- Record first half trading boosted by transformational Filta acquisition
- Full year expectations upped to top end of market forecast
- Dividend increased by 50%
International multi-brand franchise business Franchise Brands (FRAN:AIM) generated strong first-half revenue and profit growth through June, prompting management to upgrade full-year expectations to the top end of market expectations.
Group revenues increased 60% to £44.5 million while adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) jumped 74% to £7.3 million. Adjusted earnings per share increased by 51% to 4.07p.
For the full year to 31 December 2022 analysts are forecasting revenues to grow 58% to £91.2 million and EBITDA of £14 million.
The company increased the dividend by 50% to 0.9p per share in line with the growth in earnings. Investors welcomed the record first half performance by pushing the shares up 4% to 150p.
TRANSFORMATIONAL DEAL
Growth was driven by the transformational all-share acquisition of fryer services franchise company Filta Group in February 2022.
Filta contributed revenues of £8.8 million and adjusted EBITDA of £2 million. Excluding the Filta and Azure acquisitions, underlying adjusted EBITDA grew 24% to £5.9 million on revenues which were 27% higher, year-on-year.
Increased scale and good operational cost control generated operational leverage benefits which saw the adjusted EBITDA margin increase by 1.6% to 16.3%.
Following the acquisition, the business-to-business Metro-Rod franchise and Filta International generate two thirds of adjusted EBITDA.
STRONGER SECOND HALF
Executive chairman Stephen Hemsley commented: ‘The Group has had a highly productive and successful first half, with record organic growth primarily driven by Metro Rod and the transformational acquisition of Filta bringing highly complementary services, an international footprint and considerably enhanced scale.’
‘In the near term, we are focused on integration to capitalise on the opportunities the acquisition presents and we expect continued momentum in the traditionally stronger second half of the year to enable us to deliver a full year performance at the top end of market expectations.’
EXPERT VIEW
Allenby Capital said the addition of Filta to the Franchise Brands portfolio is a significantly positive move and is ‘transformational for the business,’ from UK-only into one with international scale. It also bolsters the management team with expertise in developing multiple markets, such as North America and Europe on top of its UK home patch.
Having raised its EBITDA forecast to the top of the range (£14.3 million) after the Filta acquisition, Allenby said it remained comfortable with current projections and anticipated ‘another record full year from Franchise Brands and a continuation of the exciting and dynamic growth achieved to date’.
