AGM Statement and Trading Update

Franchise Brands PLC

18 July 2024

 

18 July 2024

FRANCHISE BRANDS PLC

("Franchise Brands", the "Group" or the "Company")

AGM Statement and Trading Update

Current trading in line with market expectations for 2024

Significant growth potential for principal franchise brands

Franchise Brands plc (AIM:FRAN), an international multi-brand franchise business, will hold its Annual General Meeting today at 11.00am, at which Stephen Hemsley, Executive Chairman, will provide the following update:

"The resilient underlying demand for the Group's essential reactive services means that the business continues to perform in line with current market expectations for 2024. This enables us to generate both the profitability and the cash flow required to service and reduce the debt taken on to fund the Pirtek Europe acquisition.

System sales in the first half of the year increased by 41% to £206m (2023: £146m). On a like-for-like basis, system sales grew by 6% in the period in our core franchise brands of Pirtek, Metro Rod/Metro Plumb and Filta, in local currency and excluding used oil sales.

As indicated in the recent 2023 final results announcement, Filta International's income from the sales of used cooking oil in the first half of 2024 was impacted by a 28% fall in the average price, which was only partially compensated for by a 15% increase in volume in the period. As part of the "FiltaMax" strategic growth initiatives, the range of services offered to our commercial kitchen customer base is being expanded with the addition of new bulk virgin oil sales and an eco-friendly kitchen cleaning service, which will reduce the impact of used oil sales in the future.

As a predominantly franchised business, the Group is highly cash-generative, and Adjusted net debt* at the end of the first half of 2024 is anticipated to be below £70m. Based on current market expectations for 2024, this represents a multiple of Adjusted net debt* to Adjusted EBITDA** of less than two times, in line with the medium-term strategic model outlined at our Capital Markets Day in February 2024.

The short-term operational focus of the business remains on integrating the Group's businesses and repaying the Pirtek Europe acquisition debt. A particular focus will be migrating the business onto a common IT platform that will be managed centrally. We believe this will be key to unlocking the benefits of operational gearing and will play a significant part in underpinning future margin expansion.

We see significant growth potential for our principal franchise brands of Pirtek, Metro Rod/Metro Plumb and Filta, which currently have small shares of large markets, as we expand their range of services and geographical penetration and cross-sell to our large customer base.

The Board confirms that the Group is trading within the range of current market expectations for 2024 of Adjusted EBITDA** of £35.7m to £37.2m.

We will provide a further update to the market in our half-year financial report, which is due to be published in September."

* Adjusted net debt is the key debt measure used for testing bank covenants and excludes debt on right-of-use assets

**Adjusted EBITDA is earnings before interest, tax, depreciation, amortisation, exchange differences, share-based payment expense, non-recurring items.

Enquiries:

Franchise Brands plc		+ 44 (0) 1625 813231
Stephen Hemsley, Executive Chairman
Andrew Mallows, Interim Chief Financial Officer
Julia Choudhury, Corporate Development Director
Allenby Capital Limited (Nominated Adviser and Joint Broker)		[phone]
Jeremy Porter / Liz Kirchner (Corporate Finance) Amrit Nahal / Joscelin Pinnington (Sales & Corporate Broking)
Dowgate Capital Limited (Joint Broker)		[phone]
James Serjeant / Nicholas Chambers
Stifel Nicolaus Europe Limited (Joint Broker)		[phone]
Matthew Blawat
MHP Group (Financial PR)		[phone]
Katie Hunt / Catherine Chapman		[phone]
		[e-mail]

About Franchise Brands plc

Franchise Brands is an international, multi-brand franchisor focused on B2B van-based service with 7 franchise brands and a presence in 10 countries across the UK, North America and Europe. The Group is focused on building market-leading businesses primarily via a franchise model and has a combined network of over 625 franchisees.

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 c700 people across the Group.

For further information, visit www.franchisebrands.co.uk

 

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