We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Register for Free to get streaming real-time quotes, interactive charts, live options flow, and more.
| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Franchise Brands Plc | LSE:FRAN | London | Ordinary Share | GB00BD6P7Y24 | ORD 0.5P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 7.00 | 3.76% | 193.00 | 190.00 | 196.00 | 195.00 | 192.00 | 192.00 | 69,396 | 13:30:16 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Offices-holdng Companies,nec | 99.15M | 8.29M | 0.0636 | 30.35 | 251.5M |
From Apr 2019 to Apr 2024
TIDMFRAN
RNS Number : 6966Q
Franchise Brands PLC
14 September 2017
Prior to publication in this announcement, the information contained within the Executive Chairman's Statement of this announcement was deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR").
14 September 2017
FRANCHISE BRANDS PLC
("Franchise Brands", "the Group" or "the Company")
Half year results for the six months ended 30 June 2017
Franchise Brands plc (AIM: FRAN), a multi-brand international franchisor, is pleased to announce its half year results for the period ended 30 June 2017. In addition, the annual results of the Company's principal operating subsidiary, Metro Rod Limited, for the year to 30 April 2017, which primarily cover pre-Franchise Brands ownership, have been published today, details of which are set out in note 4 to the half year results.
Financial highlights
-- Revenue up three-fold to GBP8,639,000 (H1 2016: GBP2,488,000). -- Adjusted EBITDA increased by 66% to GBP1,256,000 (H1 2016: GBP758,000). -- Organic EBITDA increased by 13% to GBP1,161,000 (H1 2016: GBP1,026,000).
-- Adjusted profit before tax and exceptional items grew by 38% to GBP1,001,000 (H1 2016: GBP724,000).
-- Statutory loss after tax and net exceptional costs of GBP237,000 (H1 2016: profit GBP575,000).
-- Cash generated from operations before exceptional costs of GBP2,117,000 (H1 2016: GBP773,000).
-- Increase in cash balances to GBP5,961,000 (31 December 2016: GBP2,999,000). -- Net debt of GBP5,990,000 at 30 June 2017 (31 December 2016: nil).
o Gearing at 30 June 2017 of 26% (31 December 2016: nil).
-- Adjusted Basic EPS 1.31p (H1 2016: 1.58p), reflecting the significant increase in shares in issue following the IPO and acquisition of Metro Rod.
-- Basic EPS loss of 0.39p (H1 2016: profit of 1.58p), reflecting both the increase in shares in issue and the exceptional cost of the acquisition.
-- Maiden interim dividend of 0.17p per share declared, covered 7.7 times by adjusted earnings per share.
Operational highlights
-- GBP28.5m acquisition of Metro Rod completed on 11 April 2017, funded by:
o Placing of new shares which raised GBP20m before expenses (29,850,746 shares issued at 67p each);
o Bank debt of GBP12m from a five-year term loan, and
o a further GBP5m revolving credit facility, which remains undrawn.
-- Metro Rod, Chips Away, Ovenclean and Barking Mad trading in-line with management expectations.
-- Direct labour operation Kemac experienced disappointing sales to its water utility customers, but remedial action has been taken.
-- Franchise territories sold totalled 49 (H1 2016: 33). -- Total number of UK franchisees increased to 443 (H1 2016: 320). -- Board and management team strengthened.
Stephen Hemsley, Executive Chairman, commented:
"Our principal existing brands have delivered strong growth, and in a relatively short space of time we have created a high quality portfolio of businesses with significant critical mass in the franchising sector. We are focused on maximising the earnings potential from all our brands, particularly with the recent acquisition of Metro Rod, where the medium-term upside potential is substantially better than our initial expectations, with the benefit of additional near term investment.
I am hugely confident that the Group will develop into a highly profitable and cash generative business enabling a progressive dividend policy."
Enquiries:
Hot Features
Premium
+44 (0) 800
Franchise Brands plc 012 6462
Stephen Hemsley, Executive Chairman
Chris Dent, Chief Financial
Officer
Julia Choudhury, Corporate Development
Director
Allenby Capital Limited (Nominated +44 (0) 203
Adviser and Joint Broker) 328 5656
Jeremy Porter/ James Thomas/
Liz Kirchner
Dowgate Capital Stockbrokers +44 (0) 203
(Joint Broker) 903 7715
James Serjeant
MHP Communications (Financial +44 (0) 203
PR) 128 8100
Katie Hunt/Ivana Petkova
Executive Chairman's Statement
Introduction
It has been an eventful six months for the Group with the transformational acquisition of the Metro Rod businesses, which constituted a reverse takeover for AIM rules purposes, only eight months after our original IPO. This was funded by a significant equity fund raising, which was very well supported by our existing shareholders and also gave us the opportunity to welcome some new shareholders. Thank you all for your support.
Acquisition of Metro Rod
The acquisition of Metro Rod was completed on 11 April 2017, funded by a GBP20m share issue, of which the Board invested GBP12m, and a term loan facility from HSBC Bank plc ("HSBC") of GBP12m. The total acquisition cost inclusive of working capital adjustments and net of cash at completion was GBP28.5m. In addition, transaction fees and associated costs of GBP1.8m were incurred.
Shortly after completion, we completed a tour of all 40 Metro Rod franchisees, visiting them at their local offices and meeting their teams. This has given us a tremendous insight into the business and confirms the exciting opportunity presented by the Metro Rod business as well as the quality of the franchisees, who are the backbone of any franchise business. We have also spent a considerable amount of time with the teams in the Support Centre, capturing valuable feedback on the business processes and systems including how they can be improved.
We are firmly of the view that Metro Rod has a market leading national offering in the commercial drainage market which has never been fully exploited during the company's over 30 year history. With further investment in IT, sales and marketing, combined with the application of sound franchising principles and the expertise of the enlarged Franchise Brands team, we are confident that we can deliver significant additional value from this business.
In addition to the existing core drainage business, Metro Plumb was launched in February 2016 on a national basis and is operated by 30 of the 40 Metro Rod franchisees. Metro Plumb offers a limited range of plumbing services mainly to the emergency insurance market. Sales volumes have been growing and we continue to actively pursue new opportunities to further develop this early-stage business.
As part of the transaction, we also acquired a direct labour plumbing business, Kemac, which had been transferred into the Metro Rod group prior to the acquisition (in May 2016). This business executes the Metro Plumb business in areas where the Metro Rod franchisees did not take up the new franchise, mainly in London. It also undertakes a variety of specialist plumbing work, mainly for water utilities.
Operational review, current trading & prospects
ChipsAway and Ovenclean, our principal existing brands, traded well in the six months to 30 June 2017 growing EBITDA by 13% to GBP1,161,000 from GBP1,026,000. The total number of franchisees grew to 329 (H1 2016: 320), following the recruitment of 37 new franchisees (H1 2016: 33) and 28 leavers (H1 2016: 17). The quality of the earnings has also improved with an increasing number of franchisees now paying a turnover related management service fee ("MSF") rather than the lower minimum monthly fee. These highly cash generative businesses are on track to deliver another strong performance in the current year.
Barking Mad, which was acquired in October 2016, made an EBITDA contribution of GBP108,000 in the period, in line with our expectations. The total number of franchisees grew to 73 (H1 2016: 71), following the recruitment of 12 new franchisees and 10 leavers. Barking Mad is now integrated into the Group and is benefiting from our shared support services, particularly in the areas of franchise recruitment, marketing and finance.
Active promotion of the MyHome brand has now ceased, but the start-up of "The Handyman Van" is showing promise. Losses from these activities have been reduced from GBP69,000 to GBP12,000 in the period.
The core Metro Rod drainage business, made an EBITDA contribution in the eleven weeks post acquisition of GBP287,000. This was in-line with the original plan, despite our decision to incur additional payroll costs in expanding the sales team and in restoring the call centre functionality to provide customers and franchisees with an improved service.
Metro Plumb, which contributed an EBITDA of GBP62,000 in the period, is still at an early stage, and provides the participating franchisees with a "second string" of income. For many franchisees, this business has yet to reach critical mass, but much effort is being directed at generating additional sales volume, which whilst behind our ambitious initial budget, is still expected to deliver strong growth. We are increasingly encouraged that this business is becoming a viable additional source of profit for most of the participating franchisees and ourselves.
Trading at the direct labour organisation, Kemac, has been disappointing, with this business making a minimal contribution to profits due to significantly reduced sales to the water utilities companies. Remedial action has been taken, but whilst this has led to a welcome return to profitability in July and August, we are re-examining the long term potential of this business. In 2016 Kemac contributed GBP370,000 of EBITDA to the Group.
Central overheads in the period grew by 77% to GBP355,000 (2016: GBP201,000) as anticipated. This increase is almost entirely due to the costs of becoming an AIM quoted company, the cost of a full management team, and the introduction of non-cash items such as the amortisation of intangibles and the IFRS2 charge in respect of share options. A further significant change in the central overhead is forecast in the second half of the current year as the increased costs are annualised. Future increases in central overheads thereafter will be more modest.
The medium term upside potential of the Metro Rod core business is substantially better than our initial expectations. To unlock the sales and profit potential there is much work to do and the near term investment required will be greater than initially envisaged, particularly in IT, sales and marketing. The marketing element will be mostly covered by raising a National Advertising Fund ("NAF") from franchisees, although we intend to contribute alongside our franchisees an initial share equivalent to our MSF contribution of 22.5%. The cost of this contribution will be around GBP75,000 in 2018.
The IT investment is needed to replace a cumbersome and inefficient works management system, outdated call centre systems and to automate some manual administrative systems and processes all of which are inhibiting the ability of the business to grow. This expenditure is expected to start later this year following the transfer of the existing systems from Metro Rod's previous owners onto a stand-alone basis, and will be partly offset by some cost savings initiatives. This will ultimately enable the business to grow more rapidly and allow central overheads to become a reducing percentage of income, thereby enhancing our operational gearing.
Due to the lack of contribution from Kemac we expect adjusted EBITDA to be below current market expectations in the current year. Looking forward, the additional investment we have decided to make in Metro Rod and the slower rate of growth anticipated at Metro Plumb compared to the initial ambitious budget means that we also expect adjusted EBITDA to be below current market expectations in 2018. However, during this period of investment we still expect to grow earnings, cashflow will remain strong and our gearing is expected to reduce, enabling us to maintain a progressive dividend policy.
Beyond this period of intensive investment activity we anticipate enhanced earnings and much improved operational gearing as overheads decline as a proportion of income.
Management team
I am pleased to report we have strengthened the Board and management team during the course of 2017. We have recently welcomed Chris Dent as Chief Financial Officer. He is a Chartered Accountant who spent the first ten years of his career with Deloitte. More recently he was CFO of an AIM quoted company which he led through a series of acquisitions, including a reverse takeover.
In April, we also welcomed Colin Rees as Chief Information Officer. Colin was previously IT Director at Domino's Pizza Group plc for five years and prior to that held a number of senior IT positions in organisations such as EasyJet, Figleaves and News International.
More recently, we promoted Peter Molloy, formerly Commercial Director of Metro Rod, to the position of Managing Director of Metro Rod. Peter has been with the business since 2003 and he and his team have delivered and managed the majority of the impressive customer contracts that have been won during this period. Peter has already established close working relationships with the Franchise Brands teams, particularly in the areas of finance, IT and marketing, and I am confident that he and the team will unlock the huge potential we see for the Metro Rod business.
I am confident that the leadership team of the Group is now complete and that we are extremely well placed for the journey ahead.
Conclusion
It has been an exciting and challenging six months for the Group and I would like to thank the team for their hard work and commitment during this period. I would also like to thank and acknowledge the help and support of the franchisees in Chips Away, Ovenclean and Barking Mad for their continuing hard work in building these great brands.
I am pleased to welcome the Metro Rod team, who have been through a period of multiple owners to a new and permanent home at Franchise Brands. Finally, and by no means least, I would like to welcome the Metro Rod franchisees, all of whom I have now met, to the Group. Many of these are highly experienced and we have been impressed with their levels of passion for and commitment to the business. I know from our visits that they are also genuinely excited about the future potential of their businesses under Franchise Brands' ownership. I look forward to working with them all in building a truly great business.
In a relatively short space of time, we have created a high quality portfolio of businesses with significant critical mass in the franchising sector. We have also assembled an excellent and highly entrepreneurial team that can really drive it forward. This team has also made a considerable personal investment in the recent equity fundraisings, such that the Board and senior management now own 64% of the equity of the enlarged Group. I am hugely confident that following significant investment in infrastructure over the next couple of years we will have a highly profitable and cash generative business able to successfully take on still more challenges and grow into a substantial force in franchising.
Stephen Hemsley
Executive Chairman
14 September 2017
Chief Financial Officer's Review
Results for the six months
ending 30 June 2017 2016 Change %
GBP'000 GBP'000
Revenue 8,639 2,488 6,151 247%
Cost of Sales (5,033) (825) (4,208) 510%
Gross Profit 3,606 1,663 1,943 117%
------------ ---------- ------------ -------
Other Operating Costs (2,350) (905) (1,445) 160%
Adjusted EBITDA 1,256 758 498 66%
------------ ---------- ------------ -------
Depreciation (47) (32) (15) 47%
Amortisation (48) - (48) n/a
Share based payment (56) - (56) n/a
Finance costs (104) (2) (102) 5,100%
Adjusted Profit before tax 1,001 724 277 38%
------------ ---------- ------------ -------
Taxation (197) (149) (48) 32%
Adjusted profit after tax 804 575 229 40%
------------ ---------- ------------ -------
Exceptional items (net of
tax) (1,041) - (1,041) n/a
Statutory (loss)/profit (237) 575 (812) -141%
------------ ---------- ------------ -------
Analysis of the results for the six months ended 30 June 2017 is complex as we compare a period in 2016, prior to the IPO, when the Group was a private company, with a period in 2017 that includes the results of Barking Mad (acquired in October 2016) and an eleven week contribution from Metro Rod. During this period, the capital structure of the Company has also changed significantly. The annual results of the Company's principal operating subsidiary, Metro Rod Limited, for the year to 30 April 2017 have been published today, details of which are set out in note 4 of these half year results.
To understand the underlying performance of the Group, the statutory loss in the period of GBP237,000 (H1 2016: profit of GBP575,000) has been adjusted in the table above to provide a better comparison of the underlying trading results of the business.
Earnings before depreciation, amortisation, share based payments, finance costs and tax ("Adjusted EBITDA") in the six months ended 30 June 2017 increased by 66% to GBP1,256,000 (H1 2016: GBP758,000).
Adjusted profit before tax grew 38% to GBP1,001,000 (H1 2016: GBP724,000) with a number of new costs related to the change in the capital structure of the Group and the acquisition of Metro Rod:
-- The charge for depreciation increased 47% from GBP32,000 to GBP47,000 as a result of the addition of the normal on-going depreciation charge of Metro Rod.
-- A new charge of GBP48,000 in respect of the amortisation of the intangible assets recognised on the acquisition of Metro Rod.
-- A new IFRS2 charge of GBP56,000 in respect of share options granted at the IPO and subsequently. There was no such charge in the comparative period when the Group was a private company.
-- An interest charge of GBP104,000 on the term loan taken out to finance the acquisition of Metro Rod.
The tax rate is based on the estimated rate for the full year of 19.25% on the profits after tax-allowable exceptional items, resulting in a total statutory tax charge for the period of GBP40,000 (H1 2016: GBP149,000). If the tax charge on the allowable element of the exceptional items were added back, the adjusted taxation charge for the period would be GBP197,000 (H1 2016: GBP149,000).
Exceptional costs were incurred on the acquisition of Metro Rod, subsequent integration and the raising of share capital. After allocating GBP444,000 of share issue costs against share premium and GBP170,000 of finance costs against the bank facilities, an amount of GBP1,198,000 was charged to operating profit in the statutory financial statements.
Earnings per share
The number of shares in issue at 30 June 2017 was 77.7 million, a significant increase over the pre-IPO position at 30 June 2016 of 36.3 million. The average number of shares in issue during the period was 61.2 million, an increase of 69% over the comparative period. Adjusted profit before tax and exceptional items grew by 38% and as a result adjusted earnings per share in the six months to 30 June 2017 declined to 1.31 pence per share (H1 2016: 1.58 pence).
Basic earnings per share, which is based on the same number of average shares in issue and the statutory loss for the period of GBP237,000, was a loss of 0.39 pence per share (H1 2016: profit of 1.58 pence).
Dividend
To reflect our confidence in the long term prospects of the business, as set out in the Chairman's statement, the board has decided to pay a first interim dividend of 0.17 pence per share (2016: Nil). The interim dividend will be payable on 13 October 2017 to shareholders on the register as at 22 September 2017. The anticipated dividend cost of GBP132,000 will be 7.7 times covered by adjusted earnings per share.
The Group paid a dividend in the period of GBP81,000 as a final dividend for 2016.
Financing and Cash Flow
The Group generated cash from operations of GBP2,117,000 before the pre-taxation exceptional acquisition costs of GBP1,198,000. After those costs, the Group generated net cash from operations of GBP919,000 (H1 2016: GBP773,000).
The Group raised proceeds of GBP19.6m from placing 29,850,746 shares at 67p each, net of expenses of GBP444,000. The Group also negotiated a 5-year term loan of GBP12m with HSBC, raising GBP11.8m after expenses. The proceeds of the equity raise and debt financing were used to acquire Metro Rod for GBP28.5m, net of cash acquired of GBP469,000. The outstanding shareholder loans of GBP417,000 at 30 June 2016 were repaid from existing cash resources in anticipation of the transaction, enabling HSBC to be the sole lender to the enlarged Group.
The Group also entered into a GBP5m revolving credit facility with HSBC to provide additional headroom. To date, the Group has not used any of this additional facility. At 30 June 2017 cash balances were GBP5,961,000, giving headroom of nearly GBP11m.
Shareholder's funds at 30 June 2017 were GBP23,197,000 (2016: GBP3,903,000) against net debt of GBP5,990,000 (YE 2016: net cash of GBP2,999,000), giving capital gearing of a modest 26% (2016: Nil).
Chris Dent
Chief Financial Officer
14 September 2017
Franchise Brands plc
Consolidated statement of comprehensive income
for the six months ended 30 June 2017
Unaudited Unaudited Audited
6 months 6 months Year
to to ended
30 June 30 June 31 December
2017 2016 2016
GBP'000 GBP'000 GBP'000
Revenue 8,639 2,488 4,870
Cost of sales (5,033) (825) (1,572)
---------------------------- ---------- -------------- ----------------
Gross profit 3,606 1,663 3,298
Administrative expenses
before exceptional costs (2,501) (937) (2,052)
Costs of acquisition
of subsidiary (1,140) - (58)
Costs of transition of (58) - -
subsidiary
IPO costs - - (397)
---------- -------------- ----------------
Total administrative
expenses (3,699) (937) (2,507)
---------------------------- ---------- -------------- ----------------
Operating (loss)/ profit (93) 726 791
Finance income - - 2
Finance expense (104) (2) (9)
---------------------------- ---------- -------------- ----------------
(Loss)/profit before
tax (197) 724 784
Tax expense (40) (149) (260)
---------------------------- ---------- -------------- ----------------
(Loss)/profit for the
period and comprehensive
income attributable to
equity holders of the
parent company (237) 575 524
---------------------------- ---------- -------------- ----------------
All amounts relate to
continuing operations
Earnings per share (pence)
Basic (0.39) 1.58 1.28
Adjusted basic 1.31 1.58 2.4
Diluted (0.38) 1.58 1.28
Adjusted diluted 1.30 1.58 2.39
---------------------------- ---------- -------------- ----------------
Franchise Brands plc
Consolidated statement of financial position
as at 30 June 2017
Unaudited Audited
30 June
2017 31 December
GBP'000 2016
GBP'000
Assets
Non-current assets
Intangible assets 26,771 2,142
Property, plant and equipment 220 121
Trade and other receivables - 112
Deferred tax asset 774 -
------------------------------------------ ----------------- -------------
Total non-current assets 27,765 2,375
------------------------------------------ ----------------- -------------
Current assets
Inventories 353 193
Trade and other receivables 9,837 307
Cash and cash equivalents 5,961 2,999
------------------------------------------ ----------------- -------------
Total current assets 16,151 3,499
------------------------------------------ ----------------- -------------
Total assets 43,916 5,874
------------------------------------------ ----------------- -------------
Liabilities
Current liabilities
Trade and other payables 7,369 1,078
Loans and borrowings 1,167 167
Obligations under finance leases 25 29
Current tax liability 235 211
------------------------------------------ ----------------- -------------
Total current liabilities 8,796 1,485
------------------------------------------ ----------------- -------------
Non-current liabilities
Loans and borrowings 10,671 250
Obligations under finance leases 88 73
Deferred tax liability 1,164 163
------------------------------------------ ----------------- -------------
Total non-current liabilities 11,923 486
------------------------------------------ ----------------- -------------
Total liabilities 20,719 1,971
------------------------------------------ ----------------- -------------
Total net assets 23,197 3,903
------------------------------------------ ----------------- -------------
Issued capital and reserves attributable
to owners of the parent
Share capital 388 239
Share premium 22,621 3,214
Share-based payment reserve 86 30
Merger reserve 396 396
Retained earnings (294) 24
------------------------------------------ ----------------- -------------
Total equity attributable to
equity holders 23,197 3,903
------------------------------------------ ----------------- -------------
Franchise Brands plc
Condensed Consolidated statement of cash flows
for the six months ended 30 June 2017
Unaudited Unaudited Audited
6 months 6 months Year
to to ended
30 June 30 June 31 December
2017 2016 2016
GBP'000 GBP'000 GBP'000
-------------------------------- ---------- -------------------- -------------
Cash flows from operating
activities
(Loss)/profit for the
period (237) 575 524
Adjustments for:
Depreciation of property,
plant and equipment 47 33 66
Amortisation of intangible
fixed assets 48 5 10
Share-based payment expense 56 - 30
Finance income - - (2)
Finance expense 104 2 9
Profit on sale of property, - - -
plant and equipment
Income tax expense 40 149 260
-------------------------------- ---------- -------------------- -------------
58 764 897
Increase in trade receivables (885) (180) (31)
Increase in inventories (15) (22) (15)
Increase in trade and
other payables 1,761 211 261
-------------------------------- ---------- -------------------- -------------
Cash generated from operations 919 773 1,112
Income taxes paid ( 179) (71) (203)
-------------------------------- ---------- -------------------- -------------
Net cash generated from
operating activities 740 702 909
Cash flows from investing
activities
Purchase of property,
plant and equipment (93) (10) (10)
Interest received - - 2
Acquisition of subsidiary,
net of cash acquired (28,487) - (333)
-------------------------------- ---------- -------------------- -------------
Net cash used in investing
activities (28,580) (10) ( 341)
Cash flows from financing
activities
Other loans - repaid (417) - (1,847)
Other loans - received - - 500
Bank loans received 11,830 - -
Interest paid (96) (2) (9)
Proceeds from issue of
shares 20,000 - 3,562
Share issue expenses (444) - (233)
Dividends paid (81) - -
Capital element of finance
lease repaid 10 (22) (38)
-------------------------------- ---------- -------------------- -------------
Net cash generated from/(used
in) financing activities 30,802 (24) 1,935
Net increase in cash
and cash equivalents 2,962 668 2,503
Cash and cash equivalents
at beginning of period 2,999 496 496
-------------------------------- ---------- -------------------- -------------
Cash and cash equivalents
at end of period 5,961 1,164 2,999
-------------------------------- ---------- -------------------- -------------
Franchise Brands plc
Consolidated statement of changes in equity
for the six months ended 30 June 2017
Share Share-based
Share premium payment Merger Retained
capital account reserve Reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------ --------- --------- ------------ --------- ---------- --------
At 1 January
2016 120 - - - (500) (380)
Profit for the
period - - - - (575) 575
At 30 June 2016 120 - - - 75 195
--------- --------- ------------ --------- ---------- --------
Loss for the
period - - - - (51) (51)
Acquisition
of subsidiary 4 - - 396 - 400
Issue of Shares 114 3,214 - - - 3,328
Share based
payment 1 - 30 - - 31
At 1 January
2017 239 3,214 30 396 24 3,903
--------- --------- ------------ --------- ---------- --------
Loss for the
period - - - - (237) (237)
Dividend Paid - - - - (81) (81)
Acquisition
of a subsidiary 149 19,407 - - - 19,556
Share based
payment - - 56 - - 56
At 30 June 2017 388 22,621 86 396 (294) 23,197
========= ========= ============ ========= ========== ========
Franchise Brands plc
Notes forming part of the financial statements
for the six months ended 30 June 2017
1. Accounting Policies
Basis of preparation
The consolidated financial statements for the six months ended 30 June 2017 and 2016 are unaudited and were approved by the Directors on 13 September 2017. They do not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The financial statements for the year ended 31 December 2016 were prepared in accordance with IFRS and have been delivered to the Registrar of Companies. The report of the auditor on those financial statements was unqualified and did not draw attention to any matters by way of emphasis of matter.
Applicable standards
These unaudited consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union, under the historical cost convention. They have not been prepared in accordance with IAS 34, the application of which is not required to the interim financial statements of AIM companies. The interim financial statements have been prepared in accordance with the accounting policies set out in the Group's Annual Report and Accounts for the year ended 31 December 2016.
Basis of consolidation
The Group's financial statements consolidate the financial statements of Franchise Brands plc and its subsidiaries. Although the acquisition of Metro Rod Limited by Franchise Brands plc was a reverse acquisition under AIM Rules for Companies, the directors believe that the transaction is an acquisition under accounting rules. Therefore, Franchise Brands plc continues to be the legal and accounting parent. Comparative periods are accounted for under merger accounting principles, following the introduction of a new holding company on 15 July 2016, and are presented as if Franchise Brands plc has always been the holding company for the Group.
Going Concern
The condensed financial statements have been prepared on a going concern basis. At the period end the Group was profitable, cash generative on an operating level, and had cash and cash equivalents of GBP5,961,000. The directors are satisfied that there are sufficient resources available for the Group to continue for the foreseeable future.
Segmental reporting
All segment revenue, profit before taxation, assets and liabilities are presented as attributable to the single principal activity of franchise operation.
2. Earnings per share
Basic earnings per share amounts are calculated by dividing profit for the period attributable to equity holders of the parent by the weighted average number of Ordinary Shares outstanding during the period. Diluted earnings per share are calculated by dividing the profit attributable to ordinary equity holders of the parent by the weighted average number of Ordinary Shares outstanding during the year plus the weighted average number of Ordinary Shares that would have been issued on the conversion of all dilutive potential Ordinary Shares into Ordinary shares at the start of the period or, if later, the date of issue.
Adjusted earnings per share
During the period, the Group incurred significant exceptional costs associated with the acquisition of Metro Rod and transitional costs following acquisition. If these costs of GBP1,198,000, of which GBP382,000 were not deductible for corporation tax, were added back and the resultant profit taxed at 19.25% being the Group's estimated underlying tax rate for the full year, the profit attributable would be GBP804,000.
Earnings per share
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2016
2017 2016
GBP'000 GBP'000 GBP'000
------------------------------ -------------------------- -------------------------- --------------------------
Profit attributable
to owners of the
parent (237) 575 524
Exceptional items,
net of tax 1,041 - 455
------------------------------ -------------------------- -------------------------- --------------------------
Adjusted profit attributable
to owners of the
parent 804 575 979
------------------------------ -------------------------- -------------------------- --------------------------
Number Number Number
------------------------------ -------------------------- -------------------------- --------------------------
Basic weighted average
number of shares 61,239,907 36,324,429 40,837,885
Dilutive effect of
share options 827,475 - 147,654
------------------------------ -------------------------- -------------------------- --------------------------
Diluted weighted
average number of
shares 62,067,382 36,324,429 40,985,539
------------------------------ -------------------------- -------------------------- --------------------------
Pence Pence Pence
------------------------------ -------------------------- -------------------------- --------------------------
Basic earnings per
share (0.39) 1.58 1.28
Diluted earnings
per share (0.38) 1.58 1.28
Adjusted earnings
per share 1.31 1.58 2.40
Adjusted diluted
earnings per share 1.30 1.58 2.39
------------------------------ -------------------------- -------------------------- --------------------------
3. Exceptional items and other costs
GBP'000
------------------------------------------- --------
Exceptional costs of acquisition 1,140
Exceptional costs of post-acquisition
transition 58
Costs charged against Share Premium
account 444
Costs deducted from the gross outstanding
Bank loan 170
------------------------------------------- --------
1,812
------------------------------------------- --------
The Company incurred costs associated with the acquisition of Metro Rod and in relation to raising additional equity and bank loan finance. An amount of GBP1,198,000 has been charged in arriving at profit from operations. A total of GBP444,000 has been charged to share premium account. The Bank arrangement fee of GBP170,000 has been deducted from the Bank loan outstanding and is being charged to income over the five-year term of the facilities, as required by IFRS. Following acquisition the Group has incurred transition costs of in relation to bringing IT to a standalone basis and some redundancy costs. For corporation tax purposes, the exceptional costs will be partly allowed and partly disallowed as deductions from income.
4. Business combination and annual results of Metro Rod Limited
On 11 April 2017, the Group acquired 100 per cent of the voting equity interests of Metro Rod Limited, a company whose principal activity is that of a franchisor of drain care and environmental services. The acquisition was made as a transformational step in implementing the Group's stated buy and build strategy. In particular, it represents the entry into the B2B franchising market at a size and scale that is attractive strategically.
Details of the fair value of the identifiable assets and liabilities acquired, purchase consideration and goodwill are as follows:
Book value Adjustments Fair value
GBP'000 GBP'000 GBP'000
----------------------------- --------------------- ------------ ----------------------
Intangible assets 416 6,428 6,844
Property, plant and
equipment 53 - 53
Deferred tax asset 774 - 774
Current tax asset 4 (4) 0
Inventories 145 - 145
Trade and other receivables 9,009 (494) 8,515
Cash 469 - 469
Trade and other payables (4,513) - (4,513)
Deferred tax liability - (1,164) (1,164)
----------------------------- --------------------- ------------ ----------------------
Total 6,357 4,766 11,123
----------------------------- --------------------- ------------ ----------------------
Consideration paid
in cash 28,956
Goodwill 17,833
----------------------------- --------------------- ------------ ----------------------
Intangible asset adjustments comprise:
GBP'000
---------------------------------------------- --------
Write off goodwill from previous acquisition
(subsumed in Group goodwill) (121)
Write off Software costs (295)
Recognise Brand 4,685
Recognise Customer relationships 2,159
---------------------------------------------- --------
6,428
---------------------------------------------- --------
Deferred tax liability has been calculated on the value of the intangible assets acquired at a corporation tax rate of 17 per cent and a corresponding amount has been recognised as goodwill. The amount recognised as goodwill will not be deductible for tax purposes.
The values of the intangibles acquired are currently provisional, and will be finalised at the year end. Customer Relationships have a useful economic life of 10 years, whereas the Brand and Goodwill both have indefinite lives.
An adjustment has been made to write off GBP494,000 of support payments to franchisees for capital expenditure, which were previously recognised as receivables and written off as a deduction from revenue over 7 years.
Goodwill represents the value of the business that does not qualify for separate recognition.
The fair value of consideration paid and net cash paid comprised:
GBP'000
------------------------------------- --------
Cash 28,701
Other payments (warranty insurance,
transitional services, accounting) 255
------------------------------------- --------
Fair value of consideration paid 28,956
Less: cash acquired on acquisition (469)
------------------------------------- --------
Net cash paid 28,487
------------------------------------- --------
Acquisition costs relating to this transaction amounted to GBP1,198,000 and have been disclosed within the statement of comprehensive income in the Group and included within investments in the Company.
Since the acquisition date, Metro Rod Limited has contributed GBP5.6m to Group revenues and GBP0.17m to Group income. If the acquisition had occurred on 1 January 2017, Group revenue would have been GBP16.0m, Group income would have been GBP0.37m and adjusted Group income would have been GBP1.39m.
In addition, the Company today publishes the audited accounts for Metro Rod Limited for the year ended 30 April 2017 ("the Accounts"). The Accounts are substantially for a period when Metro Rod Limited was still a wholly owned and managed subsidiary of Enserve Group Limited and are therefore not consolidated with the Company, except for the 20 days since acquisition on 11 April 2017 to the year ended 30 April 2017. The Company's AIM Admission Document published on 22 March 2017 in connection with the acquisition contained financial information on Metro Rod Limited for the three and half years to 31 October 2016. Relevant extracts from the Accounts are set out below to provide financial information on Metro Rod since that which was published in the Admission Document.
Metro Rod Limited
Statement of Comprehensive Income
For the year ended 30 April 2017
Year ended Year ended
30 April 30 April
2017 2016
GBP'000 GBP'000
Revenue 24,907 21,416
Cost of sales (17,953) (15,039)
----------- -----------
Gross Profit 6,954 6,377
Administrative expenses (4,210) (3,209)
-------------------------------------------------------------------------------------------- ----------- -----------
Operating profit before exceptional items 2,744 3,168
Exceptional items (1,549) (766)
-------------------------------------------------------------------------------------------- ----------- -----------
Operating profit 1,195 2,402
Income tax 232 302
----------- -----------
Profit for the financial year and comprehensive income attributable to equity holders of
the
parent company 1,427 2,704
=========== ===========
Metro Rod Limited
Statement of Financial Position
As at 30 April 2017
As at As at
30 April 30 April
2017 2016
GBP'000 GBP'000
Fixed assets
Intangible assets - 298
Property, plant and equipment 51 62
Trade and other receivables 31 346
Deferred tax asset 774 522
----------
Total non-current assets 856 1,228
---------- ----------
Current assets
Inventories 145 24
Trade and other receivables 8,950 14,831
Cash and bank balances 2,591 12,545
---------- ----------
Total current assets 11,686 27,400
---------- ----------
Total assets 12,542 28,628
Current liabilities
Trade and other payables (7,031) (6,874)
Loans and borrowings - (5,696)
---------- ----------
Total current liabilities (7,031) (12,570)
Net assets 5,511 16,058
---------- ----------
Equity attributable to equity
holders of the company
Share capital - -
Retained earnings 5,511 16,058
---------- ----------
Total equity 5,511 16,058
---------- ----------
The Accounts were prepared in accordance with The Companies Act 2006 as applicable to companies using Financial Reporting Standard 101 'Reduced Disclosure Framework' (FRS 101). The Accounts have been prepared on the historical cost basis and on the going concern basis.
FRS 101 sets out a reduced disclosure framework for a 'qualifying entity' as defined in the standard which addresses the financial reporting requirements and disclosure exemptions in the individual financial statements of qualifying entities that otherwise apply the recognition, measurement and disclosure requirements of EU-adopted IFRS. Metro Rod Limited is a qualifying entity for the purposes of FRS 101.
5. Dividend and Post Balance Sheet Events
A dividend of 0.17p per share was paid on 28 April 2017 in respect of the financial year 2016. The board have proposed an interim dividend of 0.17 p per share (2016: GBPnil) for the financial year 2017, which will be payable in October 2017.
6. Availability of this report
This half year results report will not be sent to shareholders but is available on the Company's website at https://www.franchisebrands.co.uk/key-documents/.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR DDGDCLBBBGRX
(END) Dow Jones Newswires
September 14, 2017 02:01 ET (06:01 GMT)
1 Year Franchise Brands Chart |
1 Month Franchise Brands Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions
