REG - Franchise Brands PLC - Integration of UK DLOs & earn-out of Willow Pumps

Franchise BrandsAnnouncement

25/05/2022 07:00

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20220525:nRSY6827Ma&default-theme=true

RNS Number : 6827M  Franchise Brands PLC  25 May 2022

25 May 2022

 

FRANCHISE BRANDS PLC

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

 

Integration across UK direct labour organisations and

agreement to complete earn-out of Willow Pumps

 

The Board of Franchise Brands plc (AIM: FRAN), an international multi-brand
franchise business, is pleased to provide details of its plans to integrate
the Group's direct labour organisations ("DLOs") in the UK following the
acquisition of Filta Group Holdings plc ("Filta") in March 2022.

 

The acquisition of Filta allows the Group to offer a wider range of drainage,
pump, plumbing and fats, oils and grease management services to commercial
customers.  In order to maximise the opportunity to grow, the Board believes
it is important to streamline the way the Group's businesses operate and
collaborate. As such, the Board has identified advantages to harmonising some
of Filta UK's DLO business with Willow Pumps in order to unlock further market
opportunities in the B2B division.

 

There are considerable synergies and opportunities in the range of core
services of the two DLO businesses, as well as with the Metro Rod franchise
network, in particular pump servicing, drainage and fats oils and grease
management. These services are very complementary in terms of the customer
base, with significant opportunities to cross-sell the now extended range of
services to all existing and new customers. These synergies will provide a
number of opportunities to enhance performance and customer service and grow
revenue and profits for the enlarged group.

 

In order to realise the efficiencies as quickly and efficiently as possible,
without constraints or impediments, the Board has determined that the best
course of action is to now buy out the earn-out consideration for the
acquisition of Willow Pumps that was agreed in October 2019, rather than wait
until the earn-out period ends on 31 December 2024. The Board believes this
will facilitate an accelerated programme of integration and harmonisation
across the B2B division of the Group. This includes building on recent
initiatives between Willow Pumps and Metro Rod to deliver pump services in an
optimum way and accelerate the expansion of pump expertise and resources in
the Metro Rod network.

 

Franchise Brands acquired Willow Pumps in October 2019 from Ian Lawrence,
Managing Director of Willow Pumps, and his wife for an initial consideration
of £5.0 million (net of non-trading cash of £700,000) and a
performance-based potential deferred consideration of up to £7.5 million
("Deferred Consideration") payable over five years. The Deferred Consideration
was structured to be conditional on the achievement of targets for profits and
increases in pump work undertaken by Metro Rod franchisees for each of the
five financial years ending 31 December 2024. As previously reported, Willow
Pumps has been impacted by the disruption caused by COVID-19 in the past two
years, particularly in the house-building sector, which has resulted in a
total of £664,530 in Deferred Consideration paid to date for the first two
years ending 31 December 2021 out of a possible £3 million. Further details
of the Deferred Consideration were set out in the Company's announcement on 7
October 2019.

 

The Board has reached agreement with Ian Lawrence and his wife whereby they
will receive a cash payment of £1,335,470 for the termination of the
remainder of the earn-out element of the Willow Pumps acquisition agreement.
This means that no further consideration payments will be due and the total
payment under the Deferred Consideration will be £2 million (out of a
possible £7.5 million). This final payment to terminate the earn-out is
expected to result in an exceptional profit of £1.6 million for Franchise
Brands in the year ending 31 December 2022, against the IFRS13 fair value of
the contingent consideration provision in the 2021 accounts of £2.9
million.

 

Ian Lawrence will now become Non-Executive Chairman of Willow Pumps and the
Company has appointed Kevin Perry, previously Head of Sales and Marketing at
Willow Pumps, as Managing Director of Willow Pumps. Kevin Perry will report to
Peter Molloy who was recently appointed Managing Director of the Group's B2B
Division in the UK.

 

This agreement with Ian Lawrence and his wife to vary the deferred
consideration for the Acquisition is a related party transaction pursuant to
rule 13 of the AIM Rules for Companies, due to Mr Lawrence being a director of
a Group company.  The Directors of the Company consider, having consulted
with the Company's Nominated Adviser, that the terms of the transaction are
fair and reasonable insofar as the Company's shareholders are concerned.

 

Enquiries:

 

 

 Franchise Brands plc                                           + 44 (0) 1625 813231
 Stephen Hemsley, Executive Chairman
 Brian Hogan, 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 and Corporate Broking)

 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 / Catherine Chapman                                 +44 (0) 7884 494112
                                                                franchisebrands@mhpc.com (mailto:franchisebrands@mhpc.com)

 

 

 

About Franchise Brands plc

 

Franchise Brands is focused on building market-leading businesses in selected
customer segments, primarily via a franchise model. The Group currently has a
combined network of over 600 franchisees across six principal franchise brands
in the UK, North America and Europe. Our focus is on established brands which
can benefit from our shared support services, specialist sector expertise,
management experience and group resources.

 

Our B2B brands are Metro Rod, Metro Plumb, Filta, Willow Pumps and Azura, and
our principle B2C brands are ChipsAway, Ovenclean and Barking Mad. Each of
our brands are leaders in their respective markets. The combined trading
history of all the Group's brands is over 190 years. Franchise Brands employs
over 430 people from 5 principal offices in the UK as well as Orlando, Florida
and the Netherlands.

 

For further information, visit  www.franchisebrands.co.uk
(http://www.franchisebrands.co.uk/)  .

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  MSCAIMLTMTTTBBT