Franchise Brands (FRAN) H2 2023 earnings summary

Executive summary

• Achieved record results in 2023, with system sales up 88% to £350.1m and adjusted EBITDA up 97% to £30.1m, driven by the acquisition of Pirtek and strong organic growth in key divisions.

• Integration of Pirtek and Filta progressing well, with focus on operational synergies, digital transformation, and debt repayment.

• Resilient demand for essential services, though some softening in construction and hire-fleet sectors in H2 2023, continuing into 2024.

Financial highlights

• System sales: £350.1m (+88% year-over-year); statutory revenue: £121.3m (+74%).

• Adjusted EBITDA: £30.1m (+97%); adjusted profit before tax: £19.7m (+55%).

• Adjusted earnings per share: 8.42p (+1%); dividend per share: 2.20p (+10%).

• Net debt: £74.7m (2.48x adjusted EBITDA); cash at year-end: £12.3m.

• Adjusted profit after tax: £14.6m (+43%); statutory profit after tax: £3.0m (-63%, due to acquisition costs and non-recurring items).

Outlook and guidance

• Short-term focus on integrating acquisitions, driving operational synergies, and repaying debt.

• Expectation of net cash position by 2027; no further large acquisitions planned until then.

• Medium-term ambition for system sales of c£600m and adjusted EBITDA of c£60m by 2027.

• Some headwinds expected in 2024 from lower used oil prices in the US and changes in revenue recognition for franchise territory sales.