Franchise Brands flags steady first-half performance

Franchise Brands reported a steady performance in a trading update on Thursday, confirming that it was on track to meet market expectations for 2024.

The AIM-traded firm, which was holding its annual general meeting, emphasised resilient demand for the group's essential reactive services, supporting both profitability and cash flow, crucial for servicing and reducing the debt from the Pirtek Europe acquisition.

In the first half, system sales surged by 41% to £206m, up from £146m in the same period last year.

On a like-for-like basis, core franchise brands Pirtek, Metro Rod/Metro Plumb, and Filta saw a 6% increase in sales in local currency, excluding used oil sales.

Despite a 28% drop in the average price of used cooking oil impacting Filta International's income, a 15% increase in volume partially offset that decline.

The ‘FiltaMax’ strategic growth initiatives, including new bulk virgin oil sales and an eco-friendly kitchen cleaning service, were designed by the company to mitigate the impact of used oil sales in the future.

Franchise Brands said it continued to generate substantial cash flow, noting that by the end of the first half, adjusted net debt was expected to be below £70m, aligning with the strategic model presented at the capital markets day in February.

That debt level would represent a multiple of less than two times the adjusted net debt-to-adjusted EBITDA.

The company's immediate operational focus was on integrating its various businesses and repaying the Pirtek Europe acquisition debt.

A key part of the strategy involved migrating to a common IT platform, centrally managed, which was expected to enhance operational efficiency and support future margin expansion.

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

“The board confirms that the Group is trading within the range of current market expectations for 2024 of adjusted EBITDA of £35.7m to £37.2m.”

Hemsley said the company would provide a further update to the market in its half-year financial report in September.

At 0918 BST, shares in Franchise Brands were up 2.17% at 165p.

Reporting by Josh White for Sharecast.com.