Man working hydraulic pump
Franchise Brands doubled its annual profits / Image source: Adobe
  • Profit at top end of expectations
  • Business has doubled in size
  • Medium term goal to double again

Despite delivering full year profit at the top end of market expectations and doubling the size of the business, investors gave multi-brand franchise operator Franchise Brands (FRAN:AIM) the thumbs down with the shares dropping 11% to 152.6p.

While all the group’s key divisions achieved record results in 2023, management noted some second half softening in demand in the construction and hire fleet customer sectors which has continued into 2024.

The company also highlighted a softening in used oil prices in the US and a change in accounting treatment of sale of franchise territories income, both of which are expected to impact profit in the current financial year to 31 December 2024.

The final piece of news giving investors pause for thought was chief financial officer Mark Fryer stepping down to be replaced on an interim basis by Andrew Mallows.

Shares in Franchise Brands are down 14% over the last year compared with a 9% gain in the FTSE-All Share index.


It was a busy year for Franchise Brands, which doubled in size following the £210.8 million takeover of hydraulic hose franchiser Pirtek in April 2023, a purchase financed by £100 million of debt and £114.3 million of new equity.

The enlarged business delivered full year adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) of £30.1 million, at the top end of market forecasts, and almost double the prior year’s £15.3 million.

Adjusted pre-tax profit increased by 55% to £19.7 million as financial expenses jumped from £200,000 to £5.7 million, reflecting the increase in debt.

An increase in share count following the equity raise reduced the increase in EPS (earnings per share) to 1% to 8.42p. The company ended the period with net debt of £74.7 million, equivalent to 2.48 times adjusted EBITDA.

Franchise Brands remains very cash generative, and the business converted 100% of adjusted EBITDA into operating profit.


The company confirmed its medium-term strategic goals, as laid out at an investor day on 20 February, which include doubling system sales to £600 million and achieving a doubling of adjusted EBITDA to £60 million by 2027. The firm also anticipates getting back to a net cash position over the same timeframe.

Executive Chairman Stephen Hemsley commented: ‘We see significant growth potential for our principal franchise brands of Pirtek, Metro Rod and Filta, which have small shares of large markets, as we extend their range of services, geographical penetration and cross-selling to our larger customer base.

‘This growth potential is supported by our Maximum Potential Model which we use to estimate the potential size of our markets.’


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Issue Date: 20 Jun 2024