Franchise Brands Plc · LSE:FRAN
Franchise Brands — Investor Presentation (2023)
36 slides from Franchise Brands's investor presentation, 2023
Slide 1: Autumn Investor Presentation 2023
B FRANCHISE BRANDS a, a ice international. business Autumn Investor Presentation 2023 Stephen Hemsley, Executive Chairman / Mark Fryer, Chief Financial Officer
Slide 2: Presenters
Presenters Stephen Hemsley Executive Chairman Stephen co-founded Franchise Brands in 2008 and has led the development of the business, including the IPO and external growth. A Chartered Accountant by training, he spent nearly ten years with 3i as Investment Director. He joined Domino's Pizza as Fina
Slide 3: The Group: at a glance
The Group: at a glance Se res WHO WE ARE Multi-brand international franchisor, focused on B2B van- based services. Principal brands: Metro Rod, Filta, Pirtek. Provider of essential services. Presence in 10 countries across UK, North America and Europe. Q FOCUS Focused on building market-leading busi
Slide 4: The Group
The Group B2B Pirtek2 Filta International Adjusted EBITDA! £6.2m Total franchisees ° 159 Adjusted EBITDA! Total franchisees ° Adjusted EBITDA 2023! Total Eu £10.6m 81 £12.7m/ 69 METR@ ROD WILLQW PUMPS £16.9m filta Commercial drainage Pump design, installation 42 franchisees, >50 depots and servicing
Slide 5: Investment Rationale
Investment Rationale 3 FRANCHISE BRANDS * Highly resilient with seven market leading franchise brands across 10 countries with c650 franchisees, the vast majority in B2B. * Long established brands with a successful trading history through economic cycles. * Provider of essential services — a defensi
Slide 6: Strategic developments
Strategic developments Acquisition of Pirtek Europe, the leading European provider of on-site hydraulic hose replacement and associated services which operates in eight countries. Revenues largely derived through franchising. On 21 April the Group completed the acquisition of Hydraulic Authority | L
Slide 7: Pirtek Europe
Pirtek Europe * Established provider of on-site hydraulic hose replacement and associated services. * Operates via 217 service centres and 843 mobile service units (“MSUs"). * Revenues primarily derived from franchising: - UK, Germany & Austria, Benelux and ROI mainly operated by a total of 69 franc
Slide 8: Pirtek's value-added service offering to diverse customers
Pirtek’s value-added service offering to diverse customers Typically, a hydraulic hose will fail when equipment is in use and needs replacing on site. Pirtek targets a one-hour response time, 24/7/365. Demand for time-sensitive service solutions key in sectors with high labour costs, well evolved cu
Slide 9: ICON
ICON 0 O@ INCREASE CAPACITY, CAPABILITY AND FRANCHISEE PERFORMANCE Increase recruitment and retention of Mobile Service Technicians (MSTs), MSUs and service centres and provide higher value services. Optimise territory utilisation and franchisee performance. GROW SYSTEM SALES Significant opportunity
Slide 10: The Group's business building strategy
The Group’s business building strategy Our business-building strategy has five engines of growth. OQ oOoOS EXPANDING AND DEVELOPING OUR SERVICES Widen and deepen our range of services to increase system sales, and drive customer acquisition and retention. Low market share in all key growth businesse
Slide 11: Group financials
Group financials Statutory revenue (£m) Adjusted EBITDA (£m) CAGR 35% 160.3 CAGR 45% ” 29.3 il 8 15.3 57.7 121 440 49.9 8.5 35.5 H = | 4.0 5.2 6.6 | | 2018 2019 2020 2021 2022 H12023A 2023E* 2018 2019 2020 2021 2022 H12023A 2023E* Adjusted earnings per share (p) Dividend per share (p) CAGR 22% 8.38
Slide 12: Summary of group results
Summary of group results H12023" 12022" Change ie System sales, main driver of MSF income and DLO £000 £000 £000 i” margin, increased by 81% to £146.0m System Sales 146,060 80,642 65,418 81% Administration expenses up by 80% to £16.8m partly Statutory revenue 69,751 44,508 25,243 57% as a result of
Slide 13: Debt structure
Debt structure Expecting to fully repay acquisition ESTIMATED NET DEBT TO ADJUSTED EBITDA leverage within 5 years whilst > AT 31 DECEMBER continuing to grow organically DEBT STRUCTURE RCF of £55m RCF Tenor of 4 years plus 1 year optional extension Amortising term loan of £55m (Quarterly repayments o
Slide 14: Capital allocation
Capital allocation 8 Strategic focus is integrating Pirtek into the Group, promoting operational synergies and repaying acquisition debt. Capital allocation decisions will balance debt reduction, a progressive dividend policy and organic investment: * The deleveraging profile is ahead of schedule an
Slide 15: Corporate Governance
Corporate Governance Board and management changes effective 2 October im 14 The Group is evolving its board and management structure and introducing two-tier organisation: plc and management board ¢ PLC board being streamlined to five directors: Executive Chairman and CFO, one non-independent NED an
Slide 16: Investment rationale
Investment rationale 15 Highly resilient economically with seven market leading brands across 10 countries with c650 franchisees the vast majority in B2B. Provider of essential services — a defensive play. Long established brands with a successful trading history through economic cycles. Small marke
Slide 17: Appendix
Slide 18: The Group's franchise systems
The Group’s franchise systems as at 30 June 2023 __ fs Network size New franchisees Franchisees leaving Net new Network size 31 December, recruited the system franchisees 30 June 2022 in 1H 2023 in H1 2023 in 1H 2023 2023 +) ° =) Metro Rod 42 > - - 42 Metro Plumb* 3 3 () 2 15 B2c 349 24 (34) (10) 33
Slide 19: Pirtek operating model
Pirtek operating model (S Pa FRANCHISED MARKETS FRANCHISE LICENSE AGREEMENT * Strong, proven franchise model * Master agreement between Pirtek Australia and Pirtek * Management Service Fees (MSF) Europe. ranging from 15% in Germany to 19.5% in * Trademark license agreement alongside the Master UK. A
Slide 20: Strategic rationale for the acquisition
Strategic rationale for the acquisition Multiple growth opportunities for Pirtek 19 AIM: TO CREATE A MARKET-LEADING INTERNATIONAL B2B MULTI-BRAND FRANCHISOR IN UK, EUROPE, NORTH AMERICA DRIVE OPERATING LEVERAGE FROM CENTRAL SERVICES, IN PARTICULAR TECHNOLOGY AND MARKETING COMBINED FRANCHISING EXPERI
Slide 21: Divisional trading results
Divisional trading results H1 2023 H1 2022 Filta Inter-co Filta Inter-co B2B International _Pirtek B2C Azura elimination H12023 B2B International © B2C —Azuraelimination H12022 £'000s £1000s £'000s_—£'000s_£'000s £000s £'000s £'000s £1000s £1000s £'000s £000s__—£'000s Systemsales 52,644 42,998 37,16
Slide 22: B2B division
B2B division ‘@\ 2023 2022 : ‘ Metro Rod accounted for 71% of B2B division's Adjusted pod Pumes Filta UK 12023 eo Pome FiltaUK 12022 EBITDA. Increased by 13% to £3.6m ©000s £':000s £'000s — £'000s £000s £'000s £'000s £'000s + Metro Rod and Metro Plumb system sales increased 24% to record £35.3m. Sys
Slide 23: Filta International
Filta International North 6M North am America Europe H12023. «America Europe + H1.2022 £000 £000 £000 £000 £000 £000 System sales 41,281 4717 42,998 23,741 1144 (24,885 Revenue 13,178 492 13,670 «8,603 220 8,823 Cost of sales (8.416) ea) = (8,757) ~~ 647) (128) (5,775) Gross profit 4,762 151 4913 2,
Slide 24: Pirtek Europe
Pirtek Europe UK& Germany Benelux Sweden France Other 12023 Pirtek has operations in eight countries but is Republic of | & Austria (10 weeks) managed as five business units. Ireland £000 000 £000 000 £000 £000 £000 The UK business is the largest in the division: System sales 17,060 13,237 4,794 541
Slide 25: B2C division
B2C division ChipsAway ovenclean LUKE IT NEVER HAPPENED SESS GRIME. MORE TIME H12023 H12022 Change Change £000 £'000 £000 % Current environment of high employment, high wages and elevated , inflation, more risk aversion and reduced attractiveness of self-employment. System sales 12,881 12,900 (19) O
Slide 26: Adjusted and statutory profit
Adjusted and statutory profit H1 2023 H12022 Change Change £000 £000 £000 % Adjusted profit after tax 6,520 4,722 4,798 38% Amortisation of acquired intangibles (4,476) (669) (3,806) Share-based payment charge (ant) (351) (59) Non-recurring costs (2,991) (1,282) (1,709) Other gains and losses 1,232
Slide 27: Adjusted EBITDA £m
Adjusted EBITDA £m 14 12 £1.4m som £7.3m H1 2022 Pirtek Filta International B2B B2c Group overheads H1 2023 res ChipsAwa, | cpmrer | filta ™Memenoo new METRQ PLUMB +, — ovénclean WILLQW PUMPS filta
Slide 28: Adjusted EPS and dividend (p)
Adjusted EPS and dividend (p) Adjusted EPS increased 4% to 4.24p (H1 2022: 4.07p). This modest HI increase results from; 2023 4.00 4.24 : ; _ * The issue of shares for the Pirtek acquisition. * 4% increase in the tax rate (at consistent tax rate, EPS increased by 10%). * Budgeted reduced profits at
Slide 29: Cash flow and leverage
Cash flow and leverage £m Acquisition cost of Pirtek (net of cash acquired) 200.6 Acquisition costs (6.3) Proceeds from issue of shares 4.3 Term loan and RCF drawdown 100.0 Net cash flow from operations 26 Cash increase in period 10.0 LTM EBITDA™ Net cash at beginning of period 108 To 30 June 2023 N
Slide 30: Sales growth & EBITDA
Sales growth & EBITDA ————_—(@, METRO ROD AND METRO PLUMB SALES GROWTH, EBITDA AND MARGIN 70 6 60 5 g 50 4 _ 8 40 & 8 3g a 20 ? 10 1 0 2017 2018 2019 2020 2021 2022 mam System Sales — EBITDA EBITDA margin: 3.9% 6.2% 7.2% 8.2% 9.3% 10.0% * 2022 EBITDA estimate is consensus analyst's forecasts, Dowgat
Slide 31: Operational leverage in action
Operational leverage in action ——@) METRO ROD SYSTEM SALES PER EMPLOYEE (£) 457,826 534,057 ff 349,654 225,617 2017 2018 2019 2020 2021 2022
Slide 32: Strategy in action: The maximum potential model — FiltaMax
Strategy in action: The maximum potential model — FiltaMax S—_C— CURRENTLY MAXIMUM POTENTIAL Filta US Customer Base MODEL WORKINGS $925m max 8,500 sites Existing US franchisees with more than 50 customers revenue , Total potential sites in US potential in US 1.4m Highest market penetration based on
Slide 33: FiltaMax growth levers
FiltaMax growth levers 32 SCALING OF 55 METRO MARKETS ACROSS THE US These metro areas provide opportunities to build businesses of scale. REPLICATE SUCCESS OF LARGEST FRANCHISEES The top 5 franchisees have businesses of scale, with three turning over more than $5m and the largest with revenues of ov
Slide 34: B2B division growth levers
| B2B division growth levers 33 CONTINUE TO WIDEN AND DEEPEN RANGE OF SERVICES Opportunity to drive customer acquisition and retention, and market share, by providing more higher value services such as tankers and pumps. CROSS SELLING OPPORTUNITIES The majority of our customers require all of our se
Slide 35: Disclaimer
Disclaimer The information contained in this document (“Presentation”) and the presentation made to you verbally has been prepared by Franchise Brands ple (the *Company). Franchise Brands plc is a UK company quoted on AIM, a market operated by London Stock Exchange ple. This Presentation has not bee
Slide 36: Franchise Brands contact details
FRANCHISE BRANDS www.franchisebrands.co.uk Franchise Brands plc Ashwood Court Tytherington Business Park Macclesfield SK10 2XF mail@franchisebrands.co.uk 01625 507910 METR® ROD www.metrorod.co.uk METR® PLUMB www.metrorod.co.uk WILLQW PUMPS www.willowpumps.co.uk www.pirtek.co.uk ie filta www filta.co