Trading Update

Marlowe PLC

22 May 2024

 

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.

22 May 2024

Marlowe plc

Update on Divestment, Capital Return, Board Change and FY24 Trading

Launch of Share Buy Back Programme

Marlowe plc ("Marlowe" or the "Group"), the leader in business-critical services, provides an update on the sale of certain Governance, Risk & Compliance ("GRC") software and services assets (the "Divestment") for an Enterprise Value of £430 million, initially announced by the Company on 22 February 2024, and a trading update ahead of the Group's full year results for the year ended 31 March 2024 ("FY24").

• £430 million Divestment now expected to complete on 31 May 2024, with all necessary regulatory approvals now received.

• Marlowe to return up to an increased £225 million of proceeds of the Divestment to shareholders by way of special dividend and a share buy-back programme announced today:

o  £150 million special dividend, equating to £1.55 per share¹; and

o  Up to £75 million share buy-back to be launched on payment of the special dividend

• The Group made good financial and strategic progress in FY24, with trading in line with market expectations².

o  Revenue for the Group's continuing operations is expected to be £292 million and £111 million for Testing, Inspection and Certification ("TIC") and Occupational Health ("OH") respectively.

o  Adjusted EBITDA for continuing operations is expected to be in the region of £49 million, including the allocation of certain head office costs to discontinued operations.

o  Net debt excluding lease liabilities ("Net Debt") is expected to be in the region of £177 million, less than market expectations, reflecting strong cash generation and working capital improvements in the second half. This compares to Net Debt of £193 million as at 30 September 2023. Net cash on completion of the Divestment and following settlement of transaction costs is expected to be approximately £230 million.

o  Following the completion of the remaining integration programmes across TIC and OH by 30 September 2024, no further integration costs are expected in H2 FY25.

• Marlowe's primary focus in the near term remains on driving margin enhancement and organic growth within its highly attractive and defensive compliance service markets, where the Group will continue to display highly attractive cash flow characteristics which will be redeployed either through additional returns of capital or through bolt-on acquisitions

¹Based on the Company's issued ordinary share capital of 96,857,631 ordinary shares as at 30 April 2024.

²Company compiled consensus of £397.4 million and £47.2 million of revenue and adjusted EBITDA respectively.

Kevin Quinn, Marlowe's Executive Chairman, commented: 

"I am pleased to announce the return up to £225 million to shareholders and to report the financial and strategic progress that Marlowe made within the year, particularly our strong cash generation in the second half.

The recently-announced divestment clarifies the Group's forward strategy in the highly attractive and regulated compliance service markets and our focus on consistent organic growth, margin enhancement and the disciplined allocation of capital."

Update on the Divestment and Capital Return

Completion of the Divestment was subject to certain regulatory approvals. With approval for the Divestment now received from each of: (a) Financial Conduct Authority; (b) Solicitors Regulation Authority; and (c) Secretary of State for Department of Business, Energy and Industrial Strategy under the National Security and Investment Act 2021, completion of the Divestment is now expected to take place on 31 May 2024.

As previously announced, Alex Dacre will today be stepping down from the Marlowe Board. He will remain an employee of Marlowe plc until completion of the Divestment.

Following completion of the Divestment, the Board intends to return up to £225 million to shareholders via a £150 million special dividend (the "Special Dividend") and a share buyback programme of up to £75 million (the "Programme" and, together with the Special Dividend, the "Return of Capital").

Details of the Programme, to be launched following completion of the Divestment and on payment of the Special Dividend, are set out below.

The quantum of the Return of Capital and the mechanisms in which to do so are based on the following:

• After relevant adjustments including estimated transaction costs, settlement of certain transaction-related liabilities and earn-outs, reorganisation and separation costs, the Group expects net Divestment sale proceeds to be c.£405 million.
   
• On completion of the Divestment and after taking into account, inter alia, of the entirety of the Group's existing debt facilities, the Group expects its net cash position to be approximately £230 million.
  
  
•  The Group's continuing operations, which comprise the TIC and OH businesses, occupy large and attractive regulated markets, deliver largely recurring services and, now that restructuring programmes are concluding, are highly cash generative with strong organic growth and margin expansion prospects. Accordingly, the Board believes there exists a material mismatch between the Group's current share price and underlying value, and that share buybacks present an attractive route to generate shareholder returns.

FY24 Trading Update and Future Strategy

Marlowe made good financial and strategic progress in FY24, with trading in line with market expectations.

The Group's expects to deliver revenue from continuing operations of £292 million for TIC and £111 million for OH, with FY24 adjusted EBITDA for continuing operations expected to be in the region of £49 million, including the allocation of certain head office costs to discontinued operations.

Net Debt at 31 March 2024 is expected to be in the region of £177 million, less than market expectations, reflecting strong cash generation and working capital improvements in the second half of the year. This compares to Net Debt of £193 million as at 30 September 2023. Net cash on completion of the Divestment and following settlement of transaction costs is expected to be approximately £230 million.

Integration programmes across TIC and OH and associated restructuring investments are progressing well and are expected to have been concluded by 30 September 2024, in line with relevant schedules.

In addition, the Group announces that OH has secured more than £10 million of recent contract awards which have or will commence over the next 12 months, mitigating the previously announced short-term volume impact of the insourced client loss in H1 FY24.

Marlowe's primary focus in the near term remains on driving margin enhancement and organic growth within its highly attractive and defensive compliance service markets, where the Group displays highly attractive cash flow characteristics which will be redeployed either through additional returns of capital or through bolt-on acquisitions.

In addition, and following the completion of the remaining integration programmes across TIC and OH by 30 September 2024, no further integration costs are expected in H2 FY25.

Launch of Share Buyback Programme

The Group announces that, on completion, it intends to return up to £75 million to Group shareholders by way of on-market purchases of ordinary shares of 50 pence each in the capital of the Company ("Ordinary Shares") under a share buy-back programme (the "Programme") pursuant to the authorities obtained at the Company's last Annual General Meeting held on 13 September 2023 (the "AGM").

The Programme will be funded from the Company's existing cash resources and is intended to reduce the share capital of the Company.

Pursuant to the buyback authority granted at the AGM, the maximum price which may be paid by the Company per Ordinary Share pursuant to the Programme shall not be more than 5 per cent above the average middle market quotations for an Ordinary Share (as derived from the London Stock Exchange AIM All-Share List) for the five business days immediately preceding the date on which such share is contracted to be purchased.

Share purchases will take place in open market transactions and may be made from time to time depending on market conditions, share price, trading volume and other factors. The Company has appointed Cavendish Capital Markets Limited ("Cavendish") to manage the Programme on its behalf on a broker-managed basis, with trading decisions taken independently of, and uninfluenced by, the Company. There is no certainty that the Programme will be completed and it may be paused at any time if deemed appropriate by Cavendish with respect to market conditions.

The Company is not in a close period and currently has no unpublished price sensitive information.

The Programme will commence upon payment of the special dividend and will, unless terminated at an earlier date, expire on the earlier of the completion of the Programme or at the conclusion of the 2024 AGM (the "Expiry Date").

Marlowe intends to cancel all of the repurchased Ordinary Shares. Purchases may continue during any closed period to which the Company is subject to from the date of this announcement to the Expiry Date and any market purchase of Ordinary Shares pursuant to the Programme will be announced no later than 7.30am on the business day following the day on which the purchase occurred.

The Company has determined that it will not rely on the safe harbour conditions for trading set out in Article 3(2) and Article 3(3) of the Commission Delegated Regulation (EU) 2016/1052 (which forms part of domestic UK law pursuant to the European Union (Withdrawal) Act 2018) given the limited liquidity in the Ordinary Shares and limitations that the conditions would impose on the number of Ordinary Shares that can be purchased and, as such, the Company may (a) purchase Ordinary Shares at a price higher than the higher of the price of the last independent trade and the highest current independent bid for an Ordinary Share, and (b) purchase on any trading day materially in excess of 25 per cent of the average daily volume in the 20 trading days preceding the date on which the purchase is carried out.

As at 30 April 2024 the Company's total issued share capital consisted of 96,857,631 Ordinary Shares, with one voting right per share. As at this date the Group did not hold any Ordinary Shares in treasury.  Therefore, the total number of voting rights in the Group is 96,857,631.

For further information:

Marlowe plc
Kevin Quinn, Executive Chair		www.marloweplc.com
Adam Councell, Chief Financial Officer		Tel: [phone]
Benjamin Tucker, Head of Investor Relations
Cavendish Capital Markets Limited (Nominated Adviser and Joint Broker)
Ben Jeynes		Tel: [phone]
George Lawson
Investec Bank plc (Joint Broker)
Henry Reast	Tel: [phone]
Oliver Cardigan
FTI Consulting
Nick Hasell	Tel: [phone]
Alex Le May

About Marlowe plc

Marlowe is a leader in business-critical services which ensures compliance with strict regulations and insurance requirements across Fire Safety & Security, Water & Air Hygiene and Occupational Health. The Group has a national footprint and serves over 30,000 customers across office complexes, high streets & leisure facilities, manufacturing plants and industrial estates, and include thousands of SMEs, local authorities, facilities management providers, multi-site NHS trusts and FTSE 100 companies.

 

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