Episode Transcript
Joanna: Hello, and welcome to another episode of the London Stock Exchange's Be Inspired series. In this series, we speak to CEOs, founders, and senior leaders of companies listed on London markets and ask them to share their journey with us. We explore how being a listed company has helped the business become what it is today.
I'm Joanna Trupp and I'm Head of Spark Live. Today, I'm joined by Alex Dacre, CEO and founder of Marlowe PLC, which listed on AIM in 2016. Alex, thank you so much for joining us today.
Alex: Great to be here.
So Alex, can you tell us a little bit more about the services and software that Marlowe provides?
So Marlowe is a leader in business critical services and software which assure regulatory compliance for our customers.
So businesses of all shapes and sizes across the country have a whole load of regulation that they need to, comply with from the Health and Safety at Work Act through to the Employment Rights Act, the Fire Safety Reform Order. And we've assembled a group of services, and software products which help our customers to address those regulatory requirements.
To give you a few examples, within compliance software, we deliver enterprise risk management, solutions, which our customers use as very sophisticated risk registers to manage, and get control of all the operational risks across their organization. Our health and safety software business is used by large organizations to manage their health and safety obligations.
Our employment law advisory business provides support and advice around your employment law obligations. Our occupational health business provides services to ensure the health and wellbeing of your staff. And then on the other side of the business, on the tick side of the business, our fire safety, and water treatment businesses, provide services to ensure that your fire safety standards are in line with, compliance regulations and that your water safety, standards are compliant as well.
Joanna: Why did Marlowe choose to focus on compliance?
Alex: So compliance, is a brilliant ingredient that has been core to, to the strategy since the beginning. It leads to, non discretionary demand for our services. So if you think about the regulation, that is dictating the need for our services, this is mandatory, it's not optional, and organizations have a responsibility to, make sure that they have measures in place to comply with those regulations throughout the economic cycle. As a result of that, we have a very high degree of recurring revenues. About 85 percent of what we do recurs from year to year. So we have very strong, visibility, on our future, revenues.
So we decided to focus on these markets because not only are they growth markets, and they're growing at, increasingly attractive rates, but they're also defensive, and resilient markets, that are increasingly important and increasingly relevant to our customers.
Joanna: So Alex, can you tell us a little bit more about the history of Marlowe and how have you used acquisition to accelerate your growth?
Alex: So organic growth in our last financial year was running, at 10 percent, and it's consistently been in the high single digits, historically. That's a level that we think we can maintain going forward. I'm going right back to the beginning of Marlowe. We formed a business in 2016 as a cash shell, and started pretty much from a blank canvas. We identified the compliance market as the one that we wanted to go after we were attracted to the high levels of recurring revenues, attractive margins a large addressable market. So across our 6 or 7 business segments.
We have about an eight billion addressable market opportunity to go after. So there's major runway for future growth. And we were also attracted to the fragmented nature of the market. So there is literally hundreds of, small and medium size and larger, businesses in our market. So as a marketplace that lends itself to a strategy that, that mixes organic growth with selected acquisitions, it's highly attractive. And over the years, I think we've conducted about 85 acquisitions. So each year we've sort of done 10 or 11, acquisitions. And that's been a brilliant route to deepening our scale. And to broadening our compliance capabilities into new areas of the, compliance service and software, landscape.
Joanna: And Alex, how have you set up Marlowe to integrate the acquisitions?
Alex: So when we, acquire a business. Long in advance of the acquisition, we've developed a detailed integration plan. That's been, developed by our divisional management team, supported by their integration teams. And at the point of acquisition, we will then begin implementing that integration program.
That could take anywhere from 6 months up to about 12 months, depending on the size and the complexity, of that integration program. Because we've done it many times before now, as I say, we've done, around 85 acquisitions. Those management teams and those integration teams, have a lot of experience of how to drive effective change, how to drive effective integration programs, and how to avoid the pitfalls that integration can, sometimes present.
Joanna: Can you tell us a bit more about the medium term vision for Marlowe?
Alex: So we, I mean, we are, and we want to be a leader in compliance services and software.
So we want to be providing a closely, related range of services, and software products. that address all of our customers, compliance requirements. We, we're turning over about 500 million now. That was our FY 24, medium term financial target. So we've, achieved that target, slightly ahead of schedule.
And by the end of this financial year, we have a target in the market to get to a hundred million of EBITDA on a run rate basis. And we expect to achieve that target. Once we've got to those, targets, I think it's likely we will look to, set out new guidance, to the market, as to what we think's possible for the next stage of our development.
Suffice to say, there is a very significant market opportunity.
Joanna: And how have you achieved 10 percent growth in FY23, which is much faster than the market?
Alex: Yeah, indeed. So organic growth is clearly a key focus, of our strategy and all of our management teams. And one of the big advantages that we have as a group is that, both of our divisions and, our various business segments, often share a very similar channel to market.
So we tend to be selling to, health and safety directors, compliance officers, sometimes the HR director, sometimes the facilities director, but in the majority of cases, the individual that we're, selling our services to, is responsible for making decisions about a range of the other services that we provide, as a group. As a result of that shared channel to market, we understand what that customer cares about. We can implement similar ideas and methodologies to the different parts of the group, but also we have the ability to cross sell those different services, to that same customer through that same channel, has just been excellent service levels.
So in these markets, people are buying compliance, they want peace of mind. And if we're delivering very high compliance KPIs and achieving very high service outcomes, for our customers, and if our software products are, very well invested, and are, lowering risk and improving compliance standards for our customers.
Our customers tend to be happy, they stick with us for longer, and they often, spend additional, elements of their budget with us on other, services that we can provide. So
Joanna: Alex, can you tell us a bit more about your strategy for growth?
Alex: We've distilled, our growth strategy into four main buckets.
That we refer to as deepen, broaden, strengthen, and digital. Deepen, is focused on adding additional, scale, and market share in our six existing business lines. And we'll do that both organically, but also through selective further bolt on acquisition. In addition, we are looking to selectively broaden our capabilities into new areas of the compliance landscape.
There are other selective, compliance markets that we could potentially look to move into in future years. Something like cyber security, sustainability, potentially food safety, could be a market that our customers would see a lot of commercial logic if we were to potentially expand into that segment via an acquisition.
The next element of the strategy, is strengthen. And strengthen is probably the key element of the strategy. This is about driving effective integration programs. It's about driving cross sell. It's about driving organic growth. And also crucially, it's about expanding our margins. So our divisional EBITDA margin, At the moment is around 19%.
If you go back a few years, that will have been at least a few percent, lower than that. And we've managed to expand those margins as a result of, effective integration. And the final element of the strategy, we refer to as digital. And in about 2018, we decided that we didn't just want to be a leader in compliance services, but we also wanted to be a market leader in compliance software.
And we've made really strong progress with the delivery of that strategy, but there's a major, major future opportunity too. By delivering this blend of, SaaS applications, digital products and services, we can achieve much higher compliance outcomes for our customers.
Joanna: Well, Alex, thank you so much for joining us today and sharing your story with us.
Alex: Thank you very much.
Joanna: To learn more about the Be Inspired series, please visit lsegissureservices.com/spark
