Franchise Brands Regulatory News (FRAN)

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). With the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.

12 January 2021

FRANCHISE BRANDS PLC

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

Trading Update and Notice of Full Year Results

The Board of Franchise Brands plc (AIM: FRAN), a multi-brand franchise business, is pleased to provide the following trading update for the year ended 31 December 2020.

The Board expects the Group's revenue, adjusted EBITDA, and adjusted EPS for the year ended 31 December 2020 to be ahead of consensus market expectations*.

This resilient performance has been driven by strong trading in the first quarter, early and decisive action taken at the start of the Spring lockdown to reduce costs, and a strong recovery in the second half of the year across most of the businesses. Although we start 2021 with further restrictions that will impact our business, we are now well practiced at how to mitigate the impact by protecting our people, controlling costs and continuing to serve our customers where it is safe to do so.

Our B2B division, which comprises Metro Rod, Metro Plumb, and Willow Pumps, provides a "Water In. Waste Out" range of drainage, plumbing and pumps services to commercial and domestic customers across the whole of the UK.  Most of these services have been designated by the Government as essential and continued to operate throughout the lockdowns. At the height of the Spring lockdown, the B2B division saw a year-on-year decrease in sales of up to 30%, but these businesses recovered strongly from June onwards as many of our customers resumed normal trading.

Our B2C division demonstrated the robust nature of our franchise business model that is primarily based on franchisees paying a fixed monthly fee (rather than a turnover-related fee as in our B2B franchise businesses). Although closed during the Spring lockdown, ChipsAway and Ovenclean, which in aggregate generated nearly 90 per cent. of the divisional income in 2019, quickly returned to pre-COVID-19 levels of trading following the end of this period.

Considering the background, franchise recruitment in the B2C division was robust in 2020 and accelerated in the second half of the year with 31 new franchisees joining (H2 2019: 27), resulting in 58 new recruits for the year (2019: 61). However, given the trading difficulties experienced by some B2C franchisees, mainly in the Barking Mad network, there has been a reduction in the total number of franchisees in the B2C network at the year end to 386 from 404 at the end of 2019.

The cash generative nature of the Group's businesses, combined with the proceeds from the April share placing, meant the Group finished the year with gross cash of £13.2m (2019: £2.9m). The Group has £7m of unutilised debt facilities, giving it over £20m of cash and available facilities at 31 December 2020 (2019: £5.7m). This balance sheet strength and high level of liquidity puts the Group in a strong position to support its franchisees, invest in the business, support our dividend policy, and take advantage of acquisition opportunities.

Notice of results

The final results for the year ended 31 December 2020 are expected to be announced on 4 March 2021 and the Board looks forward to updating shareholders with further details at that time.

Stephen Hemsley, Executive Chairman of Franchise Brands, commented: 

"Against the backdrop of a challenging year, I am very pleased by what has been achieved by our franchisees and team members, but I would like to particularly acknowledge and thank all our engineers who continued to serve our customers throughout the lockdowns. The entire team has continued to show their dedication, determination and resourcefulness and are a credit to our business.

"Although we start 2021 with further restrictions that will impact our business, we are now well practiced at how to mitigate the impact of these by protecting our people, controlling costs and continuing to serve our customers where it is safe to do so. These restrictions are temporary, and we are focussed on preparing the business to take advantage of the recovery when they are lifted. Therefore, we continue to progress all our development projects to allow us to recover quickly and realise the considerable potential of the business.

"I believe that we have the people, resources, and strategy to thrive in the post-pandemic environment and look forward to the future with confidence."

 *Consensus market expectations for the financial year ended 31 December 2020 are as follows:

· Revenue £48.6m

· Adjusted EBITDA £6.1m

· Adjusted EPS 3.87p

· Dividend 0.95p

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About Franchise Brands plc

Franchise Brands is focused on building market-leading businesses in selected customer segments using primarily a franchise model. The Group currently has a combined network of over 425 franchisees across five principal franchise brands. Our focus is on established brands which can benefit from our shared support services, specialist sector expertise, management experience and group resources.

The Group is organised into a B2B division comprised of Metro Rod, Metro Plumb, and Willow Pumps, and a B2C division that incorporates ChipsAway, Ovenclean and Barking Mad. This divisional organisation of our brands is designed to provide a greater focus and structure to support the strategic development of our B2B and B2C brands.

Each of our brands are leaders in their respective markets and each brand has a long trading history. The combined trading history of all the Group's brands is over 135 years.

Franchise Brands plc employs some 250 people across three principal locations in Macclesfield, Kidderminster and Aylesford.

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