TIDMFRAN
RNS Number : 0451G
Franchise Brands PLC
22 July 2021
Prior to publication, the information contained within this
announcement was deemed by the Company to constitute inside
information as stipulated under the UK Market Abuse Regulation.
With the publication of this announcement, this information is now
considered to be in the public domain.
22 July 2021
FRANCHISE BRANDS PLC
("Franchise Brands", the "Group" or the "Company")
Interim results for the six months ended 30 June 2021
Strong revenue recovery and record profits give confidence in a
full year performance ahead of expectations
Franchise Brands plc (AIM: FRAN), a multi-brand franchise
business , is pleased to announce its unaudited results for the six
months ended 30 June 2021.
Financial highlights
-- Revenue increased by 18% to GBP28.6m ( H1 2020 : GBP24.2m).
-- Adjusted EBITDA* increased by 50% to GBP4.2m ( H1 2020 : GBP2.8m).
-- Statutory profit before tax increased by 200% to GBP2.6m ( H1 2020 : GBP0.9m).
-- Strong cash conversion of 84% (H1 2020: 38%).
-- Net cash of GBP5.2m at 30 June 2021 (31 December 2020: GBP4.9m).
-- Adjusted EPS** increased by 46% to 2.70p (H1 2020: 1.84p).
-- Basic EPS increased by 143% to 1.63p (H1 2020: 0.67p).
-- An interim dividend of 0.60p per share declared (interim 2020: 0.30p per share).
Operational highlights
-- A strong recovery across the Group, despite the Q1 lockdown.
-- Metro Rod and Metro Plumb system sales increased by 21% to
GBP23.7m, including a record GBP4.3m in June.
-- Metro Rod won significant GBP1m contract with Peel Ports, being delivered directly.
-- Digital transformation continues at pace: launch of new customer portal "Connect".
-- Pump sales by Metro Rod franchisees increased 159% to GBP0.7m, facilitated by Willow Pumps.
-- Willow Pumps sales growth of 11% driven by higher gross
margin service work and the development of the Metro Rod corporate
franchise areas.
-- A strong performance by the B2C division.
-- Robust return of recruitment with 40 new franchisees (H1 2020: 27).
-- Total number of franchisees up to 393 (30 December 2020: 386).
*Adjusted EBITDA is earnings before interest, tax, depreciation,
amortisation and share-based payment expense and non-recurring
items.
**Adjusted profit before tax and Adjusted EPS are earnings per
share before amortisation of acquired intangibles, share-based
payment expense and non-recurring items.
Stephen Hemsley, Executive Chairman, commented:
" The first half of 2021 has been a period of strong recovery
from the COVID-impacted performance in 2020, despite the lockdown
in Q1.
"The strength of our brands, our people and our franchisees have
allowed us to weather the storm and emerge fitter and stronger as
both a team and as a business. We look forward to the second half
of the year and beyond with great optimism. We are confident that
the full year performance will be ahead of current consensus market
expectations."
Consensus market expectations for the financial year ended 31
December 2021 are currently as follows:
-- Revenue GBP56.7m
-- Adjusted EBITDA GBP7.85m
-- Adjusted EPS 5.07p
-- Dividend 1.40p
Enquiries:
Franchise Brands plc + 44 (0) 1625 813231
Stephen Hemsley, Executive Chairman
Chris Dent, 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 (Sales)
Dowgate Capital Limited (Joint Broker) +44 (0) 20 3903 7715
James Serjeant / Colin Climie / Nicholas
Chambers
MHP Communications (Financial PR) +44 (0) 20 3128 8100
Katie Hunt +44 (0) 7884 494112
franchisebrands@mhpc.com
CHAIRMAN'S STATEMENT
Introduction
The first half of 2021 has been a period of strong recovery from
the COVID-impacted performance in 2020, despite the lockdown in Q1.
Metro Rod and Willow Pumps provide essential services to a wide
range of sectors which have gradually reopened over the period. As
consumer confidence has returned, our B2C businesses have seen a
recovery in the demand for the services offered by our franchisees
and increased interest in buying a franchise. Some key sectors
which the B2B division serves have still not fully reopened and the
vaccination programme which underpins consumer confidence has not
yet been completed, so we look forward to the second half of the
year (and beyond) with considerable confidence.
Metro Rod Division
The Metro Rod Division comprises the franchise activities of
Metro Rod and Metro Plumb, and the direct labour ("DLO") London
based plumbing business, Kemac, which are all the responsibility of
the divisional MD, Peter Molloy.
System sales at Metro Rod and Metro Plumb grew by 21% in the
first half of the year, accelerating throughout the period to a
record GBP4.3m in June. This strong overall performance masks a
quarterly performance impacted by lockdowns. We had previously
announced that Q1 2020 (pre-COVID) was a record for the business
with 19% growth in system sales year-on-year, whereas Q1 2021 was
substantially impacted by the winter lockdown and, as a result,
systems sales grew by only 2% year-on-year. Q2 2021 saw a complete
reversal of this position as we experienced the first, and most
severe lockdown in Q2 2020, whereas in Q2 2021 the restrictions
were more modest and, as a result, system sales grew by 48%
year-on-year.
The growth in system sales was spread through almost the entire
network, with 44 of the 47 Metro Rod and Metro Plumb franchisees
growing their business during the first half of the year (H1 2020:
21). Of the 44 in growth, 70% or 31 franchisees grew by more than
20% year-on-year (H1 2020: 8). We also achieved good progress on
existing initiatives to widen and deepen the services offered by
the franchise network, particularly in the area of pump service and
maintenance.
Demonstrating Metro Rod's ability to take on large scale
projects for customers directly, we were pleased to secure a GBP1m
contract with Peel Ports Group to deliver a comprehensive drainage
mapping and maintenance plan for its Liverpool site. We invested in
additional equipment and employed 20 new operatives to satisfy the
requirements of the project.
Metro Plumb has continued to trade well throughout the period
due to the resilient nature of its principal activity of emergency
plumbing services. We now have five independent Metro Plumb
franchisees compared with two in the first half of 2020. Plumbing
remains a clear growth opportunity for the Group and we continue to
focus on
recruiting more independent franchisees and broadening the customer base.
Kemac, which operates 6 Metro Plumb territories in the London
area, and provides specialist services to several water utilities,
traded well in the period following the management changes made in
2020. It is currently working on broadening its customer base to
improve resilience and increase the range of services offered.
The digital transformation taking place within Metro Rod
continues at pace. The completion of the roll-out of the new works
management system "Vision" at the end of 2020 and the subsequent
introduction of the customer portal "Connect" are contributing to
improved customer service and efficiency savings. Following
customer and franchisee feedback, these platforms are now being
optimised, with a series of upgrades that will further enhance
functionality. This integrated platform now allows us to progress
with further automation of the job acquisition, deployment,
reporting and invoicing process using robotics and AI technologies.
The digitisation of the business is having a positive impact on our
overhead costs as manual, repetitive, tasks are automated which
will improve our operational gearing, and hence profitability, as
we grow.
Willow Pumps Division
This division comprises the core Willow Pumps DLO pump business
acquired in 2019 and the Metro Rod corporate franchises in Kent
& Sussex and Exeter which are all the responsibility of the
divisional MD, Ian Lawrence.
The core Willow Pumps business was significantly impacted by the
winter lockdown with Q1 sales down 31% year-on-year. However, these
recovered strongly in Q2 as the restrictions lifted, with sales
growth of 43% year-on-year in the quarter, resulting in overall
sales growth of 9% in the first half of the year. As we saw in the
first half of 2020, the main driver of growth in the period was the
higher gross margin service and emergency work rather than the
lower gross margin supply and installation work ("S&I").
Service work now represents 77% of total sales (H1 2020: 64%).
Following the successful transfer of two Metro Rod corporate
franchise areas to Willow Pumps in the first half of 2020, their
sales have grown by 19% year-on-year and this previously
loss-making activity has been returned to profitability.
Overall, the division saw an 11% increase in revenue. Although
the core business continues to be more impacted by the partial
closure of the hospitality sector, and particularly hotel and
holiday venues, we are confident that sales growth will accelerate
in the second half of the year as these venues fully reopen.
In addition, Willow Pumps continues to facilitate the growth of
pump-related work within Metro Rod, where system sales by our
franchisees have increased 159% to GBP0.7m (H1 2020: GBP0.3m), more
than that achieved in the whole of 2019 and 2020 combined.
B2C Division
The B2C division comprises the ChipsAway, Ovenclean and Barking
Mad franchise businesses, which are the responsibility of the
divisional MD, Tim Harris.
The division recovered strongly in the first half of 2021,
despite the Q1 lockdown, as most of the franchisees continued to
trade and, therefore, paid full Management Service Fees ("MSF"). By
comparison, in Q2 2020 all these businesses were shut down and fees
were reduced to nominal levels.
Franchise recruitment was also strong with 40 new franchisees in
the period (H1 2020: 27). ChipsAway continues to be the strongest
brand with 27 new recruits in the period (H1 2020: 23), however,
Ovenclean recruitment accelerated strongly with 9 new recruits (H1
2020: 2). Barking Mad also contributed with 4 new recruits (H1
2020: 2). The total number of franchisees in the B2C division grew
to 393 (30 June 2020: 389).
Despite the strong overall performance during the period, t he
B2C brands continue to recover at different speeds. ChipsAway
continues to be our largest network, generating 86% of divisional
EBITDA, a year-on-year increase of 51%. The improved franchise
recruitment income at Ovenclean allowed it to contribute 13% of
divisional EBITDA and more than double its contribution in the
period. Barking Mad, our smallest network, returned to
profitability as a result of franchise recruitment and significant
cost-savings as a result of the integration of its activities into
the main Kidderminster facility. Barking Mad's MSF income will not
recover until the foreign holiday market returns, which we
anticipate will occur in the second half of the year.
Outlook
As we emerge from COVID-related disruption, the Group is very
well placed to continue investing in organic growth and
earnings-enhancing acquisitions. In March, we set out for the first
time new strategic financial targets for the Group of run-rate
revenues of GBP100m and adjusted EBITDA of GBP15m by the end of
2023. With all our main businesses growing again and with a
positive outlook, we are confident that the Group's organic growth
priorities are well supported and on track to deliver. We are,
therefore, increasing our focus on growth by acquisition and are
actively reviewing acquisition opportunities that would be
significantly earnings-enhancing.
The second half of the year has started encouragingly with
continuing growth in both Metro Rod and Willow Pumps as a result of
the opening up of the hospitality and leisure sectors. In the B2C
division, franchise recruitment remains buoyant as people continue
to reassess their work/life balance following the impact of the
COVID crisis. If they decide that self-employment is the right
course for them, there is no safer way to achieve this than through
franchising. We are therefore confident that the full year
performance will be ahead of current consensus market
expectations.
Conclusion
As ever, I would like to thank my colleagues, our franchisees
and particularly our engineers, for their continued hard work and
commitment in what continues to be a challenging and disrupted
working environment. The adaptability and resilience everyone has
shown in dealing with this disruption, whilst continuing to grow
the business, has been remarkable and I am very grateful to them
all.
In conclusion, we have weathered the storm and emerged fitter
and stronger as a team and as a business, and have heightened
ambitions. We therefore look forward to the second half of the year
and beyond with great optimism.
Stephen Hemsley
Executive Chairman
FINANCIAL REVIEW
Summary statement of income (unaudited)
H1 2021 H1 2020 Change Change
GBP'000 GBP'000 GBP'000 %
-------------------------------------- ---------------- ---------------- ----------------- -------
Revenue 28,631 24,209 4,422 18%
Cost of sales (16,921) (14,634) (2,287) 16%
-------------------------------------- ---------------- ---------------- ----------------- -------
Gross profit 11,710 9,576 2,134 22%
Administrative expenses (7,542) (6,793) (749) 11%
---------------- ---------------- -----------------
Adjusted EBITDA 4,168 2,782 1,386 50%
-------------------------------------- ---------------- ---------------- ----------------- -------
Depreciation & amortisation
of software (819) (666) (153) 23%
Finance expense (157) (262) 105 -40%
---------------- ---------------- -----------------
Adjusted profit before tax 3,192 1,854 1,338 72%
-------------------------------------- ---------------- ---------------- ----------------- -------
Tax expense (606) (286) (321) 112%
---------------- ---------------- -----------------
Adjusted profit after tax 2,586 1,568 1,017 65%
-------------------------------------- ---------------- ---------------- ----------------- -------
Amortisation of acquired intangibles (196) (196) 0
Share-based payment expense (175) (102) (73)
Non-recurring costs - (620) 620
Other gains and losses (174) (53) (121)
Tax on adjusting items (478) (26) (452)
---------------- ----------------
Statutory profit 1,562 570 992 174%
-------------------------------------- ---------------- ---------------- ----------------- -------
Overall, consolidated Group revenue has increased by 18% to
GBP28.6m in the period (H1 2020: GBP24.2m). This has been driven by
the increase in demand for the Group's services following the
continued lifting of COVID-19 lockdown restrictions. Gross profit
has increased 22% to GBP11.7m (H1 2020: GBP9.6m), reflecting a
slight increase in the gross margin from 40% to 41% as revenues
have returned more strongly in the higher-margin franchise
operations of the Group. Overheads increased by only 11%, resulting
in a 50% increase in Group EBITDA to a record GBP4.2m (H1 2020:
GBP2.8m).
Divisional trading results
The adjusted EBITDA of the operational business divisions of the
Group may be analysed as follows:
Metro Willow Metro Willow
Rod Pumps B2C H1 2021 Rod Pumps B2C H1 2020
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- --------- -------- -------- --------- --------- -------- -------- ---------
Statutory revenue 17,459 7,805 3,367 28,631 14,636 7,031 2,542 24,209
Cost of sales (12,394) (3,756) (771) (16,921) (10,496) (3,571) (567) (14,634)
-------------------- --------- -------- -------- --------- --------- -------- -------- ---------
Gross profit 5,065 4,049 2,596 11,710 4,141 3,460 1,975 9,576
-------------------- --------- -------- -------- --------- --------- -------- -------- ---------
GM% 29% 52% 77% 41% 28% 49% 78% 40%
Admin expenses (2,717) (3,120) (1,140) (6,978) (2,620) (2,640) (1,082) (6,343)
-------------------- --------- -------- -------- --------- --------- -------- -------- ---------
Divisional
EBITDA 2,347 929 1,456 4,732 1,520 820 893 3,233
Group overheads (564) (451)
Adjusted EBITDA 4,168 2,782
-------------------- --------- -------- -------- --------- --------- -------- -------- ---------
Metro Rod
Metro Rod comprises the franchise and direct labour activities
of Metro Rod and Metro Plumb, and the direct labour DLO London
based plumbing business, Kemac. The results of the division may be
summarised as follows:
H1 2021 H1 2020 Change Change
GBP'000 GBP'000 GBP'000 %
----------------- --------- --------- -------- -------
Revenue 17,459 14,636 2,823 19%
------------------ --------- --------- -------- -------
Cost of sales (12,394) (10,496) (1,898) (18)%
------------------ --------- --------- -------- -------
Gross profit 5,065 4,141 924 22%
------------------ --------- --------- -------- -------
GM% 29% 28% 1%
Admin expenses (2,717) (2,620) (97) (4)%
------------------ --------- --------- -------- -------
Adjusted EBITDA 2,347 1,520 827 54%
------------------ --------- --------- -------- -------
The statutory revenue of Metro Rod does not reflect the
underlying system sales generated by the franchisees as national
sales are accounted for on a gross basis, as are the sales of Kemac
and the direct labour activities, whereas in respect of the local
sales generated by franchisees, only the MSF revenue is reflected.
Therefore, it is re-analysed below to reconcile system sales to
gross profit.
H1 2021 H1 2020 Change Change
GBP'000 GBP'000 GBP'000 %
-------------------- --------- -------- -------- -------
System sales 23,699 19,600 4,099 21%
--------------------- --------- -------- -------- -------
MSF income 4,400 3,747 653 17%
Effective MSF
% 18.6% 19.1%
Other gross profit 665 394 271 69%
--------------------- --------- -------- -------- -------
Gross profit 5,065 4,141 924 22%
--------------------- --------- -------- -------- -------
Overall, system sales at Metro Rod and Metro Plumb, increased by
21% to a record GBP23.7m in the period (H1 2020: GBP19.6m). Our net
MSF income at Metro Rod increased by 17% to GBP4.4m (H1 2020:
GBP3.7m), which represented an effective MSF of 18.6% (H1 2020:
19.1%). We continue to incentivise Metro Rod's franchisees to grow
their businesses through a series of MSF discount schemes designed
to encourage sales growth and investment in a broader range of
equipment and people. In line with this strategy, as system sales
have grown, especially in tanker and pump work, the effective MSF
percentage rate has fallen.
Other gross profit represents the gross profit from Metro Rod's
DLOs. This profit increased 69% to GBP0.7m (H1 2020: GBP0.4m) due
to a good performance by Kemac and the contribution from Metro
Rod's new, centrally managed, contract with Peel Ports.
The 54% increase in the adjusted EBITDA to GBP2.3m (H1 2020:
GBP1.5m; H1 2019: GBP1.4m) has been driven by the increase in
system sales and the strong performance by direct labour
operations. In addition, the division continues to benefit from
some permanent cost savings through the efficiencies developed
during lockdowns and the continuing benefits resulting from the
investment in IT systems.
Willow Pumps
Willow Pumps comprises the core DLO pump business and the Metro
Rod corporate franchises in Kent & Sussex and Exeter. The
results of the division may be summarised as follows:
H1 2021 H1 2020 Change Change
GBP'000 GBP'000 GBP'000 %
----------------- -------- -------- -------- -------
Revenue 7,805 7,031 775 11%
------------------ -------- -------- -------- -------
Cost of sales (3,756) (3,571) (185) (5)%
------------------ -------- -------- -------- -------
Gross profit 4,049 3,460 589 17%
------------------ -------- -------- -------- -------
GM% 52% 49% 3%
Admin expenses (3,120) (2,640) (481) (18)%
------------------ -------- -------- -------- -------
Adjusted EBITDA 929 820 109 13%
------------------ -------- -------- -------- -------
The Willow Pumps core business has two distinct types of
revenue: Service revenue and Supply and Install revenue
("S&I"). Service revenue is generated from the routine service
and maintenance of pumps and drains. S&I revenue is generated
from the design, supply and installation of pump stations, which
are typically projects that are performed in discrete phases over a
number of accounting periods, with revenue recognised over time
based on the proportion of the contract which has been completed.
The gross profit generated on S&I projects is lower than
service work due to the significant proportion of the total cost
being the supply of the pumps.
Whilst core revenue increased by only 9%, overall divisional
revenue increased by 11% as a result of the 19% growth in sales at
the Metro Rod DLOs. This increase in volume and more effective
management of overhead costs resulted in these activities
generating a positive return.
Core sales growth has been weighted towards higher gross margin
service revenue, rather than lower gross margin S&I revenue and
therefore, gross margin increased from 52% to 54%, leading to an
increase in core gross profit of 22% to GBP3.7m (H1 2020:
GBP3.3m).
By their nature direct labour operations have less operational
gearing than franchise businesses, as the increase in income needs
to be matched by increased labour costs, all of which are included
in administration expenses. As a result, there was an 18% increase
in administrative expenses when compared with the prior period.
Overall, the 11% increase in revenue has resulted in a 13%
increase in adjusted EBITDA to GBP0.9m (H1 2020: GBP0.8m).
B2C Division
The B2C division comprises the ChipsAway, Ovenclean and Barking
Mad franchise businesses. The results of the division may be
summarised as follows:
H1 2021 H1 2020 Change Change
GBP'000 GBP'000 GBP'000 %
----------------- -------- -------- -------- -------
Revenue 3,367 2,542 824 32%
------------------ -------- -------- -------- -------
Cost of sales (771) (567) (204) (36)%
------------------ -------- -------- -------- -------
Gross profit 2,596 1,975 620 31%
------------------ -------- -------- -------- -------
GM% 77% 78% (1)%
Admin expenses (1,140) (1,082) (58) (5)%
------------------ -------- -------- -------- -------
Adjusted EBITDA 1,456 893 563 63%
------------------ -------- -------- -------- -------
The key revenue streams are MSF and Area Sales income. MSF
income is mostly made up of fixed monthly fees as this remains the
most effective method of generating income given the large number
of franchisees and the lower level of individual sales. Area Sales
are the fees generated from the sale (or resale) of franchise
territories.
Our B2C division, was the most impacted by the 2020 Spring
lockdown as the franchisees where unable to trade. To help ensure
their survival the majority of fees charged to the networks were
suspended or greatly reduced during this period. During the current
period almost all franchisees were back to paying full monthly fees
and as a result revenue increased by 32%. Franchise recruitment
also recovered strongly during the period with 40 new franchisees
joining the three brands (H1 2020: 27).
The cost base of this business was very strictly controlled
particularly when compared with a significant reduction in salary
costs in H1 2020 resulting from the furlough scheme. In the current
period we have seen the benefit of our decision to close the
Barking Mad head office and consolidate all B2C operations in
Kidderminster.
Overall, the 31% increase in gross profit, tied to a stable cost
base, resulted in an impressive 63% increase in adjusted EBITDA to
GBP1.5m (H1 2020: GBP0.9m; H1 2019: GBP1.2m).
Adjusted & statutory profit
H1 2021 H1 2020 Change Change
GBP'000 GBP'000 GBP'000 %
-------------------------------------- ---------------- ---------------- ----------------- -------
Adjusted EBITDA 4,168 2,782 1,386 50%
-------------------------------------- ---------------- ---------------- ----------------- -------
Depreciation & amortisation
of software (819) (666) (153) 23%
Finance expense (157) (262) 105 -40%
---------------- ---------------- -----------------
Adjusted profit before tax 3,192 1,854 1,338 72%
-------------------------------------- ---------------- ---------------- ----------------- -------
Tax expense (606) (286) (321) 112%
---------------- ---------------- -----------------
Adjusted profit after tax 2,586 1,568 1,017 65%
-------------------------------------- ---------------- ---------------- ----------------- -------
Amortisation of acquired intangibles (196) (196) 0
Share-based payment expense (175) (102) (73)
Non-recurring costs - (620) 620
Other gains and losses (174) (53) (121)
Tax on adjusting items (478) (26) (452)
---------------- ----------------
Statutory profit 1,562 570 992 174%
-------------------------------------- ---------------- ---------------- ----------------- -------
Depreciation and amortisation of software increased 23% to
GBP0.8m (H1 2020: GBP0.7m) as a result of the increase in the
amortisation charge in respect of software development, and the
purchase of GBP0.8m of tangible assets to support the Peel Ports
contract at Metro Rod.
The finance charge has reduced by 40% due to the lower net debt
position following the April 2020 Placing which raised GBP13.6m
(net of expenses) and was partially used to pay down bank
facilities. The finance charge does not solely reflect bank
interest, but also includes interest on capitalised leases.
During H1 2020 we took a GBP0.6m charge in respect of events
related to the COVID-19 crisis. We believed it was prudent to
anticipate that a number of customers would fail as the various
Government support schemes begin to unwind, and as a result we
increased our bad debt provision by GBP0.5m. During the period the
level of actual credit losses were GBP0.1m which were expensed,
resulting in us continuing to hold a total bad debt provision of
GBP0.8m provision (31 December 2020: GBP0.8m).
The other loss of GBP0.2m (H1 2020: GBP0.1m) represents the
movement in the fair value of the deferred consideration in
relation to the acquisition of Willow Pumps which is provided in
accordance with IFRS 9.
The tax charge for the period at 40% (H1 2020: 35%) was higher
than the statutory rate of 19% due to the revaluation of the
deferred tax liability on acquired intangibles resulting from the
increase in the future corporation tax rate to 25%. This added
GBP0.6m to the H1 tax charge. Excluding this one-off charge (which
will not recur at the year-end), the underlying tax rate would have
been 19%.
As a result, the statutory profit after tax increased by 174% to
GBP1.6m (H1 2020: GBP0.6m).
Earnings per share
No new shares have been issued during the period, meaning that
the total number of Ordinary Shares in issue throughout the period
was 95,758,470 (31 December 2020: 95,758,470). On 30 April 2020 the
Group completed a Placing of 15,555,556 new Ordinary Shares.
Although this represented a 20% dilution, the basic weighted
average number of Ordinary Shares in issue and not in Treasury in
H1 2020 was 85,067,691 (H1 2021: 95,758,470) resulting in 12.5%
dilution in the current period. As a result, whilst adjusted profit
after tax grew by 65% to GBP2.6m (H1 2020: GBP1.6m), adjusted
earnings per share increased by only 46% to 2.7p (H1 2020:
1.84p).
H1 2021 EPS H1 2020 EPS
GBP'000 p GBP'000 p
-------------------------------------- -------------------------- ------------ ----------------- -------------
Adjusted profit after tax 2,586 2.70 1,568 1.84
-------------------------------------- -------------------------- ------------ ----------------- -------------
Amortisation of acquired intangibles (196) (0.20) (196) (0.23)
Share-based payment expense (175) (0.18) (102) (0.12)
Non-recurring costs - - (620) (0.73)
Other gains and losses (174) (0.18) (53) (0.06)
Tax on adjusting items (478) (0.50) (26) (0.03)
--------------------------------------
Statutory profit after tax 1,562 1.63 570 0.67
-------------------------------------- -------------------------- ------------ ----------------- -------------
Basic earnings per share increased by 143% to 1.63p (H1 2020:
0.67p).
Financing and cash flow
At 30 June 2021, the Group had cash of GBP12.2m, and undrawn
bank facilities of GBP7.0m (comprised of the GBP5m Revolving Credit
Facility ("RCF") and GBP2m overdraft), giving the Group GBP19.2m of
cash and available facilities.
30 June 2021 31 Dec 2020 Change Change
GBP'000 GBP'000 GBP'000 %
-------------------- ------------- ------------ ----------------- ------------
Cash 12,182 13,203 (1,021) (8)%
Term loan (4,218) (5,225) 1,007 19%
RCF - - - 0%
Loan fee 84 116 (32) (28)%
Hire purchase debt (1,339) (1,408) 69 5%
Adjusted net cash 6,709 6,686 23 0%
-------------------- ------------- ------------ ----------------- ------------
Other lease debt (1,528) (1,729) 201 12%
Net cash 5,181 4,957 224 5%
-------------------- ------------- ------------ ----------------- ------------
Overall, the Group continue to be substantially ungeared, being
in a net cash position of GBP5.2m (31 December 2020: GBP4.9m). The
Group continues to hold cash on its balance sheet to allow
flexibility in terms of corporate activity.
The Group generated cash from operating activities of GBP3.5m
(H1 2020: GBP1.1m) resulting in a cash conversion rate from
adjusted EBITDA of 84% (H1 2020: 38%). During H1 2020 the Group
continued to make payments to all suppliers, providers of finance
and HMRC, however, we took a pragmatic stance with some of our
commercial customers who were unable to trade during lockdowns. As
our trading partners have been able to re-establish more normal
trading terms in H1 2021, our cash conversion has improved
significantly.
The cash generated in the period has been partially absorbed in
additional working capital as turnover has grown and by the
investment required in plant and machinery needed for the Peel
Ports contract. We have also continued to invest in our IT
infrastructure.
Dividend
Given the strong balance sheet position, the significant
increase in profits and the optimism the Board has for the full
year, the Board has declared an interim dividend of 0.60p per share
(H1 2020: 0.30p). This also reflects a reweighting between the
interim and final dividend and the unwinding of the cautious
approach we took in 2020 . The interim dividend will be paid on 17
September 2021 to shareholders on the register on 3 September
2021.
Chris Dent
Chief Financial Officer
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2021
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2021 2020 2020
GBP'000 GBP'000 GBP'000
--------------------------------------------------------------------------- ----------- ----------- -------------
Revenue 28,631 24,209 49,287
Cost of sales (16,921) (14,634) (28,362)
--------------------------------------------------------------------------- ----------- ----------- -------------
Gross profit 11,710 9,576 20,925
Adjusted earnings before interest, tax, depreciation, amortisation,
share-based payments & non-recurring items ("Adjusted EBITDA") 4,168 2,782 6,640
Depreciation (660) (577) (1,149)
Amortisation of software (159) (89) (209)
Amortisation of acquired intangibles (196) (196) (393)
Share-based payment expense (175) (102) (205)
Non-recurring items - (620) (707)
-----------
Total administrative expenses (8,733) (8,378) (16,948)
--------------------------------------------------------------------------- ----------- ----------- -------------
Operating profit 2,977 1,198 3,977
Other gains and losses (174) (53) 151
Finance expense (157) (262) (446)
--------------------------------------------------------------------------- ----------- ----------- -------------
Profit before tax 2,647 882 3,682
Tax expense (1,084) (312) (889)
--------------------------------------------------------------------------- ----------- ----------- -------------
Profit for the period and total comprehensive income attributable to equity
holders of the
Parent Company 1,562 570 2,793
--------------------------------------------------------------------------- ----------- ----------- -------------
All amounts relate to continuing operations.
Earnings per share (p)
Basic 1.63 0.67 3.09
Diluted 1.59 0.66 3.03
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 30 June 2021
Audited
Unaudited 31 December
30 June 2021 2020
GBP'000 GBP'000
----------------------------------------------------------------- ----------------- ----------------
Assets
Non-current assets
Intangible assets 34,549 34,754
Property, plant and equipment 1,979 1,274
Right-of-use assets 3,409 3,377
Trade and other receivables - 155
------------------------------------------------------------------ ----------------- ----------------
Total non-current assets 39,936 39,560
------------------------------------------------------------------ ----------------- ----------------
Current assets
Inventories 879 712
Trade and other receivables 16,040 15,072
Cash and cash equivalents 12,182 13,203
------------------------------------------------------------------ ----------------- ----------------
Total current assets 29,102 28,987
------------------------------------------------------------------ ----------------- ----------------
Total assets 69,038 68,547
------------------------------------------------------------------ ----------------- ----------------
Liabilities
Current liabilities
Trade and other payables 11,182 10,808
Loans and borrowings 2,134 1,908
Obligations under leases 759 897
Current tax liability 528 445
Contingent consideration - 320
------------------------------------------------------------------ ----------------- ----------------
Total current liabilities 14,604 14,378
------------------------------------------------------------------ ----------------- ----------------
Non-current liabilities
Loans and borrowings 2,000 3,200
Obligations under leases 2,108 2,240
Contingent consideration 3,308 3,136
Deferred tax liability 2,309 1,752
------------------------------------------------------------------ ----------------- ----------------
Total non-current liabilities 9,724 10,328
------------------------------------------------------------------ ----------------- ----------------
Total liabilities 24,328 24,706
------------------------------------------------------------------ ----------------- ----------------
Total net assets 44,710 43,841
------------------------------------------------------------------ ----------------- ----------------
Issued capital and reserves attributable to owners of the Parent
Share capital 479 479
Share premium 36,817 36,817
Share-based payment reserve 599 455
Merger reserve 1,390 1,390
Treasury reserve - -
EBT reserve (186) (149)
Retained earnings 5,611 4,849
------------------------------------------------------------------ ----------------- ----------------
Total equity attributable to equity holders 44,710 43,841
------------------------------------------------------------------ ---------------- ----------------
CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended 30 June 2021
Unaudited Unaudited Audited
6 months ended 6 months Year
30 June ended ended
2021 30 June 31 December
2020 2020
GBP'000 GBP'000 GBP'000
---------------------------------------------------------------- --------------- --------- -------------
Cash flows from operating activities
Profit for the period 1,562 570 2,793
Adjustments for:
Depreciation of property, plant and equipment 819 666 1,149
Amortisation of intangible fixed assets 196 196 209
Acquisition-related costs - - 393
Non-recurring charges - 620 707
Share-based payment expense 175 102 205
Other gains and losses 174 53 (151)
Finance expense 157 262 446
Income tax expense 1,084 312 889
---------------------------------------------------------------- --------------- --------- -------------
Operating cash flow before movements in working capital 4,168 2,782 6,640
Decrease/(increase) in trade and other receivables (1,170) 3,493 1,345
(Increase)/decrease in inventories (167) (94) ( 119)
(Decrease)/increase in trade and other payables 668 (5,199) (1,878)
---------------------------------------------------------------- --------------- --------- -------------
Cash generated from operations 3,499 982 5,988
Income taxes (paid)/received (444) (127) (745)
---------------------------------------------------------------- --------------- --------- -------------
Net cash generated from operating activities 3,055 855 5,243
Cash flows from investing activities
Purchases of property, plant and equipment (1,184) (178) (460)
Purchase of software (150) - (319)
Acquisition of subsidiary including costs, net of cash acquired (320) - -
Net cash used in investing activities (1,654) (178) (779)
Cash flows from financing activities
Bank loans- repaid (1,000) (3,300) (4,200)
Other loans- repaid/(made) 49 26 (163)
Capital element of lease obligations repaid (552) (447) (1,100)
Interest paid - bank and other loan (55) (157) (257)
Interest paid - finance leases - (109) (189)
Proceed from issue of shares - 13,677 13,696
Funds supplied to Employee Benefit Trust (98) (214)
Dividends paid (766) (229) (516)
Net cash generated from/used in financing activities (2,422) 9,461 7,057
Net increase/decrease in cash and cash equivalents (1,021) 10,138 11,521
---------------------------------------------------------------- --------------- --------- -------------
Cash and cash equivalents at beginning of period 13,203 1,682 1,682
---------------------------------------------------------------- --------------- --------- -------------
Cash and cash equivalents at end of period 12,182 11,820 13,203
---------------------------------------------------------------- --------------- --------- -------------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2021
Share Share-based
Share premium payment Merger Treasury EBT Retained
capital account reserve reserve shares reserve earnings Total
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- ---------- --------- ----------- ---------- ---------- -------- ---------- -------
At 1 January
2020 398 22,806 316 1,390 (21) - 2,970 27,859
--------------- ---------- --------- ----------- ---------- ---------- -------- ---------- -------
Profit for the
year and total
comprehensive
income - - - - - - 570 570
Contributions
by and
distributions
to owners -
Shares issued 79 13,622 (51) - 12 - 47 13,709
Dividend paid 2 389 - - - - (620) (229)
Treasury shares - - - - 9 - (9) -
Share-based
payment - - 80 - - - - 80
--------------- ---------- --------- ----------- ---------- ---------- -------- ---------- -------
At 30 June 2020 479 36,817 345 1,390 - - 2,958 41,989
--------------- ---------- --------- ----------- ---------- ---------- -------- ---------- -------
Profit for the
year and total
comprehensive
income - - - - - - 2,223 2,223
Contributions
by and
distributions
to owners -
Shares issued - - (15) - - 65 19 69
Dividend paid - - - - - - (286) (286)
Treasury shares - - - - - - - -
Contributions
to Employee
Benefit Trust - - - - - (214) (65) (279)
Share-based
payment - - 125 - - - - 125
--------------- ---------- --------- ----------- ---------- ---------- -------- ---------- -------
At 31 December
2020 479 36,817 455 1,390 - (149) 4,849 43,841
--------------- ---------- --------- ----------- ---------- ---------- -------- ---------- -------
Profit for the
year and total
comprehensive
income - - - - - - 1,562 1,562
Contributions
by and
distributions
to owners
Shares issued - - - - - - - -
Dividend paid - - - - - - (766) (766)
Treasury shares - - - - - - - -
Contributions
to Employee
Benefit Trust - - (26) - - (37) (35) (98)
Share-based
payment - - 170 - - - - 170
--------------- ---------- --------- ----------- ---------- ---------- -------- ---------- -------
At 31 December
2020 479 36,817 599 1,390 - (186) 5,611 44,710
--------------- ---------- --------- ----------- ---------- ---------- -------- ---------- -------
1. Accounting policies
Basis of preparation
The consolidated financial statements for the six months ended
30 June 2021 and 2020 are unaudited and were approved by the
Directors on 21 July 2021. They do not constitute statutory
accounts as defined in section 434 of the Companies Act 2006. The
financial statements for the year ended 31 December 2020 were
prepared in accordance with IFRS and have been delivered to the
Registrar of Companies. The report of the auditor on those
financial statements was unqualified and did not draw attention to
any matters by way of emphasis of matter. The Group's financial
statements consolidate the financial statements of Franchise Brands
plc and its subsidiaries.
Applicable standards
These unaudited consolidated interim financial statements have
been prepared in accordance with International Financial Reporting
Standards as adopted by the European Union, under the historical
cost convention. They have not been prepared in accordance with IAS
34, the application of which is not required to the interim
financial statements of AIM companies. The interim financial
statements have been prepared in accordance with the accounting
policies set out in the Group's Annual Report and Accounts for the
year ended 31 December 2020.
Going concern
The condensed financial statements have been prepared on a going
concern basis. The Group has generated profits both during the
period covered by these financial statements and in previous years.
These profits have resulted in operating cash inflows into the
Group, and the Group has sufficient current financial assets to
meet its current liabilities as they fall due.
2. Earnings per share
Basic earnings per share amounts are calculated by dividing
profit for the period attributable to equity holders of the Parent
by the weighted average number of ordinary shares outstanding
during the period. Diluted earnings per share is calculated by
dividing the profit attributable to ordinary equity holders of the
Parent by the weighted average number of ordinary shares
outstanding during the year plus the weighted average number of
Ordinary Shares that would have been issued on the conversion of
all dilutive potential ordinary shares into ordinary shares at the
start of the period or, if later, the date of issue.
During the current and comparative periods, the Group has not
incurred any exceptional costs which the Directors believe should
be separately identified.
Earnings per share
Six months Six months Year ended
ended ended 31 December
30 June 2021 30 June 2020 2020
GBP'000 GBP'000 GBP'000
----------------------------------- --------------- -------------- -----------------
Profit attributable to owners of
the Parent 1,562 570 2,793
Adjusting items, net of tax 1,023 997 1,144
----------------------------------- --------------- -------------- -----------------
Adjusted profit attributable to
owners of the Parent 2,586 1,568 3,937
----------------------------------- --------------- -------------- -----------------
Number Number Number
----------------------------------- --------------- -------------- -----------------
Basic weighted average number
of shares 95,758,470 85,067,691 90,462,594
Dilutive effect of share options 2,389,068 1,755,549 1,649,029
----------------------------------- --------------- -------------- -----------------
Diluted weighted average number
of shares 98,147,538 86,823,240 92,111,623
----------------------------------- --------------- -------------- -----------------
Pence Pence Pence
----------------------------------- --------------- -------------- -----------------
Basic earnings per share 1.63 0.67 3.09
Diluted earnings per share 1.59 0.66 3.03
Adjusted earnings per share 2.70 1.84 4.35
Adjusted diluted earnings per
share 2.63 1.81 4.27
----------------------------------- --------------- -------------- -------------------
3. Availability of this report
This half year results report will not be sent to shareholders
but is available on the Company's website at
https://www.franchisebrands.co.uk/key-documents/ .
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END
IR BLGDRSDDDGBB
(END) Dow Jones Newswires
July 22, 2021 02:00 ET (06:00 GMT)
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