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With the price stabilising at £6, have to assume that the expectation of a deal is still being priced in. With run rate ebitda a min of £95m (£93m per June update + IMSM run rate), then the medium term target of £100m is just around the corner.
Have to assume therefore that if a tic deal is announced, a new 3-5 year strat plan will accompany it, potentially with an accompanying software deal (all conditional on the tic deal completing). Just thinking that it wouldn’t make sense to sell half of your business without clearly indicating what your next plans were.
So where does that leave the price probabilities? Well if they’ve been working on all those things I mention above for most of this year, then they will be committed to a deal, by this point. The price upside odds must therefore have shortened and with another positive agm statement in a couple of weeks quite likely, downside is minimised.
Anyone any thoughts?
Yes, fingers crossed. I would hope that they will issue a trading statement alongside the AGM (like last year), so we should get a trading update soon, too.
…Good point and fingers crossed.
Hopefully the recent deterioration in general market sentiment won’t complicate any concluding negotiations that may well be at the point of dotting i’s and crossing t’s !
Good news soon I expect.
AIMO
Given the key UK indices have all continued to pull back, the Marlowe price stability suggests the TIC deal is still there in the background, I guess.
Also, just wanted to flag that we have not had the AGM agenda notified yet (it’s scheduled for 13th Sept), which when compared to prior years is now quite close to the event. I may be reading too much into it but potential additional items on that agenda may hinge from a deal announcement? So by this time next week, for example, if there is still no AGM RNS then I think that this becomes more relevant as a flag that there is the expectation of a deal from the company’s point of view.
If it gets notified next week, say, then fine, we can just cross it off the list of bits of info that might be a clue to a deal in the offing in coming weeks.
That is a fair call Stu. I don’t have any particular insight other than to say that if the sale has been on the stocks for a couple of months now, that clearly there are interested parties and DD will have been completed.
To reiterate, I think the CEO will get a deal done, it’s just down to the price (it has to be at a multiple greater than the pipeline of software deals otherwise it will not be accretive) and timing.
…Well , I believe it’s more a message for a potential buyer(s) than an update for shareholders.
That message, don’t expect to get TIC on the cheap and do expect to be in competition!
AIMO
Yes i agree but why & why now ?
They have no obligation to make such a RNS statement.
AIMO
I may be reading more in to the wording used, but haven't they just all but confirmed that they are evaluating it as an option (but no decision can be guaranteed to come from it)?
Strange timing!?
I’ve not noticed any further or increased speculation since the Sky article .
Have i missed something or is there another reason for the RNS?
AIMO
Meant to say, for context, they held 5.3m shares in q4 last year and must have trimmed their holding in the early part of this year to c4.7m, so a positive sign that they are looking to build again up to 4.8m.
Good to see Standard Life increasing by 80,000 shares from 4.92% to 5.00%
The price continues to move up nicely on low volume, which (with the benefit of hindsight) is exactly what happened in early June before the Sky news article was published.
Feels like this move could be a blend of the inflation/interest rate Uk smaller cap trade, potential TIC deal increasing in likelihood as a result, and also return to higher growth following the IMSM deal.
Anyone have any other thoughts?
Golden - Just putting the Tic deal to one side for a moment, where is the business currently ? Well net debt at mar 23 was £160m and m and a has totalled c£30m since. Take 1/3 of a year fcf off this, say £13 m, leaves net debt at £177m: so 1.8x leverage. They are clearly comfortable operating at 2x.
Listening to the results replay, iso is now ticked off the m and a list (although they state as being a fragmented market, so we must expect new bolt ons to IMSM?). The 2 other areas they mention as new verticals are food safety and cyber security. Organic firepower for this FY therefore would appear to allow similar size EV deals for both of these new verticals, so I think we should expect this over the next 8 months.
Any thoughts?
Good work; it is pleasing when it comes together like that! Well with the benefit of hindsight, the bounce off £4.8 last week may have been something to do with this deal, in addition to the inflation report (or maybe people getting wind of your purchase!).
Either way, like you say, I feel a tic deal is in the making - if small private businesses like IMSM are being bought for over 9x, then a £300m revenue fully fledged division is going to go for 13x or 14x at least - just comes down to the financing…..
I get you and agree
Glad I bought back the shares I sold at 590p. For once i timed it rather well. Well one of the two I sold at 590p and then three days later it was 670p. But I timed the bottom one! Ha
Yes - we just have to be patient. Sorry - I meant re it’s locked in for a period and in equity, not just cash. Is probably good for the management too, as they should see a strong return in 2 years
The consideration shares are paid today. They aren’t part of the deferred. The deferred is the final cash element
But I agree it’s brave to make a deal at an EV above your own. We should have seen this coming the annual report flags iso a number of times as an area of interest
Exciting times hopefully around the corner!
Yes agreed re the TIC deal. The headline EV for IMSM 9.2x - much higher than Marlowe as a whole (currently c6.5x)
On this particular deal, I like the partial move away from cash in the earn out. I also think it is worth noting the proven revenue growth Marlowe can add to acquired businesses from a software angle. For example, the deferred consideration now being allocated to Corestream over and above what was expected in the 2021 deal RNS implies a significant increase in earnings expectations (the def con - all cash -is bigger than the initial consideration). Having some def con in equity for IMSM is therefore a positive
A new GRC deal. An expensive deal like this confirms for me that TIC is as good as sold (subject to debt markets)
The cash out on this deal is high so they must be fairly confident there’s a chunk of cash coming back their way soon
Yes, as the market leader this is good news. With the OH acquisitions now nearly integrated, I would expect an investor day later in the year, so we can more fully understand the benefits.
The volume has remained well above average for 5 sessions now, so people clearly buying the potentially more favourable inflation/interest rate expectation and the likelihood that this may unlock a PE deal for TIC….
Https://www.gov.uk/government/news/new-plans-to-boost-health-in-the-workplace-to-keep-people-in-work
Consultation to start. 12 months from now could be a huge win for industry leader Marlowe!
Yes, agreed, just need to be patient for the TIC deal.
The AI piece I have pasted below; it’s from Corestream on LinkedIn:
AI continues to be the hot topic. We were an early adopter at CoreStream but focused on a single use case we knew would add value to our clients and partners; evaluating how effectively controls are written in relation to the risk they are mitigating.
Fast forward almost two years and we are about to undertake a pilot with Google, looking at AI powered content search of policy, procedure and process content, and the ability to scour the internet to provide a view on emerging risks for our clients and the third parties they work with.
Alongside this, we recognise the risks of adopting AI in a commercial setting, both in GRC activity and beyond. In response to this, we are launching our "AI Risk Manager" that supports organisations in detailing, assessing and continuing to monitor AI models they have in use. Models can be associated with Risks, Controls and a benefit analysis to justify the increased risk exposure when utilising AI. More on this soon, but please do reach out to discuss or arrange a demonstration.
Huge volume at todays close
If inflation heads down then PE will be able to access debt and the TIC sale will happen
Can you share a link to the news you suggested?
2 days of big volume following the inflation data. A number of small cap fund managers suggesting we could be close to the inflexion point for aim (ref interest rate outlook driving by prices).
On other news, noticed that Corestream have signed an AI pilot with Google - clearly they are looking to focus on this more and I will be interested to see what Vinciwork’s plans are to embed AI further in e-learning.
Looks like you just called it! Lots of trades in the last 90 mins for sure - let’s hope that tic deal pops up next week….(ever the optimist)