TIDMFRAN
RNS Number : 0746A
Franchise Brands PLC
18 January 2024
18 January 2024
FRANCHISE BRANDS PLC
("Franchise Brands", the "Group" or the "Company")
Year End Trading Update
Another year of strong growth; key divisions trading at record
levels and
Adjusted EBITDA in line with market expectations
Franchise Brands plc (AIM: FRAN), an international multi-brand
franchise business, provides the following trading update for the
financial year ended 31 December 2023.
Following the acquisition of Pirtek Europe in April 2023, the
Group now has over 625 franchisees across seven franchise brands in
ten countries covering the UK, Continental Europe and North
America, resulting in a diversified international footprint.
Divisional performance
The divisions serving business customers (Pirtek, Metro Rod,
Willow Pumps, Filta UK and Filta International) are trading at
record levels, demonstrating the resilient underlying demand for
their primarily essential reactive services in challenging
macro-economic conditions.
Pirtek traded at record levels, contributing as expected to the
Group results in the eight months of ownership, despite a softening
in sales in the construction and hire fleet sectors during Q4,
particularly in the UK and Germany. Integration of Pirtek into the
Group is progressing well, and the Group continues to identify
efficiencies, particularly in IT, where the Board foresees
significant synergies over the next few years. Work has also
started on expanding the range of services and cross-selling across
the Group's significantly enlarged customer base.
Metro Rod also delivered a record year with strong momentum,
resulting in system sales growth of almost 20%. This growth has
been driven by the continuing initiatives to widen and deepen the
services offered, particularly in pump service and maintenance.
Metro Plumb's system sales increased by over 20%, with this strong
growth reflecting the recruitment of new independent franchisees
and the broadening of its range of services.
Particularly good progress has also been made in Willow Pumps,
assisted by several planned management team changes. The special
project department is gathering momentum and with a more extensive
sales pipeline, the Board expects further progress in 2024.
At Filta UK, the transition from a direct labour operation to a
franchise model has accelerated and, whilst this reduces the gross
margin, it is helping the Group to build a more robust and
sustainable long-term business model. The previously reported
supply issues with the Cyclone grease recovery unit have been
resolved by the acquisition of all the intellectual property rights
associated with this unit. While this disruption has impacted sales
for the year, the Board is confident that full control of the
supply chain will enable accelerated growth in 2024.
Filta International's North American business had a record year,
with system sales increasing by over 15% and robust levels of
activity across all key customer sectors. Used oil volumes
increased by 25% but this was mostly offset by a c.20% reduction in
the average sale price achieved. The range of services offered to
Filta International's commercial kitchen customer base is being
expanded with the addition of new bulk virgin oil sales and a
kitchen cleaning service, which will drive the management service
fee income in future periods.
The B2C division delivered a creditable performance in a
challenging recruitment environment, and whilst its contribution to
the Group results will be below the prior year, it will exceed the
Group's more cautious expectations.
Balance Sheet
The Group's adjusted net debt on 31 December 2023 was reduced to
GBP74.8m (30 June 2023: GBP79.1m), comprised of gross debt of
GBP86.8m and cash of GBP12.0m. Adjusted net debt excludes debt on
right-of-use assets and is the debt measure used for testing bank
covenants. The Group is trading comfortably within all banking
covenants.
The strategic focus of the Group remains on integrating Pirtek,
promoting operational synergies, organic expansion of the range of
services and repaying acquisition debt. As a result, capital
allocation decisions will balance debt reduction, a progressive
dividend policy and organic investment. The Board has set a target
leverage range of 1.0-1.5 times Adjusted EBITDA before it will
consider any further acquisitions of scale.
Outlook
Despite challenging macro-economic conditions, the resilient
underlying demand for the Group's essential reactive services means
that the business continues to perform well and grow, with its key
divisions all achieving record results in 2023. As a result, and
subject to audit, the Board expects the Group's adjusted EBITDA for
the year ended 31 December 2023 to be within the range of current
market expectations of GBP29.2m to GBP30.1m.
Stephen Hemsley, Executive Chairman, commented:
"In 2023 we once again doubled the size of the Group with the
acquisition of Pirtek, having doubled in size in 2022 following the
merger with Filta. These acquisitions have transformed the Group
from a UK domestic business to a sizeable international business
with seven franchise brands in ten countries, and from adjusted
EBITDA of GBP8.5m in 2021 to c. GBP30m in 2023.
"The integration of these businesses into a single group focused
on providing essential business services primarily via a franchised
model is progressing well and at pace. We are beginning to share
resources internationally, particularly in the area of IT, which
will accelerate our operational gearing in the coming years for
both us and our franchisees.
"We also see significant potential for growth across our
principal franchise brands of Pirtek, Metro Rod and Filta, which
have small shares of large markets. As we continue to deliver on
our ambition by broadening the range of services offered,
increasing the geographical penetration and cross-selling to the
larger customer base, I am very confident in the future prospects
of the Group."
Capital Markets Day
The Group will be hosting a Capital Markets Day for
institutional investors on 20 February 2024, where it will set out
its medium-term strategic model and outline the growth potential of
the business. The event will be hosted by Stephen Hemsley,
Executive Chairman, and will include presentations from the Group's
leadership team. Further details of the Capital Markets Day will be
announced shortly.
Enquiries:
Franchise Brands plc + 44 (0) 1625 813231
Stephen Hemsley, Executive Chairman
Mark Fryer, Chief Financial Officer
Julia Choudhury, Corporate Development Director
Allenby Capital Limited (Nominated Adviser
and Joint Broker) +44 (0) 20 3328 5656
Jeremy Porter / Liz Kirchner (Corporate
Finance)
Amrit Nahal / Joscelin Pinnington (Sales
& Corporate Broking)
Dowgate Capital Limited (Joint Broker) +44 (0) 20 3903 7715
James Serjeant / Russell Cook / Nicholas
Chambers
Stifel Nicolaus Europe Limited
(Joint Broker) +44 (0) 20 7710 7600
Matthew Blawat / Francis North
MHP Group (Financial PR) +44 (0) 20 3128 8100
Katie Hunt/Catherine Chapman +44 (0) 7884 494112
franchisebrands@mhpgroup.com
About Franchise Brands plc
Franchise Brands is an international, multi-brand franchisor
focused on building market-leading businesses primarily via a
franchise model. The Group has a combined network of over 625
franchisees across seven franchise brands in ten countries covering
the UK, North America and Europe.
Franchise Brands' focus is on B2B van-based reactive and planned
services. The Company owns several market-leading brands with long
trading histories, including Pirtek in Europe, Filta, Metro Rod and
Metro Plumb, all of which benefit from the Group's central support
services, particularly technology, marketing, and finance. At the
heart of Franchise Brands' business-building strategy is helping
its franchisees grow their businesses: "if they grow, we grow".
Franchise Brands employs over 700 people across the Group.
For further information, visit www.franchisebrands.co.uk
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