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Franchise Brands to come out of pandemic on front foot as trading recovers

Snapshot

  • Comprises Metro Rod, ChipsAway, Barking Mad and Ovenclean.
  • Looking for more acquisitions
  • Recovering after first lockdown challenges
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Quick facts: Franchise Brands PLC

Price: 99.6 GBX

AIM:FRAN
Market: AIM
Market Cap: £95.38 m
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What it does

Franchise Brands PLC (LON:FRAN) has a combined network of over 450 franchisees across five franchise brands.

The AIM-listed firm has a business-to-business division, comprised of Metro Rod, Metro Plumb and Willow Pumps, and a business-to-consumer division with ChipsAway, Ovenclean and Barking Mad.

It focuses  on established brands which can benefit from its shared support services, specialist sector expertise, management experience and group resources.

 

How it is doing

The firm is confident of meeting current market expectations for its current year thanks to a steady recovery in trading following the first UK lockdown.

In the three months to September 30, sales grew by an average of 8% per month from June onwards as the UK economy emerged from lockdown, and by September system sales were 9% higher than a year ago.

As a result, the division’s sales in the third quarter were down only 6% year-on-year, compared to a 30% decline for the division at the height of lockdown in April and May.

Revenues at Willow Pumps, which was acquired in October 2019, and Kemac grew by 48% in in the third quarter compared to the second quarter, but are still 20% down on the first. However, third-quarter revenues have been weighted towards higher-margin service work resulting in gross profit in the third quarter being down by only 10% on the first quarter.

Meanwhile, the firm’s B2C division saw different brands recover at different speeds, driven by new franchisee recruitment. Its ChipsAway and Ovenclean brands, which generated 89% of the division’s income in 2019, were trading at pre-coronavirus levels, while the group’s smallest network, Barking Mad, was “well below” pre-pandemic levels given a heavy dependency on the foreign holiday market.

 

What the boss says: Stephen Hemsley, executive chairman

"I am very pleased that the group saw a return to more normal levels of trading during [the third quarter]. Our key priority remains the safety of our team members, particularly our engineers, customers and the public whilst continuing to provide the best possible service we can in a challenging environment.”

"The resilience and resourcefulness of our people and franchisees is allowing us to navigate through these difficult times.  The strength of the group provides a platform for organic and acquisitive growth as the economic environment recovers from the pandemic. I remain optimistic for the future growth and prosperity of Franchise Brands."

 

Inflexion points

  • B2B businesses Metro Rod, Metro Plumb and Willows Pumps deemed essential services
  • Addition of 21 new franchisees in the B2C division
  • Looking for add-on acquisitions 

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