TIDMFRAN
RNS Number : 1663R
Franchise Brands PLC
25 October 2023
25 October 2023
FRANCHISE BRANDS PLC
("Franchise Brands", the "Group" or the "Company")
Q3 Trading Update
All B2B business trading at record levels, with Pirtek meeting
expectations and integrating well
Confident in delivering adjusted EBITDA for the full year in
line with market expectation with debt levels reducing
Franchise Brands plc (AIM: FRAN), an international multi-brand
franchise business, provides the following trading update for the
three months to 30 September 2023 ("Q3").
Following the acquisition of Pirtek Europe in April 2023, the
Group now operates seven franchise brands in ten countries in the
UK, Continental Europe and North America, resulting in a more
diversified international footprint and a broad range of resilient
business services.
Divisional performance
The B2B businesses, which are engaged primarily in providing
essential reactive services and includes Metro Rod and Metro Plumb
in the UK and Pirtek in eight European countries, are all trading
at record levels despite some softening in demand over the summer
period. Whilst the type of reactive services provided have
resilient underlying demand whatever the macroeconomic conditions,
demand naturally reduces when customers' equipment or facilities
are not being used as intensively. Consequently, Q3 was a little
softer than in H1, but we saw a modest increase in activity at the
start of Q4.
Pirtek is integrating well and has met our expectations at the
time of its acquisition. We continue to work on expanding the range
of services and growing the customer base by identifying
cross-selling opportunities within the Group. As a result of the
significant opportunities to build a much larger business, the
Group has decided to accelerate the integration process. We have
optimised the management structure for cost and operating
efficiencies, and the new leadership team has settled in well and
is developing strong relationships across the Group. We have also
launched several initiatives to integrate technology, finance and
marketing into our central functions, with the initial focus being
on technology.
Metro Rod has experienced continued strong momentum in the
year-to-date in the growth of system sales due to the continuing
initiatives to widen and deepen the services offered, particularly
in the area of pump service and maintenance. Metro Plumb continues
to grow strongly as new independent franchisees are recruited and
the range of services offered improves. Good progress has been made
in Willow Pumps, where the special project department is gathering
momentum. The transition from a direct labour operation to a
franchise model at Filta Environmental has accelerated with
additional franchisees recruited, resulting in over 70% of the
grease recovery unit maintenance work being delivered by the
franchisees. Whilst this has reduced the Filta UK gross margin, it
is helping us build a stronger, more sustainable franchise model in
the longer term.
Filta's North American business has benefited from robust
activity across all key customer sectors, with used oil volumes and
revenues up strongly. The range of services being offered to its
commercial kitchen customer base is also being expanded with the
addition of new bulk oil sales and a steam cleaning service, which
will drive the management service fee income in future periods.
However, some of this underlying growth has been offset by a
reduction in the price achieved from the sale of used cooking
oil.
The B2C division continues to operate in a challenging
environment, although profitability is being maintained in line
with expectations.
Balance Sheet
Group net debt (excluding leases) on 30 September 2023 reduced
to GBP76.0m (30 June 2023: GBP79.1m), comprised of gross debt of
GBP92.4m and net cash of GBP16.4m. The Group is trading comfortably
within key banking covenants. The Group's interest charge is
averaging c.8% on the gross debt, which is higher than projected at
the time of the Pirtek acquisition due to increases in the Sterling
Overnight Interest Average (SONIA).
Management Team
During Q3 the Group has continued strengthening the senior
management team with Mark Fryer joining as Chief Financial Officer
and Rob Bellhouse appointed as Company Secretary. We have also
developed our corporate governance structure, in line with the
expansion of the Group and our ambition for the future, by
reorganising the board structure. We now have a smaller plc board
comprising two executive directors and three non-executive
directors, including Peter Kear, who has been appointed as Senior
Independent Non-executive Director. The plc board is supported by a
Management Board comprising the divisional CEOs and heads of the
support functions.
Outlook
Despite challenging macro-economic conditions, the resilient
nature of our services means that the Group continues to perform
well and expand. As a result, the Board expects the Group's
adjusted EBITDA for the year ending 31 December 2023 to be in line
with current consensus market expectations*.
Stephen Hemsley, Executive Chairman, commented:
"The integration of Pirtek is progressing well, and the new
senior leadership appointments are allowing us to accelerate the
process of integrating this business into the Group and achieve
more cross-functional and cross-geographic co-operation,
particularly where we can leverage our shared resources.
"We see significant potential for growth across our principal
franchise brands, which have a small share of large markets, by
broadening the range of services offered, increasing the
geographical penetration and cross-selling to the larger customer
base. This scale, and our continued investment in IT
infrastructure, will accelerate our operational gearing in future
years and be a further driver of adjusted EBITDA.
"Whilst the trading environment has become more challenging as
the year has progressed, the resilient nature of the business
services we provide gives us confidence in delivering adjusted
EBITDA for the full year in line with consensus market
expectations."
* Consensus market expectations for the financial year ending 31
December 2023 is adjusted EBITDA of GBP29.3m.
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 / George Payne
(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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END
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