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Franchise Brands raises £14mln as plumbing businesses see continuing demand

The firm said it expected its B2B division, which includes Metro Rod, Metro Plumb and Willow Pumps, to continue to trade profitably during the coronavirus lockdown

Franchise Brands PLC - Franchise Brands plumbing businesses designated as ‘essential’ by UK government, sees continuing demand

Franchise Brand PLC (LON:FRAN) said its drain specialist businesses - Metro Rod, Metro Plumb and Willow Pumps - have seen 'continuing demand” for a majority of their services, having been designated as essential under the UK government’s pandemic rules, and the group also revealed it has raised £14mln via a share placing.

In a trading update released after the close on Monday, the franchise business said it expected the B2B division, which includes Metro Rod, Metro Plumb and Willow, to continue to trade profitably during the coronavirus lockdown, adding that in the first quarter of the year, underlying earnings (EBITDA) for the division were 42% higher year-on-year, while growth in Metro Rod system sales accelerated to 19% from 14%.

READ: Franchise Brands urges shareholders to take share alternative for dividend

Meanwhile, the company’s B2C division, which includes its brands ChipsAway, Ovenclean and Barking Mad, was 5% ahead of the prior year in the first quarter, although the company said it had “significantly reduced or eliminate” franchise fees as the pandemic impacted customer demand for the franchisee's products from early March.

Franchise Brands added that it has taken a number of actions to preserve cash and strengthen liquidity, including staff furloughs and salary cuts for its board and senior management.

Looking ahead, the company said its first-quarter EBITDA was up 27% on the prior year, and that this added to its cost-saving measures meant it should be able to generate a positive but reduced adjusted EBITDA through the period, with a “strong recovery” anticipated in the key B2B division as business premises were re-occupied.

The B2C arm is expected to mount a slower recovery, with the firm estimating a full quarter for activity levels and income to be fully restored.

Share placing

Franchise Brands also said it carried out a placing at 90p a share that raised £14mln with directors and senior management putting up £2.07mln. Executive chairman Stephen Hemsley subscribed for £1.35mln worth of shares to take his stake to 23.2%.

As well as strengthening the balance sheet, Franchise Brands said the placing will help position it to take advantage of “earnings-enhancing external growth opportunities”, saying it had “considerable interest” in acquisitions to expand the range of services offered by Metro Rod, Metro Plumb and Willow Pumps.

"The group had strong momentum ahead of the [coronavirus] crisis, with Q1 trading showing significant growth on the prior year and a continuation of the accelerating rate of sales growth in its B2B division in particular.

"We have taken all the necessary actions to enable us to trade through this current uncertain period profitably, albeit at a significantly lower level”, Hemsley said in a statement.

The company's shares rose 4% to 96p on Tuesday.

--Adds share price, placing details--

Quick facts: Franchise Brands PLC

Price: 102.5 GBX

AIM:FRAN
Market: AIM
Market Cap: £98.15 m
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