REG - Franchise Brands PLC - Interim Results
17/09/2024 07:00
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RNS Number : 4104E Franchise Brands PLC 17 September 2024
17 September 2024
FRANCHISE BRANDS PLC
("Franchise Brands", the "Group" or the "Company")
Interim results for the six months ended 30 June 2024
Key divisions achieved record System sales despite some anticipated moderation
in demand across certain sectors
Full-year Adjusted EBITDA(1) expected to be within the range of current
market expectations
Integration of Pirtek Europe progressing well with significant growth
potential
Change of nominated adviser and auditor
Franchise Brands plc (AIM: FRAN), an international multi-brand franchise
business, is pleased to announce its unaudited interim results for the six
months ended 30 June 2024.
Financial highlights - Resilient trading and strong cash generation to reduce
the debt taken on to fund the Pirtek Europe acquisition
* System sales increased by 42% to £206.0m (H1 2023: £145.5m).
* Statutory revenue increased by 35% to £69.8m (H1 2023: £51.9m).
* Adjusted EBITDA(2) increased by 45% to £17.8m (H1 2023: £12.3m).
* Adjusted profit before tax(3) increased by 21% to £10.6m (H1 2023: £8.8m).
* Adjusted EPS(4) decreased 7% to 4.04p (H1 2023: 4.34p) as a result of the
increased interest cost of the Pirtek Europe acquisition debt, a 2.7% increase
in the tax rate and the 25% increase in the average number of shares in issue.
* Adjusted net debt(5) of £69.9m as at 30 June 2024 (30 June 2023: £74.7m)
which represents leverage(6) to 31 December 2024 of 1.9x (31 December 2023:
2.48x).
* Cash conversion significantly increased to 72% (H1 2023: 57%) demonstrating
the Group's strong cash-generation.
* 10% increase in the interim dividend declared to 1.10p per share (2023 interim
dividend: 1.0p per share).
Operational highlights - All key divisions achieved record System sales
* The Pirtek Europe division generated record total system sales of £92.8m, up
2% on a like-for-like basis, a resilient performance given more subdued market
conditions.
* Integration of Pirtek Europe into the Group continues to progress well,
particularly in IT.
* Metro Rod delivered record system sales of £39.3m an increase of 5% (H1 2023:
£37.4m).
* Significant improvement in Willow Pumps' profitability.
* Increase in system sales at Filta International of 5% to a record £45.0m
despite weaker used cooking oil price; FiltaMax strategic growth initiatives
gaining traction.
* Creditable performance in B2C division despite challenging environment.
Full year outlook - In line with the current range of market expectations
* The resilient underlying demand for the Group's essential reactive services
means that the business performed satisfactorily despite the macroeconomic
headwinds.
* Management remains focused on driving organic growth through cross selling and
integrating all the Group's businesses onto common IT platforms, whilst
tightly controlling costs.
* Whilst mindful of continued uncertainty in some markets, early signs of
improving macroeconomic sentiment and the pipeline of opportunities should
support an improvement in demand and a full year performance in line with the
current range of market expectations for Adjusted EBITDA.
* Confident in the significant growth potential of the Group's principal
franchise brands and that the platform for growth being built supports the
strategic ambitions set out at the Capital Markets Day held earlier this year.
1. Current market expectations of Adjusted EBITDA for the financial year
ending 31 December 2024 are £35.7m to £37.2m.
2. Adjusted EBITDA is earnings before interest, tax, depreciation,
amortisation, impairment losses, exchange differences, share-based payment
expense and non-recurring items.
3. Adjusted profit before tax is earnings before amortisation of acquired
intangibles, share-based payment expense, non-recurring items and tax.
4. Adjusted EPS is earnings per share before amortisation of acquired
intangibles, share-based payment expense and non-recurring items.
5. Adjusted net debt is the key debt measure used for testing bank covenants
and excludes debt on right-of-use assets of £9.7m.
6. Leverage is calculated using Adjusted net debt as at 30 June 2024 of
£69.9m and Adjusted EBITDA for the financial year ending 31 December 2024 of
£36.6m, which is the consensus of current market expectations.
Stephen Hemsley, Executive Chairman, commented:
"Underlying demand for the Group's essential reactive services resulted in a
resilient performance in the first half of 2024, with all our key divisions
achieving record System sales, despite some anticipated moderation in demand
across certain sectors. This is enabling us to generate both the
profitability and cash flow required to reduce the debt taken on to fund the
Pirtek Europe acquisition.
"We have made solid progress, with the integration of Pirtek Europe
progressing well, as we look to drive organic growth through cross selling
across the Group, enabled by common IT platforms in place. We also believe
technology will be key to unlocking the benefits of operational gearing and
will play a significant part in underpinning future margin expansion.
"Whilst mindful of continued uncertainty in some markets, early signs of
improving macroeconomic sentiment and our pipeline of opportunities should
support an improvement in demand and a full year performance in line with the
current range of market expectations for Adjusted EBITDA.
"We are confident in the significant growth potential of our principal
franchise brands as they grow their small shares of large, fragmented markets,
expand their range of services and geographical penetration, and cross-sell to
our large customer base. The platform for growth we are building as we focus
on integrating our recent acquisitions supports the strategic ambitions set
out at our Capital Markets Day held earlier this year."
Change of nominated adviser and auditor
Franchise Brands also announces today the appointment of Stifel Nicolaus
Europe Limited as nominated adviser to the Company, with effect from 1 October
2024. Following an audit tender process led by the Audit Committee, the Board
also announces that it has appointed PKF Littlejohn LLP as its statutory
auditor, in place of BDO LLP whose resignation has been received.
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 / Joscelin Pinnington (Sales & Corporate Broking)
Dowgate Capital Limited (Joint Broker) +44 (0) 20 3903 7715
James Serjeant / Nicholas Chambers
Stifel Nicolaus Europe Limited (Joint Broker) +44 (0) 20 7710 7600
Matthew Blawat
MHP Group (Financial PR) +44 (0) 20 3128 8100
Katie Hunt / Catherine Chapman +44 (0) 7884 494112
franchisebrands@mhpgroup.com
About Franchise Brands plc
Franchise Brands is an international, multi-brand franchisor focused on 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: "as they grow, we
grow".
Franchise Brands employs over 650 people across the Group.
For further information, visit www.franchisebrands.co.uk
(https://protect.checkpoint.com/v2/___http:/www.franchisebrands.co.uk/___.bXQtcHJvZC1jcC1ldXcyLTE6bmV4dDE1OmM6bzpjZWY1NTAzMjM5NzgwNzM5Mzg4MDk1MDY1ZDBhYWI3Mjo2OjAzODI6NTA0ZDU2ZDM2MWY2NmVhNjZjZDU2NTVlOTI4ZjQ4OTQ0MWUyOWFmMjBmZWM4MGNiY2I2M2I3ZWZjZjc5OGY1ZjpwOlQ)
CHAIRMAN'S STATEMENT
Introduction
The first half of 2024 has been a period of satisfactory progress and
integration following the acquisition of Pirtek Europe in the comparative
period last year. The resilient underlying demand for the Group's essential
reactive services resulted in all key divisions achieving record sales despite
some anticipated moderation in demand across certain sectors. Early signs of
improving macroeconomic sentiment and a pipeline of opportunities should
support an improvement in demand and a full-year performance in line with
current market expectations for Adjusted EBITDA in the range of £35.7m to
£37.2m.
The highly cash-generative nature of our predominantly franchised business has
allowed us to reduce Adjusted net debt to below £70m and leverage to below
two times (against the consensus current market expectations for full-year
Adjusted EBITDA), in line with the medium-term strategic model outlined at
our Capital Markets Day earlier this year.
Pirtek Europe
The Pirtek Europe division generated total System sales
of £92.8m, compared to £37.2m in the ten-weeks of ownership in H1 2023,
representing 2% growth on a like-for-like basis. It operates in eight
countries, with its three major markets in the UK & Republic of Ireland
("RoI"); Germany & Austria; and Benelux accounting for 94% of Pirtek
Europe's System sales in H1. These businesses are market leaders, providing
national coverage primarily on a franchise basis.
In H1 2024, the UK & RoI maintained System sales at £41.3m from its 81
service centres in the UK and five in the RoI, despite softer demand resulting
from the slowdown in the construction and plant hire sectors and reduced
project work, as increased interest rates and the uncertainty surrounding the
UK general election held back activity. These sectors are now showing signs of
a modest recovery, and we anticipate a return to growth in H2.
Germany & Austria generated System sales of £33.7m, a like-for-like
increase in local currency of 3.4% on H1 2023, from its 93 service centres in
Germany and six in Austria. The region continued to grow, with a new service
centre opening in Germany and infrastructure investment by the German
government supporting demand, despite demand being held back by the
significant slowdown in German manufacturing, where we are seeing modest signs
of recovery in the second half.
Benelux generated system sales of £12.3m in the period, a like-for-like
increase in local currency of 10.9% on H1 2023, from its 16 service centres in
the Netherlands and eight in Belgium. The key drivers of this growth were
the provision of reactive services to the infrastructure, shipping and
logistics sectors, whilst larger quoted discretionary work was more limited.
Pirtek's smaller operations in France and Sweden are corporately operated with
strong regional footholds. France generated System sales of £4.1m, a
like-for-like increase in local currency of 9.9% on H1 2023, from its eight
service centres aided by extra work resulting from the Paris Olympics.
Sweden generated System sales of £1.4m, a like-for-like decline in local
currency of 4.1% in H1 2023 from its one service centre and 24 mobile service
vehicles due to a significant slowdown in the construction and plant hire
sector, which started in H2 2023 and continued in H1 2024.
The integration of Pirtek Europe into Franchise Brands continues to progress
well, particularly in IT. We have introduced our Vision works management
system into France and are progressing with the modifications necessary to
roll it out in the franchise markets of the UK, Germany, and Benelux. We are
also sharing resources more widely across the Pirtek business. The
cross-selling initiative to the Group's wider customer base is also
progressing, with more dedicated resources, combined with technology, planned
to ensure these opportunities are identified and actioned.
The Maximum Potential Model, which we use to estimate the potential size of
our markets, has been implemented in all the larger markets and is beginning
to highlight new opportunities. Further work is being undertaken to refine the
use of the model in a business where it is more difficult to identify the
customer's location due to the reactive service often being provided on
moveable plant machinery.
Overall, Pirtek Europe has made a slow start to the year because of a number
of external factors as noted above. However, in recent weeks there have been
some early signs of recovery. We are hopeful that, with interest rates
starting to reduce the market will return to a period of more robust growth.
Water & Waste Services division
The Water & Waste Services division is a UK-based business that includes
Metro Rod, Metro Plumb, Kemac, Willow Pumps, the Filta UK direct labour
operations ("DLO"), and the UK Filta Environmental franchise network.
Overall System sales grew by 5% to £54.6m (H1 2023: £52.1m).
Metro Rod, Metro Plumb and Kemac
Metro Rod, Metro Plumb, and Kemac increased system sales by 5%
to £39.3m (H1 2023: £37.4m). This growth was spread throughout almost the
entire network, with 80% of franchisees growing their businesses in the period
(H1 2023: 86%) and 44% growing by more than 20% year-on-year (H1 2023: 48%).
Metro Plumb continues to grow, with 21 stand-alone franchisees and 18 Metro
Rod franchisees who also operate a Metro Plumb franchise. Metro Plumb system
sales grew 14% and we continue to focus on increasing the number of
stand-alone franchisees and broadening the customer base.
The B2B drainage and plumbing markets in the UK continue to be challenging,
with customers holding back their discretionary spending on non-essential
maintenance work and favouring reactive repairs rather than replacement. Sales
were also held back by our firmer position with slow-paying customers, which
we regard as an essential safeguard against bad debts and in order to maximise
our cashflow.
Willow Pumps
System sales (excluding corporate franchises) grew by 5% to £8.6m (H1 2023:
£8.2m). The initiatives taken in 2023 to reduce our exposure to high sales,
low margin activities are beginning to be realised. In particular, the Special
Projects division, which is engaged in larger, longer-term projects beyond the
scope of most Metro Rod franchisees, is gaining momentum and is building a
pipeline of work for H2 and beyond. These initiatives have resulted in a
significant improvement in both gross margin and Adjusted EBITDA.
Filta UK
The revised strategy for this area of the business is centred around the
transfer of as much grease recovery unit ("GRU") work as possible from direct
labour to the expanded Filta Environmental franchise network. Franchisees now
complete almost all the GRU servicing work, and, as a result, the Management
Service Fee ("MSF") income has increased by 52% year-on-year. Most of the GRU
installation work is still being undertaken by direct labour and this work has
increased as the supply issues with the Cyclone GRU have been overcome. We are
accelerating the training of the Filta Environmental franchisees to install
the GRUs and source more customers for installations while reducing our
dependency on direct labour.
Filta Seal System sales grew by 15% in the period to £1.2m (H1 2023: £1.0m)
as we continue to expand this DLO activity. Filta Pumps also grew by 17% to
£1.0m (H1 2023: £0.9m).
Overall revenue at Filta UK has grown by 15% to £6.0m (H1 2023: £5.3m). We
continue to review how we can integrate Filta more effectively into the wider
Water & Waste Services division to maximise the cross-selling
opportunities and reduce administrative overheads.
The softer market conditions in H1 are showing some modest signs of
improvement, but until we see more solid growth returning to the UK economy,
which will probably follow further interest rate reductions, it is difficult
to predict a return to the double-digit growth rates that have historically
been achieved in this division.
Filta International
Filta International operates in the US, Canada and continental Europe. System
sales in North America increased by 7% in local currency (5% increase in
sterling) and were flat in Europe (1% decline in sterling). System sales of
the underlying franchise business in North America (excluding used cooking oil
("UCO") sales), increased 12% in local currency and 11% in sterling.
The FiltaMax strategic growth initiatives, based on the Maximum Potential
Model, are beginning to be realised, with the number of franchisees offering
an expanded range of services continuing to grow with the addition of new bulk
virgin oil sales (FiltaGold) and an eco-friendly kitchen cleaning service
(FiltaClean), which will reduce the impact of used oil sales in the future.
For example, over 40% of franchisees now offer the FiltaClean service.
The roll-out of the MSF model continues to gain momentum due to franchisees
expanding their range of services, as new services attract an MSF as soon as
they are adopted, and also on the renewal of their franchise agreements. This
has resulted in a 23% increase in MSF income year-on-year. This change will
better align our interests with those of our franchisees as we will be fairly
rewarded for helping them grow System sales rather than receiving a fixed fee
based on the number of Mobile Filtration Units in use.
Filta International's income from the sales of UCO in the first half of 2024
was impacted by a 27% fall in the average price, which was only partially
compensated for by a 15% increase in volume in the period. This resulted in an
16% year-on-year reduction in the revenue from UCO. The reason for the fall in
the UCO price may be attributable to the following factors:
· Increased imports of UCO from China;
· The current competitive price of virgin soybean oil resulting from
favourable growing conditions; and
· Federal subsidies becoming more challenging to access.
The volatility of the UCO price has reduced in H1 2024 compared to 2023. In
2023, the price of UCO ranged from a high of $0.54/lb in February to a low of
$0.40/lb in December, with a full-year average of $0.48/Ib. Since January
2024, the price has moved in a narrower range of $0.29/Ib. to $0.38/lb., with
an H1 average of $0.35/Ib. Despite the fall in price, the underlying demand
for UCO for reprocessing into biodiesel and for use in animal feeds remains
robust and will remain a key source of income for both us and our franchisees
for the foreseeable future, although the diversification of Filta's range of
services will reduce reliance on this source of income.
System sales in Filta's European markets were flat year-on-year, but overhead
savings have almost eliminated the losses. We continue to work on a long-term
plan to grow this business, but in the short term, we are looking to merge the
overhead with the established Pirtek business in Europe.
B2C division
The B2C division comprises the ChipsAway, Ovenclean, and Barking Mad
franchise businesses. The recruitment market for small consumer-facing
franchise businesses remains challenging. Elevated interest rates increase the
costs of setting up a new business and this, combined with high salaries and
low unemployment, is making self-employment a less attractive option. These
factors also impact the retention of existing franchisees. Notwithstanding
this backdrop, the underlying trading of individual franchisees remains
robust, with average sales per franchisee increasing 9% on total System sales
which were up 3% to £13.2m (H1 2023: £12.9m).
During the period we recruited 16 new franchisees (H1 2023: 26) and had 25
leavers (H1 2023: 38), resulting in a net reduction in the number of
franchisees of nine (H1 2023: 12). At 30 June 2024 we had 318 franchisees (31
December 2023: 327).
Corporate development and capital allocation
Following recent acquisitions, our strategic focus is on integrating these
businesses into the Group and repaying the acquisition debt facilities. The
Board does not expect to make any further significant acquisitions until the
outstanding debt is substantially repaid, which we anticipate will occur in
2027. Capital allocation decisions will balance debt reduction, a progressive
dividend policy and investment in the organic expansion of the Group.
We will seek to organically grow system sales by cross-selling all Group
services into our enlarged customer base and expanding the range of services
offered to gain a greater share of our customers' spending. The Maximum
Potential Model demonstrates the significant opportunity we have for all our
B2B businesses, which have small shares of large, fragmented markets.
We continue the implementation of 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.
Corporate matters
Franchise Brands announces the appointment of Stifel Nicolaus Europe Limited
as nominated adviser to the Company with effect from 1 October 2024. Allenby
Capital Limited, Dowgate Capital Limited and Stifel Nicolaus Europe Limited
will remain as joint brokers to the Company.
Following an audit tender process led by the audit committee, the Board has
appointed PKF Littlejohn LLP as its statutory auditor, in place of BDO LLP
whose resignation has been received. The previous auditor, BDO, has confirmed
that there are no matters to be brought to the attention of the Company's
members or creditors in accordance with section 519 of the Companies Act 2006.
Further to our announcement on 20 June 2024 the Company has commenced a formal
and rigorous search process for the position of Chief Financial Officer. We
will provide a further update once that has concluded and, in the meantime,
Andrew Mallows who has been a key part of the Franchise Brands team for
many years, has been appointed Interim Chief Financial Officer and a Director
of the Company.
Outlook
The resilient underlying demand for the Group's essential reactive services
means that the business continues to grow. This is enabling 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. Our key divisions all
achieved record sales in H1 2024, despite some softening in demand in certain
sectors and customer spending being held back and more selective.
In the face of moderated demand, we have strictly controlled the factors
within our control, such as the growth in general overheads and recruitment.
However, inflationary pressures have made this challenging in some areas,
particularly in professional services such as audit. There have also been some
factors outside our control, such as the price of UCO.
Whilst mindful of continued uncertainty in some markets, early signs of
improving macroeconomic sentiment and our pipeline of opportunities should
support an improvement in demand and a full year performance in line with
current market expectations of Adjusted EBITDA in the range £35.7m to
£37.2m.
We are confident in the significant growth potential of our principal
franchise brands, Pirtek, Metro Rod and Metro Plumb and Filta International,
as they grow their small shares of large, fragmented, markets, expand their
range of services and geographical penetration, and cross-sell to our large
customer base. The platform for growth we are building as we focus on
integrating our recent acquisitions supports the strategic ambitions set out
at our Capital Markets Day held earlier this year.
Conclusion
H1 has been a demanding period for our team and our franchisees. However,
everyone has responded with the energy and determination you can only achieve
when people have "skin in the game", and I thank them for this. A franchise
business is a collection of family-owned businesses where the results have a
material impact on people's wealth and happiness. They are supported by our
team who "get it" and are, in turn, incentivised with shares and share options
in our business. In that way, we align everyone with the objective of helping
our franchisees grow. As they grow, we grow.
Stephen Hemsley
Executive Chairman
FINANCIAL REVIEW
Summary statement of income (unaudited)
H1 2024 H1 2023 restated Change Change
£'000 £'000 £'000 %
System sales 206,035 145,475 60,560 42%
Revenue 69,800 51,875 17,925 35%
Cost of sales (25,940) (22,641) (3,299) 15%
Gross profit 43,860 29,234 14,626 50%
Administrative expenses (26,099) (16,963) (9,136) 54%
Adjusted EBITDA 17,761 12,271 5,490 45%
Depreciation & amortisation of software (2,998) (1,841) (1,157) 63%
Finance expense (3,996) (1,611) (2,385) 148%
Foreign Exchange (200) (69) (131) 190%
Adjusted profit before tax 10,567 8,750 1,817 21%
Tax expense (2,793) (2,077) (716) 34%
Adjusted profit after tax 7,774 6,673 1,101 16%
Amortisation of acquired intangibles (5,111) (4,027) (1,084)
Share-based payment expense (557) (411) (146)
Non-recurring items (0) (2,991) 2,991
Tax on adjusting items 1,512 145 1,367
Statutory profit 3,618 (611) 4,229 692%
Other comprehensive income 101 - 101
Total Profit and Other Comprehensive Income 3,719 (611) 4,330 709%
The Group's results for the first half of 2024 include a full six-month
contribution from Pirtek compared to ten-weeks in the comparative period. H1
2023 also includes a number of adjustments which were set out in Note 1 of the
2023 Annual Report & Accounts.
Systems sales, which comprise the underlying sales of our franchisees and the
statutory revenue of our DLOs, increased by 42% to £206.0m in the period (H1
2023: £145.5m). System sales is one of the most important Group KPI's and is
considered a good indicator of Group performance, allowing total sales to end
customers to be visible on a comparable basis across all Group businesses.
Despite some anticipated softening in demand in certain sectors, the resilient
underlying demand for the Group's essential reactive services resulted in all
the key divisions achieving record sales.
Statutory revenue increased by 35% to £69.8m (H1 2023: £51.9m). Statutory
revenue comprises many different types of revenue, including the MSF, which is
now recorded on a net basis, as well as the statutory revenue of our DLOs.
Adjusted EBITDA, which is the main KPI of the business, increased 45% to a
record £17.8m (H1 2023: £12.3m) driven by a resilient trading performance in
a period of consolidation and integration. Overall, the ratio of Adjusted
EBITDA to System sales, another important KPI, increased to 8.6% (H1 2023:
8.4%), as a result of the operational gearing arising from efficiency gains
and integration cost savings.
Another key metric of the business, which drives organic investment, debt
repayment and dividends, is cash conversion (cash from operations/Adjusted
EBITDA). Excluding the Pirtek acquisition and re-organisation costs in H1
2023, the cash conversion rate increased to 72% from 57% in the comparative
period, demonstrating the strong cashflow performance of the Group's
franchise businesses.
Divisional trading results
The Group's divisional trading results may be summarised as follows:
Six months to 30 June 2024:
Pirtek Water & Waste Services Filta B2C Azura Inter- company elimination H1
Intl 2024
£'000 £'000 £'000 £'000 £'000 £'000 £'000
System sales 92,838 54,562 44,956 13,248 431 206,035
Statutory revenue 31,269 24,437 12,037 2,975 430 (1,348) 69,800
Cost of sales (8,213) (11,139) (7,185) (551) (0) 1,148 (25,940)
Gross profit 23,056 13,298 4,852 2,424 430 (200) 43,860
GP% 74% 54% 40% 81% 100% 15% 63%
Administrative expenses (12,701) (7,945) (1,925) (1,386) (363) 200 (24,120)
Divisional EBITDA 10,355 5,353 2,927 1,038 67 - 19,740
Group Overheads - - - - - - (1,979)
Adjusted EBITDA - - - - - - 17,761
Six months to 30 June 2023:
Pirtek Water & Waste Services Filta Int'l B2C Azura Inter-company elimination H1
2023
£'000 £'000 £'000 £'000 £'000 £'000 £'000
System sales 37,168 52,060 42,998 12,880 369 145,475
Statutory revenue 12,432 24,149 13,514 3,134 369 (1,723) 51,875
Cost of sales (3,337) (11,567) (8,601) (666) (0) 1,530 (22,641)
Gross profit 9,095 12,582 4,913 2,468 369 (193) 29,234
GP% 73% 52% 36% 79% 100% 11% 56%
Administrative expenses (5,238) (7,385) (1,807) (1,317) (270) 193 (15,824)
Divisional EBITDA 3,857 5,197 3,106 1,151 99 - 13,410
Group Overheads - - - - - - (1,139)
Adjusted EBITDA - - - - - - 12,271
On consolidation, certain inter-company revenues and costs are eliminated to
reconcile the Group's statutory revenues, gross profit, and administrative
expenses to the underlying entities. The net effect on Adjusted EBITDA is
zero.
Pirtek Europe
The results for H1 2024, and the comparative ten-weeks from the acquisition in
April 2023, may be summarised as follows:
Pirtek Europe Franchised DLO Central Costs H1 2024 Franchised DLO Central Costs H1 2023 Change Change
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 %
System sales 83,642 9,196 - 92,838 33,847 3,321 - 37,168 55,670 150%
Statutory revenue 22,277 9,196 (204) 31,269 9,132 3,321 (21) 12,432 18,837 152%
Cost of sales (5,957) (2,447) 191 (8,213) (2,606) (752) 21 (3,337) (4,876) 146%
Gross profit 16,320 6,749 (13) 23,056 6,526 2,569 - 9,095 13,961 154%
GP% 73% 73% 6% 74% 71% 77% - 73% 1% 1%
Administrative expenses (6,721) (5,498) (482) (12,701) (2,699) (2,150) (389) (5,238) (7,463) 142%
Adjusted EBITDA 9,599 1,251 (495) 10,355 3,827 419 (389) 3,857 6,498 168%
The Pirtek Europe division generated total System sales
of £92.8m compared to £37.2m in the ten weeks of ownership in 2023. On a
like-for-like basis, System sales grew by just 2% due to softening demand in
the construction and hire-fleet sectors in the UK and the manufacturing
sector in Germany. Most markets also suffered from higher value project work
being held back. 90% of System sales was generated from franchising and 10%
from DLO operations (of which 6% related to Pirtek France and Sweden).
Statutory revenue in H1 2024 was £31.3m (H1 2023: £12.4m). Statutory revenue
is made up of MSF and other fee income generated from franchisees, the sale of
materials used in the core hose replacement business upon which no margin is
made, and the sales revenue generated by the corporate operations. The
business also generates modest revenue from the sale and resale of franchise
territories.
The central costs mostly represent the cost of Pirtek Europe's head office,
which is based in Acton, London. Following the acquisition, this function was
significantly streamlined as the first step in integrating this business into
the enlarged Group, resulting in a 53% like-for-like reduction in cost.
Overall, Adjusted EBITDA in the period was £10.4m (H1 2023: £3.9m) which we
consider a satisfactory performance in challenging market conditions. Of the
major markets, UK & RoI accounted for 49% of Adjusted EBITDA, Germany
& Austria for 33% and Benelux for 19%. The ratio of Adjusted EBITDA to
System sales increased to 11.2% in H1 2024 from 10.4% in H1 2023 as a result
of integration cost savings.
Water & Waste Services division
The results of the Water & Waste Services division may be summarised as
follows:
Metro Rod Willow Pumps Filta UK H1 2024 Metro Rod Willow Pumps Filta UK H1 2023 Change Change
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 %
System sales 39,285 9,237 6,040 54,562 37,349 9,437 5,274 52,060 2,502 5%
Statutory revenue 9,753 9,237 5,447 24,437 9,438 9,437 5,274 24,149 288 1%
Cost of sales (1,859) (5,882) (3,398) (11,139) (1,901) (6,411) (3,255) (11,567) 428 (4%)
Gross profit 7,894 3,355 2,049 13,298 7,537 3,026 2,019 12,582 716 6%
GP% 81% 36% 38% 54% 80% 32% 38% 52% 2% 4%
Administrative expenses (4,189) (2,258) (1,498) (7,945) (3,803) (2,132) (1,450) (7,385) (560) 8%
Adjusted EBITDA 3,705 1,097 551 5,353 3,734 894 569 5,197 156 3%
Metro Rod
The results for Metro Rod, which includes Metro Plumb and Kemac, may be
summarised as follows:
Metro Rod Group
2024 2023 Change Change
£'000 £'000 £'000 %
System sales 39,285 37,349 1,936 5%
Statutory revenue 9,753 9,438 315 3%
Cost of sales (1,859) (1,901) 42 (2%)
Gross profit 7,894 7,537 357 5%
GP% 81% 80% 1% 1%
Administrative expenses (4,189) (3,803) (386) 10%
Adjusted EBITDA 3,705 3,734 (29) (1%)
Overall, System sales at Metro Rod and Metro Plumb increased by 5% to £37.5m
(H1 2023: £35.3m). Kemac's revenue during the first half decreased by 8% to
£1.5m (H1 2023: £1.6m) as a result of selling two of its six Metro Plumb
territories to franchisees.
Statutory revenue increased 3% to £9.8m (H1 2023: £9.4m) and includes MSF;
other fee income from franchise sales and resales and training; DLO customers'
revenue from corporate franchises and Kemac; and the revenue generated from
the National Advertising Fund ("NAF").
As MSF is the key driver of Adjusted EBITDA, it is re-analysed and compared to
System sales as follows:
Metro Rod H1 2024 H1 2023 Change Change
£'000 £'000 £'000 %
System Sales 37,468 35,324 2,144 6%
MSF Income 7,053 6,722 331 5%
Effective MSF % 18.8% 19.0%
Other Gross profit 841 815 26 3%
Gross profit 7,894 7,537 357 5%
MSF represented 72% (H1 2023: 71%) of Statutory revenue. We continue to
support Metro Rod's franchisees with incentives to widen and deepen the range
of services offered, such as pump service and tankering, which attract a lower
rate of MSF. The growth of these areas marginally diluted the effective rate
of MSF to 18.8% of System sales (H1 2023: 19.0%).
Other gross profit, which was flat over the period, includes the gross profit
generated by Kemac and the North Scotland corporate franchise; gross profit on
franchise sales and resales and the costs incurred by the NAF (which is a
non-profit generating).
During the period, Metro Rod sold part of a corporately-operated franchise in
North Scotland to a new franchisee. The resulting smaller geographical
footprint of the remaining business has resulted in increased operational
efficiency and therefore reduced losses.
Overall, administrative expenses grew by 10% due to inflationary pressures on
wages and other fixed costs. As a result, Adjusted EBITDA fell by 1% to £3.7m
(H1 2023: £3.7m). As a result of the increase in administrative expenses
exceeding the rate of sales growth, the ratio of Adjusted EBITDA to System
sales declined to 9.4% from 10.0%.
Willow Pumps
The results for Willow Pumps may be summarised as follows:
Willow Pumps
2024 2023 Change Change
£'000 £'000 £'000 %
Statutory revenue 9,237 9,437 (200) (2%)
Cost of sales (5,882) (6,411) 529 (8%)
Gross profit 3,355 3,026 329 11%
GP% 36% 32% 4% 13%
Administrative expenses (2,258) (2,132) (126) 6%
Adjusted EBITDA 1,097 894 203 23%
The core business has historically had two distinct revenue streams: service
revenue and supply and install revenue ("S&I"). A third revenue stream was
launched in H1 2023 with the establishment of a Special Project Division.
Service revenue is generated from the routine service and maintenance of above
and below-ground pumps and drains. Overall, service revenue fell by 5% in
the period, however, gross profit rose by 10% as a result of management's
focus on delivering higher-margin work.
S&I revenue is generated from the design, supply, and installation of pump
stations, which historically have been larger, longer-term projects. Whilst
maintaining this activity on a more selective basis, Willow Pumps management
has placed greater emphasis on lower revenue, higher-margin, work that can be
completed in shorter time frames. As a result, revenue from this activity
increased by 14% and gross profit by an impressive 34%.
The Special Projects division is engaged in larger longer-term projects. The
risk and cash-flow challenges of this type of work are being mitigated by
using subcontractors. During the first half, this activity contributed revenue
of £0.4m (H1 2023: nil).
As a result of the shift in focus at Willow Pumps towards lower value, higher
margin work, revenue fell by 2% but gross profit increased by 11% which
combined with effective control of overheads resulted in an increase in
Adjusted EBITDA of 23% to £1.1m (H1 2023: £0.9m).
Filta UK
The results of Filta UK may be summarised as follows:
Filta UK
2024 2023 Change Change
£'000 £'000 £'000 %
System sales 6,040 5,274 766 15%
Statutory revenue 5,447 5,274 173 3%
Cost of sales (3,398) (3,255) (143) 4%
Gross profit 2,049 2,019 30 1%
GP% 38% 38% -1%
Administrative expenses (1,498) (1,450) (48) 3%
Adjusted EBITDA 551 569 (18) (3%)
Filta UK continues to expand with an increasing emphasis on developing the
franchise channel by transferring work from direct labour. This results in a
transfer of margin from corporate to franchisees which has resulted in a small
reduction in Adjusted EBITDA. This is considered acceptable during a period of
transition that we allow us to grow a viable and sustainable Filta
Environmental franchise system that will grow significantly in future years.
Filta International
The results for Filta International may be summarised as follows:
Filta International North America Europe H1 2024 North America Europe H1 2023 Change Change
£'000 £'000 £'000 £'000 £'000 £'000 £'000 %
System sales 43,261 1,695 44,956 41,281 1,717 42,998 1,958 5%
Statutory revenue 11,754 283 12,037 13,178 336 13,514 (1,477) (11%)
Cost of sales (7,046) (139) (7,185) (8,416) (185) (8,601) 1,416 (16%)
Gross profit 4,708 144 4,852 4,762 151 4,913 (61) (1%)
GP% 40% 51% 40% 36% 45% 36% 4% 11%
Administrative expenses (1,763) (162) (1,925) (1,538) (269) (1,807) (118) 7%
Adjusted EBITDA 2,945 (18) 2,927 3,224 (118) 3,106 (179) (6%)
Statutory revenue is comprised of MSF income; UCO sales; equipment and
supplies sales; the fees generated from the sale and resale of franchise
territories; and national corporate accounts ("NCA"), marketing and IT
revenues. As UCO sales, which declined to £6.9m from £8.5m in H1 2023
compared with the comparative period, are included within statutory revenue on
a gross basis (with the amount paid to the franchisee being included within
cost of sales), the decline in UCO revenue had a disproportionate effect on
statutory revenue, which declined 11% to £12.0m from £13.5m.
The reduction in the value of UCO sales combined with a reduction in Filta's
margin to 16% from 17% in the comparative period resulted in a decline in
income from this activity of 25% to £1.1m (H1 2023: £1.5m).
Administrative expenses in North America increased by 15% in the period as a
result of the strengthening of the senior management team with the appointment
of the new COO, additional software development costs and a significant
increase in professional costs. As a consequence, Adjusted EBITDA from the
core franchise business (excluding UCO) grew by 2% to £3.3m (H1 2023:
£3.2m). Overall, Adjusted EBITDA, including UCO sales, fell by 9% to £2.9m
(H1 2023: £3.2m).
System sales in Europe are generated from fryer management, seal replacement
and GRU installations. Overall, System sales were flat and gross profit fell
by 5%. However, a re-organisation resulted in a reduction in overheads of 40%
leading to the business being close to breakeven compared to a modest loss in
the prior period.
B2C Division
The results of the B2C division may be summarised as follows:
B2C 2024 2023 Change Change
£'000 £'000 £'000 %
System sales 13,248 12,880 368 3%
Statutory revenue 2,975 3,134 (159) (5%)
Cost of sales (551) (666) 115 (17%)
Gross profit 2,424 2,468 (44) (2%)
GP% 81% 79% 3% 3%
Administrative expenses (1,386) (1,317) (69) 5%
Adjusted EBITDA 1,038 1,151 (113) (10%)
Overall, System sales of the B2C division grew by 3% in H1 2024. This was
driven by a 9% increase in the average order values at ChipsAway which
represents 72% of divisional System sales.
The key Statutory revenue streams are MSF and Area Sales income. MSF income
was flat in H1 2024, as whilst the monthly fee increased, the number of
franchisees over the period reduced. Area sales income declined as the number
of new franchisees recruitment declined. Overall Statutory revenue declined by
5% to £3m from £3.1m, although the savings in cost of sales as a result of
fewer new franchisees restricted the decline in gross profit to just 2%.
Strict overhead control in a period of inflationary pressures restricted the
growth in overheads to 5%. Adjusted EBITDA declined by 10% to £1.0m (H1 2023:
£1.2m) which we consider a solid result given the challenging environment.
Azura
Azura is a SaaS supplier of franchise management software to the Group and
over 35 other franchise businesses. The results for the period may be
summarised as follows:
Azura 2024 Azura 2023 Change Change
£'000 £'000 £'000 %
System sales 431 369 62 17%
Statutory revenue 430 369 61 17%
Cost of sales (0) (0) (0) 0%
Gross profit 430 369 61 17%
GP% 100% 100% (0%) 0%
Administrative expenses (363) (270) (93) 35%
Adjusted EBITDA 67 99 (32) (32%)
Statutory revenue is comprised of third-party income of £0.2m (H1 2023:
£0.2m) and charges to Group companies of £0.2m (H1 2023: £0.2m), which
eliminate on consolidation. During the first half Azura has invested in its
internal resources to support the rollout of the Vision works-management
platform throughout the Pirtek Group which has resulted in a significant
increase in overheads and reduced Adjusted EBITDA.
Adjusted & statutory profit
H1 2024 H1 2023 restated Change Change
£'000 £'000 £'000 %
Adjusted EBITDA 17,761 12,271 5,490 45%
Depreciation & amortisation of software (2,998) (1,841) (1,157) 63%
Finance expense (3,996) (1,611) (2,385) 148%
Foreign Exchange (200) (69) (131) 190%
Adjusted profit before tax 10,567 8,750 1,817 21%
Tax expense (2,793) (2,077) (716) 34%
Adjusted profit after tax 7,774 6,673 1,101 16%
Amortisation of acquired intangibles (5,111) (4,027) (1,083)
Share-based payment expense (557) (411) (146)
Non-recurring items (0) (2,991) 2,991
Other gains and losses - - -
Tax on adjusting items 1,512 145 1,367
Statutory profit 3,618 (611) 4,229 692%
Other Comprehensive Income 101 - 101
Total Profit and Other Comprehensive Income 3,719 (611) 4,330 709%
Depreciation and amortisation of software increased 63% to £3.0m (H1 2023:
£1.8m), principally due to the full six-month impact of the Pirtek
acquisition.
The finance expense reflects the additional interest cost of the acquisition
debt and an increase in the rate from 7.2% in 2023 to 7.8% in H1 2024. The
interest margin, however, reduced from 2.75% at the completion of the Pirtek
transaction to 2.5% at 30 June 2024. A further reduction is anticipated in H2
2024.
The overall effective tax rate of the Group has increased by 2.7% from 23.7%
to 26.4% as a result of the higher UK tax rate of 25%, and the Pirtek
acquisition as tax rates in Europe can be higher than in the UK. For example,
the combined state, local, and trade taxes in Germany are 30%.
The increase in the amortisation of acquired intangibles reflects the full
six-month impact of the Pirtek acquisition and the final valuation of these
assets.
The increase in the share-based payment expense principally reflects
additional grants made to the Pirtek team and other new employees who joined
the group during 2023.
Statutory profit after tax rose to £3.7m (H1 2023: £(0.6)m). The loss in H1
2023 arose primarily as a result of the non-recurring and exceptional
acquisition costs.
Earnings per share
The Adjusted and basic EPS is shown in table below:
H1 2024 EPS H1 2023 EPS
£'000 p £'000 p
Adjusted profit after tax 7,774 4.04 6,673 4.34
(5,111) (2.66) (4,027) (2.62)
Amortisation of acquired intangibles
(557) (0.29) (411) (0.27)
Share based payment
(0) (0.00) (2,991) (1.95)
Non-recurring costs
1,512 0.79 145 0.09
Tax on adjusting items
Statutory profit after tax 3,618 1.88 (611) (0.40)
The total number of ordinary shares in issue as at 30 June 2024 was
193,784,080 (31 December 2023: 193,784,080).
The Employee Benefit Trust ("EBT") started the year holding 1,562,685 ordinary
shares, disposed of 133,750 ordinary shares in respect of the exercise of
employee shares options, and therefore ended the period holding 1,428,935
ordinary shares. On 30 June, there were 10,141,218 shares under option (5.2%
of the total number of ordinary shares), of which 2,395,248 were vested and
capable of exercise.
The total number of ordinary shares in issue as at 30 June 2024 net of the EBT
holding was 192,355,145 (31 December 2023: 192,221,395), and the basic
weighted average number of ordinary shares in issue for H1 was 193,784,080 (H1
2023: 155,560,028).
As a result of the increased interest cost of the Pirtek acquisition debt, a
2.7% increase in the tax rate and a 25% increase in the average number of
shares in issue, Adjusted earnings per share decreased by 7% to 4.04p (H1
2023: 4.34p). Basic earnings per share based on statutory profit after tax
increased to 1.88p (H1 2023: (0.40)p as restated).
Financing and cash flow
A summary of the Group cash flow for the period is set out in the table below.
Unaudited Restated Unaudited Audited
30 June 2024 30 June 2023 31 December 2023
£'000 £'000 £'000
Adjusted EBITDA 17,761 12,272 30,101
Acquisition and reorganisation costs - (6,270) (6,159)
Working capital movements (4,977) (5,291) (61)
Cash generated from operations 12,784 711 23,881
Taxes paid (1,007) (605) (4,498)
Purchases of property, plant and equipment (592) (490) (986)
Purchase of software (670) (521) (1,350)
Purchase of IP (11) - (522)
Acquisition of subsidiaries net of cash - (200,602) (48,894)
Acquired debt repaid - - (136,747)
Funds raised via debt - 100,012 100,012
Funds raised via equity - 114,251 94,106
Bank loans received / (repaid) (3,500) - (13,000)
Interest Paid (3,548) - (5,374)
Lease payments (2,045) (1,002) (2,687)
Funds supplied (to)/received from EBT 115 (32) 192
Dividends paid - (1,433) (3,371)
Other net movements (55) (101) 859
Net cash movement 1,471 10,188 1,621
Net cash at beginning of period 12,278 10,935 10,935
Exchange differences on cash and cash equivalents (75) - (278)
Net cash at end of period 13,674 21,123 12,278
The Group generated cash from operating activities of £12.8m (H1 2023:
£7.0m), resulting in a cash conversion rate of 72% (H1 2023: 57%), excluding
the cost of the Pirtek acquisition and reorganisation costs in H1 2023.
Taxes paid increased as profits increased, and the Group moved to quarterly
advance payments. Purchases of property, plant, and equipment increased due to
the addition of the Pirtek DLO operations. The purchase of software represents
the capitalised element of expenditure on software development.
The H1 2023 acquisition cost, debt and equity fund raising all relate to the
Pirtek acquisition. During H1 2024, £3.5m of the term loan was repaid.
Interest paid represents the cost of servicing this debt.
Lease payments have increased as a result of the acquisition as Pirtek uses
lease finance to fund the mobile service vehicles used in its service centres.
The dividend payment in H1 2023 related to the final dividend for 2022. The
final dividend for 2023 was not paid until July 2024.
Overall, the business generated a net cash inflow during the period of £1.5m
(H1 2023: £10.2m). The overall closing position may be summarised as follows:
30 June 2024 31 December 2023 Change
£'000 £'000 £'000
Cash 13,674 12,278 1,396
Term loan (45,000) (50,000) 5,000
RCF (38,289) (36,908) (1,381)
Loan fee 823 749 74
Hire purchase debt (1,103) (837) (266)
Adjusted (net debt)/net cash (69,895) (74,719) 4,824
Other lease debt (9,660) (7,567) (2,093)
(Net Debt) / Net cash (79,555) (82,286) 2,731
The Group finished the period with cash of £13.7m (31 December
2023: £12.3m) and Adjusted net debt of £69.9m. Right of use assets totalled
£9.7m (31 December 2023: £7.6m).
The Group's Adjusted net debt, as used to test the bank covenants, represents
1.9x Adjusted EBITDA based on the consensus of current market expectations for
the full year 2024, in line with the medium-term strategic model outlined at
our Capital Markets Day in February 2024.
Dividend
The Board is pleased to declare an interim dividend of 1.1 pence per share (H1
2023: 1.0 pence per share). The interim dividend will be paid to those
shareholders on the register at the close of business on 4 October 2024 and
will be paid on 1 November 2024.
Andrew Mallows
Interim Chief Financial Officer
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2024
Unaudited *Restated unaudited Audited
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
Notes 2024 2023 2023
£'000 £'000 £'000
Revenue 69,800 51,875 121,265
Cost of sales (25,940) (22,640) (50,060)
Gross profit 43,860 29,235 71,205
Adjusted EBITDA 30,101
17,761 12,272
Depreciation (2,429) (1,448) (3,492)
Amortisation of software (569) (393) (925)
Amortisation of acquired intangibles (5,111) (4,028) (7,718)
Impairment loss (148) - (96)
Share-based payment expense (557) (411) (838)
Non-recurring items - (2,991) (6,159)
Total administrative expenses (34,913) (26,234) (60,332)
Operating profit 8,947 3,001 10,873
Foreign exchange loss (200) - (146)
Finance expense (3,848) (1,611) (5,711)
Profit before tax 4,899 1,390 5,016
Tax expense (1,281) (1,932) (1,979)
Profit attributable to equity holders of the Parent Company 3,618 (542) 3,037
Other comprehensive (expense)/income
Actuarial gains 26 - 63
Exchange differences on translation of foreign operations 75 (69) (131)
Total comprehensive income attributable to equity holders of the Parent 101 (69) (68)
Company
Total profit and other comprehensive income for the year attributable to 3,719 (611) 2,969
equity holders of the Parent Company
Earnings per share (p)
Basic 2 1.88 (0.40) 1.75
Diluted 2 1.86 (0.39) 1.73
*See note 1 for details
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 30 June 2024
Unaudited
30 June 2024 Audited
31 December
2023
£'000 £'000
Assets
Non-current assets
Intangible assets 300,183 305,328
Property, plant and equipment 4,512 4,418
Right-of-use assets 10,649 8,404
Contract acquisition costs 397 427
Trade and other receivables 459 641
Total non-current assets 316,200 319,218
Current assets
Inventories 7,226 7,062
Trade and other receivables 46,703 42,701
Contract acquisition costs 90 79
Current tax asset 77 1,104
Cash and cash equivalents 13,674 12,278
Total current assets 67,770 63,224
Total assets 383,970 382,442
Liabilities
Current liabilities
Trade and other payables 33,757 34,746
Loans and borrowings 9,177 9,251
Obligations under leases 2,857 2,617
Deferred income 1,710 1,318
Current tax liability 1,271 603
Total current liabilities 48,772 48,535
Non-current liabilities
Loans and borrowings 73,289 76,908
Obligations under leases 7,906 5,787
Deferred income 2,752 2,894
Deferred tax liability 32,788 33,925
Total non-current liabilities 116,735 119,514
Total liabilities 165,507 168,049
Total net assets 218,463 214,393
Issued capital and reserves attributable to owners of the Parent
Share capital 969 969
Share premium 131,131 131,131
Share-based payment reserve 2,469 1,936
Merger reserve 69,754 69,754
EBT reserve (2,565) (2,679)
Translation reserve 99 24
Retained earnings 16,606 13,258
Total equity attributable to equity holders 218,463 214,393
CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended 30 June 2024
Unaudited *Restated unaudited Audited
6 months ended 6 months Year
30 June ended ended
2024 30 June 31 December
2023 2023
£'000 £'000 £'000
Cash flows from operating activities
3,037
Profit for the period 3,618 (611)
Adjustments for: 1,066
Depreciation of property, plant and equipment 616 620
Depreciation of right-of-use assets 1,813 906 2,427
Amortisation of software 569 315 925
Amortisation of acquired intangibles 5,111 4,028 7,718
Non-recurring charges - - 786
Share-based payment expense 557 411 838
Gain on disposal of property, plant and equipment (5) - (54)
Defined benefit obligation current service costs 11 - -
Finance expense 3,848 1,611 5,711
Exchange differences on translation of foreign operations 186 69 76
Income tax expense 1,281 1,932 1,979
Operating cash flow before movements in working capital 17,605 9,281 24,509
Increase in trade and other receivables (3,711) (17,477) (3,767)
(Increase)/decrease in inventories (239) (5,282) 338
(Decrease)/increase in trade and other payables (1,026) 17,469 3,368
Cash generated from operations 12,629 3,990 24,448
Income taxes (paid)/received (1,007) (605) (4,498)
Net cash generated from operating activities 11,622 3,385 19,950
Cash flows from investing activities (1,183)
Purchases of property, plant and equipment (646) (490)
Purchase of software (670) (521) (1,350)
Proceeds from the sale of property, plant and equipment 54 - 251
Purchase of intellectual property (11) - (522)
Loans to franchisees (81) - (149)
Loans to franchisees repaid 181 134 412
Acquisition of subsidiary including costs, net of cash acquired - (63,707) (48,894)
Net cash used in investing activities (1,173) (64,584) (51,435)
Cash flows from financing activities 100,012
Bank loans - received 2,000 100,012
Bank loans - repaid (5,500) (49,222) (62,097)
Loan notes - repaid - (29,080) (29,155)
Preference shares - repaid - (58,593) (58,520)
Capital element of lease obligations repaid (1,754) (1,002) (2,362)
Interest paid - bank and other loan (3,548) (8) (5,374)
Interest paid - finance leases (291) (104) (325)
Proceed from issue of shares - 110,972 94,106
Proceeds from sale/(purchase) of shares by the Employee Benefit Trust 115 (32) 192
Dividends paid - (1,433) (3,371)
Net cash generated from/used in financing activities (8,978) 71,510 33,106
Net increase/decrease in cash and cash equivalents 1,471 10,311 1,621
Cash and cash equivalents at beginning of period 12,278 10,935 10,935
Exchange differences on cash and cash equivalents (75) (123) (278)
Cash and cash equivalents at end of period 13,674 21,123 12,278
*See note 1 for details
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2024
Share capital Share premium account Share-based payment reserve Merger reserve Translation reserve *Restated EBT reserve *Restated Retained earnings Total
Group £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2023 652 37,293 1,217 52,212 155 (3,007) 14,518 103,040
Correction of errors - - - - - 136 (492) (356)
*Restated At 1 January 2023 652 37,293 1,217 52,212 155 (2,871) 14,026 102,684
Profit for the period - - - - - - (611) (611)
Foreign exchange translation differences - - - - (108) - - (108)
Total comprehensive income - - - - (108) - (611) (719)
Contributions by and distributions to owners:
Shares issued 317 96,392 - 17,542 - - - 114,251
Share placing costs charged to share premium - (3,279) - - - - - (3,279)
Dividend paid - - - - - - (1,433) (1,433)
Contributions to Employee Benefit Trust - - - - - (33) - (33)
Share-based payment - - 337 - - - - 337
At 30 June 2023 969 130,406 1,554 69,754 47 (2,904) 11,982 211,808
Profit for the period - - - - - - 3,648 3,648
Other comprehensive income - - - - - - 63 63
Foreign exchange translation differences - - - - (23) - - (23)
Profit for the year and total comprehensive income - - - - (23) - 3,711 3,688
Contributions by and distributions to owners:
Shares issued - - - - - - - -
Share placing costs charged to share premium - 725 - - - - - 725
Dividend paid - - - - - - (1,938) (1,938)
Contributions to Employee Benefit Trust - - - - - 225 - 225
Share-based payment - - 382 - - - - 382
Tax on share-based payment expense - - - - - - (496) (496)
At 31 December 2023 969 131,131 1,936 69,754 24 (2,679) 13,258 214,393
Profit for the period - - - - - - 3,618 3,618
Other comprehensive income - - - - - - 26 26
Foreign exchange translation differences - - - - 75 - - 75
Profit for the year and total comprehensive income - - - - 75 - 3,644 3,719
Contributions by and distributions to owners:
Shares issued - - - - - - - -
Dividend paid - - - - - - - -
Contributions to Employee Benefit Trust - - - - - 114 - 114
Share-based payment - - 533 - - - - 533
Tax on share-based payment expense - - - - - - (296) (296)
At 30 June 2024 969 131,131 2,469 69,754 99 (2,565) 16,606 218,463
*See note 1 for details
Accounting policies
Basis of preparation
The consolidated financial statements for the six months ended 30 June 2024
are unaudited and were approved by the Directors on 16 September 2024. They do
not constitute statutory accounts as defined in section 434 of the Companies
Act 2006. The consolidated financial statements for the six months ended 30
June 2023 are also unaudited. The financial statements for the year ended 31
December 2023 were prepared in accordance with IFRS 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 UK-adopted International Financial Reporting Standards
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
2023.
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 2024
1. Restatements
During the prior year a number of errors were identified that have given rise
to restatement of the June 2023 accounts which were set out in Note 1 of the
2023 Annual Report & Accounts.
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 are calculated by dividing the profit attributable to ordinary equity
holders of the Parent Company by the weighted average number of ordinary
shares outstanding during the period plus the weighted average number of
ordinary shares that would have been issued on the conversion of all dilutive
share options 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 2024 30 June 2023 31 December 2023
£'000 £'000 £'000
Profit attributable to owners of the Parent Company 3,618 (611) 3,037
Non-recurring costs - 2,991 6,159
Amortisation of acquired intangibles 5,111 4,027 7,718
Share-based payment expense 557 411 838
Tax on adjusting items (1,512) (145) (3,174)
Adjusted profit attributable to owners of the Parent Company 7,774 6,673 14,578
Number Number Number
Basic weighted average number of shares 192,290,101 153,781,948 173,090,691
Dilutive effect of share options 2,268,174 2,452,633 2,241,161
Diluted weighted average number of shares 194,558,275 156,234,581 175,331,852
Pence Pence Pence
Basic earnings per share 1.88 (0.40) 1.75
Diluted earnings per share 1.86 (0.39) 1.73
Adjusted earnings per share 4.04 4.34 8.42
Adjusted diluted earnings per share 4.00 4.27 8.31
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/investor-information/reports-presentations/#interim-reports
(https://protect.checkpoint.com/v2/___https:/www.franchisebrands.co.uk/investor-information/reports-presentations/___.bXQtcHJvZC1jcC1ldXcyLTE6bmV4dDE1OmM6bzplMDQyODY4ZTZkZThkM2NiZjVkZjM0NjdlNjc5YWQ0Njo2OmEwNGE6ZWFkZWVlY2EwNTdlMWUyODQ3YjBkNDk0MDNjOTU4OTJlZjcwZDQ1MDVhNDBlOWNjNGU4YzQyN2M0MWNjOGYyZjpwOkY6Tg#interim-reports)
.
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