Franchise Brands shares drop on 2024 outlook, CFO exit

Shares in Franchise Brands dropped sharply on Thursday despite the B2B van-based services group meeting expectations with its full-year results, as the company gave a cautious outlook for 2024 and announced the departure of its chief financial officer.

The company, which has a network of more than 625 franchisees across seven franchise brands in ten countries, said all key divisions achieved record results in 2023, with group adjusted EBITDA rising 97% to £30.1m, at the top end of market expectations, as was guided to two weeks ago.

System sales were up 88% at £350.1m, while statutory revenue jumped 74% to £121.3m.

The cash conversion rate increased to 100% from 90% in 2022, due to the strong cashflow performance of its franchise businesses, while the final dividend was lifted to 1.2p per share from 1.1p previously, leading to a 10% increase in the total dividend to 2.2p.

However, the company revealed that the softening in demand in the construction and hire-fleet customer sectors that it experienced in the second half has continued into the current financial year.

Meanwhile, falling prices for used oil in the US also impacted profit growth in 2023 and continued weakness in pricing – though now stabilised – will hit income this year.

The company also said that a change in the accounting treatment of sale of franchise territories income may also impact profit in 2024, as it shifts from taking revenue upfront to spreading it over the life of the franchise agreement.

In a separate statement, Franchise Brands said its CFO Mark Fryer is stepping down with immediate effect after just 10 months with the company, with commercial director Andrew Mallows stepping in as interim replacement. The company did not give a reason for Fryer's exit.

The stock was down 10.8% at 153p by 0919 BST.