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Unfortunately we’ve just sold the part of the business that does this
There was a useful new compliance article this week on the website of NWT (Newmark Security) subsidiary company Grosvenor Technology:-
"Compliance as a Catalyst: How Regulations Shape Our HCM Solutions
In today’s rapidly evolving digital landscape, compliance with data protection laws has become ever more vital."
http://www.grosvenortechnology.com/insights/compliance-as-a-catalyst-how-regulations-shape-our-hcm-solutions/
Another significant volume day. Noticed that one of the shorts reduced marginally (c.40k shares) yesterday. The market is still very strong so surely a positive outlook statement is becoming more likely. Can’t be too far off some news now - they would usually issue final results in the next 6 weeks but I would imagine they will do a deal update rns first
Yes, true re the funds selling, if a buyback. I’m working on the assumption that if trading is at least in line with prior guidance, then there should be a reasonable re rating upwards, given the overall market has picked up.
Ideally, one of the potential TIC acquirers from last year may resurface with a bid, as the financing environment and interest rates outlook is much clearer than mid 23. We shall see I guess.
With the high volume though and the business changing fundamentally I think funds will just sell into the buy back. It also gives some of the shorts wiggle room
All my shares are in an ISA. I think you’re right though that it will be buy back as Lord Ashcroft won’t want to have a big tax bill
Fair enough. I want all buyback as will just have to pay tax on non-Isa divis above the threshold. I expect (hope!) it will be mostly buyback with smaller element of divi
Good points. I noticed this the other day when the short interest also increased
I think the market is perhaps having a bit of mistrust re the TICC business given that’s where all the restructuring costs have been sitting
Just needs a few good updates. I hope the cash return is a divi and not a buy back
Every day this week has seen very high volume (1-2% of float) per day. We can’t be too far off a trading update, deal update and potential new CEO announcement.
Have also noticed that Marlowe has lagged the wider rally on Aim, small cap and 250 indices of late, so would have thought a reasonable re rating should occur post the update.
Customer means corporate accounts. Each corporate can have hundreds or thousands of employees so your KPI need adjusting just a touch
Captain jumps ship with GRC software and service assets, acquired by private entity.
OH lost one major customer, more to follow?
No CEO in place.
Smelly, Smelly, Smelly.
Who is to say £150M will be returned to shareholders in cash?
Are share buy backs not an option?
"Our services are delivered, often through multi-year contracts, by some 900 occupational health clinicians to over 3,000 customers."
It is not hard to see that this means there are about 3 and a third customers per clinician. Are these clinicians full time amployed? Is this efficiency of human resource? Can anybody please explain above.
The institutions will presently be buying shares to eliminate their short positions. Who are going to be the buyers once the positions are closed?
Continuing small bolt ons in TIC likely I would suggest given the £60m ish war chest. Although I agree a period of organic growth, clean financials and cash generation would probably help with the rating, accretive bolt ons should generate value long term. I think there is quite a bit of margin upside on the TIC side also - which they also call out in HY results. Operating margins should be comfortably double digit in that business and were only 9% in H1.
PTSG did 20%+ EBIT margins, and ultimately was bought for c.16x EBITDA back in 2019. Different market now though!
Having said that I do think there is a more than reasonable chance the TIC and OH bits get sold now that Dacre is moving on. Possible there is fire where there is smoke re the earlier rumoured c.£300m TIC disposal...
Great summary. Not sure how much of an impact the OH contract loss was but think it’s a dent
This just need a few good quarters to get confidence back in these two core businesses but I’d be happy to see them sold for the values below
Annoyingly my first tranche of shares was 750p(ish - and I’ve averaged down now). But valuations I don’t think will come back for a while
Was in London today with a PE fund. They were not very positive on Marlowes M&A team so I’m hoping it’s organic growth for the short / medium term
Felt compelled to post (first time!) as quite a few different figures flying around for the remaining biz, including from their house broker. My take below. All figures are co adjusted and public:
1) The sold biz did £31.4m EBITDA in FY23 as per the RNS. As others have pointed out this means the £430m consideration is c.13.7x trailing multiple, and lower on current year numbers - it probably did £16-17m most recent HY, and a recent £20m bolt on IMSM, so FY24 probably £34-35m. An OK price in these markets, but not knock out. Note the £31.4m was 38% of FY23 Group EBITDA (£82.7m) which tallies with the c.40% that the RNS states.
2) This means the remaining OH biz did £20.1m EBITDA in FY23, because the total GRC division did £51.5m (ie 51.5-31.4). Commentary in the HY results suggest some margin pressure in H1, but they grew single digits organically, noted a strong pipeline and expect margins to increase through 'significant' synergies going forward. Seems a business in decent health, excuse the pun. For more info on it, there is a pres on their website from 2022 when they acquired Optima Health (£11m EBITDA for £135m). Total OH EBITDA for Marlowe at this point expected to be £19m post synergies. They subsequently acquired TP Health for c.£15m for £1m pre-tax profit. So the £19m + £1m triangulates well with the £20m EBITDA I think OH did last year, although it seems they are behind in terms of getting further synergies from integrating the various bits.
[LINK REMOVED]
3) Which leaves the TIC business, which did £36.8m EBITDA last year, £19.3m in the most recent HY, and they are growing organically (6% pa) and completed 4 bolt ons , which suggests H2 will be better than H1, ie for this year TIC probably does about £40m EBITDA.
4) Central costs running at £6.5-£7.0m pa assuming no cost out post divestment. Means Group EBITDA this year at least £53m. Although CEO is moving across and business 30-40% smaller so there should be cost out here.
5) House broker (Cavendish) up until recently had forecast of £92.5m EBITDA for this year. If you ex out a rough £35m for the sold biz you get £57.5m EBITDA for this year. I wonder if this has been trimmed a little, but this suggests my £53m is conservative mainly due to growth / M&A / margin improvement to come in H2. I think £55m for this year (y/e March( is about right. Cav had £97m for next year (FY25) which we are almost in, and I'd suggest this is a better basis for valuation; ex the sold business I think this would be roughly £57-60m for TIC & OH.
Putting it together I agree £700-750m total value is well underpinned by the remaining businesses and the cash on the balance sheet post deal. Cash c.£205m, OH at 10x is £200m+, TIC at 8x is £320m+ = £725m+. I'm long obviously, and considering adding as I think 40-50% upside should be realised in short term once market cottons on, or if previo
Morning, the 16.2 multiple is cash ebitda, which falls to 13.7x on an accounting basis (which is comparable to the numbers Marlowe publish). Working that back explains the difference you reference.
Thanks for the £710m EV - yes broadly looks about right to me, too.
Will be interesting to see if the other shorts close now. Presumably their investment case has gone ie there’s no fundraise risk now?
Tbh over the weekend I thought about this deal and tbh it stinks. I think we’ve been desperate sellers and Alex has stolen some jewels for a song. Ideagen bought for £1bln I’d have liked to have seen a bit more for this division
The 16.2x implied multiple means a £26m EBITDA. Last year this division did £50m so I’m keen to understand the bridge. As far as I can see £8m capex deducted means OH must be £18m EBITDA. That feels about right?
If you backward solve it the other way it also seems to work. Obviously OH lost a large contract recently so maybe £15m EBITDA is now the run-rate
£150m divi + £60m cash + £150m OH + £350m TIC gives £710m EV which should be mcap given no debt. Any discount now is presumably the markets concern around TIC (quality of earning due to large integration costs) and the OH business (as it lost a large customer)
A good update and this should recover the discount. Even better is everything is sold
Today's rise is not to do with yesterday's big news,but rather shorts having to buy back many shares as they were caught out by yesterday's announcements
Agree. Alex was the key driver of the strategic vision and growth and with him gone, a new CEO (basically a corporate manager) would have no skin in the game and would be focussed on running for cash, dividends etc. As a stock, I think this has now gone ex-growth (no new platforms, cross sell between OH and TIC being fairly low, like you say), so the multiple will be lower? We still have a 5% CEO stock overhang, at some point, too?
I think they should get both businesses running sweetly, with all integrating finished, and then look to sell. Certainly I will be holding to see how this plays out in the coming months.
Blackrock got stung it seems. Increased on 20th and 21st! They have now unwound their short (or below the threshold). The issue for the short is 1) not much liquidity in the stock and 2) they will have to have cash on hand to pay the divi!
Still more shorts to close and hopefully they do. No reason why this business can’t be double the size as a standalone TICC business. Let’s get OH sold to a PE firm. The two don’t fit together
That’s how I see it!
Mcap is c.£500m of which £150m is cash. There should be about £60m of cash which is (cash the business already had, £30m and what’s left from the £405m after divi and debt paid). So of £500m you’ve £210m of cash!
That leave the remaining businesses which shouod push out £50m of EBITDA and £40m of FCF valued at £290m. That’s clearly not right
OH businesses trade at 10x multiples so if you carve that out the TICC element is pretty much valued at £150m! Given what Inflexion paid for Phenna group that’s clearly not right
Shame Inflexion didn’t buy the lot
£1.54 a share dividend I worked out?
Hope that’s correct.
£150 mill divided by 96.775 million shares .
With £150 million set aside for share holders.
This would seem a great entry price .
Clearly a lot of profit taking here to be expected for those that need to release funds.
Sorry my numbers were wrong. TICC EBITDA is c.£40m so it’s c.£32m of FCF
£40m on a poor 8x EBITDA multiple is £320m. £75m of cash and £150m for OH. £545m
I think this shows shares are undervalued here especially as that FCF builds and builds