Franchise Brands Regulatory News (FRAN)

18 April 2023

Franchise Brands plc

("Franchise Brands" or the "Group")

AGM Statement and Q1 Trading Update

Strong momentum continued in Q1 2023

Announcement of transformational acquisition of Pirtek Europe

Franchise Brands plc (AIM: FRAN), an international multi-brand franchise business, will hold its Annual General Meeting today at 11.00am, at which Stephen Hemsley, Executive Chairman, will provide the following update:

"As reported in our annual results, the excellent momentum in the B2B Division that was a feature of 2022 has continued. Metro Rod experienced strong growth in system sales, achieving record levels in Q1. The integration of Filta UK within this division continues with the combined objectives of improving customer service and reducing costs in the medium term. The defensive, mainly essential services provided by this division have proved resilient despite the current macro-economic uncertainties.

"Filta in North America has continued to perform robustly in Q1 with franchise and equipment sales driving growth. Revenue from the sale of used cooking oil for biodiesel production was in line with expectations, with increased volumes compensating for the anticipated lower price of used oil. The outlook for used oil revenues remains unchanged. The FiltaMax expansion strategy is gathering momentum, underpinning our confidence in the continued growth of Filta in North America.

"As expected, franchisee recruitment in the B2C division has improved in Q1 compared to Q4 2022. ChipsAway, the largest brand in the division, is now back to the same level as achieved in Q1 2022. The level of attrition has also reduced to below the five-year average. However, as anticipated, the loss of franchisees in 2022 and increased overheads generally have impacted income in Q1 2023. 

"On 3 April 2023, Franchise Brands announced the proposed transformational acquisition of Hydraulic Authority I Limited, the owner of Pirtek Europe, the leading European provider of on-site hydraulic hose replacement and associated services, for a consideration of £200 million, plus a working capital adjustment of £12.2m. Subject to shareholder approval at the General Meeting on 20 April, the acquisition is expected to complete on 21 April.

"Pirtek Europe provides a mission-critical, emergency response service to a diverse portfolio of customers, principally via a network of 70 franchisees. The business has 213 service centres and 838 mobile service vehicles in eight countries - the UK, Republic of Ireland, Germany, France, Austria, Belgium, Sweden and the Netherlands. Pirtek Europe has a royalty-free, indefinite Master Franchise Licence Agreement in respect of 16 countries in Europe, so has significant opportunities for expansion.

"The acquisition of Pirtek Europe, which will expand the Group's operations into ten countries, will significantly advance the Board's ambition of creating a market-leading international B2B multi-brand franchisor that generates its income equally from the UK, North America and continental Europe. It also provides a low-cost platform from which to launch the Group's current brands into new markets and the opportunity to further leverage central services efficiently, principally in the areas of technology, marketing and finance. The acquisition is expected to be immediately earnings accretive.

"In conclusion, the existing Group has had a good start to 2023. The acquisition of Pirtek Europe will further transform the Group by diversifying the range of emergency response services provided and our geographical reach and customer base. This will provide greater resilience to earnings and provide a platform for the acceleration in the growth of our business. We, therefore, look forward to the rest of 2023 and beyond with great confidence."

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About Franchise Brands plc

Franchise Brands is an international, multi-brand franchisor focused on building market-leading businesses primarily via a franchise model. The Group currently has a combined network of 586 franchisees across six principal franchise brands in the UK, North America and Europe.

Franchise Brands' focus is on B2B van-based reactive and planned services. The Company owns several market-leading brands with a long trading history which benefit from the Group's central support services, in particular technology, marketing, management experience and other group resources. At the centre of Franchise Brands' business building strategy is helping its franchisees grow their businesses.

Franchise Brands employs 415 people from 5 principal offices in the UK, Orlando, Florida and the Netherlands.

For further information, visit www.franchisebrands.co.uk