Multi-brand franchiser Franchise Brands (FRAN:AIM) reported full year revenues up 24% to £44m, above analysts’ expectations and giving the shares a 4% boost to 130.4p.

Executive chairman Stephen Hemsley commented, ‘trading in 2020 has started well, with job intake at Metro Rod, Metro Plumb and Willow Pumps up on the same period in 2019 and a strong start to the year for franchisee recruitment in the B2C division.’

WILLOW PUMPS UP GROWTH

The acquisition of Willow Pumps in October 2019 contributed revenues of £3.8m and therefore underlying revenue growth was 13%.

Earnings before interest, tax, depreciation and amortisation (EBITDA) grew 29% to £5.2m, driven by revenue growth and relatively flat overheads which only grew 2%.

Willow Pumps contributed EBITDA of £0.5m and saw ‘particularly strong trading at the end of the year’ exceeding expectations at the time of the acquisition.

An established business, Willow Pumps gives Franchise Brands the opportunity to enter a specialist market with scale and brings the existing management team into the group.

The plan is to introduce the Metro Rod and Metro Plumb franchisees to the substantial growth opportunities in the pump sector.

The company has decided to franchise the Metro Plumb business separately from the Metro Rod business to enable the franchisees to expand the customer base more actively.

Ultimately there is an opportunity to develop a national plumbing service for commercial customers.

BUSINESS TO CONSUMER (B2C)

The three consumer brands, Chips Away, Ovenclean and Barking Mad have been formed into a single division in order to maximize overhead and operational efficiencies. Strong franchise recruitment at car repair brand Chips Away saw net franchise growth across the division against a reduction in 2018.

One of the attractions of franchises is the capital light nature of the business model. This was demonstrated by the company converting 90% of EBITDA into cash compared with 79% in 2018.

The dividend was increased 42% to 0.95p for the year, covered 4.6 times by adjusted after-tax profit.

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Issue Date: 05 Mar 2020