Franchise Brands Plc · LSE:FRAN
Franchise Brands — Investor Presentation (November 2023)
36 slides from Franchise Brands's investor presentation, November 2023
Slide 1: Franchise Brands: Presentation to Investors
B FRANCHISE BRANDS a, a ice international. business 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 rs 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 busine
Slide 4: The Group
The Group (Pre-Q3 Trading Update) 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,
Slide 5: 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 6: The Maximum Potential Model
The Maximum Potential Model Filta US p E— THE BUSINESS (2022) MAXIMUM POTENTIAL MODEL WORKINGS System sales of $100m (Q4 2022 run rate). Use SIC codes of existing Existing Franchisees with more than customers to estimate potential. 50 customers Filta US Customer Base Highest Market Penetration 3.9%
Slide 7: The "Max" model in action
The “Max” model in action LONG TERM TERRITORY DEVELOPM 2 PLAN FOR INCREASING PENETR ‘ ] AND SPEND PER CUSTO
Slide 8: Group financials
Group financials (@ Statutory revenue (£m) 186.6 Adjusted EBITDA (£m) 38.0 CAGR 32% 160.3 : CAGR 46% 29.7 : 99.2 153 69.8 12. 355 440 49.9 577 66 | 85 ‘ see ft —- - a a a oe 2018 2019 2020 2021 2022 HI 2023E* 2024E* 2018 2019 2020 2021 2022 HI 2023E* 2024E* 2023A 2023A Adjusted earnings per share (p
Slide 9: Capital allocation
Capital allocation im 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. We fully expect the Pirtek acquisition facilities
Slide 10: Investment rationale
Investment rationale Highly resilient with seven market leading franchise brands across 10 countries with over 625 franchisees, the vast majority in B2B Long established brands with a successful trading history through economic cycles. Provider of essential services — a defensive play. Low market sh
Slide 11: Appendix
Slide 12: 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 13: 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 14: 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 15: Pirtek operating model
Pirtek operating model ey 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 16: Strategic rationale for the acquisition
Strategic rationale for the acquisition Multiple growth opportunities for Pirtek 15 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 17: Grow system sales
16 GROW SYSTEM SALES Increase capacity, capability and franchisee performance. Optimise territory utilisation and franchisee performance. Recruitment and retention of Mobile Service Technicians, increase Mobile Service Vehicles and service centres. Significant opportunity to leverage Group marketing
Slide 18: Corporate Governance
Corporate Governance Board and management changes effective 2 October im The Group has implemented changes to its board and management structure and introducing two- tier organisation: plc and management board. * PLC board streamlined to five directors: Executive Chairman and CFO, one non-independen
Slide 19: Q3 Trading Update
Q3 Trading Update FRANCHISE BRANDS + Divisional performance: + The B2B businesses, are all trading at record levels despite some softening in demand over the summer period + Whilst the type of reactive services provided have resilient underlying demand whatever the macroeconomic conditions, demand n
Slide 20: Summary of group results
Summary of group results H12023" 12022" Change ie System sales, main driver of MSF income and DLO £000 £000 £000 ° 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 Cua 44,508 25,248 57% as a result of the
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 37,168
Slide 22: B2B division
B2B division ‘@\ 2023 2022 : ‘i 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. Sy
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 4,913
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 £1000 £000 £000 The UK business is the largest in the division: System sales 17,060 13,237 4,794
Slide 25: B2C division
B2C division ChipsAway ovenclean LUKE IT NEVER HAPPENED SESS GRIME. MORE TIME 12023 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) 0% Re
Slide 26: Adjusted and statutory profit
Adjusted and statutory profit H1 2023 H1 2022 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
10 Adjusted EBITDA £m o £1.1m 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 gE 50 4 7 8 40 & g 38 a ir 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,
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: FiltaMax growth levers
FiltaMax growth levers 31 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 ove
Slide 33: B2B division growth levers
| B2B division growth levers 32 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 34: The Group's franchise systems as at June 2023
The Group’s franchise systems as at 30 June 2023 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 C+) ° =) Metro Rod 42 > - - 42 Metro Plumb* 13 3 (1) 2 15 B2c 349 24 (34) (10) 339 F
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 www.metrorod.co.uk WILLQW PUMPS www.willowpumps.co.uk www.pirtek.co.uk ie filta www filta.co.uk www.gofi
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