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I’m probably slow to spot this, as am sure you industry people will know more, but just noticed that Inflexion PE set up a new vehicle, Celnor, to invest in TIC businesses in October. I noticed their exec team includes the M&A director (until Oct 23) for Marlowe.

Looks like Celnor aren’t focussed on Fire and Water but can’t see why they wouldn’t be interested in Marlowe? Also, clearly indicates there is no current/expected Tic M&A by Marlowe?

FYI inflexion own Alcumus (direct competitor of Marlowe in grc).

Any thoughts anyone?

Ah ok, I misunderstood your earlier message, apologies. I thought you were saying that a fall against the rise of the aim market over the last week or 2 was because there was rumour in the last week or 2 that a TIC deal was off. Whereas you are saying it’s just general debt and interest concerns.

I agree re the rate cycle. Markets pricing in the first cut in H2 24 feels too late. I think the data will weaken through to the end of the year sufficiently that markets will price in an earlier cut.

Interims are due at the end of the month or so. Not sure why the price is drifting at odds to the wider AIM over the last week. Interesting that you are hearing that the TIC deal is off; I remember you saying you had an industry contact.

I would imagine we are not too far off some strategic action and update of targets, given latest run rate numbers. Let’s see once the results are out….

Interesting that all 3 shorts are amending their positions this week and a net increase overall / more bearish view for longs like me.

Therefore, we have to assume they view a TIC deal as increasingly unlikely. From a financial and macro view, I understand this. However, I think strategically Marlowe will look for a deal.

In terms of potential impact on share price: By my numbers and assuming 14x for a deal, the shares would rise to £8.66 ( this assumes no upward revision to rating from having a rump business with net cash, software focussed etc). A no deal scenario and tough macro on the downside and the price could fall to £5 (mainly through multiple compression, not poor earnings numbers- I think earnings should hold in line).

So, potential 50% upside vs 20% downside in the next 6 months or so.

Been quiet on here for a while - anyone any views?

Key for me is the bank debt / covenants despite the maturity being long dated. Per the 22 auditeds, max permitted leverage covenant is 4.5x net debt to ebitda.

Given debt post deferred consideration will be c£200m, then ebitda can fall to £45m before they breach.

Given the operating leverage, will be waiting to see the q3 update in mid Nov and their guidance for the full year at that point, before taking a position.

If the guidance is maintained, I feel that this will rerate significantly.

If they maintain £100m ebitda guidance or thereabouts, then a 5.5x EV looks good value.

GLG short has just increased 80,000 shares to 0.70%.

Anyone know if they are increasing on any other small cap or roll up stories?

So a very high level trading update, with, unusually no detail around run rate info, strategy, cash flow etc. IMSM is the only acquisition made since FY results late June.

Therefore, my working assumption, like I’ve said before, is that a more detailed announcement re next strategy etc will be made following a TIC sale. Surely if a TIC sale wasn’t happening, then this would have been the opportunity to update the market as a bridge between June FY and Dec 23 interims?

Note the YouTube video posted on linkedin this morning re Phil Greenwood overviewing the TIC division. Given the timing of this, would suggest that they are not selling. They are clear to highlight they have big (£30m+ EV) deals to make in future, in addition to bolt ons

Looking forward to this week. Will we or won’t we get a TIC sale alongside an AGM statement…..

Agreed, the volume has increased significantly the last few days, so I suspect we are not too far away. AGM now 8 working days away, so quite possible that if there is strong trading, the price might rise in the 2-3 days before, regardless of the deal announcement.

Will wait and see….

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.

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.

Well it’s certainly looking like an interesting play from here. Like I said previously, it is even more relevant now for the company to reduce debt, with the market cap not too far north of net debt. A divi removal must be on the agenda. Albeit they did state net debt and cash flow were broadly stable in the July RNS.

However, shareholders must surely be pressing the management (or future CEO) to realise value via a break up? I’m sure this will feature at some point in the near future.

Am seriously tempted to take a position this week as anything other than poor results will hopefully see an uptick. A new CEO on Wednesday would surely kitchen sink as much as poss to be subsequently viewed as the white knight?

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.

It is frustrating Simon but I expect there is probably going to be some nervousness ahead of the results, week after next. Whilst that is understandable given the last announcement, there are potential positive catalysts alongside e.g new CEO and CFO announcements.

TBH, I will just wait for the results and decide from there, rather than run the risk of buying now.

Regardless of short term price movements, fundamentally the RM business alone is worth more than the current EV so I suspect a strategic review will accompany the new CEO announcement and therefore potentially another positive catalyst.

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?