Marlowe plc (MRL) Earnings Call Transcript & Summary

Good morning, all, and welcome to the Marlowe plc Half Year Results Call. My name is Adam, and I'll be your operator today. I will now hand you over to Alex Dacre, Chief Executive of Marlowe, to begin. So Alex, please go ahead when you're ready.

Good morning, and welcome to the Marlowe plc FY '22 Half Year Results Presentation. I'm Alex Dacre, Chief Executive. I'm here with Adam Councell, our CFO, who we are delighted to have joined the group earlier this year. I'll kick off this morning with a summary of our strong first half performance before Adam talks us through the numbers. And then I'll run through the major progress we've made on our growth strategy and explain why we're so excited for the future, before opening up to some Q&A. You'll hear this morning that we've delivered on each of the 4 key strands of strategy in the first half with strong organic growth and 12 acquisitions, deepening and broadening our compliance platform, while strengthening our operations via effective integration and expanding our margins. And you'll hear of the major progress delivering our digitalized strategy to become the market leader in compliance software. Marlowe is a leader in business-critical services and software, which assure regulatory compliance. Our 2 divisions, Governance, Risk and Compliance, and Testing, Inspection and Certification help companies to stay compliant with the constantly evolving regulatory issues that they face. And as a result of the regulations that drive our model, such as the Health and Safety at Work Act, Fire Safety Regs, or the Employment Rights Act. Over 85% of our revenues are recurring -- delivered as a recurring contract or a subscription. And this is in the context of our sharply focused strategy to deepen, broaden, strengthen, and digitalize our compliance activities, that we are very pleased to have delivered such strong financial, operational and strategic progress, the highlights of which you can see on Slide 4, which I'll talk you through now before Adam goes through the financials in more detail. Group revenue grew 61% to GBP 134.5 million. We now have current annualized run rate revenue of over GBP 335 million. We really have become a platform of scale. The benefits of that scale, operational and technological improvements, and the success of our integration programs can be clearly seen in the strong margin accretion we've delivered in the first half. Divisional adjusted EBITDA grew 300 basis points to 17.8%, and our current run rate is now 19%. Adjusted EPS grew 50% to 16 pence, thanks to the strong organic growth and significant acquisition-led growth. Organic revenue growth was 15%, and we estimate that underlying organic growth when adjusted for COVID was 8%, which is a continued acceleration reflecting strong levels of new business and cross-sales success, higher standards of service and compliance KPIs, reducing attrition, and the positive structural drivers that are supporting growth across our markets, such as increasing corporate and societal focus on ESG. We've made major progress building our software scale and delivering our digital strategy. We've now achieved our target of 10% of group revenue being generated from SaaS. We now generate over GBP 35 million of software annual recurring revenue and approximately 20% of group profit is now driven by software. We've become a major compliant software force in the market. What this all means is that we enter the second half in a strong position. And we recently announced we expect to exceed market expectations for the full year. We also expect to materially overachieve our 2024 target of GBP 100 million EBITDA. I now want to talk you through progress against our 3-year strategy. We have a clear growth strategy, which we set out at our CMD in February of this year. And this slide shows how we're delivering strongly on what we've set out. The Marlowe strategic vision is to deliver a one-stop approach to our clients' regulatory compliance needs. And the 4 strands of our growth strategy are digital, deepen, broaden and strengthen. Digitalizing our proposition to help customers monitor, analyze and enhance their organization's compliance, their governance and their performance. Deepening our presence in our markets, both organically and through further M&A to build on our leading positions. Broadening our capabilities and coverage across the compliance and business-critical service and software landscape. And of course, strengthening our group by driving organic growth, driving cross-selling, expanding our margins through effective integration programs and operational improvements. We said in doing this we would double group revenues to GBP 500 million and almost triple group adjusted EBITDA to GBP 100 million, leading us to achieve a 20% adjusted EBITDA margin, while delivering in excess of 90% cash conversion. And we were targeting a software ARR of at least 10% of overall group revenue. And in the 10 months since the Capital Markets Day, we've made significant progress on each of these fronts, achieving our cash and SaaS ARR targets and making major progress towards our 2024 financial targets. Our digitalized strategy has been our principal focus. It's been significantly advanced by the acquisition of some key GRC software platforms, including Barbour, CoreStream, VinciWorks and EssentialSkillz. Individually, these products are leading, but when taken together, they span regulatory data and information, enterprise risk management, compliance e-learning, and governance, audit and workflow tools. I'll go into detail about these specifically later in the presentation, but software is now over 10% of our revenue, generating GBP 35 million of ARR. Our software business is fast growing at 20% plus each year, and we see software acquisitions as a core part of our future growth strategy, too. We've also used our scale to invest in creating our own products. And the recent development and launch of ProSure 360 marks a significant achievement for the group by bringing a new supply chain assurance software product to market. Supply chain compliance is a key risk area and we design and build the product to help our clients qualify their suppliers via tech and verification with the ProSure accreditation. Key highlights of our deepen and broaden strategy include the acquisition of Healthwork in Occupational Health, which is given as a platform of scale and infrastructure to absorb our existing occupational health activities in a market which offers very attractive returns and is seeing increased demand from clients focused on their employee well-being. We continue to be active in our core TIC markets of fire safety and water compliance to adding scale and deepening our market share. Significant deals include the in-period ACL Fire Safety, which added about GBP 10 million of revenue, and the post-period GBP 30 million acquisition of Hydro-X, which added a further GBP 20 million of revenue. And whilst we execute our deepen, broaden and digitalize strategy at pace, our focus is always based on ensuring that the whole is so much more than the sum of the parts. This is our strength and strategy. Our integration playbooks and management expertise continue to unlock operational improvements and efficiencies post acquisition, clearly seen in our 300 basis point margin enhancement driven by effective integration programs, service delivery efficiency gains, increased revenue per day per fee earner and the high-margin nature of our GRC and software activities. The key integration milestone has been achieved with the launch of the WorkNest brand, consolidating all our legacy employment law and HR brands. We entered the market a few years ago, we built a business from around GBP 5 million of revenue to over GBP 35 million today via acquisition and effective integration. And our autonomous divisional structure with real strength and depth across our management team, supported by large dedicated integration teams allows us to undertake multiple integrations concurrently. It helps us to maintain the pace of our acquisition strategy, and it sets us up well for continued acquisition-led growth in the future. I'll now hand over to Adam to take you through the financials.

Thanks, Alex. I'm going to take you through a few slides covering the key financial highlights from the first half of the financial year. Starting with the financial summary. Revenue was up 61% on the prior year to GBP 134.5 million. The increase in revenue has been driven by a combination of organic growth and the impact of acquisitions made in both the current and prior year. Organic growth in the first half was 15%. However, this does include a normalization following the COVID-19 site access related issues that impacted the prior year in our route-based businesses, which sits in our TIC division. We estimate that once this is removed, underlying organic growth was still a strong 8%. At a profit level, we've seen operational margin improvement complement earnings-accretive acquisitions, which have driven up adjusted EBITDA, operating profit and adjusted PBT by 90%, 122% and 127%, respectively. Divisional EBITDA margins increased by 300 basis points to 17.8%. Towards the end of the last financial year, we completed GBP 100 million equity placing to fund future acquisitions, which we've been successful in deploying through the first half of this financial year. Despite the fully dilutive effect of the equity placing on the first half, the adjusted earnings per share has still increased by 50%. Lastly, net bank debt, that is debt excluding IFRS 16 leases, has increased to GBP 42.3 million, which left us with headroom to deploy capital in the second half of the financial year, which I'll come back to later on. In terms of divisional performance, our GRC division, which includes our employment law, HR, health and safety, occupational health, and eLearning businesses, has seen significant step forward in terms of scale. The attractive organic growth rate of 11% has been augmented with a successful execution of our acquisition strategy and resulted in division tripling its revenues to GBP 34.4 million. The EBITDA and operating profit have grown by 173% and 157%, respectively. The margin movement reflects the change of business mix in this division as it has grown in scale. The net result is a step change in the scale of our GRC division that has resulted in it contributing over half of the group divisional adjusted operating profit in the first 6 months. Our TIC division, which is primarily made up of WCS Group, our water and air business, and our Marlowe fire and security business performed well. The division did see a limited revenue impact in the prior year as a result of COVID restricting our ability to gain access to our customer sites. The overall organic growth of 16% of this division does, therefore, include an element of normalization against prior year. Total revenues in TIC increased by 39% to just over GBP 100 million. Adjusted EBITDA and operating profit increased by 56% and 92%, respectively. One of the key factors in this increase was the EBITDA margin improvement of 150 basis points, which has been driven by operational improvement and the ongoing integration of the acquired businesses. In terms of cash generation, the group consists of businesses that have strong underlying cash metrics. This is borne out by the 96% cash conversion of operating cash flow to adjusted operating profit over the last 18 months. The 18-month period is the clearest representation of our cash generation, as it eliminates much of the COVID-related timing differences around deferred payments to HMRC and working capital movements that originated in the prior year and unwound in the first half of this year. The attractive working capital characteristics of our business are clear through the net working capital percentage of revenue, which currently stands at 4%. This reflects the negative working capital characteristics of our GRC division blended with a positive model seen in the TIC division. In terms of the balance sheet, this remains strong as we continue to grow. Net assets have almost doubled in the last 12 months to GBP 266 million. Net debt at the half year, excluding IFRS 16 leases, was GBP 42.3 million. I'm just going to finish up with a short update on our current position. Overall performance in the first half was strong with acquisitions continuing at pace and operational performance highlights the continued integration, organic growth and margin improvement agenda. I'm pleased that this momentum has continued into the second half. Since the first half, we've successfully deployed GBP 96 million on earnings accretive acquisitions. This has been facilitated by the execution of GBP 50 million equity placing in October 2021. In addition, we have also extended our debt facilities to GBP 130 million in October 2021. This has been achieved through the continued support of our existing lending syndicate. In terms of our current leverage, we estimate that following these events, group pro forma leverage is approximately 1.6x on a run rate basis, excluding IFRS 16 leases. This position gives us further scope for capital deployment during the rest of the financial year. Our strong trading has meant that we have increased guidance for the current year, and we're now well ahead of the current run rate needed to achieve our medium-term targets. This has been driven by the pace at which we have reached our current run rate revenues of GBP 335 million and adjusted EBITDA of GBP 60 million. Now on that note, I'll hand back to Alex.

Thanks, Adam. Before talking to our M&A integration achievements and why we are at the forefront of ESG, I wanted to focus on the success of our Governance, Risk and Compliance division. We've transformed this business to become a one-stop shop for customers, and we're very well placed to go after this GBP 5 billion-plus addressable market. Over the last 3 years, we've built GRC into a leader in the U.K., and it now accounts for over half of our group operating profits. GRC encompasses our consulting and software solutions across governance, risk and compliance software, EHS software, health and safety, employment law and HR, occupational health and compliance eLearning. Our software platforms are used by clients to implement governance frameworks and to manage and monitor, audit and control risk, compliance and performance throughout their businesses. We provide a range of business-critical services from health and safety support, advice, risk assessments, governance advice on employment law, HR or occupational health issues. Enhancing the well-being of our clients' employees, and we train their people in relevant regulatory compliance standards via e-learning. Our services are delivered under 3- or 5-year contracts with subscription-based revenues. We now have a run rate revenue of around GBP 90 million and our strong organic revenue growth of 11%, which is supported by strong structural tailwinds for the type of services and software that we provide. In compliance, eLearning, the increasing regulatory burden is resulting in organizations allocating large compliance budgets towards improving the compliance of their workforce in areas such as health and safety, diversity and inclusion, anti-money laundering, DAC6, bribery and corruption and cybersecurity. In compliance software, we're seeing major demand from customers who are responding to drivers such as ESG reporting and governance requirements or the threat of fines from regulators for noncompliance. We deliver regulatory EHS data, which helps customers to understand the rules and how to implement their compliance regimes. We offer software tools for managing enterprise risk and policy management. We monitor and report on health and safety risks and incidents across premises and supply chains, and we can manage confidential employment law cases and HR compliance processes via our HR platform. Our employment law and safety offering provides specialist employment law and health and safety advice to U.K. companies. It benefits from strong structural drivers resulting in increased employment law legislation and employee protections and corporate health and safety legislation, all leading to an increased need for compliance. WorkNest and William Martin are our leading platforms in the provision of these services. And service and software is usually sold as a bundled solution, creating a really sticky and effective solution. We significantly reduce risk for organizations. A non-WorkNest client has a 91% chance of losing at an employment tribunal receiving average costs of GBP 15,000. A WorkNest client has only a 12% chance of losing. This saves our clients' money, it reduces their risk, and it creates a more compliant, productive and successful workplace. Another core part of our GRC division is our occupational health offering, which is growing very quickly. We identify the market as attractive and complementary to our health and safety and employment law consulting business and our broader GRC activities. The decision-maker usually responsible for procuring occupational health is often also responsible for employment law and HR. So having identified the significant potential this market offered, the substantial synergy with our strategy and the really attractive investment characteristics, we took the decision to build a business of scale. We've delivered on this objective over the past couple of years and the increased focus on employee mental health and well-being continues to drive really strong demand in this core market. Our digital plan and software operations are front and center and crucial to our future strategy. We're creating a holistic software solution for compliance from regulation tracking to the monitoring of compliance and governance actions, workflows and data. Our software is developed in collaboration with our consultancy businesses, such that it benefits from huge subject matter of expertise from leading industry practitioners. There are 3 key software products, which help to illustrate Marlowe's transformation in digital as we build the leader in compliance software. The acquisition of CoreStream, the leading governance risk and compliance platform, enables us to offer clients a complete GRC risk management solution. It strengthens our ability to support clients with their ESG objectives and support large organizations with their corporate compliance and risk management needs. The business has recorded continued strong growth in the period since acquisition with Software as a Service ARR currently 25% higher than the prior period. And Barbour joined the group in July following the GBP 32 million carve-out from Informa plc. It's the U.K.'s market leading EHS intelligence software platform. The deal significantly progressed our digital ambitions and broadened our capability such that we can now deliver access to regulatory compliance data, advice and insights to our customers on a subscription basis to ensure that they remain fully abreast of regulatory developments. For instance, a health and safety professional working for a large industrial firm, who wants to access the latest environmental regulations, would use the platform to access relevant data, advice, practical guidance and legal registers. Barbour is trading ahead of pre-deal expectations and has recorded its record sales month in the period since the acquisition. The post-period-end acquisition of VinciWorks for an initial consideration of GBP 39 million and the GBP 25 million acquisition of EssentialSkillz represent further major progress. A key focus of our digital strategy has been to develop scale and capabilities in the group's e-learning offering as clients' compliance training requirements become ever more complex in response to new legislation and workplace standards. The combination of Vinci, Essential, and the previous acquisitions of DeltaNet and Cylix make us a leader in this highly attractive fast-growth software market. A key part of Marlowe's growth strategy is M&A. In the half year, we completed acquisitions across both TIC and GRC and across both software and services. We have a strong record of both executing and integrating acquisitions. And over the next 2 slides, I'll outline our approach to both aspects and why we're confident we're well placed to consolidate our markets and continue to deliver superior returns for our shareholders. 16 acquisitions have been completed so far this financial year with 12 completed during the first half for an initial consideration of GBP 76.5 million, adding approximately GBP 11.4 million of adjusted EBITDA. We expect these acquisitions to achieve a return on invested capital of at least 15% within a year. We completed 3 software acquisitions during the half, which helped take our SaaS revenues to over GBP 35 million ARR. We completed 9 service acquisitions during the first half, in line with our deeper and broadened strategy to build leading positions and broaden our compliance activities. And we've completed further 4 acquisitions so far in the second half, deploying a further GBP 95.5 million. And looking forward, our M&A pipeline is strong. We have some 50 or so active conversations ongoing. Most of the deals we do are off-market. And our 7 strong M&A teams are constantly reviewing new opportunities. We've developed a reputation as a very attractive acquirer in our markets and potential acquisitions are attracted to the significant strategic value they can generate from joining our group. For instance, the fast-growth software business can accelerate growth further via access to our group-wide sales and marketing capability and our client list of around 50,000 customers. Key to our strengthened strategy is effective integration of acquired businesses. Our management teams are proficient in this field, and we're set up with 6 autonomous management teams and 6 well invested and scalable back-office hubs that are designed to effectively absorb further scale. Our integration playbook is well developed. Our management team, supported by dedicated integration teams, transition acquired businesses into our operating model. We remove duplicated overhead. We install common IT platforms, we consolidate properties, we implement our operating processes and merge service deliveries, generate productivity and efficiency improvements and group density, leading to improved gross margins and enhanced standards of compliance for our customers. With software businesses, we integrate compliance data via APIs. We share features across our platforms. We enhance development processes, improve the user interface, benefit from DevOps synergies and ensure a close collaboration between our product and software directors. A really clear example of our integration success is illustrated with the recently launched brand of WorkNest, which makes up about half of our GRC activities. This followed the Ellis Whittam acquisition, which we completed in November 2020, and the subsequent integration of 7 other businesses to form this operation. The integrated and rebranded business delivers a one-stop shop solution of subscription-based employment law, HR and safety consultancy and software. Ellis Whittam employed less than 100 people upon acquisitions. WorkNest now employs more than 400. The business benefits from 1 integrated back office, 1 leadership team, 1 finance team and 1 sales and marketing engine, which consists of 60 people, a really well-developed marketing engine covering content, SEO, campaigns and telemarketing to sell the entire range of WorkNest services. And our current integration programs across the board are very much on track, and we have the resources, the bandwidth and the operating structure to do more. Marlowe is aligned with key ESG objectives. Our business model benefits from increasingly stringent regulations and increased ESG requirements on businesses. Much of what we do is nondiscretionary as a result of the business critical requirement for our services and the regulation that underpins what we do. Increasing corporate and societal focus on ESG, public expectations around safety, around compliance and well-being, and corporate brand and reputational concerns drive the need for our services. Our markets continue to grow at attractive rates because of heightened focus on the environment of the social and governance issues inherent in business. The risks of noncompliance significantly outweigh the cost of implementing compliance. We help to ensure the safety of people to improve governance, to protect assets, and to optimize client operating costs, and our services and software products are highly valued. In short, the areas that we address are becoming more and more important. ESG is crucially aligned with the vast bulk of our client offerings. Marlowe delivers software products and services, which assure clients' compliance, enhanced corporate governance standards, test and improve water and air quality to meet environmental standards, improve and protect employee health, well-being and mental health, train people via e-learning in areas such as diversity and inclusion, anti-money laundering or bribery and corruption, manage workplace risks through regular audits and risk assessments, protect life and property from risks such as fire, and safeguard employee legal rights. And how we're implementing ESG internally matters too, and we've been making good progress. Building on extensive existing ESG initiatives and policies within each of our divisions, Marlowe's group-wide ESG Committee has now been formally established with group-wide representation to ensure a standardized approach to data tracking and target setting. A group GAAP assessment has been completed and the results of this delivered. Now we're in the process of formalizing KPI tracking system and improving our disclosure. We look forward to reporting our ESG progress in our full year's annual report. So we're entering the second half in a strong position with a comprehensive compliance offering, driven by very attractive market forces, particularly ESG tailwinds. We have scale with GBP 335 million of revenue. EPS has grown by 50% in the first half. We've surpassed our Software as a Service target already, GBP 35 million of ARR. We're benefiting from our disciplined compliance focus and our common channel to market by maximizing cross-selling and organic growth across the group, now at over 8%. We're committed to executing against our compliance strategy and broadening our activities into complementary compliance markets where we can apply the same Marlowe growth model. And our integration playbook has allowed us to grow by M&A quickly, whilst also ensuring strong foundations and realizing synergies and enhanced margin by 300 basis points. Current margin is running at 19%. And the effect of all this is that we recently upgraded our full year expectations and expect to materially overachieve against our 2024 EBITDA target of GBP 100 million. I would like to thank you for listening this morning. We'll now have a short pause as the operator opens the lines for the analyst Q&A session, which should begin imminently if you could be patient for a few moments. Thanks very much.

[Operator Instructions] And our first question today comes from Calum Battersby of Berenberg.

I just have 3 questions, all on the software disclosure. Firstly, would you mind giving us more of an idea of the split of the software earnings? There's clearly kind of quite a few different businesses within this. So is there any way you can break down the ARR between the different segments that you see within this. So I don't know, e-learning, compliance management platforms, et cetera. Secondly, just to make sure I understood this correctly, Alex stated that these businesses are growing at 20%. Just to check, is that organic revenue growth? And do you believe that this can continue at that level? And then lastly, the software profit, as you say, now more than 20% of the group run rate. Given higher growth than the rest of the group, this proportion should be growing over time. Then obviously, if you continue to deploy more capital in this area, that will be higher still. I just wondered if you could give any update on strategic ambitions for how much of the business you now want or expect the software earnings to reach?

Thanks, Calum. I'll take that. It's Alex here. In terms of the split of the software revenues and profits, we announced this morning that over 10% of group revenue now comes from software ARR. That translates into about GBP 35 million of ARR and about 20% of overall group profits now arising from software. That translates to about GBP 12 million, GBP 13 million. The 4 main segments to our software are compliance e-learning, GRC software, health and safety, and performance management software, the Elogbooks business that we acquired a couple of years ago. We don't disclose exact splits of the software, but in very rough terms, I think about 25%, 30% of the profit comes from eLearning, about 30% comes from the combination of Meridian and CoreStream and the balance comes from Omnitrack and the Elogbooks performance management systems. In terms of organic growth of software, yes, we're achieving in excess of 20% organic growth from selling additional software subscriptions. That will range from about sort of high double digits, so 15%, 20%, up to 25% within VinciWorks and CoreStream. We're pretty confident that we'll be able to maintain that pace of growth going forward. There should potentially be opportunities to accelerate that pace of organic growth. Do remember, we've got 50,000 customers across the group. The channel to market across our business lines is very similar. So the decision-maker making decisions about health and safety services is often the same decision maker who makes decisions about health and safety software. Likewise, we've got numerous risk and compliance officers who are making decisions about GRC software and also fire safety services. So the ability to accelerate and turbocharge organic growth through cross-sell is 1 of the key strategic value-adds that we can bring to software businesses that join the group. I think your last question was on what percentage do we expect software to be going forward given that we've already achieved our medium-term 2024 target. Well, we're at about GBP 35 million now. We want to get to GBP 50 million by 2024. But as you've identified, we seem to be significantly overachieving against that target. And from a corporate development and growth perspective, I think it's fair to say we are allocating significant resource and energy into building our scale and what we see as a really, really attractive growth opportunity. Can we get that to 15% of overall revenues during that time frame? We're not changing our targets, but I think it could be a fair assumption that you will see the proportion of our technology revenues growing as a percentage of overall revenues in the coming months and years. The financial characteristics are highly attractive. We add additional users with relatively limited incremental costs and the strategic value that we can add to our group, but also to our customers in terms of enhancing their compliance standards is very significant. We find customers that are using both consultancy services and software have significantly higher standards of compliance. So as a tool to achieve our overall group objective, which is to assure business critical regulatory compliance for our customers, we see software as a major competitive advantage and a major tool that we can use to achieve that mission.

Our next question is from Sam Dindol of Stifel.

Three questions from me. Firstly, on the margin improvement piece. Obviously, very good progress in the first half, driven by M&A, but also the underlying improvement. Given you're already at 19% divisional EBITDA margin run rate, is there a sense that, that 20% target could be quite easily overachieved going forward? Secondly, on wage inflation, are you seeing any impact there, particularly the tech division? And is it easy to pass those on. And then finally, on the GBP 100 million EBITDA target, materially overachieving that, should we read that as -- how early do you think you could achieve that target in essence? It's I appreciate dependent on M&A, but could that be early '24 rather than the end of '24.

Thanks, Sam. As you've identified, our run rate margin is currently just shy of our medium-term target. On a run rate basis, adjusted EBITDA margin is 19%. We said earlier in February this year that we wanted to achieve 20% by the end of financial year '24. So I think it's fair to make the assumption that we will significantly overachieve against that target. That improvement has been driven by a number of factors. It's being driven by improved productivity, efficiency and utilization across the board. But particularly within our IIC businesses, we've seen a 1.5 percentage improvement in margin, largely as a result of higher revenue per day per fee earner. There's still significantly more to go out there. We also are now benefiting from the extremely well-invested back-office infrastructure we've got. If you think of our strengthened strategy, which is all about driving forward effective integration and ensuring that our platforms are scalable and can support further growth, we're now starting to see attractive organic drop through as a result of that investment that we've made. There's no structural reason why we can't get to 25%. Look, we're not changing our target today. Once we've got to the 20%, we will give the market guidance as to where we think it's possible within an acceptable time frame thereafter. But in short, to answer your question, yes, we will look to significantly overachieve against that 20% target once we've met it. From a wage inflation perspective, we have seen some limited wage inflation, particularly in the route-based side of our business, the TIC side of our business. We saw, when the economy opened up in sort of July, August, September, that field-based service operatives were moving around to competitors a bit more than they had been historically. That led to a limited amount of wage inflation in the market. We've been very successful with passing that increased cost on to our customers via increased prices. So no material impact on margin. Actually, towards the end of September, October, that short-term tightening significantly loosened and we're sort of getting back to steady state normal situation. So I don't think it will be a long-term issue. We're not seeing any wage inflation in the GRC side of our business, and we're not seeing any in the software side of our business either. In terms of the GBP 100 million target, well, I think 10 months in, we're about 38% of the way towards that target. We have had a particularly busy period from an M&A perspective. We expect to continue deploying capital effectively into earnings-enhancing acquisitions in the months ahead. I'm reluctant to give a specific date, but we announced this morning and last week that we do expect to materially overachieve against that target. Clearly, our focus as a business is on identifying really attractive complementary businesses that will deepen our presence across existing markets, broaden our capabilities into adjacent business critical compliance sectors and continue to digitalize our offering to become the market leader in compliance software.

The next question is from Peter Renton of Cenkos.

Just a quick question again on the software side of things. So you said you've made a series of pretty exciting acquisitions in that space recently. How much organic investment is now going into software and digital development? And is there any other functionality that you'd like to obtain either through acquisition or organic development?

Thanks, Peter. I'll take that one as well. So we announced this morning the launch of a new product, ProSure 360. That's been about a year in the making and significant organic investment has gone into that product. It's 1 that the Meridian and Elogbooks teams have been working on in close collaboration, and it's a new software platform, which will assure the compliance of our customers' supply chain. So if you take, I don't know, a large property manager where we look after all that health and safety, we will then also deploy our ProSure platform to vet and verify the compliance of all of the suppliers that are delivering services and turning up to their premises. So a significant organic development. We now have about 100 software developers across the group, and they will be covering a whole range of technology areas. That's an area that we continue to invest in. So I suspect we've seen heads organically higher than we were from the businesses that we've acquired. So we're thinking of these businesses in the long term. There are significant opportunities, some of which we've delivered, some of which we're working on to further the integration of our separate software platforms. So building API links between the different platforms to share client compliance data, so that if you're a user of 1 of our eLearning platforms, you also use Meridian, our health and safety platform, and you also use YouManage, our HR software platform, you will have a seamless experience and you will have very similar UX and user interfaces. And the data related to your employees' eLearning will be in the HR system and it'll be in the health and safety system as well. So there's major opportunities, and we've made major progress. And we expect to continue investing significantly in that objective.