REG - Franchise Brands PLC - Interim Results
26/07/2022 07:00
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RNS Number : 6863T Franchise Brands PLC 26 July 2022
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.
26 July 2022
FRANCHISE BRANDS PLC
("Franchise Brands", the "Group" or the "Company")
Interim results for the six months ended 30 June 2022
Trading in the first half of 2022 has been buoyant, at the top end of
expectations, supporting a 50% increase in the interim dividend
Transformational acquisition of Filta
Franchise Brands plc (AIM: FRAN), an international multi-brand franchise
business, is pleased to announce its unaudited results for the six months
ended 30 June 2022.
Financial highlights
· Revenue increased by 60% to £44.5m (H1 2021: £27.8m).
· Adjusted EBITDA* increased by 74% to £7.3m (H1 2021: £4.2m).
· Statutory profit before tax increased by 83% to £4.8m (H1 2021:
£2.6m).
· Adjusted EPS** increased by 51% to 4.07p (H1 2021: 2.70p).
· Basic EPS increased by 89% to 3.08p (H1 2021: 1.63p).
· Net cash*** of £4.7m at 30 June 2022 (31 December 2021: £6.5m)
after £1.3m of costs associated with the acquisition of Filta, and Willow
Pumps contingent consideration payment of £1.7m.
· Strong first half of the year and optimism for the full-year
performance has given the Board the confidence to declare a 50% increase in
the interim dividend to 0.90p per share (interim 2021: 0.60p per share).
Operational highlights
· Metro Rod and Metro Plumb system sales increased by 20% to £28.5m.
· Metro Plumb system sales increased by 32% and now represent 9% of
total system sales.
· Pump sales increased by 78% and now represent almost 5% of system
sales.
· Technology-enablement of the business continues to have a positive
impact on overhead costs, for example, robots assisted in logging 27% of all
jobs in H1 2022.
· Scheduling solution supporting further efficiency and productivity
gains currently being trialled.
· Completion of the transformational acquisition of Filta in March,
bringing an international footprint, a broader range of complementary services
and considerably enhanced scale.
· Filta International has delivered strong results, ahead of our
expectations, driven by both the recovering levels of activity in the customer
base post-Covid and the elevated price of cooking oil.
· Filta UK integration progressing well as part of the overall B2B
integration and harmonisation initiatives.
· B2C recruitment of 29 new B2C franchisees (H1 2021: 40) against a
five-year average of 34.
· Andrew Mallows, Group Commercial Director, appointed interim CFO to
replace Brian Hogan who has resigned for personal reasons.
*Adjusted EBITDA is earnings before interest, tax, depreciation, amortisation
and share-based payment expense and non-recurring items.
** Adjusted EPS is earnings per share before amortisation of acquired
intangibles, share-based payment expense and non-recurring items.
*** Net cash is cash less obligations under leases
Stephen Hemsley, Executive Chairman, commented:
"The Group has had a highly productive and successful first half, with record
organic growth primarily driven by Metro Rod and the transformational
acquisition of Filta bringing highly complementary services, an international
footprint and considerably enhanced scale.
"In the near term, we are focussed on integration to capitalise on the
opportunities the acquisition presents and we expect continued momentum in the
traditionally stronger second half of the year to enable us to deliver a full
year performance at the top end of market expectations*.
"Beyond the near term, we are confident our largest businesses, Metro Rod and
Filta, are well positioned to capture the clear opportunities to grow from
their current small share of large, fragmented markets where scale is becoming
still more of a competitive advantage, including through the implementation of
efficiency-enhancing technology.
"As a highly profitable and cash generative business, with a strong ungeared
balance sheet, we are in a robust financial position to weather uncertain
economic conditions, take advantage of future organic growth and acquisition
opportunities, and deliver growing returns to shareholders, as we have today
through a 50% increase in our interim dividend."
*Consensus market expectations for the financial year ending 31 December
2022 are currently as follows:
·
Revenue
£91.2m
· Adjusted EBITDA £14.0m
· Adjusted EPS
7.11p
· Dividend
1.90p
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) +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/Catherine Chapman +44 (0) 7884 494112
franchisebrands@mhpc.com
CHAIRMAN'S STATEMENT
Introduction
The first half of 2022 has been a very busy and successful period for the
Company, with the transformational acquisition of Filta Group Holdings plc
("Filta") and the organic growth of the existing business to record levels,
driven by Metro Rod.
The acquisition of Filta has taken us from a UK-focused company to one with
international scale and an expanded management team capable of developing the
Group in North America, the UK and Europe. It will allow us to
significantly progress our ambition of offering a "Water In. Waste Out"
service to the UK commercial sector, where we have a small share of a
fragmented market with substantial opportunities to grow all aspects of our
business.
The increased scale of the enlarged Group also allows us to leverage further
the investment we have made in our shared support services and infrastructure,
particularly in the area of technology. The technology-enablement of the
business continues to have a positive impact on our overhead costs which is
improving our operational gearing as we grow.
The Filta Acquisition
On 16 February 2022, we announced that we had agreed on the terms of a
recommended all-share offer to acquire Filta. The offer became wholly
unconditional on 10 March and the acquisition was completed on 1 June when the
compulsory acquisition of all remaining Filta shares was completed.
FiltaFry, the core and original service of Filta, provides cooking oil
filtration and fryer management services to a wide variety of commercial
customers, including restaurants, supermarkets, stadiums, healthcare,
education, hotels and amusement parks through an exclusively franchised
network. Franchisees also supply cooking oil to customers and collect used
oil, which is then sold to be recycled into biodiesel.
The North American FiltaFry business has achieved significant scale due to the
prevalence of fried food in these markets, with 130 franchise partners, most
of which are multi-van operators. FiltaFry in mainland Europe is comprised of
17 franchisees, including 15 in Germany, 1 in France and a Benelux master
franchisee based in the Netherlands. The FiltaFry business in North America
and mainland Europe forms a new division of the Group under the leadership of
Jason Sayers.
Filta's operations in the UK include a FiltaFry network of 27 franchisees,
which operates on a similar basis to FiltaFry Europe, and a direct labour
organisation ("DLO") which provides a wide range of services to the commercial
kitchen sector, as follows:
· The supply, installation and maintenance of GRUs: Filta has a
ten-year exclusive agreement with the manufacturer of the newly developed and
patented Cyclone GRU which offers industry-leading removal of fat, oils and
grease ("FOG") from wastewater at very low energy costs. With escalating
regulatory and environmental legislation, we see a significant opportunity to
roll-out the Cyclone unit in all our markets once the necessary regulatory
approvals have been secured.
· Pump and drainage repair and maintenance: The Filta UK DLO offers
pump and drainage maintenance services mainly to the hospitality sector. These
services are highly complementary to those offered by Metro Rod and Willow
Pumps. We are, therefore, reviewing how to deliver these services more
efficiently.
· Fridge and freezer seal replacement: Trading as FiltaSeal, this
exciting business offers a one-stop service to any user of commercial fridges
or freezers. It employs a patented system to make replacement fridge and
freezer seals on-site from the back of a specially equipped van. This highly
cost-effective and convenient service is provided on both a planned and
reactive basis to commercial kitchens, retailers, and food manufacturers. We
see a significant opportunity to expand this business as a DLO.
· Commercial kitchen extraction vent cleaning and servicing:
Trading as FiltaVent, this is another exciting growth opportunity. This
innovative solution helps commercial kitchen owners comply with their
insurance policies by having their kitchen vents cleaned and maintained to TR
19 regulatory standards. Although FiltaVent is an embryonic service stream we
believe there are significant opportunities to expand this area of the
business.
B2B Division
The B2B Division now includes Metro Rod, Willow Pumps, the newly acquired
Filta UK DLO, and the UK FiltaFry franchise network. In order to maximise
the opportunity to grow these complementary businesses by selling a broader
range of services to the combined customer base, we have started to integrate
and harmonise them under the leadership of Peter Molloy, formerly Managing
Director of Metro Rod and Metro Plumb. By streamlining how they operate and
collaborate, we expect to unlock further market opportunities, reduce costs
and provide our customers with a better service.
To further accelerate this process, we have also agreed the early settlement
of the contingent consideration due in respect of the Willow Pumps
acquisition. Under the terms of the October 2019 acquisition agreement a
further consideration of up to £7.5m was payable in respect of the five years
to 31 December 2024 linked to sales and profits growth over the period. A
total of £0.7m was paid in respect of the first two years ended 31 December
2021, and a further £1.3m was paid at the end of May to settle this
liability.
Metro Rod, Metro Plumb and Kemac
Metro Rod and Metro Plumb experienced continued strong momentum, with system
sales growing by 20% in the period to £28.5m. This growth was spread through
almost the entire network, with 46 of the 53 Metro Rod and Metro Plumb
franchisees growing their businesses (H1 2021: 44), and 61% or 28 franchisees
growing by more than 20% year-on-year (H1 2021: 31).
We also achieved further 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. Pump sales grew by 78% and now represent
almost 5% of system sales, with an average order value nearly five times that
of drainage.
Metro Plumb continued to expand with the recruitment of four new stand-alone
franchisees bringing the total to 11. We have also sold additional territories
to 3 existing franchisees to enable them to expand their businesses. We
continue to prioritise the recruitment of stand-alone Metro Plumb franchisees
in both new territories and through resales from Metro Rod franchisees. The
benefit to Metro Rod franchisees of selling their plumbing business is that it
gives them both the resources and focus to grow their drainage businesses.
Metro Plumb system sales grew by 32% and now represent 9% of total system
sales. We continue to focus on broadening the customer base in both the
commercial and domestic plumbing sectors.
Kemac, the London-based DLO plumbing business, which operates five Metro Plumb
territories, also provides specialist services to several water utilities. It
traded satisfactorily in the period and continues to broaden its customer base
and the range of services offered.
Willow Pumps
Willow Pumps has been slower in recovering from the impact of the Covid
restrictions owing to its greater focus on the construction and hospitality
sectors. Core sales grew by 12%, driven by a 14% increase in service and
emergency work and by a 12% increase in supply and installation work
("S&I"). Service work now represents 78% of total sales (H1 2021: 77%).
The early settlement of the Willow earn-out will help build on recent
initiatives between Willow Pumps and Metro Rod to deliver pump services in an
optimum way by utilising the Metro Rod depot network, although this does
result in an element of the margin on such work moving between the two
businesses.
The Metro Rod corporate franchises in Kent & Sussex and Exeter, which are
managed by Willow Pumps, grew sales by 6% and continued to operate profitably.
They have also played a key role in trialling our new labour scheduling IT
solution.
Filta UK
Since the acquisition, we have reorganised the management of the Filta UK
business to reduce overheads in some areas by eliminating duplication and
focusing the business on sales and operational delivery. To facilitate this,
we have begun recruiting additional technicians in areas of the business where
we see the greatest opportunities, such as FiltaSeal.
The pump and drainage maintenance activities are highly complementary to the
mainly reactive services offered by the regional depots of Metro Rod, Metro
Plumb and Willow Pumps. Elements of this work, particularly tankering, have
also historically been sub-contracted. We are therefore reviewing all these
activities to establish how the enlarged Group can best deliver them for the
mutual benefit of the customer, the franchisees and the DLOs.
An area of focus for the growth within the Filta UK DLO has been the roll-out
of the Cyclone GRU, but this has been held up by supply constraints and delays
in securing regulatory approval in target markets. Several potentially large
customers have also postponed the deployment of GRUs due to internal business
reviews. However, we are confident the unit is an efficient and innovative
solution to helping customers with the increased regulations governing the
disposal of FOG in an environmentally-friendly manner.
Filta North America & Europe
Since the acquisition, Filta North America, led by Tom Dunn, has performed
strongly, driven by both the recovering levels of activity in the customer
base post-Covid and the elevated price of cooking oil. The small and currently
sub-scale operations in Europe have recovered more slowly due to the slower
reopening of the hospitality sector.
The bounce-back in activity in Filta's key customer sectors of hospitality,
education and sporting venues post-Covid has been rapid and broad. The
elevated price of cooking oil has also had a number of cumulative positive
benefits to the business. As the FiltaFry technology can double the life of
cooking oil, customer demand for the core filtration service has risen. This
has driven demand from our franchisees for additional mobile filtration units
("MFU's"), the main driver of our product and Management Service Fee ("MSF")
income.
The elevated price of used cooking oil over the period is due to a number of
factors including the higher price of virgin cooking oil due to supply issues;
higher fuel oil prices; and Federal and State sustainability incentives to
increase the proportion of biodiesel in vehicle fuel. The FiltaFry
filtration process and careful storage of the used cooking oil by the
franchisees also produces a better quality used cooking oil for recycling
which needs less subsequent processing. This has recently been reflected in
premium pricing, which accounts for about a quarter of the price improvement
that Filta is currently benefitting from. A virtuous circle has therefore been
created, with higher cooking oil prices driving demand for the underlying
FiltaFry filtration service from customers, which drives demand for additional
MFUs from franchisees, which is in turn funded by the enhanced cashflow
generated by higher waste oil prices.
Due to the structural differences in the market, with a much lower density of
fryers per location in Europe, the economics of the European business are on a
reduced scale to that of North America. Most franchisees in Europe are single
van operators offering only the core oil filtration service to smaller
customer premises. Generally, they do not collect and recycle cooking oil,
although some are engaged in the servicing of grease recovery units ("GRUs")
in commercial kitchens, which we see as an area for future development.
In summary, Filta International has delivered strong results ahead of our
expectations. The North America business has benefitted from the strong
bounce-back in the US economy together with a number of cumulative, positive
benefits resulting from the elevated price of cooking oil. The movement in
exchange rates over the period has also enhanced the sterling value of the
dollar earnings of Filta North America to the Group. This performance also
reflects the operational gearing benefits of a franchise model when revenue
accelerates, and we anticipate that Filta International will continue to build
on this momentum.
B2C Division
The B2C division comprises the ChipsAway, Ovenclean and Barking Mad
franchise businesses, which continue to be the responsibility of Tim Harris,
the divisional Managing Director. The B2C franchise market is going through
one of the most unusual periods I can recall. Following the pandemic there are
two competing forces at work. On the one hand, we are seeing acceptable levels
of interest from new franchisee candidates who want a better work/life balance
and see starting their own business as a way of achieving this. Conversely, we
are seeing some long-term franchisees opt for early retirement or a return to
employment at the currently inflated salary levels on offer in specific
sectors.
Underlying trading in the franchise communities of all three brands remains
robust, as our generally older and more financially secure customer base is
reasonably resilient to cost-of-living pressures. Franchisees continue to
benefit from a substantial number of customer leads that are generated by our
national marketing activity. For example, less than 25% of leads generated for
ChipsAway franchisees are converted into jobs due to a number of factors,
including capacity constraints. We therefore have a significant degree of
resilience before our franchisees' income would be impacted by any downturn in
the economy.
ChipsAway continues to be our strongest B2C brand with 16 recruits in the
period (H1 2021: 27). It also had the greatest attrition, with 25 leavers,
resulting in a decline in the system to 204 franchisees, slightly below the
five-year average. Ovenclean recruitment maintained last year's strong
progress with eight recruits (H1 2021: 9) and seven leavers, resulting in an
unchanged system of 106 franchisees, in line with the five-year average.
Barking Mad, which was severely impacted by the Covid restrictions on foreign
travel, recruited five new franchisees and had eight leavers, resulting in a
further decline in this system to 60 franchisees. The unprecedented number of
leavers at Barking Mad since the start of the pandemic is stabilising, and
franchisee trading is rapidly improving as the foreign holiday market
recovers.
Overall, B2C franchise recruitment in the period was satisfactory, albeit
below the exceptional levels achieved in the immediate post-lockdown period,
with 29 recruits (H1 2021: 40) against a five-year average of 34. The total
number of leavers, at 40, was slightly higher than the five-year average of
35. As a result, the total number of franchisees in the B2C division at the
period end was 370 (30 June 2021: 394) and compares to a five-year average at
the half-year of 387 franchisees.
Azura
We acquired Azura, a leading franchise management software system developer,
in November 2021 to secure our software development capability and full
ownership of the intellectual property in Vision, our proprietary works
management system. We also foresaw an opportunity to use our in-house
expertise to help Azura further develop and market its franchise management
software as a service ("SaaS") solution to other franchise brands. Since the
acquisition, the planned management succession has also been completed, with
Simon Pullum becoming Non-Executive Chairman of Azura and Mark Scott,
previously Operations Director, being promoted to Managing Director.
Azura operates on an arms-length basis within the Franchise Brands Group to
ensure that other competing franchise businesses have the confidence to
continue using the Azura platform. Whilst Franchise Brands continues to be
Azura's largest customer, third-party trading in the period has been
encouraging and we have added new franchise businesses as customers and
experienced minimal attrition.
Digital transformation
The digital transformation of the business is progressing well with continuing
upgrades to the Vision works management system to improve functionality. These
have been focused on improving engineer productivity and efficiency. The
technology-enablement of the business continues to have a positive impact on
our overhead costs as manual, repetitive tasks are automated. This is
improving our operational gearing and hence the profitability of both ours and
our franchisees' businesses, as we grow. Robots assisted in logging 27% of all
jobs in the period.
We have also been developing technology-enabled solutions which can help us
address business-critical issues in the current environment. A key focus has
been the development of a scheduling tool to improve engineer utilisation and
efficiency. This is a vital requirement in the current tight labour market
where inflationary wage pressures might otherwise erode margins or limit our
ability to grow. An initial scheduling solution has been trialled at our
corporate operations and this has now been expanded to include a franchise
business. The early results have been encouraging, with a reduction in
unproductive, and therefore unbillable, time of 23 minutes per engineer per
day. Whilst this may be viewed as modest progress, it represents a significant
amount of additional potential capacity across the resource base of over 500
engineers, with any incremental sales achieved using this time being at a very
high margin.
Our technology team has also been reviewing Filta's IT platforms, particularly
in the UK DLO, to identify opportunities to automate operational processes. We
are also looking at areas where Filta's IT platforms might further improve our
existing systems.
People
Following the acquisition of Filta, I would like to welcome Jason Sayers to
the Franchise Brands plc Board. Jason will be responsible for developing the
Filta business in North America and Europe, including identifying acquisition
opportunities.
Brian Hogan, who joined the Board as CFO following the Filta acquisition is
leaving the business for personal reasons and will be returning to the US. He
has resigned from the Board with immediate effect. Andrew Mallows, our Group
Commercial Director, will be appointed interim CFO (non Board). Andrew was our
original Finance Director at the time of our IPO in 2016 and previously was
Finance Director of Domino's Pizza from 2001 to 2004.
Following the settlement of the Willow Pumps earn-out, Ian Lawrence, formerly
Managing Director of the business has been appointed Non-Executive Chairman
and Kevin Perry, previously Head of Sales and Marketing, has been promoted to
Managing Director reporting to Peter Molloy. Kevin will be supported by Joe
Lawrence who has been promoted to Operations Director.
Acquisitions
The short-term focus of the Group will be organic growth and the integration
of Filta into the enlarged Group. We remain interested in acquiring B2C
franchise businesses but continue to be cautious given the current economic
environment for consumers.
The merger with Filta has established a franchise business with a robust
international footprint that will, in due course, allow overseas development
of the Group's existing brands and facilitate the acquisition of new brands
in North America, the UK and Europe. When the right market conditions
prevail and we identify an attractive opportunity, we will be very well placed
to make earnings-enhancing acquisitions given we are profitable, highly cash
generative and have an ungeared £100 million balance sheet.
Outlook
Since our IPO in 2016, we have successfully built the business both
organically and by acquisition and our highly experienced management team has
a strong track record in delivering profitable growth. The investment we have
made in Metro Rod since acquiring the business in April 2017 has resulted in
system sales increasing from £33.5m in the whole of 2017 to £28.5m in the
first half of 2022. Given our small share of a highly fragmented market where
scale is becoming still more of a competitive advantage, we see significant
potential to grow this business over the long term. Filta also has
considerable growth potential given its very low share of the commercial
kitchen services market. We also see significant potential to grow Metro Plumb
into a truly national plumbing business.
Trading in the first half of 2022 has been buoyant for our two largest
businesses, Metro Rod and Filta North America, which together contributed 72%
of adjusted EBITDA. We expect this pattern to be repeated in the traditionally
stronger second half of the year. The availability of engineer resources in a
tight labour market remains a critical factor as we grow, but we are confident
that our new scheduling tool will play an important role in improving labour
efficiency and contribute to providing the additional capacity we need to
grow.
The outlook for our B2C business, which accounts for 19% of EBITDA, is more
uncertain for the reasons set out above. The team is, however, working hard on
a series of initiatives which will mitigate the effects of any shortfall in
new franchise recruitment and network attrition. Further leveraging the use of
our central resources and the excellent management team we have in the B2C
division by complementary acquisitions remains our ambition. However, in the
current environment we are cautious about acquiring consumer-facing franchise
businesses.
In the DLO businesses that form part of the B2B Division, good progress is
being made in integrating operational delivery and developing sales across the
enlarged customer base. We are also focused on ensuring that our franchise
communities fully participate in providing the expanding range of services on
offer.
Overall, we remain confident that the enlarged Group will maintain the
momentum established since the end of the Covid lockdowns into the second half
of the year and beyond, and we anticipate a full-year performance at the top
end of market expectations.
Conclusion
The last couple of years have been very challenging for everyone in the
business, but the teamwork of my colleagues, our franchisees and particularly
our engineers has resulted in us collectively building an even stronger, more
robust business which has thrived in the current environment.
Our technology-enabled business is highly profitable, enjoys a robust cash
flow, and has a strong ungeared £100 million balance sheet, which positions
us very well to weather any short-term challenges the current economic
conditions may present and to take advantage of future organic growth and
acquisition opportunities that will further drive shareholder value.
Stephen Hemsley
Executive Chairman
25 July 2022
FINANCIAL REVIEW
Summary statement of income (unaudited)
H1 2022 H1 2021 Change Change
£'000 £'000 £'000 %
Revenue 44,508 27,793 16,715 60%
Cost of sales (28,200) (17,580) (10,620) 60%
Gross profit 16,308 10,213 6,095 60%
Administrative expenses (9,042) (6,045) (2,997) 50%
Adjusted EBITDA 7,265 4,168 3,097 74%
Depreciation & amortisation of software (1,097) (819) (278) 34%
Finance expense (253) (157) (96) 61%
Adjusted profit before tax 5,915 3,192 2,723 85%
Tax expense (1,193) (606) (587) 97%
Adjusted profit after tax 4,722 2,586 2,137 83%
Amortisation of acquired intangibles (669) (196) (473)
Share-based payment expense (351) (175) (176)
Non-recurring costs (1,282) - (1,282)
Other gains and losses 1,232 (174) 1,406
Tax on adjusting items (83) (478) 395
Statutory profit after tax 3,570 1,562 2,007 129%
The Group's results for the six months ended 30 June 2022 include a
contribution from Filta for the four-month period since acquisition and a full
six-month contribution from Azura (acquired in November 2021).
Overall, consolidated Group revenue has increased by 60% to £44.5m in the
period (H1 2021: £27.8m). Gross profit has also increased 60% to £16.3m (H1
2021: £10.2m). Statutory revenue and gross margins have a different mix
following the acquisitions, and as a result of the varying mix of the
underlying businesses as they grow and is not a KPI we use at Group level.
Initial cost savings made in the integration of Filta and the continued
efficiency gains arising from the digital enablement of the business resulted
in overheads increasing by only 50%. This has driven a 74% increase in
adjusted EBITDA, which is a key KPI, to a record £7.3m (H1 2021: £4.2m).
Divisional trading results
The adjusted EBITDA of the operational business divisions of the Group may be
analysed as follows:
B2B Filta Intl B2C Azura H1 2022 B2B Filta Intl B2C Azura H1 2021
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Statutory revenue 31,842 8,823 3,432 411 44,508 24,426 - 3,367 - 27,793
Cost of sales (21,763) (5,775) (662) (0) (28,200) (16,809) - (771) - (17,580)
Gross profit 10,079 3,048 2,770 411 16,308 7,618 - 2,596 - 10,213
GM% 32% 35% 81% 100% 37% 31% 77% 37%
Administrative expenses (5,712) (1,039) (1,265) (313) (8,328) (4,342) - (1,140) - (5,481)
Divisional EBITDA 4,367 2,009 1,506 98 7,980 3,276 - 1,456 - 4,732
Group Overheads (714) (564)
Adjusted EBITDA 7,265 4,168
B2B Division
The B2B division comprises the franchise activities of Metro Rod, Metro Plumb
and Filta UK together with the DLO operations of Willow Pumps, Filta UK and
Kemac. The organisation of these activities within this division reflects both
management responsibilities and our internal KPIs. The results of the B2B
division may be summarised as follows:
Metro Rod Willow Pumps Filta UK H1 2022 Metro Rod Willow Pumps Filta UK H1 2021
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Statutory revenue 19,506 8,773 3,563 31,842 16,621 7,805 - 24,426
Cost of sales (13,385) (6,150) (2,228) (21,763) (11,556) (5,253) - (16,809)
Gross profit 6,121 2,624 1,335 10,079 5,065 2,553 - 7,618
GM% 31% 30% 37% 32% 30% 33% 31%
Administrative expenses (2,953) (1,732) (1,027) (5,712) (2,717) (1,624) - (4,342)
Adjusted EBITDA 3,168 892 308 4,367 2,347 929 - 3,276
Metro Rod
Metro Rod comprises the franchise and direct labour activities of Metro Rod
and Metro Plumb, Kemac and the direct labour contract at Peel Ports which came
to a conclusion during the period. The results may be summarised as follows:
H1 2022 H1 2021 Change Change
£'000 £'000 £'000 %
Revenue 19,506 16,621 2,885 17%
Cost of sales (13,385) (11,556) (1,829) 16%
Gross profit 6,121 5,065 1,056 21%
GM% 31% 30% 1% 3%
Admin expenses (2,953) (2,717) (236) 9%
Adjusted EBITDA 3,168 2,347 820 35%
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 2022 H1 2021 Change Change
£'000 £'000 £'000 %
System sales 28,452 23,699 4,753 20%
MSF income 5,234 4,400 834 19%
Effective MSF % 18.4% 18.6%
Other gross profit 886 665 221 33%
Gross profit 6,121 5,065 1,056 21%
Overall, system sales at Metro Rod and Metro Plumb increased by 20% to a
record £28.5m in the period (H1 2021: £23.7m). The net MSF income at Metro
Rod increased by 19% to £5.2m (H1 2021: £4.4m), which represented an
effective MSF of 18.4% (H1 2021: 18.6%). We continue to support Metro Rod's
franchisees in growing their businesses through a series of MSF incentives
designed to encourage sales growth and investment in a broader range of
equipment, services and people. In line with this strategy, as system sales
have grown, especially in tanker and pump work, the effective MSF percentage
rate has continued to fall. Other gross profit increased 33% to £0.9m (H1
2021: £0.7m) due primarily to an increase in franchise sales and resales.
Administration expenses have grown at less than half the rate of system sales
as a result of the efficiency gains the digital enablement of the business has
allowed and some permanent cost savings resulting from new ways of working
developed during lockdowns. As a result, adjusted EBITDA grew by 35% to £3.2m
(H1 2021: £2.3m).
Willow Pumps
Willow Pumps comprises the core DLO pump business and the Metro Rod corporate
franchises in Kent & Sussex and Exeter. The results may be summarised as
follows:
H1 2022 H1 2021 Change Change
£'000 £'000 £'000 %
Revenue 8,773 7,805 968 12%
Cost of sales (6,150) (5,253) (897) 17%
Gross profit 2,624 2,553 71 3%
GM% 30% 33% -3% -9%
Administrative expenses (1,732) (1,624) (108) 7%
Adjusted EBITDA 892 929 (37) (4)%
The Willow Pumps core business has two distinct types of revenue: Service
revenue and Supply & 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 revenue increased by 12% during the period, the gross margin percentage
declined from 33% to 30%, resulting in only a modest 3% increase in gross
profit. The principal cause of this decline was the increased cost of
materials which could not be passed on to customers. Revised contract terms
have been introduced to avoid this in future. Another factor which has
contributed to the decline in gross margin was the planned subcontracting of
service work to the Metro Rod franchise network. However, the loss of margin
in Willow Pumps was compensated for by the additional franchisee margin and
MSF income in Metro Rod.
Effective overhead control resulted in administrative expenses growing at a
slower rate than revenue. However, this was not sufficient to fully compensate
for the shortfall in gross margin and adjusted EBITDA declined marginally.
Filta UK
Filta UK comprises the core DLO services which includes pump and drainage
repair and maintenance, fridge and freezer seal replacement, vent cleaning and
the supply, installation and maintenance of GRUs. The FiltaFry network of
franchisees is also included in this business.
The results for the period are in respect of the four months since
acquisition, and may be summarised as follows:
H1 2022
£'000
Revenue 3,563
Cost of sales (2,228)
Gross profit 1,335
GM% 37%
Administrative expenses (1,027)
Adjusted EBITDA 308
Filta UK has experienced improved revenue and EBITDA growth post-Covid, but
this has been lower than expected due to a shortfall in sales. The principal
reason for this has been a hold-up in the roll-out of the Cyclone GRU and the
associated installation and service work. We remain confident that this
activity will make a meaningful contribution to the division once the start-up
challenges have been overcome.
Pump service, which accounted for 21% of total revenue in the period,
continues to experience a strong pipeline of new business quotes, although
operational delivery has been a challenge owing to delays in sourcing
materials and labour constraints. As this business is highly complementary to
the services offered by Metro Rod, Metro Plumb and Willow Pumps we are
reviewing how the service can best be delivered by the broader group.
FiltaSeal, which provided 17% of total revenue, has traded well in the period.
Whilst sales volume has been slightly lower than expected due to capacity
constraints, this has been more than compensated for by considerably higher
margins. Additional technicians are being recruited to significantly expand
this activity.
Finally, administrative expenses are lower than expected due to the
elimination of duplicated overhead following the acquisition, and other
savings made to better align costs with the current sales volume. Overall,
Filta UK has made a modest contribution to Group profits, with adjusted EBITDA
at £0.3m. However, the actions being taken and the development of group
synergies are expected to lead to an improvement in trading in the second half
of the year and beyond.
Filta International
Filta International operates a franchise network that comprises the franchise
activities of Filta in North America and mainland Europe. Filta
International's results for the period represent the four months of
contribution since acquisition and may be summarised as follows:
North America Europe H1 2022
£'000 £'000 £'000
Revenue 8,603 220 8,823
Cost of sales (5,647) (128) (5,775)
Gross profit 2,956 92 3,048
GM% 34% 42% 35%
Administrative expenses (924) (114) (1,038)
Adjusted EBITDA 2,032 (22) 2,009
The table below provides a breakdown of the key revenue streams and gross
profit contributions for the North American operation.
Revenue Gross Profit Gross Margin
£'000 £'000 %
MSF, Equipment & Supplies 2,260 1,600 71%
Waste Oil 5,917 1,047 18%
Area Sales 426 309 73%
Total 8,603 2,956 34%
MSF and Equipment & Supply revenue consists of the monthly charge paid by
the franchisees for each MFU in operation; the additional fee for generating
and administrating the national accounts; and the revenue from the sale of new
MFUs, replacement parts and supplies sold to franchisees. This revenue
stream has bounced-back strongly in the period as key customer sectors have
recovered from the Covid shutdowns and demand for FiltaFry's services has
increased.
Waste oil revenues are derived from the sale of used cooking oil for biodiesel
production. Through national agreements with biodiesel companies, Filta
administers the programme which involves the franchisees collecting and
storing the oil prior to local pick-up via tankers organised by Filta. Filta
retains an average 18% margin on waste oil sales. Waste oil revenue has more
than doubled from the comparable prior year period with approximately
one-third of the increase being volume-related and two-thirds price-related.
Area Sales revenues are derived from the sale and resale of franchise
territories. Of the income derived from the sale of a new franchise, 60% is
recognised as revenue once training is completed, with the balance spread
equally over the 10-year life of the agreement. The revenue from franchise
resales, on which a 5-10% commission is earned, is recognised when the
transaction completes. During the period, three new franchises and five
resales were completed which, in total, was twice as many as in the comparable
prior period.
Whilst Europe has experienced improved revenue and gross profit growth
post-Covid, the recovery has been slower and has been compounded by hold-ups
in rolling out the GRU. We remain confident that this activity will make a
strong contribution to the division once the business achieves scale.
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 2022 H1 2021 Change Change
£'000 £'000 £'000 %
Revenue 3,432 3,367 65 2%
Cost of sales (662) (771) 109 -14%
Gross profit 2,770 2,596 174 7%
GM% 81% 77% 4%
Admin expenses (1,265) (1,140) (125) 11%
Adjusted EBITDA 1,506 1,456 50 3%
The key revenue streams are MSF and Area Sales income. MSF income is
primarily 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. MSF Income was flat in the period due to the
reduced recruitment and higher network churn. Area Sales income represents the
fees generated from the sale (or resale) of franchise territories and were
lower in the period due to lower recruitment, particularly at ChipsAway.
Revenue in the period benefited from the one-off sale of the MyHome domain
name for £0.1m.
Cost of sales declined in the period due to a change in the recruitment mix
towards Ovenclean and Barking Mad and away from the higher-cost ChipsAway
franchise. Overheads increased by 11% as a result of the re-introduction of
costs that were suspended during the Covid period, in particular, the annual
franchise conference for ChipsAway. Overall, adjusted EBITDA in the B2C
division increased by 3% when compared to the buoyant post-recovery trading in
the first half of 2021.
Azura
Azura was acquired on 29 November 2021 and therefore this period represents
its first H1 trading period as part of the Group.
H1 2022
£'000
Revenue 411
Cost of sales (0)
Gross profit 411
GM% 100%
Admin expenses (313)
Adjusted EBITDA 98
Since the acquisition, Azura has focused on improving efficiency in delivering
its software solutions to franchise businesses and building sales. It has also
been building its internal resources to support the further digital
enhancement of the Group's businesses. Third-party revenue and adjusted EBITDA
for the period have exceeded management expectations.
Adjusted & statutory profit
H1 2022 H1 2021 Change Change
£'000 £'000 £'000 %
Adjusted EBITDA 7,265 4,168 3,097 74%
Depreciation & amortisation of software (1,097) (819) (278) (34%)
Finance expense (253) (157) (96) (61%)
Adjusted profit before tax 5,915 3,192 2,723 85%
Tax expense (1,193) (606) (587) (97%)
Adjusted profit after tax 4,722 2,586 2,136 83%
Amortisation of acquired intangibles (669) (196) (473)
Share-based payment expense (351) (175) (176)
Non-recurring costs (1,282) - (1,282)
Other gains and losses 1,232 (174) 1,406
Tax on adjusting items (83) (478) 395
Statutory profit 3,570 1,562 2,008 129%
Depreciation and amortisation of software increased 34% to £1.1m (H1 2021:
£0.8m), primarily as a result of the impact of the acquisitions of Filta and
Azura and the subsequent additions to both tangible assets and software.
The finance charge has increased by 61% reflecting the interest cost of
Filta's debt which included a term debt facility and a Coronavirus Business
Interruption Loan. Both of these loans were repaid in full in June 2022. The
finance charge also includes interest on hire purchase debt.
The tax charge for the period at 25% (H1 2021: 40%) was higher than the
statutory rate of 19% in the UK, reflecting the additional pre-tax profit
contribution from the Filta North America operations where the corporate tax
rate is 26%.
The increase in the amortisation of acquired intangibles reflect the
additional intangible assets acquired as a result of the Filta acquisition.
The increase in the share-based payment expense principally reflects the grant
of 3 million replacement share options and stock appreciation rights primarily
to Filta employees. The non-recurring costs reflect the Filta acquisition
costs and the subsequent one-off reorganisation costs. Other gains and losses
reflect the write-back of the IFRS13 contingent consideration provision made
in respect of the Willow Pumps earn-out following the early settlement of this
potential liability.
After a provision in respect of tax on adjusting items, statutory profit after
tax increased by 129% to £3.6m (H1 2021: £1.6m).
Earnings per share
During the period the Group issued 33,788,008 new Ordinary Shares in
consideration for the acquisition of Filta. In addition, the Group issued
354,465 new Ordinary Shares to satisfy the exercise of share options. This
resulted in the total number of Ordinary Shares in issue increasing to
130,008,082 at 30 June 2022 (31 December 2021: 95,865,609) and a basic
weighted average number of Ordinary Shares in issue of 116,061,969 (H1 2021:
95,758,470).
Adjusted earnings per share increased by 51% to 4.07p (H1 2021: 2.70p), and
basic earnings per share increased by 89% to 3.08p (H1 2021: 1.63p), as set
out in the table below.
H1 2022 EPS H1 2021 EPS
£'000 p £'000 p
Adjusted profit after tax 4,722 4.07 2,586 2.70
Amortisation of acquired intangibles (669) (0.58) (196) (0.20)
Share-based payment expense (351) (0.30) (175) (0.18)
Non-recurring costs (1,282) (1.10) - -
Other gains and losses 1,232 1.06 (174) (0.18)
Tax on adjusting items (83) (0.07) (478) (0.50)
Statutory profit after tax 3,570 3.08 1,562 1.63
Financing and cash flow
A summary of the Group cash flow for the period is set out in the table below.
Net cash at 31 December 2021 (£m) 6.5
Cash flow from operations 5.0
Repayment of Filta debt (3.0)
Filta acquisition and reorganisation costs (1.3)
Willow earn-out payment (1.7)
Dividend (2021 final) (1.2)
Other net movements 0.4
Net cash at 30 June 2022 (£m) 4.7
The cash flow from operations includes the working capital movements resulting
from the Filta acquisition. The principal uses of cash during the period were
the early repayment of Filta's outstanding loans of £3m; the acquisition and
subsequent reorganisation costs of Filta of £1.3m; the settlement of the
contingent consideration in respect of Willow Pumps which totalled £1.7m; and
the £1.2m cost of the 2021 final dividend. After these outflows, the Group
finished the period with net cash of £4.7m (31 December 2021: £6.5m) as set
out below.
After these outflows, the Group finished the period with net cash of £4.7m
(31 December 2021: £6.5m) as set out below.
30 June 2022 31 Dec 2021 Change Change
£'000 £'000 £'000 %
Cash 7,531 9,054 (1,523) (17)%
Hire purchase debt (684) (821) 137 17%
Adjusted net cash 6,847 8,233 (1,386) (17)%
Other lease debt (2,146) (1,713) (432) (25)%
Net cash 4,701 6,520 (1,818) (28)%
The Group continues to be ungeared, with a £100m balance sheet, gross cash of
£7.5m, and a £5.0m unutilised Revolving Credit Facility giving the Group
£12.5m of cash and available facilities.
Dividend
The strong first half of the year and the optimism we have for the full-year
performance has given the Board the confidence to declare a 50% increase in
the interim dividend to 0.90p per share (H1 2021: 0.60p). The interim dividend
will be paid on 23 September 2022 to shareholders on the register on 9
September 2022.
Andrew Mallows
Interim Chief Financial Officer
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2022
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
Notes 2022 2021 2021
£'000 £'000 £'000
Revenue 44,508 27,793 57,690
Cost of sales (28,200) (17,580) (35,764)
Gross profit 16,308 10,213 21,926
Adjusted earnings before interest, tax, depreciation, amortisation, 8,474
share-based payments & non-recurring items ("Adjusted EBITDA") 7,265 4,168
Depreciation (885) (660) (1,377)
Amortisation of software (212) (159) (339)
Amortisation of acquired intangibles (669) (196) (393)
Share-based payment expense (351) (175) (334)
Non-recurring items 2 (1,282) - (187)
Total administrative expenses (12,441) (7,235) (16,082)
Operating profit 3,867 2,978 5,844
Other gains and losses 3 1,232 (174) 223
Finance expense (253) (157) (292)
Profit before tax 4,846 2,647 5,775
Tax expense (1,276) (1,085) (1,542)
Net profit attributable to equity holders of the Parent Company 3,570 1,562 4,233
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign operations 289 - -
Total Other Comprehensive Income for the year 289 - -
Profit and total comprehensive income for the year 3,859 1,562 4,233
Earnings per share (p)
Basic 1 3.08 1.63 4.42
Diluted 1 3.01 1.59 4.30
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 30 June 2022
Unaudited
30 June 2022 Audited
31 December
2021
£'000 £'000
Assets
Non-current assets
Intangible assets 86,224 35,278
Property, plant and equipment 3,741 2,609
Right-of-use assets 2,944 2,723
Trade and other receivables 394 182
Total non-current assets 93,303 40,792
Current assets
Inventories 2,040 908
Trade and other receivables 24,216 16,514
Cash and cash equivalents 7,531 9,054
Total current assets 33,787 26,476
Total assets 127,090 67,268
Liabilities
Current liabilities
Trade and other payables 18,610 12,144
Obligations under leases 888 754
Current tax liability 747 213
Contingent consideration - 345
Total current liabilities 20,245 13,456
Non-current liabilities
Obligations under leases 1,941 1,780
Contingent consideration - 2,567
Deferred tax liability 3,995 2,139
Total non-current liabilities 5,936 6,487
Total liabilities 26,181 19,943
Total net assets 100,909 47,325
Issued capital and reserves attributable to owners of the Parent
Share capital 649 480
Share premium 36,966 36,966
Share-based payment reserve 1,074 789
Merger reserve 52,212 1,390
EBT reserve (887) (504)
Cumulative translation adjustment 289 -
Retained earnings 10,606 8,204
Total equity attributable to equity holders 100,909 47,325
CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended 30 June 2022
Unaudited Unaudited Audited
6 months ended 6 months Year
30 June ended ended
2022 30 June 31 December
2021 2021
£'000 £'000 £'000
Cash flows from operating activities
4,233
Profit for the period 3,570 1,562
Adjustments for:
1,378
Depreciation of property, plant and equipment 885 819
Amortisation of intangible fixed assets 881 196 339
Acquisition-related costs - - 393
Non-recurring charges 1,282 - 187
Share-based payment expense 351 175 334
Other gains and losses (1,232) 174 (223)
Finance expense 253 157 292
Income tax expense 1,276 1,084 1,542
Operating cash flow before movements in working capital 7,265 4,168 8,474
Decrease/(increase) in trade and other receivables (7,914) (1,170) (1,392)
(Increase)/decrease in inventories (1,132) (167) (195)
(Decrease)/increase in trade and other payables 6,769 668 1,311
Cash generated from operations 4,989 3,499 8,198
Income taxes (paid)/received (1,355) (444) (924)
Net cash generated from operating activities 3,634 3,055 7,273
Cash flows from investing activities (1,723)
Purchases of property, plant and equipment (626) (1,184)
Purchase of software (466) (150) (433)
Proceeds from the sale of property, plant and equipment 202 - -
Acquisition of subsidiary including costs, net of cash acquired 2,951 - (541)
Payment of contingent consideration (1,680) (320) (320)
Net cash used in investing activities 381 (1,654) (3,017)
Cash flows from financing activities (5,309)
Bank loans- repaid (3,042) (1,000)
Other loans- repaid/(made) (491) 49 2
Capital element of lease obligations repaid (559) (552) (1,106)
Interest paid - bank and other loan (42) (55) (107)
Interest paid - finance leases (33) - (189)
Proceed from issue of shares 180 - -
Funds supplied to Employee Benefit Trust (383) (98) (355)
Dividends paid (1,169) (766) (1,341)
Net cash generated from/used in financing activities (5,538) (2,422) (8,404)
Net increase/decrease in cash and cash equivalents (1,523) (1,021) (4,148)
Cash and cash equivalents at beginning of period 9,054 13,203 13,203
Cash and cash equivalents at end of period 7,531 12,182 9,054
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2022
Share capital Share premium account Share-based payment reserve Merger reserve EBT Retained earnings Total
reserve Foreign exchange reserve
Group £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2021 479 36,817 455 1,390 (149) - 4,849 43,841
Profit for the period - - - - - - 1,562 1,562
Contributions by and distributions to owners -
Dividend paid - - - - - - (766) (766)
Contributions to Employee Benefit Trust - - (26) - (37) - (35) (98)
Share-based payment - - 170 - - - - 170
At 30 June 2021 479 36,817 599 1,390 (186) - 5,611 44,710
Profit for the period - - - - - 2,671 2,671
Contributions by and distributions to owners: -
Shares issued 1 149 - - - - - 150
Dividend paid - - - - - - (575) (575)
Contributions to Employee Benefit Trust - - 26 - (318) - 35 (257)
Share-based payment - - 164 - - - 462 626
At 31 December 2021 480 36,966 789 1,390 (504) - 8,204 47,325
Profit for the period - - - - - 3,570 3,570
Foreign exchange translation differences - - - - - 289 - 289
Total comprehensive income - - - - - 289 3,570 3,860
Contributions by and distributions to owners:
Shares issued 169 - - 50,822 - - - 50,991
Dividend paid - - - - - (1,169) (1,169)
Contributions to Employee Benefit Trust - - - - (383) - - (383)
Share-based payment - - 285 - - - - 285
At 30 June 2022 649 36,966 1,074 52,212 (887) 289 10,606 100,909
Accounting policies
Basis of preparation
The consolidated financial statements for the six months ended 30 June 2022
and 2021 are unaudited and were approved by the Directors on 25 July 2022.
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
2021 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
2021.
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.
Notes to the unaudited results for the six months ended 30 June 2022
1. 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.
Earnings per share
Six months ended Six months ended Year ended
30 June 2022 30 June 2021 31 December 2021
£'000 £'000 £'000
Profit attributable to owners of the Parent 3,570 1,562 4,233
Adjusting items, net of tax 1,153 1,023 1,078
Adjusted profit attributable to owners of the Parent 4,722 2,586 5,311
Number Number Number
Basic weighted average number of shares 116,061,969 95,758,470 95,767,863
Dilutive effect of share options 2,363,754 2,389,068 2,600,637
Diluted weighted average number of shares 118,425,723 98,147,538 98,368,500
Pence Pence Pence
Basic earnings per share 3.08 1.63 4.42
Diluted earnings per share 3.01 1.59 4.30
Adjusted earnings per share 4.07 2.70 5.55
Adjusted diluted earnings per share 3.99 2.63 5.40
2. Non-recurring items
The Company incurred costs associated with the acquisition of Filta. An amount
of £1.3 million has been charged in arriving at statutory profit. Following
the acquisition, the Group has incurred reorganisation costs principally in
the form of redundancy payments.
£'000
Filta acquisition costs 978
B2B reorganisation costs 304
1,282
3. Other gains and losses
During the year, the Group made a gain as a result of the early settlement of
the contingent consideration in respect of the Willow Pumps acquisition. At 31
December 2021, the Group recorded a liability of £2.9m in respect of the
estimated future payments. During the period, the Group negotiated an early
settlement of this contingent consideration for £1.3m, which together with
the amount owed for 2021 made a total payment of £1.7m in the period,
resulting in a gain of £1.2m being recorded within other gains and losses.
4. Business Combination
On 10 March, the Company announced that its all share offer for Filta became
unconditional. On 1 June the Company announced that the compulsory acquisition
of the remaining Filta shares was completed. Accordingly, the Company owns
100 per cent. of the entire issued share capital of Filta.
Details of the fair value of the identifiable assets and liabilities acquired,
purchase consideration and goodwill are as follows:
Book value Adjustments Fair Value
£'000 £'000 £'000
Intangible assets 15,933 15,933
Property, plant and equipment 1,847 1,847
Deferred tax asset 1,493 1,493
Inventories 1,466 1,466
Trade and other receivables 4,436 4,436
Cash 4,229 4,229
Trade and other payables (6,761) (6,761)
Deferred tax liability (9,232) (3,510) (4,433)
Other working capital (3,698) (3,698)
Total 2,089 12,423 14,512
Total consideration paid 50,991
Goodwill 36,479
The deferred tax liability has been calculated on the value of the intangible
assets acquired at a blended corporation tax rate of 24.5% per cent and a
corresponding amount has been recognised as goodwill. The amount recognised as
goodwill will not be deductible for tax purposes.
The values of the intangibles acquired are currently provisional and will be
finalised at the year-end. All of the intangible assets have a useful economic
life of 10 years, with the exception of the Brand and Goodwill which both have
indefinite lives.
5. 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/
(https://www.franchisebrands.co.uk/key-documents/) .
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. END IR BELLLLDLEBBQRecent news on Franchise Brands
See all newsREG - Franchise Brands PLC - Holding(s) in Company
AnnouncementREG - Franchise Brands PLC - Move to SETS
AnnouncementREG - Franchise Brands PLC - Result of AGM
AnnouncementREG - Franchise Brands PLC - AGM Statement and Q1 Trading Update
AnnouncementREG - Franchise Brands PLC - Directors' dealings
Announcement