due after one year	(13.9)	(11.1)	(13.6)
Net (debt)/cash	(61.7)	(17.2)	24.3

10  Financial liabilities - Borrowings

	Unaudited 30 September 2021	Unaudited 30 September 2020	Audited 31 March 2021
	£'m	£'m	£'m
Current
Bank loans - secured	-	-	-
	-	-	-
Non - current
Bank loans - secured	100.0	10.0	-
	100.0	10.0	-

The bank debt is due to HSBC UK Bank plc and National Westminster Bank plc and is secured by a fixed and floating charge over the assets of the Group.  Under the terms of the finance facility the Group is required to meet quarterly covenant tests in respect of interest cover and leverage.

11  Called up share capital

The following shares were issued during the period:

	No. of shares	Share capital	Share premium
	'm	£'m	£'m
Balance at 1 April 2020	45.9	22.9	66.5
15 April 2020 - Marlowe 2016 Incentive Scheme Conversion	0.2	0.1	-
26 June 2020 - Subscription Shares	4.4	2.2	18.9
Directly attributable costs	-	-	(0.7)
15 July 2020 - Subscription Shares	4.0	2.0	16.9
Directly attributable costs	-	-	(0.6)
31 July 2020 - Employee Bonus Shares	-	-	0.2
8 September 2020 - Consideration Shares ("William Martin"	0.4	0.2	1.7
Balance at 30 September 2020	54.9	27.4	102.9
29 October 2020 - Subscription Shares	5.4	2.7	27.0
Directly attributable costs	-	-	(0.9)
7 January 2021 - Consideration Shares ("WPL")	0.1	0.1	-
4 February 2021 - Marlowe 2016 Incentive Scheme Conversion	2.1	1.0	-
19 March 2021 - Subscription Shares	14.5	7.3	92.8
Directly attributable costs	-	-	(2.7)
Balance at 31 March 2021	77.0	38.5	219.1
1 April 2021 - Consideration shares ("Law At Work")	0.2	0.1	1.0
Balance at 30 September 2021	77.2	38.6	220.1

12  Cash inflow from operations

	Unaudited six months ended 30 September 2021		Unaudited six months ended 30 September 2020			Audited year ended 31 March 2021
	£'m		£'m			£'m
Profit/(loss) before tax	1.6		0.6			(1.5)
Depreciation of property, plant and equipment	5.4		4.1			8.9
Amortisation of intangible assets	5.4		2.2			6.5
Net finance costs	1.2		0.7			2.6
Acquisition costs	2.0		0.6			2.2
Movements in contingent consideration	1.6		-			0.2
Restructuring costs	3.4		2.4			5.7
Legacy long term incentives	1.2		0.9			4.2
(Increase)/decrease in inventories	(0.9)		-			0.3
(Increase)/decrease in trade and other receivables	(7.2)		0.1			0.3
(Decrease)/increase in trade and other payables	(1.3)		8.7			2.6
Net cash generated from operations	12.4		20.3			32.0

13. Post balance sheet events

On 4 October 2021, the Group acquired Vinci Legal Ltd ("VinciWorks"), a provider of regulatory compliance eLearning and software solutions, for a total consideration of £53.8 million (net of cash acquired) satisfied by the payment of £38.4 million in cash on completion and contingent consideration of approximately £15.4 million subject to the achievement of certain performance targets by the acquired business for the periods ending 31 December 2021, 2022 and 2023.

On 5 October 2021, the Group agreed the acquisition of Hydro-X Group Ltd ("Hydro-X"), a provider of water treatment and air hygiene services, for a total consideration of £31.0 million (net of cash acquired) satisfied by the payment of £31.0 million in cash on completion.  The acquisition completed on 12 October.

On 6 October 2021, the Group acquired Sterling Hydrotech Holdings Limited ("Sterling Hydrotech"), a provider of water treatment and compliance services, for a total consideration of £1.3 million (net of cash acquired), satisfied by the payment of £1.0 million in cash on completion and a contingent consideration of approximately £0.3 million subject to the achievement of certain performance targets by the acquired business 12 months post acquisition.

On 8 October 2021, the Group increased its finance facility with HSBC UK Bank Plc and National Westminster Bank Plc. The total facility stands at £130 million.

On 20 October 2021, the Group acquired Riskwize Limited and its wholly owned subsidiary EssentialSkillz Limited (together, "EssentialSkillz"), a provider of eLearning and compliance SaaS, for a total consideration of £25.0 million (net of cash acquired), satisfied by the payment of £25.0 million in cash on completion.

On 20 October 2021 the Group announced the successful placing of 5,512,679 ordinary shares raising gross proceeds of £50.0 million

14. Related party transactions and key management compensation

Related party transactions

There were no related party transactions during the period.

Key management compensation

Transactions between the Group and key management personnel in the period relate to remuneration consistent with the policy set out in the Directors' Remuneration Report within the Group's 2021 Annual Report.

 

END

 

 

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