BUSINESS DESCRIPTION

Citation is a leading provider of outsourced HR, Employment Law, Health & Safety and ISO certification services to over 17,000 customers across the UK.

Citation helps SMEs comply with the relevant Employment Law and Health & Safety regulations. Customers have access to 24/7 advice from highly-skilled and qualified experts in the fields of HR, Employment Law and Health & Safety who can assist with a broad range of business-related issues.

Citation also provides ISO certification and consultancy services to SMEs under a separate brand (‘QMS’). QMS has helped implement over 20,000 management systems in organisations across the UK, which are then certified as being in line with international standards of quality. Its services are highly complementary to Citation’s, with a significant opportunity to cross-sell services across both customer bases.

WHY DID WE INVEST?

Citation operates in the regulatory-driven compliance services sector for SMEs which is structurally growing at mid-single digit rates. Under the current management team, the business has improved and professionalised its sales & marketing function which has driven double-digit organic growth. The business is one of the highest quality in this sector, noted for its high levels of customer satisfaction resulting in market-leading retention rates.

HOW DO WE INTEND TO CREATE VALUE?

We believe that satisfaction levels among Citation’s customers provide the opportunity to sell more through new adjacent services and an expansion of their offering. There is also a significant opportunity for M&A in both the Employment Law and Health & Safety compliance and ISO certification markets, which are highly fragmented with a large number of smaller local players.

WHAT HAS BEEN ACHIEVED?

The key areas of focus for the management team at present are: investing in the sales & marketing function for future growth by continuing to gain market share; improving financial reporting, budgeting and controls to ensure these processes are robust enough for the business as it moves through its next phase of growth; and executing the value creation plan which developed over the first six months.

HOW IS IT PERFORMING?

Citation is seeing year on year double digit EBITDA growth with the ISO division experiencing particularly strong performance in 2016. FY16 EBITDA was 21% ahead of prior year, driven by 10% growth in the Employment Law and Health & Safety customer base and 14% growth in the ISO customer base. Further improvements in the sales & marketing function, including developing new channels, have driven a reduction in customer acquisition costs as the team becomes more efficient at gaining new customers.

Citation is a relatively new investment within the portfolio and is valued broadly in line with its initial investment value.

HOW WILL WE CRYSTALLISE VALUE?

Citation’s regulatory-driven services and long-term subscription-based revenue model will continue to attract private equity interest at exit. In addition, there are also a number of potential trade exit opportunities across the accounting, payroll, HR and legal services space.

Sector Location Date of Investment Residual cost £’000 Unrealised Value £’000
Services
UK March 2016 10,068 11,022