Berenberg lowers Marlowe target price but sees potential for medium-term rerating

The provider of business-critical services and software's latest full-year numbers reflected the company's shift in focus from mergers and acquisitions, during the prior year, to integration of the new assets.

And yet, the shares had dropped by 26% over the past year.

They attributed that performance to investors' increased focus on cash and the divergence between adjusted and reported profits.

But there was better news on both fronts from the latest results.

The company's one-off working capital issues from the first half had unwound over the last six months and free cash flow generation - on Berenberg's definition - had swung from -£10m to £16m.

Even so, with their own estimates effectively unchanged, Berenberg cut its target price from 1,160.0p to 800.0p "reflecting lower market multiples and a view that it will take Marlowe time to prove its cash generation and recover its rating."

On longer time frames however, the broker spied potential for a medium-term re-rating and "significant" earnings growth in both organic and inorganic terms "in line with the group's history".