Franchise Brands Regulatory News (FRAN)

26 October 2021

FRANCHISE BRANDS PLC

("Franchise Brands", the "Group" or the "Company")

Q3 Trading Update

Record Metro Rod system sales, up 32%, leading to strong Q3 profits

Board confident of meeting consensus market expectations for 2021

Franchise Brands plc (AIM: FRAN), a multi-brand franchise business, provides the following trading update for the three months to 30 September 2021 ("Q3").

The Group has continued to perform strongly during Q3, with adjusted EBITDA for the quarter and year-to-date reaching a record level. This strong performance has been driven by the outstanding growth of our Metro Rod franchisees, who have increased system sales for the quarter by 32% year-on-year. Willow Pumps has been slower to recover from the reduced Covid-related volumes of 2020, particularly in the supply and installation part of the business which is reliant on the house-building sector. The B2C division continues to perform well with 52 new recruits year-to-date, which is ahead of 2020 and in line with 2019. The Board is therefore confident of meeting current consensus market expectations* for the year to 31 December 2021 (which had been upgraded in July) and reconfirms the Group's strategic financial target of run-rate turnover of £100m and adjusted EBITDA of £15m by the end of 2023.

The digital transformation at Metro Rod and Metro Plumb continues at pace. Our integrated technology platform, the core elements of which are the "Vision" works management system and the "Connect" customer portal, is being optimised with a series of upgrades to further enhance functionality. The next stage is to develop an improved engineer interface and scheduling capability to further improve productivity, which is important in the current tight labour market. It is our ambition to develop a common technology platform across all our businesses that will enhance the end-to-end customer experience and improve the efficiency and productivity of our business and those of our customers and franchisees.

We continue to seek opportunities to utilise our considerable balance sheet strength to complement our organic growth through earnings-enhancing acquisitions that will either expand or enhance our B2B division, leverage our existing B2C infrastructure, or identify a franchise business of scale that would create a third division of the Group.

Stephen Hemsley, Executive Chairman, commented:

"I am pleased with our Q3 performance which demonstrates the strength of our organic strategy and look forward to Q4 and the full year result with confidence. The progress we are making with our digital platform is already beginning to transform our existing businesses and will provide a scaleable technology platform to support the accelerated development of businesses we will acquire in the future. We will therefore continue to invest significant resources in this area.

"We continue to review a number of acquisition opportunities but remain patient and will only move forward where we are confident that an opportunity will provide a good return for our shareholders, in a reasonable timescale, and with an acceptable risk."

*Consensus market expectations for the financial year ending 31 December 2021 are currently as follows:

·Revenue £58.2m

·Adjusted EBITDA £8.4m

·Adjusted EPS 5.43p

·Dividend 1.50p

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