Shares in multi-brand franchise business Franchised Brands (FRAN:AIM) jumped 7.4% to 109p as it outlined new growth targets, after reporting resilient full year revenues up 12% to £49.3 million and adjusted pre-tax profit up 19% to £4.8 million.
NEW STRATEGIC TARGET
Franchised Brands runs both business-to-business (B2B) and business-to-consumer (B2C) brands, making income from charging fees to franchisees. Brands include Metro Rod and Metro Plumb, which serve businesses, and ChipsAway, Ovenclean and Barking Mad which serve consumers.
Since coming to the market in 2016 the group has grown EBITDA (earnings before interest, taxes, depreciation, and amortisation) at a compound annual growth rate (CAGR) of 47% per year and dividends by 59% per year.
Today the company set a new three-year target to reach revenues of £100 million and EBITDA of £15 million by 2023, both through organic growth and selective acquisitions. This represents a doubling of revenues and a 127% increase in profit from current levels.
Executive chairman Stephen Hemsley told Shares that the bulk of the growth, up to around £12 million, will be achieved organically with the rest by acquisition.
In addition, the company is on the hunt for a new franchise to add a third division which would probably be a B2B franchise ‘of scale’ and require shareholder support.
After raising £14 million of new funds from shareholders in April during the first lockdown, the company ended the year with available liquidity of £20 million.
For the year ended 31 December 2020 the company generated cash from operations of £6 million, up 27% and representing 90% of adjusted EBITDA.
Improved trading in the second half and healthy cash generation led the board to propose a final dividend of 0.8 pence per share, taking the total dividend to 1.1 pence per share, an increase of 16% and covered 2.8 times by statutory profit.