Marlowe plc (MRL) Earnings Call Transcript & Summary

Good afternoon, folks, and welcome to the Marlowe PLC Capital Markets Day 2023. I'm Kevin Quinn, Non-Executive Chairman of the Group. This afternoon's event will update on the significant strides our company has made since our last CMD in March 2022. We'll showcase our momentum in delivering the Marlowe compliance strategy in our resilience markets, which are demonstrating growth throughout the cycle. In a period of intensive growth and acquisition, we also wanted to use today's event to bring to life our integration model to highlight the levers we use to drive organic growth and margin expansion and to explain why this restructuring is an important investment and an area that the Board is closely focused on. We're building a group for the long term and this investment is vital to achieve our goals. In February 2021, our Chief Executive, Alex Dacre, plotted out an ambitious strategy for Marlowe, setting goals to deliver run rate revenues of GBP 500 million, EBITDA of GBP 100 million and 10% software ARR by the end of our next financial year. Targets we're close to achieving. Crucially,these are now goals that we're capable of achieving organically. Marlowe continues to deliver very strong growth and financial performance. In December, we reported H1 revenue and adjusted EBITDA growth of 66% and 80%, respectively. Earnings per share were up 39%. Our deepen, broaden, strengthened and digitalized strategy has not only driven this impressive growth, but has enhanced our client proposition and cemented Marlowe's long-term position as the provider of choice for our clients' regulatory compliance and safety needs. The benefits of Marlowe's approach and our breadth of compliance capabilities is clearly evidenced in our sustained high single-digit organic revenue growth, which we expect to continue delivering. The Marlowe plc Board of Directors was further strengthened during 2021 with significant additional experience to match the company's ambitions. The group benefits from a first-class Board, it brings together vast experience across a range of highly relevant B2B service and digital sectors. We bring this experience to bear to ensure that the executives are focused on delivering long-term shareholder value, the organic growth, effective integration and restructuring to drive synergies and margin expansion and crucially cash generation. Gillian Kent brings a track record of digital transformation in B2B businesses, providing stewardship to Marlowe's digital strategy as we innovate with software to promote our customers' regulatory compliance standards. Charles Skinner has spent over 20 years at the helm of acquisitive listed B2B service businesses and understands what is needed to grow successfully through sustained M&A as a tool to compound organic growth. Charles brings an acute focus on effective integration and restructuring to the Board. As a former CFO of Future plc, Rachel Addison brings substantial financial acumen to the Board and to her role as Chair of the Audit Committee. Rachel maintains a keen focus on balance sheet strength, prudent capital structuring and maximizing cash conversion. Peter Gaze has a long career building and operating large B2B service businesses and is experienced in managing the cycles of growth. And through my role as Chair of the Board, I administer and promote strong governance standards. My tenure as CFO of Berendsen plc impressed upon me the importance of supporting a strong commercial strategy with structured executive decision-making and the rigorous controls both operational and financial needed to successfully integrate and grow businesses. These are vital features of a mature growing company. Today's presentation will lead with a deep dive into our approach to integration, explaining our group-wide methodology. We'll discuss what we've been able to achieve through effective integrations, namely the creation of a cohesive and market-leading set of divisions, GRC and TIC. To that end, we'll provide an update on the key integration projects happening across both these divisions. We'll then hear from Jonathan Thomas, Head of Optima, Marlowe's Occupational Health business. Jonathan will cover how Optima supports the well-being of millions of employees across the U.K., and in doing so, keeps their employers compliant and productive at a time when approximately GBP 90 billion is being lost from the U.K. economy due to employee absence. Crucially, Jonathan will outline the major progress his team have made with restructuring and integrating into a single business and it illustrates the attractive synergies that are being unlocked. Adam Councell, Marlowe's CFO, will then discuss our restructuring model and the detail the nature of the costs we incurred during integration. The Board and executive team are clear in their conviction that successful integration is fundamental to growing successfully through sustained M&A. Accordingly, we consider the exceptional costs incurred to restructure, integrate and unify our acquired businesses and some of the most important investments Marlowe makes. Adam will explain how we treat restructuring costs, sharing detailed analysis about these costs historically and illustrate how they link closely to the acquisitions and phase down quickly once the acquisition integration is complete. He'll also speak to the attractive cash flow characteristics of Marlowe's businesses, discuss the group's working capital profile and dig into our forward cash generation trajectory. Adam will set out our framework for capital allocation and how we assess our options to utilize the group's free cash flows. We'll focus on our testing, inspection, certification division, hearing from Phil Greenwood and his Head of Integration, Andy Walls. Phil and Andy will update on significant progress made across the TIC division, including the successes we've had in integrating Hydro-X, an acquisition, which confirmed our leading position in the water hygiene market and the delivery of efficiencies we are now achieving following the rollout of the Wave, our proprietary scheduling and management software platform. We'll then hear from Gavin Snell. who's recently set up to head up our GRC division; and Andy Gunson, our new GRC CFO, to take you through some of the steps that we're taking to enhance our organizational structure to ensure that we're optimizing organic growth opportunities and cost efficiencies. Gavin will also take you through the successful eLearning restructure, which is currently in its final stages. Today's event is scheduled to take a couple of hours. As always, there will be an opportunity to ask questions that will be answered after the presentations. So please use the Q&A tool on the screen to submit these as we go and we'll look to address as many of these as we can. Thank you.

Thank you, Kevin. Good afternoon. I'm Alex Dacre, Group Chief Executive. Today's event is primarily intended to shine a light on the Marlowe growth model with a specific focus on our model for integration and restructuring, the resilience of our business model and markets, to illustrate some of the levers that we use to drive organic growth and margin expansion and to highlight the attractive underlying cash flow dynamics of the group. We'd like to demonstrate today how we create significant value through the effective investment in restructuring and the delivery of associated operational improvements. We'd like to demonstrate why this restructuring is such an essential investment to build the group that we are building to show how we're driving forward integration programs and how we're set up and organized to drive further growth this way in the future. Acquisition and subsequent integration has been a central tool that the group has used to achieve its ambitions over the last 7 years. In the 18 months to September 2022, the group completed 29 acquisitions for an enterprise value of GBP 384 million. This was an intensively active and successful growth period for the group. Alongside growing organically faster than our markets, this inorganic growth and success with subsequent integration has been a vital lever that the group has used to build out such major compliance service and software positions across both our GRC and our TIC divisions. It's how we built the business from around GBP 20 million of revenues in April 2016 to approaching GBP 500 million of revenues today. Put simply, if we didn't invest in integration and drive acquisition-related restructuring programs with the intensity that we do, we wouldn't have been able to build the group to the scale that we've achieved today, we would have become too big and too unwieldy long ago. We would not have been able to accelerate organic growth from around 4% in 2017 to 9% today. We would not have been able to grow EBITDA margin from 16% in 2021 to 19% today. And we wouldn't be well prepared to achieve our future growth ambitions by a balanced blend of further organic and inorganic growth. We'll take you through this integration model and the associated restructuring investment today. I think you'll see clearly why it's such an essential cost to incur that allows us to drive returns. But before we focus in on this integration model, I'd like to take a few minutes to remind you of our regulated compliance strategy and the attraction of our markets. Since 2016, Marlowe has incrementally built its offering into the end-to-end compliance platform that we've become today. We deliver a one-stop approach to our clients' compliance needs. With a partner for over 50,000 companies across the U.K. delivering their software or service requirements in core compliance areas such as health and safety, HR, employment law, occupational health, compliance, e-learning, fire safety and water and air hygiene. At a broad level, we keep companies running smoothly, safely, productively, efficiently and in compliance with regulations. Nearly everything we do for our clients is underpinned or necessitated by essential laws, standards and regulations. Whether it's one of our 300 health and safety consultants, conducting an audit to keep you compliant with the Health and Safety at Work Act, one of our 150 or so employment lawyers advising you on the Employment Rights Act. Our 900 clinical professionals undertaking annual health assessments, advising you on your health and well-being strategy, a safety software platform you're subscribing to and to ensure that your business or your organization is meeting safety regs. An eLearning course, we've designed to train your staff in anti-bribery and corruption legislation or a biannual fire safety test conducted by 1 of our 1,000 fire safety compliance specialists. Perhaps the risk management software platform developed by 1 of our 120 software developers to help you to comply with governance regulations or to manage your operational risk. Everything we do has a corresponding regulation. The majority of the compliance services we deliver in GRC revolve around our clients' employees and their organizational risks. Our consultancy services are delivered largely under 3 or 5-year contracts with subscription-based revenues. Our compliance software business line encompasses compliance eLearning and compliance SaaS products. Our products empower customers to comply with numerous regulations and to improve governance and control. Our TIC activities are typically field-based and focused on the safety of our clients' business premises. As we continue to grow, the route density becomes more attractive. We look to enhance revenue per day per fee earner through effective management through scheduling technology and the benefits that our improved density leads to. This improved revenue per day results in improved gross margins, and thanks to our well-invested back-office functions, an attractive level of this margin drops through to profit. So whether by delivering innovative eLearning and the latest compliance standards, providing regulatory intelligence or GRC software, advising on an employee dispute or auditing health and safety standards or by certifying fire safety compliance, all of our activities, whether service or software are bound by the same mission of assuring business-critical compliance. We have competitors in our individual markets, Citation, Peninsula, Alchemist or Ideagen on the GRC side of our business. Chubb, Ecolab, Veolia, SGS or Churches Fire on the TIC side of the group, but no competitor straddles as many compliance service and software markets as we do. This focus translates into a high-quality set of commercial characteristics. Our average client relationship is over 12 years. Our average customer spend is around GBP 9,000 per year. We serve all key sectors from SMEs to FTSE 100s, commercial and industrial, health care, hospitality and leisure, education, property management. No one customer is over 3% of our revenue. Our well-aligned organizational structure of compliance services and software means a complementary service or product can be easily provided to an existing customer who's typically Head of Compliance, a Head of Health and Safety, a compliance officer or perhaps a manager of a small business who is responsible for procuring a range of safety and compliance services. Our GRC and TIC offerings, usually share an identical channel to market. They're seen as very logical extensions to one another. This is demonstrated by the regular cross-sell we achieved. About 40% of our revenues come from multiservice clients. Consulting is usually remotely delivered advice and software is delivered as a subscription, which allows us to achieve the EBITDA margins that we do in this division, 26% in the first half. GRC generates about GBP 200 million of revenue and TIC generates approximately GBP 280 million. GRC accounts for around 60% of Marlowe's profit and TIC around 40%. TIC operates as an EBITDA margin of around 14% to 15%, which reflects its route-based delivery model. Both divisions present significant future margin expansion opportunities. At a group level, we expect to achieve our 20% target soon, thanks to the significant operational improvements and the integration synergies that have been extracted as part of the projects you'll hear about today, as well as the fast growth of our high-margin software and GRC activities. Once we've hit the 20% target, we plan to go much further and the financial characteristics of our sectors make this possible. Across our two divisions, we generate recurring revenue levels of approximately 85%, which gives us a high degree of visibility in our business' future performance. We announced at the start of FY '22, when we were generating GBP 37 million EBITDA our 3-year financial target to reach GBP 100 million of run rate EBITDA on GBP 500 million of revenue by the end of FY '24, about 12 months from today on a run rate basis. These are highly ambitious targets, but one that we thought we could achieve through our model of compounding organic growth via M&A and effective integration. We thought we could deliver high single-digit organic growth each year, drive EBITDA margins to 20% and add significant further scale through M&A. We thought that our resilient and defensive markets, which remain highly fragmented, provide the right environment to deliver this growth. I'm pleased to say that 2 years since setting those targets we've made very pleasing progress towards them well ahead of our original expectations. We've reached a run rate EBITDA today approaching GBP 90 million and run rate revenues of circa GBP 480 million. We now expect to exceed these original targets purely on an organic basis, with continued high single-digit organic revenue growth and continued margin accretion momentum. When you factor in further bolt-on M&A, we'll comfortably exceed the original targets within the original time scale. And in line with our plans, our SaaS revenues have grown to over GBP 40 million ARR, now representing around 10% of total group revenues. Approaching 25% of group profit is now derived from software. We've become a leader in compliance software in the U.K., and this mix will continue to grow as our software subscriptions grow each year at fast ahead of market growth rates. Both TIC and GRC are structural growth markets, which we accelerate to our high single-digit target through the delivery of superior client service, the effects of cross-sell and our own best-in-class management teams who have a sales-focused mindset. As of today, we conservatively estimate our addressable market to be around GBP 8.4 billion with attractive growth rates of between 4% and 10%, as we've broadened our offer into new compliance areas, the size of the market opportunity has increased. Our clients' budgets continue to grow at attractive rates because of heightened focus on the environmental, social and governance issues inherent in business. Regulatory complexity, insurance requirements and the evolving regulatory burden. The risks and costs of not implementing compliance significantly outweighed the cost of implementing it. The areas that we address are becoming more and more important in the eyes of our clients. We occupy between 5% and 10% of each of our markets, and we're a market leader in 4, top 3 across the board. As you can see, there's a major runway for future growth. Organic growth is a metric we look at very closely. Our management teams are targeted and incentivized to deliver it and it's a key metric that we track throughout the year. It's an essential product of our growth model. By integrating effectively and delivering brilliant sales and marketing strategies, we're able to consistently deliver attractive organic growth in excess of market. In calculating organic growth, we undertake a completely like-for-like analysis on revenue growth to give investors the clearest and the most accurate picture of growth. You can see from the graph how organic growth has ticked up consistently each year to the high single digits level it's at now. We reported 9% in FY '22 and 8% in H1 FY '23. This is at least a few percent faster than our market growth. We're currently tracking to deliver over 9% this financial year. Over Marlowe's 7-year history, we have deployed capital in existing compliance markets and broadened our capabilities into new compliance markets across GRC and TIC. We've added around 11 acquisitions each year on average and invested in total around GBP 675 million into inorganic growth, which includes GBP 40 million of restructuring costs and the GBP 15 million we've spent getting the deals done. Over this period, we've become expert in originating, negotiating and integrating complementary acquisition targets which fit with our strategic criteria of nondiscretionary recurring revenues in key compliance markets with long customer relationships and where we can see a clear route to achieving at least a 15% return on invested capital over the medium term. The 20% return on invested capital we're now generating in TIC, the market we've been in since 2016 is a clear illustration of the delivery of these returns, and it's a metric we expect GRC to get to into the medium term as well. Integration is a fundamental part of our model for growth, and it has been ever since we formed the group. We do not leave the businesses we buy stranded that would destroy value rather than create value. The point of integration is to make sure that we go to market as the most unified business as possible and realize the associated benefits of phasing our duplicated overheads rationalizing property portfolios benefiting from economies of scale such as route density, implementing excellent IT systems and strong governance and control. And crucially, speeding up organic growth via better service, sales and account management. We maintain the pace of our growth, thanks to our well-designed organizational structure, which is focused on divisional entrepreneurial autonomy and agility. This structure gives our managers the resources and the responsibility to deliver their strategic plans, whilst driving integration programs at pace. Each of our 6 business lines have autonomous leadership teams, supported by dedicated integration resources and a well-developed integration playbook. This structure enables us to integrate acquired businesses efficiently with an integration program within one business line being largely discrete from that within another. So we can integrate multiple businesses concurrently without straining management bandwidth. We're getting better at avoiding the pitfalls with our track record and our scale, integration risk diminishes. We have the structure and leadership, integration resources, infrastructure, systems and strategy to take on more scale with increasingly attractive synergies. One of the clearest examples of this integration strategy in action is evidenced in our HR employment law offering. Marlowe's WorkNest subdivision brings together 12 acquisitions and delivers a one-stop solution of subscription-based, employment law, HR and safety consultancy and software. The first major deal we completed in this space was the GBP 60 million is Ellis Whittam deal in late 2020. That base business had revenues of around GBP 16 million. WorkNest budget for the next financial year, 29 months after that deal sees revenue of around GBP 50 million, nearly 3x the size it was upon acquisition. The client base has grown to around 40,000 U.K. employers. The integrated business benefits from a single organizational structure, single leadership, common technology platforms across finance, HR and CRM. Service delivery is unified, further major operational improvements are underway. We're seeing a reducing cost to acquire new customers and more efficient cost to deliver service. The common sales and marketing structure is in place, and the business was rebranded last year with a reinvigorated vision for growth and common purpose. We're now leveraging WorkNest's highly tuned sales and marketing machine to accelerate organic growth across the operation. We're selling additional products such as eLearning, HR or safety software across the client base. Today, you're going to hear some key case studies from our management, mainly focused on how we are integrating, restructuring and driving synergies. The key integration projects that are ongoing across occupational health and eLearning within GRC and within water and air in TIC, these are projects that are bringing together key acquisitions into their respective divisions and allowing us to build a cohesive offering. You will receive insights into these from the management teams who are delivering these projects and they will update you on the phasing of these integrations and the key deliverables being achieved from these projects. We are well progressed with the integration program on the recent acquisition of Optima and our other occupational health activities. We now have one unified management team. We have one back office, one operating model, and the Optima tech platform is being rolled out across the combined business. The three parts of the business will be rebranded as Optima in the coming months. In eLearning, we have on compliance content library, one software environment, and then moving on to the LMS led by our Vinci brand. All the back office and support functions are now merged and Josh is leading the team. Essential sales and marketing team has been formed Consolidation of all key systems is also underway. Annual cost savings of over GBP 1 million have been extracted from the business so far. We're now the largest compliance e-learning business in the U.K. I'll now hand over to Johnny Thomas, CEO of our GBP 115 million revenue occupational health business.

Good morning. I'm Jonathan Thomas, CEO of Marlowe's Occupation Health Division, Optima Health. We are the industry leader in occupational health and well-being in the U.K., and today, I want to talk to you about how our division is successfully integrating multiple businesses to achieve better customer and business outcomes. Our job is to implement multiyear health inspection programs for our clients where we monitor, report and advise on occupation related health issues. We help businesses comply with legislation, navigate risk and make favorable management decisions to improve the staff productivity and well-being. We provide recurring health surveillance services, preplacement and fitness for work assessments, specialist mental health and musculoskeletal interventions and consultancy. We have rivaled expertise in all industry sectors across the U.K., and our proposition is underpinned by our proprietary technology platforms. We have the ability to service SME clients from GBP 3,000 annual spend to the largest and most complex enterprise customers in the U.K. with annual spend running into the millions. An estimated GBP 90 billion is lost through absence and presenteeism in the U.K. The backdrop for the U.K. workforce is one that is gaining older and progressively less healthy. Set against often increasing job demand and an increasing prevalence of mental health and musculoskeletal issue. This is not just an issue for employers, not fulfilling the legal requirements to provide a healthy working place, but it is a P&L issue. Absence affects business productivity and is hitting the bottom line for companies across the U.K. So we offer our health solutions to address these factors, providing our customers with tangible returns, improving health and well-being and ultimately enabling business to get the best from their people. Of course, every organization is different. But through our extensive capabilities and nationwide coverage, we can provide a holistic package to meet any organization's needs. A case to the example illustrating our differentiated offering is a large national government agency. This client was struggling to meet necessary service standards due to an outdated on-site delivery model, which was inefficient, migrating this client to our proprietary Marlowe's portal technology platform brought with a wealth of benefits, including access to our U.K.-wide clinical capability, efficient online booking functionality, high-quality data as well as significant savings versus the previous model. Following on from this, we've been able in partnership with this client to identify key clinical risk areas and have introduced an active condition management model to further support their employees in managing their health in a proactive manner. Marlowe started this journey in occupational health through the initial acquisition of Managed Occupational Health in early 2020. Since then, the group has made 8 additional acquisitions to build the market leader in occupational health and well-being in the U.K. The two largest and most recent of these being the acquisitions of Optima Health, which was acquired for GBP 135 million in January 2022 and TP Health in April of the same year, which we acquired for GBP 21 million. We have created a standout market leader in this space with over 900 occupational health specialists serving 5 million employees, roughly 17% of the U.K. workforce, delivering around 1 million interventions each year. As part of the integration, we have consolidated all the acquisitions under the Optima Health brand. And we now, as a division, contribute to over GBP 110 million to group annual revenues and are delivering organic growth in the high single digits. Today, I want to talk to you about the integration we're carrying out across the division. Integrations of the scale and complexity take time to execute successfully and is crucial, it's done well to compound future growth. And I'm pleased to report we've made significant progress in this journey and are well on the way to becoming one team under one brand with a consistent robust strategy for future growth. Having built a platform previously through a combination of acquisition and organic investment under our previous private equity owners, we followed our tried and tested guiding principles in developing our business. They are a single brand, one team values, one strategy, consistent operating model, leading clinical governance and technology-enabled and customer focused. Ultimately, these will allow us to turn our industry-leading attributes into value for our customers, our people and our shareholders. So what are we doing in occupational health? Well, we're taking all of the acquisitions we have completed in the last 18 months, and we're bringing these businesses together via detailed integration plans using a clear framework of guiding principle. Our actions have followed this. Through the process, we have become a real living wage employer across the business and have delivered several improvements to benefits and standardized policies, making us the leading employer in the sector. This helps with retention and drives improved performance and sustained organic growth. We are improving our operating model to drive efficiency, creating a scalable model with consistent processes and procedures, which will underpin our future growth. This is being done by migrating customers, clinical and delivery teams to common IT platforms and then overlaying consistent clinical governance, quality and audit best practice across our operation. Having a consolidated CRM in occupational health, not only connects all acquired businesses in OH but also connects Marlowe's cross-divisional CRM, and this acts as a key driver of cross-selling across Marlowe's division. For example, occupational health issues are often issues related to HR, while health and safety and often lead to cross sales. With our group-wide CRM, we can now easily pass over customer queries to other Marlowe divisions and have been able to unlock revenue synergies by delivering work in-house via Marlowe's employment law and HR division that was previously passed to a third-party partner outside of the group. And finally, we are deploying our leading clinical CPD program to improve our people's training and development, providing opportunities for excellent and progressive careers within Optima Health. This investment leads to improving our retention of talent and also supporting us to effectively manage our cost base. In summary, we have taken three leading businesses and merged them to create the integrated U.K. leader with an unmatched breadth of service, geographic coverage and industry-leading management team. Key to an integration of this size and complexity is extensive planning and effective communication across the organization. During early 2020, following the acquisition of Optima Health and the subsequent acquisition of TP Health, which took place a few months later, we spent a lot of time learning and understanding the businesses and what we had acquired through road shows and workshops, uncovering the gems and also the areas where there's room for improvement and engaging with our people along the way. That work culminated in a clear integration plan that we are now well progressed with implementing. An integration of this size and complexity comes with associated costs and duplicated costs. We segment these at Marlowe into 4 separate buckets: staff restructuring, system upgrades and replacement, integration teams and property and other costs. One of the obvious operational efficiencies that comes with combining businesses is that corporate and back-office functions can be rationalized and leveraged across the wider business. Prior to the start of the integration program, there were three senior leadership teams, HealthWorks, Optima Health and TP Health. Through this restructuring process, we have combined under one leadership team. This is also the case across back office and central functions. We now only need one finance team, one HR team, one IT team, one clinical governance team and one sales team. This process presents significant opportunity to realize efficiencies by the removal of duplicated roles, which we achieved through restructuring. This type of activity makes up around half of our restructuring and integration cost investment is made up of the costs associated to the duplicate individuals that are leaving the business as part of the integration program and the costs associated with the redundancy itself. A large proportion of these duplicated roles have now left the business. Since January 2022, 37 individuals have left the business, realizing GBP 2.7 million in annualized cost benefit. The secondary system upgrades and replacement. When we acquire businesses, they often come with their own software and systems in place. As part of the integration process, we want to consolidate our operations onto one of our industry-leading proprietary software systems. We have two platforms, one focused on our larger enterprise customers, and one on SMEs with appropriate overlap, so we can remain agile in meeting our customers' needs. This transition and IT change program does, however, come with significant one-off costs. Firstly, there is the upgrade cost of implementing the systems and the IT consultants that are associated with these projects, and secondly, there is a cost associated with the dual running of both new and legacy systems alongside one another during the transition period. The process of project managing and completing this type of integration involves significant effort, resource and time and results in associated exceptional costs. Within Optima Health, we benefit from dedicated integration specialists, supporting and project managing our integration projects. These resources ensure that my management team are able to oversee and manage the integration program while simultaneously providing them with bandwidth to continue to drive organic initiatives while focusing on our customers' needs. This integration resource is an essential one-off cost that we must invest on a temporary basis. These transformation and integration specialists that joined the business for the duration of the project are flexed up and down depending on the volume and scope of the integration. If we ceased the acquiring businesses, these integration teams would not exist. Within our integration teams, we have program management capability to ensure we deliver our projects to plan and budget. IT specialists to oversee technology change programs, business analysts to support the documentation of new operating procedures and operational experts to ensure the change is effectively managed into both the operation internally and to our people and externally to our customers. Our integration resources constitute roughly 1/4 of the restructuring investment costs associated with this project. The final area of integration and associated costs primarily revolves around property and the rationalization of our portfolio. As a result of acquisition, we often inherit duplicated properties that are no longer required. To date, eight leases have been identified to be discontinued and these are either in the process of exit or have already been actioned. Additionally, other costs include engagement with external consultants in areas like clinical governance audit, branding and communications. Why do we do this? Other than the cost efficiencies that we can generate via integration, it enables us to grow faster and therefore, drive shareholder returns by accelerating organic growth and improving profitability. Acting as one company will also enable us to benefit from continuous ongoing efficiency improvements. We estimate we can drive margin improvements of around 1% per annum in the medium term. One of the key areas that will drive this is our improved ability in deploying our operational resource, in essence, making sure the right specialist is assigned to the right customer at the right time. Operating as separate businesses would not allow us to deliver on this and our ability to scale, realize efficiencies, govern effectively or drive change will be severely hindered. Having a dedicated integration resource allows our management team to focus on delivering our organic strategic priorities, to illustrate a few of these and what we're working on, they are refining our SME subscription service, which may be supercharged by the incoming government subsidies, developing our EAP, employee assistance programs as an area of significant growth, enhancing and expanding our treatment services in mental health and musculoskeletal, again, an area of significant growth potential for us, particularly when taken in context of NHS waiting lists. Further, building on our market differentiation, leading workplace and corporate health into the next generation, utilizing our proprietary digital tools, clinical algorithms and driving automation. And finally, and fundamentally important, we will continue to invest in our people, creating the best place in the industry for our people to work, which in turn will translate into Optima Health continuing to be the best place our clients are serviced. That relentless focus on both integration and underlying performance is key to our future growth and the reason why we are still able to grow organically at high single digits.

Thanks, Johnny. As we've already heard from Alex, inorganic growth through M&A activity is a core part of our growth strategy. Since April 2021, just under 2 years ago, we've executed 30 acquisitions for an EV of GBP 392 million. We've added well over GBP 150 million of revenues inorganically. 29 of these deals were completed in the 18 months until September 2022. This, by any measure, was a particularly active and intensive period of major investment for the group. Today, we wanted to provide investors with greater understanding of two main areas. Firstly, our investment and subsequent integration and restructuring model; and secondly, the cash flow dynamics of our business, operating in highly cash generative sectors, a key management and Board focus is free cash flow. We can redeploy these cash flows into bolt-on M&A activity, which alongside the organic growth that we deliver creates attractive returns for our shareholders. Cash generation is a key performance indicator in which we focus closely and which we want our stakeholders to follow and understand easily. In a dynamic, high-growth business undertaking many acquisitions such as Marlowe, cash flow can become opaque, particularly in such a busy growth period as the one we've had in recent months. In order to understand it in more detail, it is vital to understand the group's working capital requirements, which can be impacted by strong organic growth, acquisitions and the effects of timing. Let's start with our restructuring model and how we build up to our adjusted numbers. Due to the nature of acquisitions, the costs associated with those acquisitions and the subsequent integration costs, we provide adjusted measures to provide an accurate representation of the underlying performance of the group, which can be significantly distorted by investment in acquisitions and the subsequent necessary restructuring investments. All of these restructuring investments are expensed through the P&L. As is common, the high-growth businesses, we adjust for acquisition costs, restructuring costs, amortization required intangibles, share-based payments and legacy long-term incentives. Using our interim results as an example, we see the following adjustments. Firstly, acquisition costs. At the interim, acquisition costs amounted to GBP 1.5 million and include professional adviser fees, the cost of financial, commercial and tax due diligence, legal costs, transaction costs and staff costs associated with completing acquisitions. If we were to seize further M&A activity, these costs would not continue and are therefore nonrecurring in nature. This will be clearly seen in H2, was a period in which we have not invested into M&A to any significant extent where the cost will be much lower than they were in H1, a busier period for M&A. Secondly, restructuring costs. I'll go into more detail in the next couple of slides, but these amounted to GBP 10 million in the first half of the year, and we are guiding to around GBP 20 million at the full year. This investment is set in the context of deploying our GBP 392 million on M&A since April 2021. Thirdly, amortization of acquired intangibles. These are non-cash non-trading charges revising from investment activities and is the amortization charge for those intangible assets recognized on business combinations. These amounted to GBP 11.8 million and are expected to be around GBP 24 million at the full year. Lastly, share-based payments and legacy long-term incentives. We believe it is useful to exclude certain share-based compensation expenses from adjusted profit measures to better understand the long-term performance of our underlying business. Certain legacy long-term incentives are considered to be part of the investing activities of the group and nonrecurring in nature. In addition, the factors that go in to derive in these charges do not form part of operational decision-making. Total of these amounted to GBP 1.4 million at the interim results and are expected to be GBP 3 million at the full year. Other share-based payment charges, such as the group's SAYE scheme sit above the line and are not adjusted out. Over the life of Marlowe, we have invested over GBP 600 million of consideration. Integrating these businesses effectively is a key objective of the Board and senior management teams. We've consistently indicated that we see restructuring costs associated with the integration as part of the cost of investment equation. We factored them into our return on investment modeling. Divisional EBITDA margin is perhaps our clearest indicator of our ability to integrate businesses and drive these synergies. We have seen divisional EBITDA margin increase from 13% in FY '20 to 19% at our recent interim results, very pleasing progress. We split restructuring costs in five distinct buckets: staff restructuring, replacement software and system upgrades, integration resource, property cost and other. The largest of these is staff restructuring. These are the costs incurred in redundancies and duplicated roles during the integration process. An example of this, which Johnny just talked you through, can be seen in our occupational health business, where we've delivered a reorganization of three large management teams into one. Next, replacements of software and system upgrades. As you will hear later, a clear example of this can be seen in the merger of our eLearning software activities, where we have brought five different businesses each historically is in different software platforms onto one LMS and software platform, or it can be seen within WorkNest, where we successfully displaced all third-party software to replace within our health and safety, HR and eLearning proposition via SafetyNest, Youmanage and VinciWorks. Integration programs of this size are complicated and take appropriate specialist resource, which is a mixture of both employed staff and temporary project teams. Our integration resource is scalable and allocated appropriately across each of our six business lines depending on the extent of integration ongoing. Again, if we stopped acquiring, this resource would no longer be required. The two smaller buckets of property costs and other. Property costs are duplicated office costs, which we expect to vacate within a reasonable time frame post acquisition. Other includes rebranding, legal or the less material costs associated with restructuring. Restructuring typically takes two forms: restructuring costs associated with the initial integration and acquisition and restructuring costs associated with the largest strategic integration projects once a number of smaller acquisitions have been completed. Integration programs for acquired businesses typically take 6 to 12 months from when that integration program begins depending on size and complexity of said acquisition, as a result, there was a lag between capital deployed and the associated restructuring costs to integrate and drive synergies from their acquisition that the capital is deployed into. This restructuring lag can be clearly seen in both our GRC and TIC divisions where, as a graph show, large acquisition spend has been followed shortly thereafter by higher restructuring investment. And in a similar vein, in periods in which acquisition spend has reduced, restructuring costs also reduced commensurately. We expect restructuring costs associated with the current acquisitions and projects to largely fall away by the end of the first half of FY '24. On this slide, you can see the breakout of our restructuring cost per division at our interim results. I won't go through all of them, so I'll just pull out a few key numbers highlighted in pink. You can see staff restructuring has been a key focus within our water and air hygiene business, where following the Hydro-X acquisition, we've undergone a significant period of both operational and administrative consolidation. At the conclusion of this process, we expect to have removed around 120 duplicated roles from the combined businesses with an annualized cost of between GBP 4 million and GBP 5 million. The second, as mentioned in the previous slide, is a replacement of duplicated systems with in-house software. The 600,000 shown in replacement software and system upgrades under employment law and HR related to the runoff costs of third-party software costs that we no longer require as we move across the internal software within our existing businesses. The third is the 800,000 in occupational health relating to their integration resource. As you heard from Johnny, occupational health is going through a large-scale integration, bringing three major occupational health businesses under one roof. This takes significant planning and organization so as not to create risk of operational failings during the integration process. And this 800,000 relates to project management and the additional integration resource required as we proceed through the integration program to create one integrated and scalable business. There are currently 3 areas I want to go into a bit more detail on. Firstly, compliance software. We entered the compliance software market in late 2018 and have deployed over GBP 120 million of capital since then. Most of that investment has taken place since late 2020. What I wanted to show here is that restructuring costs typically lag behind the capital deployed by 6 to 12 months, and there are occasions where one-off projects will be undertaken after a number of smaller acquisitions have been completed. This can be seen within eLearning. One of the key projects in this space is merging our eLearning businesses following the platform acquisition of VinciWorks. We have the opportunity to consolidate all our e-learning activities under our lead eLearning brand. You'll hear more on this later as Gavin is going to take you through this element of our integration program, but it is a necessary investment to bring five acquisitions together into Vinci, and to create an efficient and scalable platform for future software growth. We entered the water and air hygiene market back in 2017 and have since completed 22 acquisitions in this space, the largest by some margin, being the GBP 30 million acquisition of Hydro-X in FY '22. Looking at the chart, here, we can see restructuring costs again typically lag behind capital deployed. And after a period of lower acquisition spend in the latter part of FY '20, restructuring costs dropped off into FY '21. As we move through FY '22 and significant further capital has been deployed, we are therefore seeing the consequential impact on restructuring costs into the current financial year. Phil and Andy will take you through how we've recently implemented our proprietary Wave operating platform and are in the final stages of integrating the Hydro-X acquisition, which has delivered significant cost synergies, which will enhance our return on invested capital. The last and largest sits within occupational health and brings all of our occupational health businesses under Optima. We entered the occupational health market in the back in the latter half of FY '20 through the acquisition of MOH and has since deployed GBP 170 million over 9 acquisitions. The largest being the GBP 135 million acquisition of Optima in January '22 and GBP 22 million acquisition of TP Health in April '22. Johnny provided a deep dive into the entire project and benefit, but I wanted to pull out that we're making good progress and expect the restructuring costs to run off by mid-FY '24. We closely monitor our restructuring costs run off. Looking back to FY '22, we incurred GBP 10 million of restructuring costs, which included GBP 3 million of integration resource. Of the remaining GBP 7 million, over 75% ceased within FY '22. With the remainder largely removed in FY '23, with the exception of some duplicated software contracts, which are a few months left to run. In terms of our integration resource, this has either moved on to new projects, left the business or is finalizing FY '22 projects. As previously explained, this integration resource is scalable and would no longer be required to stop acquiring. We see restructuring costs as an appropriate use of capital, and therefore, is a significant way to drive shareholder returns. Of the GBP 10 million deployed in FY '22, we estimate an annualized benefit of around GBP 5 million. In summary, we integrated these acquisitions because we could achieve a high return on investment from the capital we deploy on restructuring, and we monitor these costs have phased out of the business in line with our expectations. I would now like to hand it over to Phil and Andy from our water and air segment to talk you through the progress they've made in their business.

Hello. I'm Phil Greenwood, CEO of Marlowe Compliance Services, Marlowe's water and air business line. I'm responsible for overseeing the successful growth of the business, which makes up just over half of the group's TIC division alongside our Fire Safety and Security activities. Together, TIC is the largest property, safety and compliance services provider in the U.K., generating revenues of over GBP 270 million and operating across all key commercial and public sector and industrial sectors. A large majority of our revenues are recurring, tied into long-term contracts and underpinned by essential regulation. Our division is growing organically at around 10% a year, and our client relationships tend to be long at around 12 years on average.

And I'm Andy Walls Chief Operating Officer of Marlowe compliant client services. Alongside my day-to-day business. I have a strong focus on overseeing successful integration and change programs, which will be a key focus for today's presentation. I've been with Marlowe around 5 years now. I was able to bring experience from other B2B service businesses such as HomeServe where I led transformation for many years prior to joining Marlowe. So we entered the Water and Air Market in 2016 through the acquisition of WCS Group, a regional was a hygiene operator in the south of the U.K. with revenues of around GBP 6 million, 7 years on via organic growth targeted acquisitions and successful integration programs, we built what is, by far, the largest water and air testing business in the U.K. with revenues of over GBP 160 million a year. With significant geographic reach and a very extensive range of capabilities, allowing us to service all types of customers across an array of compliance requirements to ensure they are meeting their regulations around water hygiene and safety and ensuring efficient and smooth running of their operations. We deliver risk assessment, consultancy, testing and inspection, chemicals, treatment, engineering and training across water, wastewater, air quality, health and safety, CDM and asbestos. Today, we're going to focus on the Water business line and talk through 2 key integration projects that have been a focus for us in the recent year. The rollout of our new proprietary scheduling platform called Wave, and the integration of Hydro-X, the most significant acquisition that we have conducted as a division to date. Since 2016, we've completed over 20 acquisitions. The largest of those being the GBP 30 million acquisition of Hydro-X back in October 2021. Current U.K. addressable water in our hygiene market is around GBP 1.6 billion in size, and we occupy less than 10% of this market, well by some distance, the biggest player in it. Acquisition has been and will continue to be a viable tool to compound our organic growth and to further develop our strategic capabilities. We've used acquisitions as a tool to deepen and broaden our presence in the market. It's allowed us to successfully build geographical coverage and enhanced route density alongside expanding on our capabilities. This added scale and broader capabilities. The results from acquisition allows us to drive operational efficiencies and revenue synergies. However, whilst acquisition has been vital to build out scale across our markets, it's the organic initiatives that we via our integration model, which helps us to grow organically and faster than the market. Our centralized sales, marketing, account management capabilities are very well established. And these allow us to get close to the customer cross-sell our range of capabilities and acquire new clients more effectively. We invested hugely over the past 7 years in building out the infrastructure that supports our growth today. And that infrastructure is now well established and primed to support significant further growth with increasingly attractive economics. As we continue to grow organically, we don't need to make the same level of investments in our overhead. So this has been made possible through our investment in our proprietary digital ERP platforms that allow us to plan, schedule and execute our operations with the maximum efficiency that we can achieve. Our CRM platforms and sales process that allow our sales teams to maximize growth opportunities. Our finance platforms and controls that give us greater visibility and allow us to identify our most profitable work streams. Our HR systems and processes and our staff training academies, which allow us to attract develop and retain the best hand in the market right the way through to our QHSE support structure, which ensures our service delivery is audited to the very highest standards.

Firstly, we improved the acquisition through integration and deploying the divisional infrastructure we have built out over the past 7 years. We are primed and ready to support and improve new businesses that joined the group, and we have a well-rehearsed and repeatable playbook that we implement, and we have a strong track record of doing so successfully with a team of industry-leading professionals leading these programs. One of our key goals in making sure that each of these 20 acquisitions has been integrated effectively is to ensure that the whole is much greater than some of its parts. This is not just about cost efficiencies, but also driving control and visibility, creating the ability to scale and crucially delivering improved and consistent customer service. Compliance levels and organic revenue growth were also just as important. Integration also creates opportunities for our people as part of ambitious and dynamic market leader. A typical integration for us involves various stages. One of the main stages is combining back-office functions. We look to merge and acquire business back office into our existing one, swiftly following completion of a deal. This not only allows us to significantly reduce people, systems and property costs, but also leads to improved governance and risk management along with much greater control. It results in better efficiency in the back office. As a much larger business, we bring a depth of sales and operational support, smaller businesses would not have access to. Sales claims can operate more effectively, service teams can spend less time worrying about administration and more time delivering service and generating revenue as part of WCS. Our systems allow us to plan and execute this work in a more efficient manner, which means we deliver the work at better margins and the client is happier because we can respond to the issues more quickly and achieve higher standards of compliance. Or we can use our compliance report systems to present critical data that we wouldn't have had access to in the past. Looking back over the last 7 years, it simply would not have been possible to keep 20 acquisitions separate and run 20 back offices. That's why we have been so focused on driving integration right from the start of our strategy. We can drive cohesion pricing -- pricing strategies and prioritize organic investments once we follow the back office into our platform. Then we make sure that nuts and bolts of integration works too and that we are on a single IT, CRM and finance systems. Having centralized systems allow us to reduce dual running costs of these systems and also reduce operational complexity whilst improving our financial controls. Alongside this, we look at rationalizing our property footprint. And since 2016, we have vacated 32 properties across Water and Air. We have spent the last year also moving all of our businesses on to our newer proprietary operating system called Wave. Using a single operating system allows us to efficiently plan and triage work, take advantage of the route density effects and upsell new capabilities to current customers. It results in better service levels delivered more efficiently. Being a business of scale means we can benefit from the economies that this creates. It follows the larger you are, the number of customers you might have in a particular ever served by a technician or consultant. It means our fee earners incur less travel time and cost when serving clients and are able to complete more jobs per day, generating more revenue per day, so route density improves and so does our gross margin. A key part of our water treatment and hygiene involves the use of chemicals, and we actually blend our own chemicals in-house from 1 of our 2 manufacturing facilities, which means we save significant margin on the chemical costs than if we had produced them externally, and we can blend bespoke chemical applications to address particular client requirements. Of course, by being large it allows to negotiate better prices on materials that we do procure because we are a large volume buyer. Scale means you can in sign stuff by investing in market-leading training facilities and training is one of the key benefits we bring to an acquired business. We invest significantly in talent development and upskilling. Being a leader in TIC safety allows us to cross-sell to Water and Air is often sending business to fire and security and vice versa. We know that across Marlowe, the depth from range of compliance capabilities available means we can cross-sell through our shared customer channel confidently knowing that the service will be dealt with expertly. We have a well rehearsed playbook in integrating acquisitions. We make sure we have the correct resource available and created a detailed integration plan. This is done long before the completion of a deal. We plan for integration as soon as due diligence starts, planning for integration runs power lots of financial and commercial due diligence. Integration plans are ultimately presented to the Marlowe Board for sign-off, that's at least a couple of weeks before a deal completes. We have a dedicated integration team focused on the project. They would do both the practical heavy lifting of the integration, the 2Ps, contract transfers, data migration and procurement savings, as well as the regular report into group on how the integration is performing and delivering against the pre-acquisition plan. Take a typical bolt-on acquisition. It might bring around GBP 3.5 million to GBP 5 million worth of revenue to the group, and we look at integrating this type of acquisition, we have around 6 months of completion. We have bolt-on deals. We are typically looking at transferring the customer base and retaining the fee earners, perhaps just some along with some key salespeople in the cable management stuff. And we're then to aim to target the overheads for the main synergies. One restructuring program that is well progressed is that of Hydro-X. Hydro-X is by some margin, the largest Water and Air deal to date. Employed 180 people, serves thousands of customers across a variety of commercial sectors, and we acquired the business for GBP 30 million and added circa GBP 20 million of revenue to the group. This acquisition broadened our capabilities in indoor air quality, health, safety and training and inspection of fire dampers and ventilation hygiene. It allowed us to benefit from improved [ route identity ] leading to technicians optimizing their route to site and, therefore, improving revenue per day per fee earner across our existing core hygiene offering. Furthermore, we have managed to continue the growth of the business, which has outperformed our expectations. We have reverse integrate our air business into what was the Hydro-X operating platform and now have the large share offering in the U.K. on one single operating platform under one management team. As a leader in critical compliance, assuring our customers we have delivered our responsibilities and enabling our technicians to efficiently operate is critical to driving profitable sustainable growth. Our acquisitions of multiple businesses over the years meant that we had a number of competing processes, ways of operating and systems in place. We've added standardization of processes and systems. We wouldn't have been able to unlock further efficiency benefits and scale to the level we plan to be in the years ahead. That's why a few years ago, following the Clearwater acquisition, we began developing SR plans for our new end-to-end operating platform, and I'm pleased to say that we have now successfully rolled out the new Wave across the business. The system handles all of our water operations with over 0.5 million tasks run through the system each year, increasing efficiency improvements, providing clear compliance management reporting and consistently high customer service levels. This level of integration is not just a system deployment. This is about removing over 60 pieces of [indiscernible] software, removing clunky manual processes, removing hundreds of historic operating processes and a large number of localized customer requirements and replacing them with a streamlined and unified modern bespoke ERP platform that we have developed specifically for our business and market that will deliver scalable efficiency across our operations. This sets us up brilliantly to absorb and integrate future deals, too. Change on this scale is not straightforward, and it's not cheap, but it's the right thing to do to achieve our ambitions, and it results in attractive medium-term returns on investment. The Wave platform has been one of the largest sources of one-off costs incurred this year. Implementing the system on this scale presents challenges and considerations, not just for the IT team, but for the finance team and the whole business. For instance, over the summer last year, we decided to temporarily slow down our invoicing cycle to ensure the new system is working and planned and producing accurate data while the new processes were buddy down, which had a temporary impact on accrued income and subsequent cash flow. This was the right decision but demonstrates some of the complexities that need to be considered when playing for restructuring and change.

So effective integration projects essential to support a successful acquisitive growth strategy naturally require investments of time and money. This investment is part of the investment in M&A. So when we look at a deal, we don't just look at the upfront cash costs, but we look at the cost that it will incur as a result of restructuring and integration and the synergies that we think we can generate as a result. If the total return we think we can generate in the context of the total cost to acquire and then restructure the business stacks up, then we proceed with the deal. The costs are the costs of temporary project management expertise, people exit costs or double running leases, cost of properties that we plan to exit. So we identify, categorize and report regularly on these costs to head office in order to show the underlying picture of the business. These are the costs that we have typically identified preacquisition as part of our thorough integration planning. It is on to us to execute the phasing out of these costs and ensure that they translate into cash savings as soon as reasonably possible. Our teams are targeted and incentivized to achieve this efficiency. So in the first half of this year, there was around GBP 2 million of staff restructuring costs and around GBP 600,000 of integrated source which are primarily related to the Wave platform rollout and larger acquisition integration programs such as Hydro-X, Santia, Musketeer, or Phase technology. So the costs are substantial, but we have a plan to phase all of them from the business over the coming months, such that if there were no further acquisitions or one of projects, these restructuring costs would not feature in the business. We remain very optimistic about the growth opportunities across our market, where we are actively tracking hundreds of potential targets, many of which are suitable bolt-ons and typically with revenues of around GBP 3 million to GBP 5 million annual turnover. We maintain warm relationships with key targets, and we are seen as an acquirer of choice in our sector. That's thanks to our market-leading service, reputation for professionalism, continued word-of-mouth recommendations from past sellers. We get deals done efficiently. Other acquirers in the market don't tend to benefit from our track record of integration expertise. So we are able to tackle the more complex types of deals that others just aren't equipped to do. Regulations are evolving and the enforcement burden is increasing. The pressure on water systems to be compliant is increasing and we are also particularly well exposed to the wastewater treatment market, which is seeing a huge increase in demand due to the government clamping down on both.

Thanks, Andy and Phil Next, I want to touch on the group's cash dynamics and working capital. Marlowe is a blended group with a portfolio mix of working capital cycles. Overall, we have an attractive profile, which has resulted in working capital as a percentage of revenue being consistently below 5%. It's currently running at 4%. This is strong for our sectors and compares favorably to our peer set. The revenues in our business roughly split into 4 buckets. The first being SaaS-based revenues, which make up close to 10% of group revenues and have highly attractive working capital dynamics. The majority of SaaS revenues are made up of annual contracts built either yearly or monthly in advance, and therefore, display attractive negative working capital. The next bucket are revenues associated with our multiyear subscription service contracts. These are the typical contracts that can be seen in the rest of our GLC businesses. Again, these are often built in advance, so once again display a negative working capital model roughly constitute 20% of group revenues. The third bucket, annual and multiyear contracts paid on delivery of services are revenues associated with a larger within TIC. However, similar pay models do also make a proportion of our occupational health business. This makes up around 55% of revenues and displays a positive working capital model. Lastly, are the one-off projects that largely sit within TIC, these are projects that can sometimes take a few months to complete, and are unusually paid on completion or via Sage payment, and therefore, have a positive working capital model. Costs across the group are primarily staff costs which will be paid in the month when they're incurred. Outside of staff costs, our other costs would include associate and subcontractor costs, properties, vehicles, and within TIC, there are some material costs. Group debtor remained largely consistent over the previous periods, with GRCs showing slightly more attractive characteristics. GRC debtor days have also been assisted by the acquisition of Optima, which is debtor days of 25 to 30 days. TIC debtor days are on average below 55 days, which is good for a business operating in the B2B services space. Since the half year, we did see some mild pressure on debtor days given the current economic environment with customer payment periods lengthening slightly compared to agreed terms during the third quarter of the financial year. Pleasingly, though, we have made good progress on recovering the debtor days towards normal levels as we progress through the final quarter. Here, you can see how accrued and deferred income balances have moved over the last 4 reporting periods. The first point I wanted to clarify here is that the group revenue recognition policy has not changed at all over this period. Accrued income balances have increased due to the acquisition of Optima which have high levels of accrued income, which offset the low debtor days I noted on the previous slide. We also saw a temporary increase in accrued income within our Water and Air business in the first half due to the implementation of a new billing system, Wave. The temporary impact caused by the billing system in TIC is now as expected to reversed in the second half. Deferred income is significantly higher in our GRC division due to the prevalence of SaaS and subscription service models I highlighted earlier. Deferred income as a percentage of run rate revenues has remained broadly consistent in each division with the overall group run rate increasing to around 6%, but the GRC division has increased in scale more recently. To complete the working capital component, you can see here the other debtor and creditor balances. Inventories make up a relatively small part of our working capital profile with overall balances running at less than 2% of run rate revenue. Prepayments and other debts have remained largely consistent with increasing scale of the group, albeit with the higher levels at the half year due to timing such as annual prepayments for insurance. Trade creditors as a proportion of run rate revenues have decreased slightly over the last 2 years as the GRC division increases in size it carries a lower trade creditor requirement. Other current liabilities have again stayed broadly consistent given the increased scale of the group. All this means that when looking at our overall working capital levels, we've reduced the requirement as a percentage of revenue from 7% when TIC with the primary component of the group to sub-5% consistently over the last 4 reporting periods. We did see a temporary reduction in working capital during COVID due to HMRC deferrals and other operational effects. However, the current run rate of 4% reflects an attractive level of operational working capital. Moving on to capital expenditure. Spend on PPE or maintenance CapEx has remained consistent at around 1% of revenues. Software has been a key focus of the group, and we've acquired 7 SaaS-based businesses over the last 24 months. We look to continue to invest in our software businesses. And we now have the in-house capability to develop software products organically. As a result of this, CapEx related to software has increased to 2% of revenues, a level which we are comfortable with in line with our expectations going forward. This is a valuable investment to ensure that we can maintain software organic growth in the region of 15% to 20% per year. For the financial year ending 31st of March, we expect CapEx to be at GBP 16 million. I wanted to pull out some illustrative outlines of our free cash flow. Firstly, the consensus forecast for our FY '24 free cash flow. You can see the impact of reducing levels of restructuring costs and how this translates into increased levels of free cash flow. Secondly, based on GBP 100 million run rate EBITDA target by the end of FY '24 and assumes restructuring costs have run off within FY '24. This is a target which we are now confident of achieving organically. And based on our assumptions, we'd expect to have north of GBP 40 million of cash available for deployment. From a capital allocation point of view, this GBP 42 million can be used for 3 main areas. Firstly, deleveraging. If leverage is in excess of the Board's appetite, our current comfort range is 1.5x to 2.5x run rate adjusted EBITDA. We would allocate capital to reduce net debt. We can bring leverage down by around half a turn each period, which would in turn lower our interest costs and increase our ability to deleverage. If deleveraging is not required and there is an attractive investment opportunity, we would deploy capital on M&A or invest in organic initiatives. With this level of free cash, we can add around GBP 7 million of additional EBITDA to the group at a post-synergy north of 6x. If an excess remains, we will then either repurchase shares or start to pay a dividend depending on the share price at that current time. The Board has begun to consider this as a route to returning value to shareholders. On that note, I'll pass you back to Alex.

Thank you, Adam. So before I hand over to Gavin to talk you through our GRC organizational changes and our successfully learning integration program, and we then return to answer your questions, some key takeaways. We've made major strategic progress with the disciplined execution of our strategy to build a leader in compliance services and software. We are a defensive business occupying resilient growth markets, and we're delivering organic growth of around 9% per annum. You've seen today that integration is a key part of the Marlowe growth model. And this is a vital investment to generate sustainable growth and improving financial profile and attractive shareholder returns. You've seen the quality of our leadership teams who are delivering our growth strategy and some of the key integration programs they're executing. You've seen the attractive underlying cash flow dynamic of the group. And you've heard our run rate revenue today are GBP 480 million and run rate EBITDA is nearing GBP 90 million, and the progress towards our FY '24 financial targets has been strong. Thank you very much.

Hi, everyone. I'm Gavin Snell, the recently appointed Chief Executive of Marlowe's Governance, Risk & Compliance division and the former head of the group's HR employment law and Health and Safety division WorkNest. I'm going to talk today about some of the key programs underway across the GRC division and how we're setting up the division for further growth whilst realizing integration efficiencies and ensuring we're collaborating closely across the division to accelerate organic growth. I'll then go into detail about one of our major integration projects, the merging of our e-learning businesses to create the U.K.'s leading compliance e-learning software business. This project is a key example of how we use organic growth and M&A to rapidly scale in an attractive compliance market, then consolidate onto a single platform, resulting in significant cost synergies and whilst enhancing our customer proposition. GLC has grown rapidly from a health and safety consultancy and software offering in 2018 with revenues of around GBP 10 million. To what is now a broad division with revenues of GBP 200 million, most of which is recurring and delivered as a subscription. With an EBITDA margin of 25%, spanning a wide array of compliance areas and software offerings in high-growth and resilient markets. As regulations continue to evolve, the enforcement burden grows and employees become more litigious, our offering is increasingly relevant. We aim to provide a wide bundle of compliance solutions from health and safety support services and intelligence products, employment law advice, health and well-being support through to EHS software, compliance e-learning or enterprise risk management software for large enterprises. Our business is all about risk and compliance, whether it's workplace risk or workforce risk. The scale that we have built since 2018 has created a depth and breadth of expertise. We work with customers across the U.K., and increasingly, our SaaS businesses are delivering to international geographies and working across all sectors with clients of shapes -- of all shapes and sizes. With this scale comes the need to evolve, a challenge and an opportunity. We know that we share these challenges and opportunities across our GRC divisions with common issues such as how do we retain and promote our top talent? How do we leverage our huge client base? How do we implement strong governance controls and consistent reporting metrics? How do we drive integration synergies effectively? In the light of these common challenges and opportunities, we have been implementing a strategy to evolve the structure of the GRC division and selectively develop key shared functions with common leadership to ensure that we have coordinated approaches across our businesses. At Marlowe, we've always been strong believers in entrepreneurial autonomy and this new GRC organizational structure reflects this. Business unit leaders are unambiguously accountable and responsible for designing and delivering business plans and P&L returns. We're not creating any scale shared service operations, but we're taking advantage of opportunities to work more closely together as a division to accelerate growth and drive greater efficiencies. Every decision we make in evolving our structure must achieve one of the following objectives: increasing profitable revenue growth, improving leadership and talent retention, improving the realization of integration synergies, improving our governance and increasing profitability. Whilst the organic growth engines within our individual GRC businesses are well-oiled machines, we think we can go even faster. We're creating a framework for organic investment to ensure that we continue to evolve our offering to match our customer needs and maintain a best-in-class service. We will align divisions on targets and ensure that we make pragmatic decisions on areas of ongoing investments. For example, we've made significant investments into an entirely new platform, Prosure360 and recently approved a significant investment program for our HR software platform. The second area where we are looking to drive further growth is through a strategic sales initiatives, ensuring that we become even more effective at driving cross-sells revenue and maximizing the opportunity presented by our 15,000-plus clients within GRC, particularly at the enterprise level customer. In addition, we're focusing considerable effort on developing existing and new partnership channels. Crucial to these growth initiatives is the attraction and retention of talent in our business. Despite our growing software offering, we're still very much a people-led business, and we must continue to ensure that we offer opportunities for key talent to advance, encouraging the next generation of leaders. To drive this, we're focusing on several key initiatives, including standardized talent reviews, giving us visibility of the talent profile across our division, a centralized leadership development program, and driving engagement across the group through leadership conferences. Adjacent to our key growth and talent management initiatives, which are essential to driving future organic growth is our program to align systems, such as those ensuring that we're using Salesforce, our CRM platform effectively to drive cross-sales opportunities. Then there are also governance processes we want to align around ESG, IT security and other internal compliance areas. Alignment in these areas will drive harmonization of standards across the division. Whilst improving our ability to tender for contracts, ensuring that we're not only best-in-class in our service and software offering but also in our approach to key areas of governance. The final piece of this divisional initiative of enhanced collaboration is sharing integration best practice, ensuring that we have a well-honed playbook when it comes to compact of integration, such as switching finance and CRM systems, implementing headcount restructuring decisions or reviewing pricing strategy. This is core to evolving the GRC division to ensure that we're ready for further growth and will enable the group to continue to use M&A as a key value creation driver. The businesses we buy are not always as well governed as we are. Through this thoughtful approach, we aim to increase the effectiveness of our integration programs whilst reducing their costs. All of the above initiatives are at the core of the restructure of our GRC division. These initiatives are centered around either increasing growth, reducing costs improving talent or mitigating risk and enhancing financial controls and governance. The sum of this effort will also result in improved returns on capital. This restructure is not designed to be a one-off initiative -- it will be a continuous process, ensuring we are maximizing all areas of value in the group and ensuring that Marlowe is operating as a cohesive business.

Good afternoon. I'm Andy Councell, recently appointed GRC CFO and former CFO of WorkNest. Like Gavin, I recently stepped into this new role and I'm working with him to develop a GRC finance function that is driving growth and efficiency in a well-controlled and effectively managed way. Each of the divisional business units within GRC has a strong dedicated finance team and my new GRC finance function is not about supplanting these existing functions but enhancing and supporting them with common oversight, shared resources, greater efficiency, enhanced controls and expertise as we prepare for our next phase of growth. My first area of focus will be on enhancing our financial planning and commercial financial management. I will work with our divisional finance teams in setting budgets with clear measurable targets and ensuring that all the finance, sales ops and management teams are held accountable to these financial plans. Key to this process will be setting ambitious but realistic growth goals and ensuring that growth in the top line is converting into cash at the bottom, through tracking key working capital metrics and ensuring we are maximizing the return on every pound spent. Alongside this, we will broaden the scope of divisional reporting by implementing broader KPI tracking. This will enable us to gain a deeper insight into the functioning of our divisions, ensuring that when performance is not tracking to plan, we have a resource of data to draw upon to diagnose the issue and inform a solution. It will also enable us to be more targeted in our investment approach, ensuring that we can invest in areas where we know we will get the best return and address areas where returns are subpar. I will work alongside Gavin and the divisional finance teams in carrying out a full audit of our existing procurement process and practices. The primary aim of this will be to leverage our scale to achieve better terms with large areas of our procurement spend. The end goal of this audit is to generate savings across all areas of procurement spend and I'll be tasking divisional finance teams to identify areas of inefficiency and commit to cost-out targets in FY '24. In tandem, we're refining the processes mentioned above and say ambitious, achievable targets for our divisional teams. We are currently signing a new incentive plan for our key executives, ensuring their compensation is aligned with our business goals. This new incentive plan will be contingent on the good performance in key areas of our respective divisions, such as EBIT growth, cash conversion, organic revenue growth and EBIT margin accretion. Through this incentive plan, we aim to continue rewarding our key executives, ensuring we retain our best talent whilst keeping their compensation aligned to the creation of shareholder value. I'll now pass back to Gavin to talk about one of our key ongoing integration projects.

I'd like to talk you through the consolidation of our eLearning businesses, one of the key current integration projects within our GRC division. This project is being orchestrated and led by Josh Goodhart, the CEO of our e-learning division, VinciWorks. And the project, which is well progressed, is bringing together all our compliance e-learning activities to create 1 brand, 1 software infrastructure, 1 learning management system, 1 content team, 1 sales team, 1 development team all under common management as a key business unit within GRC division. From the client's perspective, the integration is resulting in an enhanced SaaS platform, a better, more streamlined user experience and a broader offering of compliance content across areas such as health and safety, diversity and inclusion, financial crime regulation and GDPR. As some background to this project, our eLearning division began with the acquisition of DeltaNet in 2020, we then made a further 4 acquisitions in this space with VinciWorks being the largest of them. This transformed our eLearning Group from being a relatively small U.K. provider to the leading compliance e-learning player in the U.K. serving clients globally from operational hubs in Ireland, the U.K. and Israel. This rapid transformation and growth led to the need to integrate these businesses closely, ensuring that we were maximizing the combined potential of these businesses in a cost-efficient manner. This integration is focused on 3 primary areas: merging the back-end and front-end software environment, into our proprietary learning management system platform, consolidation and rationalization of the e-learning content library, ensuring that we have a market-leading offering with breadth of courses whilst lowering maintenance costs as a percentage of revenue. Merging the development team, the sales and marketing teams and other support functions, adopting best practices and removing significant duplication where necessary. This will set up VinciWorks to be a platform for future organic M&A growth. Let's talk through the consolidation and rationalization of the content library. Between the 5 e-learning companies that Marlowe has acquired, there is an extensive library of over 800 compliance topics, addressing the full spectrum of compliance from manual handling training through to anti-money laundering forces. Our ability to upsell to customers is greatly increased by having a flexible single source of all content courses. The goal of this work has been to review the full library identifying courses, which should be kept and are in high use by our customers and those that should be retired. Through this process, we are significantly reducing the cost associated with course maintenance and development whilst ensuring that we have the highest quality content and breadth of subject matter expertise in the market. The next area of focus has been consolidating our sales and marketing under VinciWorks. Improving our return on sales and marketing spend has been a core focus of this integration project, and there are several strands to this improvement. The first has been to move all companies on to VinciWorks' content marketing operation and removing any areas of overlapping spend, whilst this has been a recent change, we're already seeing a significant uptick in marketing metrics. Alongside improving lead generation, we are implementing changes to drive better conversion of leads and retention of customers. Whilst VinciWorks already keeps clients for more than 10 years, there is room to improve retention across the business. and the team has been working on aligning customer success, account management and renewal processes to drive this improvement. Alongside this, we've reviewed the pricing strategy of the business ensuring that we're optimizing price and implementing automatic annual price rises. Through these initiatives, we've generated in excess of GBP 1 million in annualized cost savings, whilst improving the retention of our customer base and accelerating new logo wins and upselling our product suite to existing customers. The final core of this integration project has been to ensure the back-office functions operate as 1 unit and has the infrastructure to absorb and integrate companies going forward. The core part of this has been unifying back-office systems, moving all teams onto the same CRM and internal communication platforms, consolidating financial reporting and moving everyone on to VinciWorks proprietary software tools whilst retiring other overlapping software platforms currently in operation. This is resulting in reduced maintenance costs whilst freeing up resources to focus on further developing VinciWorks software suite into a market-leading offering. Alongside the system and platform consolidation, the final piece of this project has been to set up a team for the future. We've worked on rationalizing areas of the team and have engaged in 2 redundancy rounds, ensuring we maintain a lean, highly talented workforce. Further to this, the management structure of VinciWorks Group has been reorganized. Ensuring that the executive team led by Josh has a strong layer of middle management to cope with the demands of growing at pace. So what does all of this translate into? The product of this consolidation will be 1 Marlowe eLearning division operating under 1 brand with one of the largest libraries of compliance e-learning content in the U.K. with a single cohesive pricing strategy driving this. Alongside this content will be a suite of market-leading software products, enhancing our customer proposition. The company will run on 1 set of systems and the management structure is set up for future growth and integration. This will allow us to drive more value from our existing businesses, whilst also being able to extract material cost synergies from acquisitions going forward and having a proven playbook to enhance growth for new acquisitions. Marlowe's eLearn division is becoming highly scalable, poised to become the global leader in compliance e-learning, a key strategic vision for us into the future.

[Operator Instructions] Our first question today comes from Calum Battersby with Berenberg. Calum, please go ahead.

Three questions for me, please. Firstly, I want to check if you could be slightly more specific on the restructuring and access and costs for the next couple of years, which the chart in the presentation seems to suggest you have a pretty clear line of sight on. So are you able to give kind of rough figures on one, how much is spent on those cost buckets in the second half of FY '23 and then what we should expect for FY '24 absent any further sniffing acquisitions. I'll leave it there and then go next.

So as you see, I think the chart sort of already highlighted it. And then if you look at the market forecast, as sort of GBP 8 million to GBP 10 million of restructuring costs in next year. The vast majority of those will fall in the first half, but there might be a bit of run off into the second half. After that, then we -- there won't be after the sort of second half of FY '24, it won't be on into FY '25 unless obviously, there's further M&A, which requires a restructuring beyond the end of FY '24. But at this stage, based on the current projects, we expect all restructuring costs to finish at the end of FY '24 and largely by the end of halfway through FY '24.

Yes. You kind of alluded to a few examples in the presentation. But then for that GBP 8 million to GBP 10 million, are you able to give us a rough summary of what the main projects are, that are continuing into next year and how sizable it should be though?

Yes. So the largest projects that are running into next year are the ongoing occupational health integration, which Johnny took you through earlier. There's a bit of a finishing off the Water integration that Phil and Andy took you through too. And then it's tidying up the acquisitions we've made this year, which is a bit in Fire and a bit in our WorkNest division.

Got it. And then last 1 for me. Given the sounds of some of kind of the headlines that you've got in the release in the presentation today, it sounds if the current focus is shifting slightly more towards generating cash and deleveraging. So I wanted to check if there is anything you're doing in terms of reducing the size of some of the in-house M&A or integration teams in the business, particularly, I expect some of the integration teams must be quiet now than they have been for a couple of years.

Well I'll go with that. I mean the integration teams, by their nature, flex up and down the whole time. And as the current integration programs fall away and are completed. Those integration teams will fall away as well. From an M&A team perspective, we've got a small team in the head office who are focused on our growth strategy, and we still see significant opportunities for growth through bolt-on M&A and the team are very focused on developing that pipeline and the opportunities for the future such that when we're at the stage where we've made really good progress with the integration programs that are ongoing. We can continue using M&A selectively as a route and a tool to compound our organic growth. And obviously, in the first half of this financial year, you saw that taking place. We completed 10 small acquisitions in the second half. There's been a much slower pace of growth. So we did 1 acquisition, the PCS deal. That was a GBP 9 million consideration. And looking forward to next financial year, selectively, we do expect to be doing small bolt-ons. So a significantly slower pace than historically over the last couple of years. But we still do see significant opportunities in the market. Understood reminder.

[Operator Instructions] We do not have any further questions currently registered on the phone line. So I'll hand the call over to the management team.