REG - Franchise Brands PLC - Final Results
20/06/2024 07:00
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RNS Number : 1345T Franchise Brands PLC 20 June 2024
20 June 2024
FRANCHISE BRANDS PLC
("Franchise Brands", the "Group" or the "Company")
Final results for the year ended 31 December 2023
Acquisition of Pirtek doubled the size of the Group and integration
progressing well
Franchise Brands plc (AIM: FRAN), an international multi-brand franchise
business, is pleased to announce its audited results for the year ended 31
December 2023.
Financial highlights
· System sales increased by 88% to £350.1m (2022: £186.4m).
· Statutory revenue increased by 74% to £121.3m (2022: £69.8m*).
· Adjusted EBITDA** increased by 97% to £30.1m (2022: £15.3m*).
· Adjusted profit before tax increased 55% to £19.7m (2022: £12.7m*).
· Adjusted EPS*** increased by 1% to 8.42p (2022: 8.34p*).
· Adjusted net debt**** of £74.7m at 31 December 2023 (31 December
2022: net cash of £9.8m), 2.48x Adjusted EBITDA.
· Cash conversion rate increased to 100% (2022: 90%) demonstrating the
strong cashflow performance of the Group's franchise businesses.
· Final dividend for FY23 of 1.2p per share proposed (2022: 1.1p),
giving a 10% increase in the total dividend for the year of 10% to 2.2p per
share (2022: 2.0p), 3.9 times covered by Adjusted profits after tax (2022: 4.2
times).
*The results include a number of prior year adjustments which are set out in
Note 1 to the Accounts in the Annual Report & Accounts. The overall impact
of the adjustments in 2022 is a reduction in statutory revenue of £29.3m and
no change in Adjusted EBITDA as explained further below.
Operational highlights
Another year of momentous change for the business with the acquisition of
Pirtek Europe Ltd for £210.8m*****, funded by £100m of bank debt and
£114.3m of equity, which has again doubled the size of the Group.
· The enlarged Group performed strongly in the period generating both
the profitability and the cashflow required to service and reduce the debt
taken on to fund the Pirtek acquisition.
· During just over eight months of ownership in 2023, Pirtek traded at
record levels, contributing as expected to the Group's results.
· The integration of Pirtek is progressing well, with an immediate
focus on optimising the effectiveness of the business through utilising shared
resources, in particular technology.
· In the newly named Water & Waste Services division, system sales
grew by 18.2% to £106.7m, with Metro Rod and Metro Plumb being the main
drivers of this increase.
· Creation of new centralised international IT function that will
manage every aspect of the digital landscape for the whole business.
Outlook
· The resilient underlying demand for the Group's essential reactive
services means that the business continues to perform well and grow. The
Group's key divisions all achieved record results in 2023, despite some
softening in demand in the second half of the year in the construction and
hire-fleet customer sectors which has continued into the current year.
· The fall in the price for used oil in the US also impacted profits in
2023, and whilst volumes continue to grow, the price continues to soften which
will impact our income in 2024.
· The change in the accounting treatment of sale of franchise
territories income from taking revenue upfront to spreading it over the life
of the franchise agreement may also impact profit in 2024.
· The short-term operational focus is continuing the integration of all
the Group's businesses and repaying the Pirtek acquisition debt, which is
progressing well.
· The centralised international IT function will accelerate growth and
new developments that can positively impact the Group although it will
increase our IT expenditure in the short term.
· Capital allocation decisions will balance debt reduction, a
progressive dividend policy and organic investment in the Group. The Board
does not expect to make any further acquisitions of scale until the
acquisition debt is substantially repaid.
Stephen Hemsley, Executive Chairman, commented:
"The Group has delivered Adjusted EBITDA at the top end of the range of market
expectations in a year when we once again doubled the size of the Group with
the acquisition of Pirtek, having doubled in size in 2022 as a result of the
acquisition of Filta. The Group now operates seven brands in ten countries in
the UK, Continental Europe and North America, giving it a more diversified
international footprint and range of resilient business services.
"The resilient underlying demand for the Group's essential reactive services
enabled all of its key divisions to achieve record results in 2023, despite
some softening in demand in the construction and hire-fleet customer sectors
and in used oil prices which has continued into the current year. We see
significant growth potential for our principal franchise brands of Pirtek,
Metro Rod and Filta, which have small shares of large markets, as we extend
their range of services, geographical penetration and cross-selling to our
larger customer base. This growth potential is supported by our Maximum
Potential Model which we use to estimate the potential size of our markets.
"We are progressing well with integrating the Group's businesses and
beginning to share resources internationally, enabled by technology, which
will accelerate operational gearing for both us and our franchisees in the
coming years. This progress will support our medium-term ambitions of growing
system sales to c.£600m and Adjusted EBITDA of c.£60m in 2027, and given the
Group is highly cash-generative, we will continue to de-gear as previously
guided, giving me great confidence in the tremendous opportunity ahead."
** Adjusted EBITDA is earnings before interest, tax, depreciation,
amortisation, exchange differences, share-based payment expense and
non-recurring items.
*** Adjusted EPS is earnings per share before amortisation of acquired
intangibles, share-based payment expense, exchange differences and
non-recurring items.
****Adjusted net debt is the key debt measure used for testing bank covenants
and excludes debt of £7.6m on right-of-use assets.
*****Less the cash acquired, net of share issue costs
Enquiries:
Franchise Brands plc + 44 (0) 1625 813231
Stephen Hemsley, Executive Chairman
Julia Choudhury, Corporate Development Director
Allenby Capital Limited (Nominated Adviser and Joint Broker) +44 (0) 20 3328 5656
Jeremy Porter / Liz Kirchner (Corporate Finance)
Amrit Nahal / Joscelin Pinnington (Sales & Corporate Broking)
Dowgate Capital Limited (Joint Broker) +44 (0) 20 3903 7715
James Serjeant / Nicholas Chambers
Stifel Nicolaus Europe Limited (Joint Broker) +44 (0) 20 7710 7600
Matthew Blawat
MHP Group (Financial PR) +44 (0) 20 3128 8100
Katie Hunt / Catherine Chapman +44 (0) 7884 494112
franchisebrands@mhpgroup.com (mailto:franchisebrands@mhpgroup.com)
About Franchise Brands plc
Franchise Brands is an international, multi-brand franchisor focused on B2B
van-based service with 7 franchise brands and a presence in 10 countries
across the UK, North America and Europe. The Group is focused on building
market-leading businesses primarily via a franchise model and has a combined
network of over 625 franchisees.
The Company owns several market-leading brands with long trading histories,
including Pirtek in Europe, Filta, Metro Rod and Metro Plumb, all of which
benefit from the Group's central support services, particularly technology,
marketing, and finance. At the heart of Franchise Brands' business-building
strategy is helping its franchisees grow their businesses: "if they grow, we
grow".
Franchise Brands employs c700 people across the Group.
For further information, visit www.franchisebrands.co.uk
(https://protect.checkpoint.com/v2/___http:/www.franchisebrands.co.uk/___.bXQtcHJvZC1jcC1ldXcyLTE6bmV4dDE1OmM6bzpjZWY1NTAzMjM5NzgwNzM5Mzg4MDk1MDY1ZDBhYWI3Mjo2OjAzODI6NTA0ZDU2ZDM2MWY2NmVhNjZjZDU2NTVlOTI4ZjQ4OTQ0MWUyOWFmMjBmZWM4MGNiY2I2M2I3ZWZjZjc5OGY1ZjpwOlQ)
CHAIRMAN'S STATEMENT
Introduction
2023 has been another year of momentous change for the business with the
acquisition of Pirtek, which has again doubled the size of the Group,
following the doubling in size in 2022 as a result of the acquisition of Filta
Group Holdings plc. The expanded Group now operates seven brands in ten
countries in the UK, Continental Europe and North America, giving it a more
diversified international footprint and a broader range of resilient business
services. The Group generated System sales of £350m in 2023 (statutory
revenue: £121.3m).
The enlarged Group performed strongly in the period, generating both the
anticipated profitability and the cashflow required to service and reduce the
debt taken on to fund the Pirtek acquisition. The Group will use the cash flow
from its highly cash-generative, mainly franchised businesses to de-gear and
anticipates being in a net cash position in 2027, with this enhanced value
accruing to shareholders.
Pirtek Europe
On 20 April 2023, we acquired the entire share capital of Hydraulic Authority
I Limited and its subsidiaries, (together "Pirtek"). Pirtek is an established
provider of on-site hydraulic hose replacement and associated services. The
service is provided via 73 franchises that operate through 217 service centres
with over 850 mobile service units ("MSUs"). Its revenues are primarily
derived from franchising.
Pirtek operates in eight European countries: the UK, Germany, the Netherlands,
Belgium, France, Sweden, Austria and the Republic of Ireland. In the UK,
Germany, the Netherlands, Belgium and the Republic of Ireland, the business is
mostly franchised, whereas the operations in the start-up markets of France
and Sweden are corporately operated. Pirtek has a significant opportunity to
expand into eight additional European countries under the terms of its master
licence agreement, which gives it perpetual, royalty-free use of the brand in
16 European countries. However, our priority is to achieve profitability in
all existing countries before venturing into new markets.
The Pirtek division generated total System sales of £126.0m (statutory
revenue: £42.0m). The more developed franchise markets have national coverage
and are highly profitable, whereas the start-up corporate markets in France
and Sweden and the small Austrian operation have yet to reach scale and only
make a small profit.
The resilient underlying demand for Pirtek's essential reactive services
resulted in the division trading at record levels during our eight months of
ownership in 2023, despite some softening in demand in the second half of the
year in the construction and hire-fleet customer sectors that particularly
impacted Pirtek in the UK and Germany. These sectors have remained subdued in
the year to date, but other Pirtek customer sectors are growing strongly,
including waste management, logistics and rail.
Following the completion of the acquisition, we reviewed Pirtek's management
structure and concluded that the previous holding company management
structure, which was needed as an independent private equity-owned business,
was unnecessary as part of a larger group. The objective was to integrate the
Pirtek business into Franchise Brands and share as many resources as possible.
This integration is being led by Chris Stuckey, previously Managing Director
of Pirtek UK, who was promoted to CEO of Pirtek Europe.
An area of particular focus is IT, where Pirtek has a variety of both works
management and financial systems, and we have the objective of unifying these,
and other systems around the Group, onto common platforms.
With only a modest amount of adaptation, our in-house works management system,
Vision, will be an ideal replacement for the Pirtek works management system,
and thereby save third party licensing costs. This will result in improved
functionality, cost savings and sharing of information for both the
franchisees and at corporate level.
We are also working on the closer integration of the Pirtek businesses in the
various countries, which, under previous private equity ownership, have
historically operated on a more stand-alone basis. We also see a significant
opportunity for co-operation with the Metro Rod and Filta businesses at both
the franchisee and corporate levels. By sharing resources, knowledge and
particularly customers, we believe that growth in System sales for the whole
group will be accelerated and overhead costs reduced.
The Pirtek business has a significant opportunity to continue growing in its
existing more developed markets through the expansion of its reactive business
and by extending the range of services offered. The earlier-stage markets of
France, Sweden, and Austria also have huge potential to reach scale and
national coverage, particularly where the competition is fragmented. In
addition, Pirtek has the opportunity to expand into eight more European
markets, which will be developed when the existing early-stage markets become
more mature and profitable.
Water & Waste Services division
As most of the group's businesses now operate in the B2B environment, we have
renamed the B2B division the Water & Waste Services division, which more
accurately describes its activities.
This division includes the UK-based businesses Metro Rod, Metro Plumb, Kemac,
Willow Pumps, the Filta UK direct labour operations ("DLO") and the Filta
Environmental franchise network. The Filta businesses are included for the
full 12 months in this period compared with ten months in 2022 following the
acquisition in March 2022. Overall, System sales grew by 18.2% to £106.7m
(statutory revenue: £48.9m), with Metro Rod and Metro Plumb being the main
drivers of this increase.
Metro Rod, Metro Plumb and Kemac
Metro Rod and Metro Plumb delivered continued strong momentum, with System
sales growing by 19.7% in the period to £71.6m (statutory revenue: £15.2m).
The rate of growth, however, slowed in H2 to 16% compared with 24% in H1. This
resulted from a planned reduction in our dependency on fixed price, high
volume, emergency work that provides no potential upside for further work. The
valuable labour resources that have been freed up are driving our average
order value, which increased by 12% during the year on a 7% increase in
jobs completed.
This growth was spread throughout almost the entire network, with 86% of our
42 Metro Rod franchisees growing their businesses in the period (2022: 91%)
and 48% growing by more than 20% year-on-year (2022: 61%).
Metro Plumb continued to expand with 18 stand-alone and 19 combined Metro
Plumb/Metro Rod franchisees, and six territories operated by Kemac. This
results from seven new stand-alone franchisees and two leavers over the
previous 12 months. Metro Plumb System sales grew by 22% and now represent
9.6% of total Metro Rod and Metro Plumb System sales in 2023. We continue to
focus on increasing the number of stand-alone franchisees and broadening the
customer base in both the commercial and domestic plumbing sectors.
Kemac, the London-based DLO plumbing business that operates Metro Plumb
corporate franchises and provides specialist services to several water
utilities increased its revenues by 10.5% in 2023.
Willow Pumps
Willow Pumps revenue grew by 2.7% to £18.7m (2022: £18.2m), following a
significant slowdown in H2. However, this can be attributed to the new
management team, which assumed control of the business towards the end of H1,
and shifted it away from activities that produced significant sales but little
profit, such as above-ground installations and adoptable pump stations. A
"special projects" division was also launched during the year focused on work
that would be beyond the scope of the Metro Rod franchise network. We expect
this new activity to make a significant contribution in future years.
The Metro Rod corporate franchises in Kent & Sussex operated by Willow
Pumps were successfully split up and sold to two neighbouring Metro Rod
franchisees in H2.
Filta UK
Filta UK has undergone a period of considerable change since being acquired in
March 2022. Following the initial management reorganisation, which returned
the business to profitability, we have continued to review how best to deliver
the wide range of services offered by this business, which was made up of the
original and much-neglected Filta Environmental franchise network and two
acquisitions that had not been effectively integrated. Some of these services
duplicated Metro Rod and Willow Pumps services or could be more efficiently
serviced by a re-invigorated Filta Environmental franchise network.
As a result of our review, the following further actions have been taken:
· The servicing of Grease Recovery Units ("GRUs") previously undertaken
by direct labour has been largely transferred to the Filta Environmental
franchise network. This has significantly improved the economics of these
franchisees' businesses and has allowed us to begin expanding this network.
This transfer has reduced our corporate sales and profits but will allow us to
build a more robust and sustainable long-term business model, which can be
expanded nationally on a franchise basis.
· The previous distribution arrangement for the supply of the Cyclone
GRU has been terminated, and we have acquired the intellectual property rights
associated with this unit. We have sub-contracted manufacturing, and now have
a reliable supply chain of one of the best-performing GRUs on the market. This
will help ensure a consistent supply to our existing customers. It also
provides us with the ability to push ahead with marketing to new customers in
this rapidly growing market where the treatment of waste water to reduce fats,
oil and grease being discharged into the public sewerage system has become a
legal requirement.
· The FiltaSeal business, which provides a cost-effective service
replacing fridge and freezer seals on-site for a wide range of customers, is
being expanded as a DLO by recruiting more technicians and by additional
marketing to the Group's expanded customer base.
· Overall, Filta UK System sales increased by 35.0% to £12.3m (2022
ten months: £9.1m) and on a like-for-like basis by 13% despite the transfer
of servicing business to the franchisees. Now that most of the necessary
structural changes have been implemented, we expect further significant
progress in 2024.
Filta International
Filta North America System sales increased 34% to $108.2m (statutory revenue:
$33.0m) and by 12% on a like-for-like basis. In sterling, System sales
increased by 30% to £87.0m (2022 ten months: £66.7m) and by 8% on a
like-for-like basis. The management team in North America continued to develop
the FiltaMax strategic growth initiatives based on the Maximum Potential Model
and experienced robust activity across all key customer sectors. Our focus is
now on over 50 metro areas where franchisees can build businesses of scale.
Used oil volumes, sold for recycling into biodiesel, increased by 25% to 6.2m
gallons, and to accommodate this, more franchisees have been installing 6,000
gallon tanks. However, in local currency, this was more than offset by a fall
in the average weighted selling price of 21% compared with 2022, resulting in
a 1% year-on-year reduction in revenue. In sterling term, a decline in the
average weighted price of 22% resulted in a decline in revenue of 3%. At the
start of 2024, the price of used oil continued to decline but has now
stabilised at a lower level, impacting revenue and margin in the current year
for both us and our franchisees.
Excluding the revenue from used oil sales and on a like-for-like basis, System
sales in North America increased by 19% in local currency and 12% in sterling.
To reduce our reliance on used oil sales and to better align us with our
franchisees we are transitioning towards an income model based on management
service fee ("MSF"). This will be introduced as fast as possible but in some
cases may have to wait until the renewal of the franchise agreement, which
could be as long as nine years.
The range of services offered to our commercial kitchen customer base is also
being expanded with the addition of new bulk virgin oil sales and a kitchen
cleaning service, on which MSF will be immediately payable. The delivery of
virgin oil (FiltaGold) has been developed with the roll-out of bulk oil
handling equipment to franchisees. This will enable them to buy virgin oil in
bulk, dispense it into reusable 17-litre "jugs", and profitably supply it to
customers at a competitive price. An additional attraction to our customers is
the ESG benefits arising from the reduction in the waste they generate from
the use of reusable jugs, which will be reported to them in the monthly
Environmental Statement that Filta provides.
We have also strengthened the management team of the North American business
by recruiting John Michals as Chief Operating Officer. John joined Filta as
the franchisee for New Jersey just before the COVID lockdowns but has
subsequently led one of the fastest-growing franchises in the network. He is
well respected by his fellow franchisees, having previously been President of
the Filta Franchise Association. We look forward to working with John and
using his valuable experience to accelerate the growth of the Filta system in
North America.
Filta's European markets are at an earlier stage and require more work to
develop a compelling corporate and franchise model. A number of different
strategies are being considered at present to grow this business and eliminate
its small losses, including merging the overhead with the established Pirtek
business in Europe.
Filta is an almost unique business, with virtually no direct competition and a
huge potential market in the US, where customers can benefit from both the
cost savings resulting from oil filtration and the environmental benefits
arising from the responsible recycling of used oil and fats, oils and grease
("FOG") management. This business has real traction in the US and is poised
for significantly accelerated expansion with the strengthening of the
management team.
B2C division
The B2C division comprises the ChipsAway, Ovenclean and Barking Mad franchise
businesses. The franchise recruitment and retention environment in the UK
continues to be challenging. Record employment levels, high wages, high
interest rates, and elevated inflation have made people more risk-averse and
less attracted to self-employment, even in the relative safety of a franchise
model.
Notwithstanding this backdrop, franchise recruitment in 2023 matched that for
2022, with 39 new franchisees joining our B2C brands, and the number of
leavers declined from 69 to 59. Overall, we closed the year with 327
franchisees compared to 347 at the end of 2022. In a difficult market, we
consider this to be a creditable performance.
In early 2023, we announced that we intended to seek a buyer for the B2C
division. While offers were received, these did not meet our expectations, so
we decided to suspend marketing activity until further notice. This remains
the current position.
Digital transformation
In my 2020 statement, I announced a three-year journey to further develop our
IT systems so that jobs could eventually be booked online, deployed to an
engineer, reported to our customer, and billed with minimum human
intervention. I anticipated that efficiency gains and enhanced sales
opportunities would cover the additional cost of the more extensive
digitisation of the business and thereby have very little effect on short-term
profitability.
Most of the 2020 technical objectives have been met and are being rolled out
across the business. The recent acquisitions of Filta and Pirtek have given us
the opportunity to implement these developments on an international basis and
further enhance them with the new tools available through AI. As an
international group that is now more visible, we also need to be ever-more
vigilant in cyber security.
We are now taking a further strategic step by creating a centralised
international IT function. This function will manage every aspect of the
digital landscape for the whole business, ensuring efficient day-to-day IT
operations and accelerating new developments that can positively impact the
group. This move builds on the expertise we acquired with Azura, enhancing our
systems and platforms. Our aim is to migrate most of our UK and European
businesses onto a uniform platform based on our "Vision" works management
system and a new accounting system, further streamlining our operations.
This will once again increase our IT expenditure in the short term, but as we
replace third-party systems, on which we pay licence fees, with our own
internally developed systems, the additional costs of the roll-out
will decline.
Azura, already a SaaS supplier to around 30 non-group franchise businesses, is
also growing as its work for the group enhances its software platforms, making
them more attractive to larger third-party users. I anticipate this business
becoming a more significant contributor to group profits over
the coming years.
Corporate governance
In line with the expansion of the Group and our ambitions for the future, we
have developed our corporate governance by introducing a two-tier Board
structure. The plc Board now comprises two Executive Directors and three
Non-executive Directors, two of whom are independent. I am pleased to welcome
to the plc Board Mark Fryer, who joined us as Chief Financial Officer in
August, and Peter Kear, who joined us as our Senior Independent Non-executive
Director in October. I am also pleased to welcome Rob Bellhouse, previously an
independent Non-executive Director, as Company Secretary.
The Management Board is made up of the Chairman, the Chief Financial Officer,
the divisional CEOs, the Directors of the central support functions, and the
Company Secretary. It is responsible for the day-to-day operational and
financial management of the business and the delivery of the Group's strategic
plan.
Corporate development and capital allocation
Following the acquisition of Filta and, more recently, Pirtek, our strategic
focus is on integrating these businesses into the Group and repaying the
acquisition debt facilities.
We will also seek to organically grow System sales by cross-selling all group
services into our enlarged customer base, and expanding the range of services
offered to deepen and widen this customer base. We will also seek to use our
shared central services of finance, IT, and marketing to enhance the
effectiveness of all our businesses while looking to reduce costs by sharing
resources.
Capital allocation decisions will balance debt reduction, a progressive
dividend policy and organic investment in the Group. The Board does not expect
to make any further acquisitions of scale until the Pirtek acquisition debt is
substantially repaid.
Outlook
The acquisitions of Filta and Pirtek have significantly advanced our ambition
of building a market-leading international B2B multi-brand franchisor that
generates its income equally from the UK, North America and Continental
Europe. The resilient underlying demand for the Group's essential reactive
services means that the business continues to perform well and grow. Its key
divisions all achieved record results in 2023, despite some softening in
demand in the second half of the year in the construction and hire-fleet
customer sectors which has continued into the current year.
The reduced pricing being received for used oil in the US also impacted
profits in 2023, and whilst volumes continue to grow, the price continues to
soften which will impact our income in 2024. The change in the accounting
treatment of franchise recruitment income from taking revenue upfront to
spreading it over the life of the franchise agreement may also impact profit
in 2024.
Our short-term operational focus is integrating all the Group's businesses and
repaying the Pirtek acquisition debt, which is progressing well. We are
beginning to share resources internationally, particularly in IT, which will
accelerate our operational gearing for both us and our franchisees in the
coming years.
The Maximum Potential Model, which we use to estimate the size of the markets
in which we operate, demonstrates the significant opportunity we have for all
our B2B businesses. The Group's System sales in 2023 were £350m, but we
estimate the maximum market potential for Metro Rod, Filta International, and
Pirtek, based on just the existing range of services we offer,
to be £1.8bn.
We have incorporated this methodology into a medium-term strategic model that
we set out at our Capital Markets Day on 20 February 2024. The strategic model
underscores the Group's medium-term ambitions of growing System sales at a
compound rate of 11-12% to achieve c.£600m in 2027. Operational gearing,
enabled by technology, will also be a significant driver of Adjusted EBITDA
growth. Our operational gearing KPI is the ratio of Adjusted EBITDA to System
sales which in 2023 was 8.6%. We aim to improve this by 30 basis points per
annum, which, if achieved, would result in an Adjusted EBITDA of c.£60m in
2027.
As a franchised business, the Group is highly cash-generative, and we will use
this cash flow to de-gear, with the modelling indicating that we will be in a
net cash position by the end of 2027. Whilst this is not a forecast, it
demonstrates the tremendous opportunity we have and gives me great confidence
in our future prospects.
Conclusion
2023 has been another busy year as we build a Group with a truly international
reach.
I would like to welcome our new colleagues at Pirtek and look forward to
working with them for many years to come. 2024 is bringing a changed focus as
we work on integrating the recent acquisition and repaying our debt, but I am
not expecting this to be any less exciting for the excellent corporate team we
are building.
Of course, none of this would have been possible without our dedicated
franchisees, so I would also like to thank them for their continued hard work
and commitment to building our great business. We truly believe that if our
franchisees grow, we grow.
Stephen Hemsley
Executive Chairman
19 June 2024
FINANCIAL REVIEW
At close of business on 20 April 2023, we acquired the entire share capital of
Hydraulic Authority 1 Limited and its subsidiaries (together "Pirtek" or
"Pirtek Europe"). The acquisition was announced to the Stock Exchange on 21
April 2023. The Group's results for the year ended 31 December 2023 therefore
include a maiden contribution, for just over eight months, from Pirtek; the
first full-year contribution from Filta, which was acquired in March 2022, and
the B2C division, which is included as a continuing operation as it is no
longer being actively marketed for sale.
Systems sales, which comprise the underlying sales of our franchisees and the
statutory revenue of our Direct Labour Operations ("DLO"), increased by 88% to
£350.1m in the period (2022: £186.4m). System sales are a KPI of the Group
and are considered a good indicator of Group performance as it allows total
sales to end customers to be visible on a comparable basis across all
businesses within the Group. Statutory revenue comprises many different types
of revenue, including the MSF, which is now recorded on a net basis, as well
as the statutory revenue of our DLOs. Statutory revenue increased by 74% to
£121.3m (2022: £69.8m) after the prior year adjustments referred to below.
A strong trading performance and continued efficiency gains combined with cost
savings from integrating Filta and Pirtek have enabled the Group to increase
Adjusted EBITDA by 97% to a record £30.1m (2022: £15.3m). Adjusted EBITDA,
although an alternate performance measure, is the most important KPI used in
managing the business. Overall Adjusted EBITDA / System sales for 2023 has
grown to 8.6% (2022: 8.2%), demonstrating the operational gearing arising from
the integration of the acquisitions and the continuing digitisation of the
business.
Another important KPI of the business, which drives organic investment, debt
repayment and dividends, is cash conversion (cash from operations / Adjusted
EBITDA). Excluding the acquisition and re-organisation costs for Pirtek in
2023 and Filta in 2022, the cash conversion rate increased to 100% (2022: 90%)
demonstrating the strong cashflow performance of the Group's
franchise businesses.
Prior Year Adjustments
Following the Group's recent material acquisition and subsequent increase in
market capitalisation, the Group has become an Other Entity of Public Interest
("OPIE") and as such the audit of its accounts is now in scope for the
purposes of the Financial Reporting Council's audit quality review processes.
Following challenges from our auditors, BDO LLP as part of the audit process
on the application of accounting standards, we have extensively reviewed our
existing accounting policies to ensure they comply with the latest accounting
standards and are consistent across the enlarged Group. This has caused a
significant delay in publishing this year's results. We are confident this
will not re-occur in future years.
As a result of this extensive review, several prior year adjustments are
incorporated into the 2023 statements to reflect corrections needed in the
2022 Annual Report. The adjustments are laid out in greater detail in Note 1
on pages 127 to 128 of the Annual Report. The overall impact of the
adjustments in 2022 is a reduction in statutory revenue of £29.3m and a
reduction in adjusted EBITDA of £0.0m. The principal adjustments are:
· We have identified that certain transactions in the Group's Metro Rod
Limited, The Filta Group Limited, Filta Deutschland GmbH and ChipsAway
International subsidiaries had been incorrectly treated in respect of IFRS 15.
National account revenue has historically been treated gross, with these
subsidiaries being the principal. We are now treating this revenue net, as
following consideration of the underlying contracts, facts and circumstances,
we consider these subsidiaries to be acting as a commission agent for their
franchisees.
· The businesses only have momentary control of the incoming order
following acceptance of the job ahead of passing it to the incumbent franchise
in a back-to-back arrangement where local Franchisees have a right of first
refusal on the order received. Operational fulfilment also rests with the
franchisee. The impact of this is to reduce revenue in the year ended 31
December 2022 by £29.3m, with an equivalent reduction in cost of sales; there
is no profit impact of this change.
· We have identified further transactions in the Metro Rod Limited
subsidiary that have been treated incorrectly in respect of IFRS 15. National
account revenue has historically been recognised at the point of invoice, as
we considered this to be our performance obligation. We now consider our
performance obligation to be the passing of the work order to the franchisee,
having considered the underlying contracts, facts and circumstances.
Therefore, revenue is now recognised at this point. The impact of this is to
increase revenue and profit before tax in the year ended 31 December 2022 by
£0.2m. In the Consolidated Statement of Financial Position this adjustment
increases Trade and Other Receivables for Accrued Income by £3.5m (2021:
£2.6m), increases Trade and Other Payables for Accruals by £2.7m (2021:
£2.1m) and increases Retained Earnings by £0.7m (2021: £0.6m). In the
Consolidated Statement of Cashflows the impact is an increase in profit of
£0.2m, a £0.8m reduction in cash flows from trade and other receivables and
a £0.7m reduction in cash flows to trade and other payables.
· We have identified that certain transactions in the Group had been
incorrectly treated in respect of IFRS 15 in regard to the timing of
recognising franchise sales and related training fees. Within Metro Rod
Limited, ChipsAway International Limited, Ovenclean Limited and Barking Mad
Limited in the past we have recognised the initial franchise fee when we have
delivered the training for the new franchises to operate in line with the
necessary standards on completion of the franchise sale (at a point in time).
This is however considered a pre-opening activity necessary for the franchisee
to operate and not a distinct performance obligation in the franchisee
contracts of these subsidiaries. We are now recognising this revenue over the
life of the franchise agreement on a straight line basis, as our obligation is
to provide a license for the franchise to operate, which extends over the life
of the agreement. The impact of this is to reduce revenue and profit before
tax in the year ended 31 December 2022 by £0.2m. At 31 December 2022 this
also created current deferred income of £0.1m (2021: £0.3m) and non-current
deferred income of £0.1m (2021: £0.5m), increased liabilities held for sale
by £0.8m (2021: nil), decreased assets held for sale by £0.1m (2021: nil),
reversed previously held other debtors of nil (2021: £0.1m) and decreased
Retained Earnings by £1.1m (2021: £0.9m) in the Consolidated Statement of
Financial Position. In the Consolidated statement of Cashflows this decreased
profit by £0.2m, increased cashflows from receivables £0.0m and decreased
cashflows to payables £0.2m.
· Franchise Brands plc acquired Filta Group Holdings plc in March 2022.
A valuation exercise was completed in the prior year as part of the purchase
price allocation exercise as required by IFRS 3. Corrections required were
identified, including incorrect rates and unsuitable valuation models for
certain intangibles. Another valuation was completed to correct these points
subsequent to the 12-month measurement period.
· The review occurred outside the permitted time period, and as such
requires correction as a prior year adjustment, not as a fair value
adjustment. The revaluation decreased the fair value of intangibles acquired
by £1.0m (reduced software acquired by £2.7m, reduced indefinite life brands
by £0.1m, patent technology by £0.4m and customer relations by £0.6m;
however, increased franchise agreements by £2.8m) and reduced the deferred
tax liability by £0.3m at recognition with the corresponding impact being a
£0.7m increase in goodwill. The impact on the Consolidated Statement of
Income is a £0.2m increase in amortisation of acquired intangibles and a
£0.0m increase in relation to the deferred tax credit. The impact on the
Consolidated Statement of Financial Position is a £0.4m reduction in
intangible assets and a £0.3m decrease in deferred tax liability. The impact
on the Consolidated Statement of Cash Flows is a £0.1m reduction in profit, a
£0.2m increase in the adjustment for amortisation of acquired intangibles and
a £0.0m decrease in the adjustment for income tax with nil impact to
operating cash flows.
· In previous periods cash transferred to the Employee Benefit Trust
(EBT) was included as part of the EBT reserve. As this cash is held on our
behalf, it is now accounted for in cash and cash equivalents. This has
increased cash at 31 December 2022 by £0.1m and increased cash at 31 December
2021 by £0.0m in the Consolidated and Company Statement of Financial Position
with the corresponding decrease in the EBT reserve. In both the Consolidated
and Company Statement of Cashflows this has decreased the purchase of shares
by the EBT £0.1m, increased cash at the beginning of the period by £0.0m and
increased cash at the end of the period by £0.1m.
· Cash outflows of £1.7m for the year ended 31 December 2022 with
regards to deferred consideration were incorrectly presented as operating cash
outflows. As the deferred consideration was related to the purchase of Willow
Pumps Limited, these should be recorded as investing activities. As a result,
these have been reclassified in the Consolidated and Company Statement of Cash
Flows for the year ended 31 December 2022, increasing cash flows from
operations by £1.7m and increasing cash outflows from investing activities by
£1.7m, with no overall impact on cash flows.
· The company incurred costs of £1.0m in the acquisition of Filta
Group Holdings, expensed as non-recurring costs. Of this, £0.9m were directly
attributable costs therefore the treatment of this was incorrect, in
accordance with IAS 27 that requires measurement of investment in subsidiaries
at cost for the Company. The correction removes these non-recurring costs and
increases the investment in group companies. This change is reversed on
consolidation in line with IFRS 3 and so has no impact on the Consolidated
Statement of Comprehensive Income. In the Company Statement of Comprehensive
Income it decreases non-recurring costs by £0.9m and increases profit £0.9m.
In the Company Statement of Financial Position, it increases investment in
subsidiaries by £0.9m; and in the Company Statement of Cash Flows there is a
£0.9m increase in cash flows used in the acquisition of subsidiaries.
· We have identified that corrections were required in recording
intercompany debtors in the company, as they had been incorrectly netted off
against creditors in the prior periods. These were originally shown within
Trade and Other Payables, so adjustments to the Company Statement of Financial
Position were required to increase both Trade and Other Receivables and Trade
and Other Payables by £0.6m (2021: £0.3m). There is no change to profit or
reserves. The adjustments had no overall impact on cashflows. In the Company
Statement of Cashflows it decreased cash flows from trade and other
receivables by £0.3m, with an equivalent decrease in cash flows to trade and
other payables.
· We have identified that corrections were required in relation to the
treatment of trade debtors recognised in Metro Rod Limited for Local Account
sales. In such transactions, the work is sourced by the Franchisee but billed
by Metro Rod Limited. The Group is obtaining MSF Royalty income only on the
transaction and does not have the credit risk for the full amount. Trade
debtors should, therefore, reflect only the amounts due to the Group being the
MSF Royalty income. If advanced payments are made to the franchisee before
receipt of the full payment from the customer, this should be recorded as a
franchisee loan debtor. Given that this is a contractual obligation to the
franchisee, the Group has recorded the open commitments at year-end in Note
22. When payment is collected from the customer the assets recorded are
de-recognised and a trade payable recorded for the amounts due to the
Franchisee. The impact to the Consolidated Statement of Financial Position is
a £0.1m (2021: £0.4m) reduction in trade and other receivables and a
reduction of £0.1m (2021: £0.4m) in trade and other payables. There is no
impact on the Consolidated Statement of Cash Flows. The impact on the
Consolidated Statement of Cash Flows is a £0.2m reduction in cash flows from
trade and other receivables and a £0.2m reduction in cash flows to trade and
other payables.
The following restatements have been made to improve disclosures:
· Within Note 7 of the financial statements, prior year revenue has
been disaggregated further to better understand the Group's revenue streams to
ensure compliance with the requirements of IFRS 15.
· Within Note 14 of the financial statements prior year, intangible
assets with indefinite useful lives have been disaggregated further to show
Filta International and Filta UK as separate CGUs in line with the conclusions
reached by Group management in the prior year. There is no impact on
intangibles. The note now also includes the recoverable amount for all CGUs as
required by IFRS.
· In Note 5 of the financial statements, the segment reporting note has
been restated to show the assets arising from the consolidation as unallocated
assets rather than assets from another segment.
· Within Note 6 of the financial statements additional disclosures have
been made within the Filta Group Holdings section regarding the primary
reasons for the business combination, and the amounts of revenue and profit or
loss of the acquiree since the acquisition date included in the consolidated
statement of comprehensive income for 2022 as required by IFRS 3.
· Within Note 4 of the financial statements we have restated trade and
other payables within the categories of financial instruments table, as it
previously included deferred income, which is not defined as a financial
instrument.
Summary statement of income
2023 2022 Change Change
£'000
(restated)
£'000
%
£'000
System sales 350,053 186,353 163,700 88%
Statutory revenue 121,265 69,839 51,426 74%
Cost of sales (50,060) (33,898) (16,162) 48%
Gross profit 71,205 35,941 35,264 98%
Administrative expenses (41,104) (20,684) (20,420) 99%
Adjusted EBITDA 30,101 15,257 14,844 97%
Depreciation & amortisation of software (4,417) (2,281) (2,136) 94%
Finance expense (5,711) (235) (5,476) 2330%
Impairment loss (96) - (96) 100%
Foreign Exchange (146) - (146) 100%
Adjusted profit before tax 19,731 12,741 6,990 55%
Tax expense (5,153) (2,560) (2,593) 101%
Adjusted profit after tax 14,578 10,181 4,397 43%
Amortisation of acquired intangibles (7,718) (1,693) (6,025)
Share-based payment expense (838) (535) (303)
Non-recurring items (6,159) (1,708) (4,451)
Other gains and losses - 1,232 (1,232)
Tax on adjusting items 3,174 649 2,525
Statutory profit 3,037 8,126 (5,089) (63%)
Divisional trading results
Following the acquisition of Pirtek, the decision was taken to rename the B2B
Division as Water & Waste Services division to better distinguish the
Group trading activities. The divisional trading results may be analysed as
follows:
Pirtek Water & Waste Services Filta International B2C Azura Inter-company 2023
£'000
£'000
£'000
£'000
£'000
£'000
£'000
System sales 125,976 106,661 90,482 26,189 745 - 350,053
Statutory revenue 41,947 48,880 27,117 6,106 745 (3,530) 121,265
Cost of sales (11,408) (23,284) (17,349) (1,207) (0) 3,188 (50,060)
Gross profit 30,539 25,596 9,768 4,899 745 (342) 71,205
GP% 73% 52% 36% 80% 100% 10% 59%
Administrative expenses (17,221) (14,689) (3,671) (2,583) (531) 342 (38,353)
Divisional EBITDA 13,318 10,907 6,097 2,316 214 - 32,852
Group overheads - - - - - - (2,751)
Adjusted EBITDA - - - - - - 30,101
Pirtek Water & Waste Services (restated) Filta International B2C Azura Inter-company 2022
£'000
£'000
£'000
(restated)
£'000
£'000
(restated)
£'000
£'000
System sales - 90,223 69,560 25,773 797 - 186,353
Statutory revenue - 42,473 23,750 6,138 797 (3,319) 69,839
Cost of sales - (20,111) (15,659) (1,063) (1) 2,936 (33,898)
Gross profit - 22,362 8,091 5,075 796 (383) 35,941
GP% 53% 34% 83% 100% 12% 51%
Administrative expenses - (13,112) (2,877) (2,618) (625) 383 (18,849)
Divisional EBITDA - 9,250 5,214 2,457 171 - 17,092
Group overheads - - - - - - (1,835)
Adjusted EBITDA - - - - - - 15,257
On consolidation, certain inter-company revenues and costs are eliminated to
reconcile the Group's statutory revenues, gross profit, and administrative
expenses to the underlying entities. These include the work undertaken by
Metro Rod on behalf of Willow Pumps and the IT development work undertaken by
Azura on behalf of various Group subsidiaries. The net effect on Adjusted
EBITDA is zero.
Pirtek Europe
Pirtek Europe operates through a network of depots providing on-site hydraulic
hose replacement in eight European countries. It was acquired in April 2023,
and therefore, the trading results summarised below comprise just over eight
months of
post-acquisition contribution.
Franchise DLO Central Costs 2023
£'000 £'000 £'000 £'000
System sales 118,687 7,289 - 125,976
Statutory revenue 34,771 7,292 (116) 41,947
Cost of sales (9,954) (1,570) 116 (11,408)
Gross profit 24,817 5,722 0 30,539
GP% 71% 78% 0% 73%
Administrative expenses (11,178) (5,305) (738) (17,221)
Adjusted EBITDA 13,639 417 (738) 13,318
Like other businesses in the Group, System sales comprise the sales made to
third parties by franchisees; franchise territories operated corporately in
each country; and by the DLO operations in the corporate markets of France and
Sweden. 94% of System sales were generated by franchisees and 6% by DLOs.
Statutory revenue is made up of MSF and other fee income generated from
franchisees (46%), the sale of materials used in the core hose replacement
business (25%), and the sales revenue generated by the corporate operations
(28%). The business also generates some revenue from the sale and resale of
franchise territories, but as the business has national coverage in its
largest markets of the UK, Germany and the Netherlands, this is less than 1%
of revenue.
When the Pirtek business in Europe was first established in 1998, the
franchise model was set up as it had been in other countries, with franchisees
paying a low percentage MSF but being tied in under the franchise agreement to
purchase all their materials from the franchisor at a mark-up. This structure
required constant policing to ensure compliance. In 2017, the company began
transitioning to the current model whereby materials are supplied at cost, and
a higher MSF Royalty income is received in exchange. This better aligns the
interests of the franchisee and franchisor in growing the business,
particularly where the service has a high labour, as opposed to material
element in the sale, such as with total hose management. The transition was
completed in the UK, the Republic of Ireland ("RoI"), Germany, and Austria
before the acquisition. It was finally completed in the Netherlands and
Belgium by the end of 2023.
The UK and the RoI are the most developed markets, generating £55.8m or 44%
of Pirtek Europe's System sales and £6.8m or 51% of its Adjusted EBITDA. RoI,
which is operated from the UK facility, was started in 1994 and generates 8%
of territory System sales. Both the UK and ROI are almost entirely franchised,
with only two corporate franchises in York and Aberdeen. Materials supplied to
franchisees make up 27% of the division's Statutory revenue, but these are
sold at a small margin, with almost all gross profit arising from the MSF on
System sales and other small fees that franchisees pay for training and other
add-on services.
Germany & Austria are the next most developed markets, with Germany having
been established in 1996. Austria, which was started in 2014 and is operated
from the German facility, generates 4% of territory System sales. The combined
business generated £46.5m or 37% of Pirtek Europe's System sales and £4.2m
or 32% of its Adjusted EBITDA. Like the UK, materials are supplied to the
franchisees at cost, and it only has one corporate franchise in Graz, Austria,
so once again, the vast majority of income is generated from MSF and other fee
income from franchisees.
Benelux, which comprises the operations in the Netherlands and Belgium, were
started in 1997 and 1998, respectively. Belgium, which operates from the
Netherlands facility, generates 19% of territory System sales. The combined
business generated £16.4m or 13% of Pirtek Europe's System sales and £2.6m
or 19% of its Adjusted EBITDA. Benelux operates six of the 24 depots as
corporate franchises, contributing 24% of System sales in these territories.
As mentioned above, Benelux only completed the MSF transition at the end of
2023, so gross profit was generated from both the margin on materials supplied
to franchisees and MSF on System sales.
The DLO operations in France and Sweden contributed £7.3m or 6% of the
division's System sales and £0.4m or 3% of its Adjusted EBITDA. These
early-stage operations do not have national coverage, making the acquisition
of national customers more challenging. Whilst they are currently sub-scale,
we intend to continue to invest in growing the footprint of depots and service
vans and expect them to make a more meaningful contribution over the coming
years. Like most franchise businesses, it is necessary to establish the
business model's viability in new territories before promoting the opportunity
to franchisees, which we may do in the future.
The central costs mostly represent the cost of the Pirtek Europe senior
management team based in Acton, London.
Water & Waste Services division
The Water & Waste Services division comprises Metro Rod, Metro Plumb,
Filta UK's franchise activities and the DLO operations of Willow Pumps, Filta
UK and Kemac. The organisation of these activities within this division
reflects both management responsibilities and our internal KPIs. The results
of the Water & Waste Services division may be summarised as follows:
Metro Rod Willow Pumps Filta UK 2023 Metro Rod (restated) Willow Pumps Filta UK 2022 (restated) Change Change
£'000 £'000 £'000 £'000 £'000 £'000 (restated) £'000 £'000 %
£'000
System sales 75,671 18,659 12,331 106,661 62,916 18,175 9,132 90,223 16,438 18%
Statutory revenue 19,203 18,659 11,018 48,880 15,641 18,175 8,657 42,473 6,407 15%
Cost of sales (4,020) (12,399) (6,865) (23,284) (2,747) (12,196) (5,168) (20,111) (3,173) 16%
Gross profit 15,183 6,260 4,153 25,596 12,894 5,979 3,489 22,362 3,234 14%
GP% 79% 34% 38% 52% 82% 33% 40% 53% (0%) (1%)
Administrative expenses (7,595) (4,406) (2,688) (14,689) (6,556) (4,134) (2,422) (13,112) (1,577) 12%
Adjusted EBITDA 7,588 1,854 1,465 10,907 6,338 1,845 1,067 9,250 1,657 18%
Metro Rod
Metro Rod comprises the franchise and direct labour activities of Metro Rod
and Metro Plumb and Kemac. The results may be summarised as follows:
2023 2022 (restated) Change Change
£'000 £'000 £'000 %
System sales 75,671 62,916 12,755 20%
Statutory revenue 19,203 15,641 3,562 23%
Cost of sales (4,020) (2,747) (1,273) 46%
Gross profit 15,183 12,894 2,289 18%
GP% 79% 82% (3%) (4%)
Administrative expenses (7,595) (6,556) (1,039) 16%
Adjusted EBITDA 7,588 6,338 1,250 20%
Overall, System sales at Metro Rod and Metro Plumb increased by 20% to a
record £71.6m (2022: £59.8m), compared to a 21% increase in MSF. We continue
to support Metro Rod's franchisees with initiatives to widen and deepen the
range of services offered, particularly those with a high average order value,
such as pump service, which increased by 21%, and tankering, which increased
by 23% during the year. These activities have an average order value of over
three times that of drainage.
Statutory revenue of £19m includes MSF; other fee income from franchise sales
& resale and training; DLO customers' revenue from corporate franchises
and Kemac; and the revenue generated from the National Advertising Fund
("NAF"). As MSF is the key driver of Adjusted EBITDA, it is re-analysed and
compared to System sales as follows:
2023 2022 (restated) Change Change
£'000 £'000 £'000 %
System sales 71,616 59,814 11,802 20%
MSF income 13,404 11,085 2,319 21%
Effective MSF % 18.7% 18.5% - 0.2%
Other gross profit 1,779 1,809 (30) (2%)
Gross profit 15,183 12,894 2,289 18%
MSF represented 69% (2022: 71%) of Statutory revenue and increased marginally
to 18.7% from 18.5% of System sales in 2023. We continue to use MSF incentives
to encourage franchisees to grow System sales, offering a lower rate in
activities where we are targeting growth. Therefore, the overall rate for the
year depends on the mix of sales and the level of allowable costs that may be
deducted from sales when calculating the MSF payable, which in turn depends on
the type of work undertaken. We anticipate the MSF percentage will decline
over time as System sales increase, driven partly by these incentives.
Other gross profit includes the gross profit generated by Kemac and the
corporate franchise in North Scotland and the gross profit on franchise sales
and resales. It also includes the costs incurred by the national advertising
fund, which is a non-profit generating and is run on behalf of the
franchisees.
Administration expenses grew by 16%, less than the 20% growth in System sales,
due to the operational gearing inherent in a franchise business, accelerated
by the continuing investment in the Group's digital transformation. As a
result of this operational gearing, Adjusted EBITDA grew by 20% to £7.6m
(2022: £6.3m).
Willow Pumps
Willow Pumps comprises the core DLO pump & business and the Metro Rod
corporate franchises in Exeter and Kent & Sussex (which was sold in the
second half of 2023).
The results for the division may be summarised as follows:
2023 2022 Change Change
£'000 £'000 £'000 %
Statutory revenue 18,659 18,175 484 3%
Cost of sales (12,399) (12,196) (203) 2%
Gross profit 6,260 5,979 281 5%
GP% 34% 33% 1% 2%
Administrative expenses (4,406) (4,134) (272) 7%
Adjusted EBITDA 1,854 1,845 9 0%
Willow Pumps' core business has historically had two distinct revenue streams:
Service revenue and Supply and install revenue ("S&I"). A third revenue
stream was launched in Q2 2023 with the establishment of a Special Project
Division.
S&I revenue is generated from the design, supply, and installation of pump
stations, which historically have been large projects performed in discrete
phases over several accounting periods. Service revenue is generated from the
routine service and maintenance of above and below-ground pumps and drains.
The new management team at Willow is migrating the business away from
high-revenue, low gross margin business in pump station design &
installation and above-ground pump work to higher margin work that can be
completed in shorter time frames. This is now being complimented by a newly
recruited team that runs the Special Projects Division. This work will include
more significant, longer-term work, but much of the risk and cash-flow
challenges will be mitigated by the use of subcontractors. We expect this new
activity to start contributing H2 2024.
Off-setting, to some extent, the move to higher-margin work is the increasing
amount of work that is being subcontracted to Metro Rod, which, whilst still
reflected in Willow Pumps revenue (before consolidation eliminations), is at a
far lower margin than would have been the case had it undertaken the work
itself. This is more efficient for the Group as it leverages Metro Rod's
national coverage in drainage and gives the Metro Rod engineers practical
experience in pump work following their training.
As a result of this business's changing focus, revenue has only increased by
3% during the period, but the gross margin contribution has increased by 5% as
the gross margin percentage increased to 34% from 33% in 2022. Overheads
increased by 7% as a result of the recruitment of the new team for the Special
Project Division. Overall, Adjusted EBITDA grew very marginally.
Filta UK
Filta UK comprises the DLO services of fridge & freezer seal replacement;
the supply, installation and maintenance of Grease Recovery Units ("GRUs");
extraction vent cleaning & servicing; pump & drainage repair and
maintenance; and the Filta Environmental network of 25 franchisees.
The results for 2023 and the comparative ten months from the acquisition in
March 2022 may be summarised as follows:
2023 2022 (restated) Change Change
£'000 £'000 £'000 %
System sales 12,331 9,132 3,199 35%
Statutory revenue 11,018 8,657 2,361 27%
Cost of sales (6,865) (5,168) (1,697) 33%
Gross profit 4,153 3,489 664 19%
GP% 38% 40% (2%) (6%)
Administrative expenses (2,688) (2,422) (266) 11%
Adjusted EBITDA 1,465 1,067 398 37%
System sales increased by 35% to £12.3m from £9.1m and on a like-for-like
basis by 13%. FiltaSeal grew strongly during this period as more technicians
were recruited, allowing us to service a larger range of national accounts
more efficiently on an increasingly country-wide basis. The revenue generated
from the installation of GRUs was impacted by a dispute with our supplier that
held up the delivery of these units. This has now been resolved through the
acquisition of intellectual property, and we expect strong growth in this area
in 2024 and beyond. The cost of resolving this matter was £0.8m, which has
been considered exceptional.
Statutory Revenue increased by 27% to £11.0m from £8.7m and has increased by
6% on a like-for-like basis. Administrative expenses were well controlled and
declined by 7% on a like-for-like basis, resulting from the annualisation of
overhead savings made following the acquisition in 2022 and further savings
made possible by subcontracting the GRU servicing work to franchisees.
Adjusted EBITDA increased by 37% to £1.5m from £1.1m and by 14% on a
like-for-like basis on System sales, up by 13% on a similar basis. This is
considered a creditable result as a significant margin is being transferred to
franchisees to improve their viability so that we can grow this franchise
system robustly and sustainably in the future.
Filta International
Filta International operates a franchise network that comprises Filta's
franchise activities in North America and mainland Continental Europe. The
results for 2023 and the comparative ten months from acquisition in March 2022
may be summarised as follows:
North America Europe 2023 North America Europe 2022 Change Change
£'000 £'000 £'000 £'000 £'000 £'000 £'000 %
System sales 87,004 3,478 90,482 66,700 2,860 69,560 20,922 30%
Statutory revenue 26,506 611 27,117 23,273 477 23,750 3,367 14%
Cost of sales (17,011) (338) (17,349) (15,398) (261) (15,659) (1,690) 11%
Gross profit 9,495 273 9,768 7,875 216 8,091 1,677 21%
GP% 36% 29% 36% 34% 36% 34% 2% 6%
Administrative expenses (3,171) (500) (3,671) (2,516) (361) (2,877) (794) 28%
Adjusted EBITDA 6,324 (227) 6,097 5,359 (145) 5,214 883 17%
System sales increased 30% to £90.5m (2022 ten months: £69.6m), a
like-for-like increase of 8%. The like-for-like increase in North America was
9% and 1% in Europe. System sales in North America comprise MSF income; used
oil sales; equipment and supplies sales; the fees generated from the sale and
resale of franchise territories; and national corporate accounts ("NCA"),
marketing and IT revenues.
MSF revenue in North America currently mainly consists of the fixed monthly
fee paid by the franchisees for each mobile filtration unit ("MFU") in
operation. The high price of used oil in 2022 and the early months of 2023
encouraged the franchises to expand their capacity by purchasing additional
MFUs. This drove MSF in 2023, which increased by 38% to £3.1m (2022: £2.3m)
and, on a like-for-like basis, by 13%. Our strategy is changing to one where
MSF will be based on System sales so that our interests are aligned with
franchisees and not focused principally on selling more MFUs. We hope to
negotiate this transition with each franchise as soon as possible.
Used oil revenues, all of which is generated in in North America, are derived
from the sale of used cooking oil for biodiesel production. Filta administers
the programme through national agreements with biodiesel companies, which
involves the franchisees collecting and storing the oil before local pick-up
via tankers organised centrally. On a like-for-like basis, volumes in 2023
increased by 25% over 2022 to 6.2m gallons, however, this was offset by a 21%
decline in the average dollar price. Used oil sales are accounted for on a
gross basis, with the margin reflected as gross profit. Filta's margin in 2023
averaged 17% (2022: 18%). Whilst reported revenue from used oil sales
increased by 8% to £17.6m from £16.3m and gross profit by 3% to £3.0 from
£2.9m, on a like-for-like basis, revenue and gross margin (in sterling)
declined by 10% and 14% respectively.
Equipment & Supply revenue in North America consists of revenue from
selling new and replacement MFUs, spare parts, and supplies to franchisees. In
2023, revenue increased by 14%, but on a like-for-like basis, it fell by 4%,
reflecting the franchisees' reduction in cashflow from the sale of used oil.
Area Sales revenue in North America is derived from the sale and resale of
franchise territories. Many new franchisees are introduced by external brokers
who are paid a 5-10% commission. The commission payable is recognised when the
transaction is completed. Six new franchises and seven resales were completed
during the period.
The NCA, marketing, and IT revenues in North America are the additional fees
charged to franchisees for generating and administering the national accounts
and providing marketing and IT systems. Revenue from these high-margin
activities increased by 49% in 2023 or 24% on a like-for-like basis,
reflecting the strong growth in the core franchise business. The NCA revenues
will eventually be absorbed in the percentage MSF as this is rolled out.
Overall, Adjusted EBITDA in North America, including oil sales, increased by
18% to £6.3m (2022: £5.4m). If the gross margin on oil sales is excluded and
without any reapportionment of central overheads, Adjusted EBITDA from the
core franchise business grew by 37% to £3.3m (2022: £2.4m) or 14% on a
like-for-like basis.
System sales in Europe are generated from fryer management, seal replacement
and GRU installations. Overall, System sales grew by 22% and on a
like-for-like basis by only 1%, although gross profit grew on a like-for-like
basis by 5%, reflecting the sales mix. The slow recovery of this sub-scale
business from the effects of the COVID-19 shutdowns continues. This has been
compounded by hold-ups in rolling out the GRU due to the supply problems that
also impacted Filta in the UK, referred to above. In 2022, additional sales
people were recruited in an attempt to accelerate growth, but this has not
been successful, and the additional costs have resulted in an increased,
albeit relatively small, loss of £0.2m in the period.
B2C Division
The B2C division comprises the ChipsAway, Ovenclean and Barking Mad franchise
businesses. The results of the division may be summarised as follows:
2023 2022 (restated) Change Change
£'000 £'000 £'000 %
System sales 26,189 25,773 416 2%
Statutory revenue 6,106 6,138 (32) (1%)
Cost of sales (1,207) (1,063) (144) 14%
Gross profit 4,899 5,075 (176) (3%)
GP% 80% 83% (2%) (3%)
Administrative expenses (2,583) (2,618) 35 (1%)
Adjusted EBITDA 2,316 2,457 (141) (6%)
Overall, System sales of the B2C division grew by 2% in 2023. This was driven
by a 10% increase in the average order values at ChipsAway which represents
72% of divisional System sales. The key Statutory revenue streams are MSF and
Area Sales income. MSF income is primarily made up of fixed monthly fees, as
this remains the most effective method of generating income given the large
number of franchisees with a lower level of individual sales. MSF income
overall was flat as whilst the fixed monthly fee was increased, the number of
franchisees over the period reduced to 327 at 31 December 2023 (31 December
2022: 349). Notwithstanding the challenging franchise recruitment and
retention environment, ChipsAway performed robustly, recruiting 25 new
franchisees (2022: 20) with 30 leavers (2022: 40). Overall, 39 new franchisees
were recruited (2022: 39) and 59 (2022: 69) left the system.
Prudent cost control resulted in administrative expenses declining slightly
during the period. Adjusted EBITDA declined by 6% to £2.3m (2022: £2.5m),
but if the one-off £0.1m income from the sale of the MyHome domain name were
excluded from 2022, profits were flat year-on-year.
Azura
Azura is a SaaS supplier of franchise management software to the Group and 30
other franchise businesses. The 2023 results may be summarised as follows:
2023 2022 Change
£'000 £'000 £'000
Statutory revenue 745 797 (52)
Cost of sales (0) (1) 1
Gross profit 745 796 (51)
GP% 100% 100% 0%
Administrative expenses (531) (625) 94
Adjusted EBITDA 214 171 43
Statutory revenue is comprised of third-party income of £0.4m (2022: £0.4m)
and charges to Group companies of £0.3m (2022: £0.4m), which are eliminated
on consolidation. Azura continues to develop its software solution with £0.2m
capitalised in 2023, which will be amortised over a 5-year period. The
enhanced platform is now being targeted at larger international multi-site
franchisors rather than its traditional market of smaller domestic franchise
businesses. It has also been building its internal resources to support the
further digital enablement of the Group's businesses by improving the
functionality of the Vision works-management platform and developing this for
a roll-out to the Pirtek businesses in the UK and continental Europe.
Adjusted & statutory profit
2023 2022 (restated) Change Change
£'000 £'000 £'000 %
Adjusted EBITDA 30,101 15,257 14,844 97%
Depreciation & amortisation
of software (4,417) (2,281) (2,136) 94%
Finance expense (5,807) (235) (5,572) 2371%
Foreign exchange (146) - (146) 100%
Adjusted profit before tax 19,731 12,741 6,990 55%
Tax expense (5,153) (2,560) (2,593) 101%
Adjusted profit after tax 14,578 10,181 4,397 43%
Amortisation of acquired intangibles (7,718) (1,693) (6,025)
Share-based payment expense (838) (535) (303)
Non-recurring costs (6,159) (1,708) (4,451)
Other gains and losses - 1,232 (1,232)
Tax on adjusting items 3,174 649 2,525
Statutory profit 3,037 8,126 (5,089) (63%)
Software depreciation and amortisation increased 94% to £4.4m (2022: £2.1m),
primarily due to the acquisitions of Pirtek and the full twelve-month impact
of the Filta acquisition. The finance expense reflects the additional interest
cost of the debt taken to acquire Pirtek combined with the increasing base
rate over the year.
The overall effective tax rate of the Group has increased from 20% to 26% as a
result of the increase in the UK tax rate to 25%, a full-year charge in
respect of Filta North America, where the combined state and federal corporate
tax rate is 27%, and the acquisition of Pirtek, where tax rates can be higher
than in the UK. For example, the combined state, local, and trade taxes are
30% in Germany.
The non-recurring costs of £6.2m (2022: £1.7m) reflect the Pirtek
acquisition costs of £3.6m and the subsequent one-off re-organisation costs
of £1.5m, the one-off costs of the Filta Cyclone GRU dispute of £0.5m,
software written off as a result of the adjustments referred to above of
£0.3m, and other costs of £0.3m. The tax on adjusting items reflects the tax
relief available on some of these exceptional costs. The exceptional item in
2022 is mainly related to the acquisition and subsequent reorganisation costs
of the Filta acquisition.
The increase in the amortisation of acquired intangibles reflects the
additional intangible assets acquired with the Pirtek acquisition and the full
twelve-month impact of the Filta acquisition. See Note 6.
The increase in the share-based payment expense principally reflects
additional grants made to the Pirtek team and other new employees who joined
the group during the year.
As a result of the costs incurred in acquiring Pirtek, statutory profit after
tax reduced by 63% to £3.0m (2022: £8.1m).
Earnings per share
The adjusted and basic EPS is shown in table:
2023 EPS 2022 EPS
£'000 p (restated) p
£'000
Adjusted profit after tax / Adjusted EPS 14,578 8.42 10,181 8.34
Amortisation of acquired intangibles (7,718) (4.46) (1,693) (1.39)
Share-based payment expense (838) (0.48) (535) (0.44)
Non-recurring costs (6,159) (3.56) (1,708) (1.40)
Other gains and losses - - 1,232 1.01
Tax on adjusting items 3,174 1.83 649 0.53
Statutory profit after tax / Basic EPS 3,037 1.75 8,126 6.65
During the year, the Group issued 63,472,968 new ordinary shares of 0.5p each
("ordinary shares") in consideration for the acquisition of Pirtek. This
increased the total number of ordinary shares in issue to 193,784,080 at the
year-end (31 December 2022: 130,311,112).
The Employee Benefit Trust ("EBT") started the year holding 1,770,683 ordinary
shares, purchased 18,420 ordinary shares during the year at an average price
of £2.00, disposed of 226,418 ordinary shares in respect of the exercise of
employee shares options, and therefore ended the year holding 1,562,685
ordinary shares. On 31 December 2023, there were 10,347,231 shares under
option, of which 2,480,394 were vested and capable of exercise.
The total number of ordinary shares in issue on 31 December 2023, net of the
EBT holding, was 192,221,395 (31 December 2022: 128,540,429), and a basic
weighted average number of ordinary shares in issue of 173,090,691 (2022:
122,126,350).
Adjusted basic EPS increased by 1% to 8.42p (2022: 8.34p as restated), and
basic earnings per share decreased by 74% to 1.75p (2022: 6.65p as restated).
Financing and cash flow
A summary of the Group cash flow for the period is set out in the table below.
2023 2022
£'000 (restated)
£'000
Adjusted EBITDA 30,101 15,257
Acquisition and reorganisation costs (6,159) (1,708)
Working capital movements (61) (1,512)
Cash generated from operations 23,881 12,037
Taxes paid (4,498) (2,629)
Purchases of property, plant and equipment (986) (422)
Purchase of software (1,350) (1,088)
Purchase of IP (522) -
Acquisition of subsidiaries net of cash (48,894) 4,320
Acquired debt repaid (136,747) -
Deferred consideration - (1,680)
Funds raised via debt 100,012 -
Funds raised via equity 94,106 -
Bank loans repaid (13,000) (2,953)
Interest Paid (5,374) -
Lease payments (2,687) (1,156)
Funds supplied to EBT 192 (2,370)
Dividends paid (3,371) (2,339)
Other net movements 859 (41)
Net cash movement 1,621 1,679
Net cash at beginning of year 10,935 9,057
Exchange differences on cash and cash equivalents (278) 199
Net cash at end of year 12,278 10,935
The Group generated cash from operating activities of £23.9m (2021: £12.0m),
resulting in a cash conversion rate of 79% (2022: 79%). However, if the cost
of the Pirtek and Filta acquisitions and reorganisation is added back, the
rate of cash conversion in 2023 was 100% (2022: 90%).
Taxes paid increased as profits increased, and the Group moved to quarterly
advance payments. Purchases of property, plant, and equipment increased due to
the addition of the Pirtek DLO operation. The purchase of IP relates to the
purchase of the Cyclone GRU IP.
The acquisition of subsidiaries represents the acquisition of Pirtek for
£210.8m, which was financed with bank debt of £100m, £93.5m from the issue
of new shares (after costs), and £17.6m new shares given as consideration
shares. Immediately after the acquisition Franchise Brands settled Pirtek's
preference shares and loans and borrowings in order to consolidate Group
borrowings. The total value of this post-acquisition settlement was
£137.3m, comprising £78.2m loans and borrowings, £0.6m acquisition costs,
£21.7m interest on preference shares and £36.8m in relation to the nominal
value of the preference shares. Cash acquired of £7.0m is deducted to
result in an acquisition of subsidiaries in the Consolidated Statement of Cash
Flows of £48.9m. In 2022, Filta was acquired in an all-shares transaction,
so it did not involve cash movement.
Bank loans repaid represent the repayment of the loans taken out in April 2023
to finance the acquisition of Pirtek. Dividends paid in 2023 represent the
combined cash cost of the 2022 final and the 2023 interim dividends.
After these outflows, the Group finished the period with cash of £12.3m (31
December 2022: £10.9m) and gross debt, including hire purchase debt of
£87.0m. Lease debt of £7.6m (2022: £1.6m) increased considerably due to the
acquisition of Pirtek, which funds the vans used in its DLO operation using
lease finance.
31 Dec 2023 31 Dec 2022 (restated) Change
£'000 £'000 £'000
Cash 12,278 10,935 1,343
Term loan (50,000) - (50,000)
RCF (36,908) - (36,908)
Loan fee 749 - 749
Hire purchase debt (837) (1,132) 295
Adjusted (net debt)/net cash (74,718) 9,803 (84,521)
Other lease debt (7,567) (1,624) (5,943)
(Net Debt) / Net cash (82,285) 8,179 (90,464)
The Group had headroom of £23.0m on its bank facilities (total facility
including accordion option of £110.0m less £87.0m in use) at 31 December
2023.
The Group's adjusted net debt, as used to test the bank covenants, was £74.7m
at 31 December 2023, which represents 2.48x Adjusted 2023 EBITDA. Thus, the
Group has comfortable headroom on all its bank covenants.
Dividend
The Board is pleased to propose a final dividend of 1.2 pence per share (2022:
1.1 pence per share). This takes the total dividend for the year to 2.2 pence
per share (2022: 2.0 pence per share), an increase of 10%. The dividend is 3.9
times covered by Adjusted profits after tax (2022: 4.2 times).
Subject to shareholder approval at the AGM, the final dividend will be paid to
those shareholders on the register on 28 June 2024, at the close of business
on 25 July 2024.
Mark Fryer
Chief Financial Officer
19 June 2024
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2023
Note 2023 Restated*
2022
Total
Total
£'000
£'000
Revenue 5 121,265 69,839
Cost of sales (50,060) (33,898)
Gross profit 71,205 35,941
Adjusted earnings before interest, tax, depreciation, amortisation, 30,101 15,257
share-based payments, impairment loss & non-recurring items ("Adjusted
EBITDA")
Depreciation 6 (3,492) (1,781)
Amortisation of software 6 (925) (500)
Amortisation of acquired intangibles (7,718) (1,693)
Impairment loss (96) -
Share-based payment expense (838) (535)
Non-recurring items 6 (6,159) (475)
Total administrative expenses (60,332) (25,668)
Operating profit 10,873 10,273
Foreign exchange losses (146) -
Finance expense (5,711) (235)
Profit before tax 5,016 10,038
Tax expense (1,979) (1,912)
Profit for the year attributable to equity holders of the Parent Company 3,037 8,126
Other comprehensive (expense)/income
Actuarial gains 63 -
Exchange differences on translation of foreign operations (131) 28
Total comprehensive (expense)/income attributable to equity holders of the (68) 28
Parent Company
Total Profit and other comprehensive income for the year attributable to 2,969 8,154
equity holders of the Parent Company
Earnings per share
Basic 7 1.75 6.65
Diluted 7 1.73 6.54
Consolidated Statement of Financial Position
For the year ended 31 December 2023
Note 2023 Restated* Restated*
2022
2021
£'000
£'000 £'000
Assets
Non-current assets
Intangible assets 305,328 84,664 35,278
Property, plant and equipment 4,418 3,208 2,609
Right-of-use assets 8,404 2,568 2,723
Contract acquisition costs 427 402 -
Trade and other receivables 641 811 182
Total non-current assets 319,218 91,653 40,792
Assets in disposal groups classified as held for sale - 5,455 -
Current assets
Inventories 7,062 1,989 908
Trade and other receivables 42,701 24,991 18,685
Contract acquisition costs 79 92 -
Current tax asset 1,104 220 -
Cash and cash equivalents 12,278 10,935 9,057
Total current assets 63,224 38,227 28,650
Total assets 382,442 135,335 69,442
Liabilities
Current liabilities
Trade and other payables 34,746 20,778 13,882
Loans and borrowings 9,251 - -
Obligations under leases 2,617 831 754
Deferred income 1,318 873 302
Current tax liability 603 - 213
Contingent consideration - - 345
Total current liabilities 48,535 22,482 15,496
Liabilities directly associated with assets in Disposal groups classified as - 2,561 -
held for sale
Non-current liabilities
Loans and borrowings 76,908 - -
Obligations under leases 5,787 1,626 1,780
Deferred income 2,894 1,848 460
Contingent consideration - - 2,567
Deferred tax liability 33,925 4,134 2,139
Total non-current liabilities 119,514 7,608 6,946
Total liabilities 168,049 32,651 22,442
Total net assets 214,393 102,684 46,999
Issued capital and reserves attributable to owners of the Company
Share capital 969 652 480
Share premium 131,131 37,293 36,966
Share-based payment reserve 1,936 1,217 789
Merger reserve 69,754 52,212 1,390
Translation reserve 24 155 -
EBT reserve (2,679) (2,871) (501)
Retained earnings 13,258 14,026 7,875
Total equity attributable to equity holders 214,393 102,684 46,999
* See Note 1 for details.
Company Statement of Financial Position
At 31 December 2023
Note 2023 Restated* Restated*
2022
2021
£'000
£'000 £'000
Assets
Non-current assets
Investment in Group companies 207,830 92,514 42,823
Total non-current assets 207,830 92,514 42,823
Assets in disposal groups classified as held for sale - 2,564 -
Current assets
Trade and other receivables 103,177 1,876 1,158
Cash and cash equivalents 875 3,418 3,961
Total current assets 104,052 5,294 5,119
Total assets 311,882 100,372 47,942
Liabilities
Current liabilities
Trade and other payables 16,311 5,139 1,480
Loans and borrowings 9,251 - -
Contingent consideration - - 344
Total current liabilities 25,562 5,139 1,824
Non-current liabilities
Loans and borrowings 76,908 - -
Contingent consideration - - 2,568
Total non-current liabilities 76,908 - 2,568
Total liabilities 102,470 5,139 4,392
Net assets 209,412 95,233 43,550
Issued capital and reserves attributable to owners of the Company
Share capital 969 652 480
Share premium 131,131 37,293 36,966
Share-based payment reserve 1,936 1,217 789
Merger reserve 69,634 52,092 1,270
Translation reserve - - -
EBT reserve (2,679) (2,871) (501)
Retained earnings 8,421 6,850 4,546
Total equity attributable to equity holders 209,412 95,233 43,550
* See Note 1 for details.
Consolidated Statement of Cash Flows
For the year ended 31 December 2023
Note 2023 Restated*
£'000 2022
£'000
Cash flows from operating activities
Profit for the year 3,037 8,154
Adjustments for:
Depreciation of property, plant and equipment 1,066 756
Depreciation of right-of-use assets 2,427 1,025
Amortisation of software & other intangibles 925 500
Amortisation of acquired intangibles 7,718 1,693
Non-recurring costs 786 -
Share-based payment expense 838 535
Willow Pumps contingent consideration - (1,232)
Gain on disposal of property, plant and equipment (54) -
Finance expense 5,711 235
Exchange differences on translation of foreign operations 76 (28)
Tax expense 1,979 1,912
Operating cash flow before movements in working capital 24,509 13,550
(Increase) in trade and other receivables (3,767) (3,062)
(Increase)/decrease in inventories 338 (401)
Increase in trade and other payables 3,368 1,950
Cash generated from operations 24,448 12,037
Corporation taxes paid (4,498) (2,629)
Net cash generated from operating activities 19,950 9,408
Cash flows from investing activities
Purchases of property, plant and equipment (1,183) (422)
Proceeds from the sale of property, plant and equipment 251 259
Purchase of software (1,350) (1,088)
Purchase of Intellectual Property (522) -
Loans to franchisees (149) (1,062)
Loans to franchisees repaid 412 548
Deferred consideration - (1,680)
Acquisition of subsidiaries including costs, net of cash acquired 4 (48,894) 4,320
Net cash used in investing activities (51,435) 875
Cash flows from financing activities
Bank loans - received 100,012 -
Bank loans - repaid (62,097) (2,953)
Loan notes - repaid (29,155) -
Preference shares - repaid (58,520) -
Capital element of lease liability repaid (2,362) (1,037)
Interest paid - bank and other loan (5,374) (116)
Interest paid - leases (325) (119)
Proceed from issue of shares 94,106 330
Proceeds from sale/(purchase) of shares by the Employee Benefit Trust 192 (2,370)
Dividends paid 8 (3,371) (2,339)
Net cash generated/(absorbed) from financing activities 33,106 (8,604)
Net increase/(decreased) in cash and cash equivalents 1,621 1,679
Cash and cash equivalents at beginning of year 10,935 9,057
Exchange differences on cash and cash equivalents (278) 199
Cash and cash equivalents at end of year 12,278 10,935
* See Note 1 for details.
Reconciliation of cash flow to the Group net debt position
Group Term Loan Revolving credit facility Loans & borrowings Preference shares Lease Total liabilities from financing activities *Restated *Restated
liabilities
Total net cash/(net debt)
£'000 £'000 £'000 £'000
£'000 Cash
£'000
£'000
£'000
At 1 January 2022 - - - - (2,534) (2,534) 9,057 6,523
Financing cash flows (2,953) - - - 1,155 (1,798) - (1,798)
Other cash flows* - - - - - - 1,679 1,679
Other changes 2,953 - - - (1,377) 1,576 199 1,775
At 1 January 2023* - - - - (2,756) (2,756) 10,935 8,179
Financing cash inflows (55,000) (45,012) - - - (100,012) - (100,012)
Financing cash outflows 5,000 8,000 78,227 58,520 2,687 152,434 - 152,434
Leases interest expense - - - - (325) (325) - (325)
Other cash flows - - - - - - (5,421) (5,421)
Acquired through business combination - - (78,227) (58,520) (6,127) (142,874) 7,042 (135,832)
Amortised loan fees 749 - - - - 749 - 749
Foreign exchange movements - 104 - - (53) 51 (278) (227)
New leases - - - - (1,925) (1,925) - (1,925)
Disposals - - - - 95 95 - 95
At 31 December 2023 (49,251) (36,908) - - (8,404) (94,563) 12,278 (82,285)
* See Note 1 for details.
Company Statement of Cash Flows
For the year ended 31 December 2023
Note 2023 Restated*
£'000 2022
£'000
Cash flows from operating activities
Profit for the year 5,000 4,639
Adjustments for:
Non-recurring costs 130 -
Management charges (2,834) -
Finance expenses 5,384 40
Willow Pumps contingent consideration - (1,232)
Tax expense (1,377) (108)
Exchange differences on translation of foreign operations (105) -
Share-based payment expense 211 90
Operating cash flow before movements in working capital 6,409 3,429
(Increase) in trade and other receivables 3,373 (311)
Increase in trade and other payables 11,071 4,292
Cash (absorbed)/generated from operations 20,853 7,410
Corporation taxes paid (1,345) (930)
Net cash generated from operating activities 19,508 6,480
Cash flows from investing activities
Deferred consideration - (1,680)
Investment in subsidiary (36,826) -
Loan to subsidiary (99,925) -
Acquisition of subsidiaries including costs (57,855) (924)
Net cash used in investing activities (194,606) (2,604)
Cash flows from financing activities
Bank loans - received 100,012 -
Bank loans - repaid (13,000) -
Interest paid - bank and other loans (5,384) (40)
Proceed from issue of shares (net of costs) 94,106 330
Proceeds from sale/(purchase) of shares by the Employee Benefit Trust 192 (2,370)
Dividends paid 8 (3,371) (2,339)
Net cash flows (used)/generated by financing activities 172,555 (4,419)
Net (decrease) in cash and cash equivalents (2,543) (543)
Cash and cash equivalents at beginning of year 3,418 3,961
Cash and cash equivalents at end of year 875 3,418
Reconciliation of cash flow to the Company net debt position
Group Term Loan Revolving Total liabilities *Restated *Restated
credit facility
from financing
cash
Total net cash
£'000
activities
(net debt)
£'000
£'000 £'000
£'000
At 1 January 2022 - - - 3,961 3,961
Financing cash flows - - - - -
Other cash flows* - - - (543) (543)
Other changes - - - - -
At 1 January 2023* - - - 3,418 3,418
Financing cash inflows (55,000) (45,012) (100,012) - (100,012)
Financing cash outflows 5,000 8,000 13,000 - 13,000
Other cash flows - - - (2,543) (2,543)
Amortised loan fees 749 - 749 - 749
Foreign exchange movements - 104 104 - 104
At 31 December 2023 (49,251) (36,908) (86,159) 875 (85,284)
* See Note 1 for details.
Consolidated Statement of Changes in Equity
For the year ended 31 December 2023
Group Share Share Share-based Merger Translation *Restated *Restated Retained Total
capital
premium
payment
reserve
reserve
EBT reserve
earnings
account
£'000
£'000
£'000
£'000 £'000 £'000 £'000 £'000
At 1 January 2022 480 36,966 789 1,390 - (504) 8,205 47,325
Correction of Errors - - - - - 3 (329) (326)
*Restated At 1 January 2022 480 36,966 789 1,390 - (501) 7,875 46,999
Profit for the year - - - - - - 8,154 8,154
Foreign exchange translation differences - - - - 155 - - 155
Profit for the year and total comprehensive income - - - - 155 - 8,154 8,309
Contributions by and distributions to owners
Shares issued 169 - - 50,822 - - - 50,991
Dividend paid - - - - - - (2,339) (2,339)
Contributions to Employee Benefit Trust 3 327 - - - (2,370) - (2,040)
Share-based payment - - 428 - - - 335 763
At 1 January 2023 652 37,293 1,217 52,212 155 (2,871) 14,026 102,684
- - - - - - 3,037 3,037
Profit for the year
Actuarial gain - - - - - - 63 63
Foreign exchange translation differences - - - - (131) - - (131)
Profit for the year and total comprehensive income - - - - (131) - 3,100 2,969
Contributions by and distributions to owners
Shares issued 317 96,392 - 17,542 - - - 114,251
Share Placing costs charged to Share Premium - (2,554) - - - - - (2,554)
Dividend paid - - - - - - (3,371) (3,371)
Contributions to Employee Benefit Trust - - - - - 192 - 192
Share-based payment
Tax on share-based payment expense - - - - - - (496) (496)
At 31 December 2023 969 131,131 1,936 69,754 24 (2,679) 13,258 214,393
* See Note 1 for details.
Company Statement of Changes in Equity
For the year ended 31 December 2023
Company Share Share Share-based Merger *Restated *Restated Retained *Restated
EBT reserve
capital premium payment reserve
earnings Total
£'000
£'000 account reserve £'000 £'000 £'000
£'000 £'000
At 1 January 2022 480 36,966 789 1,270 (504) 4,546 43,547
Correction of Errors - - - - 3 - 3
*Restated At 1 January 2022 480 36,966 789 1,270 (501) 4,546 43,550
*Restated Profit for the year and total comprehensive income - - - - - 4,639 4,639
Contributions by and distributions to owners
Shares issued 169 - - 50,822 - - 50,991
Dividend paid - - - - - (2,339) (2,339)
Contributions to Employee Benefit Trust 3 327 - - (2,370) - (2,040)
Share-based payment - - 428 - - 4 432
At 1 January 2023 652 37,293 1,217 52,092 (2,871) 6,850 95,233
- - - - - 5,000 5,000
Profit for the year and total comprehensive income
Contributions by and distributions to owners
Shares issued 317 96,392 - 17,542 - - 114,251
Share Placing costs charged to Share Premium - (2,554) - - - - (2,554)
Dividend paid - - - - - (3,371) (3,371)
Contributions to Employee Benefit Trust - - - - 192 - 192
Share-based payment
Tax on share-based payment expense - - - - - (58) (58)
At 31 December 2023 969 131,131 1,936 69,634 (2,679) 8,421 209,412
* See Note 1 for details.
Notes forming part of the Financial Statements
For the year ended 31 December 2023
1 Basis of preparation
The Group's financial statements have been prepared in accordance with
UK-adopted international accounting standards, in accordance with the
Companies Act 2006 as they apply to the financial statements of the Group for
the year ended 31 December 2023. The Group's consolidated financial statements
are prepared under the historical cost convention. The principal accounting
policies adopted are set out below and have been consistently applied to all
the years presented. The Group's financial statements are presented in
sterling and all values are rounded to the nearest thousand pounds (£'000s)
except where indicated.
The consolidated financial statements incorporate the results and net assets
of the Company and its subsidiary undertakings. Subsidiaries are consolidated
from the date of their acquisition, being the date on which the Group obtains
control, and continue to be consolidated until the date control ceases. All
inter-company transactions and balances between Group entities are eliminated
upon consolidation.
2 Restatements
During the year we have identified a number of errors that have given rise to
a restatement of the prior year accounts.
1. We have identified errors that certain transactions in the Group's
Metro Rod Limited, The Filta Group Limited, Filta Deutschland GmbH and
ChipsAway International Limited subsidiaries had been incorrectly treated in
respect of IFRS 15. National account revenue has historically been treated
gross, with Metro Rod, The Filta Group, Filta Deutschland GmbH and ChipsAway
being the principal. We are now treating this revenue net, as following
consideration of the underlying contracts, facts and circumstances, we
consider these subsidiaries to be acting as a commission agent for their
franchisees. The businesses only have momentary control of the incoming order
following acceptance of the job ahead of passing it to the incumbent franchise
in a back-to-back arrangement where local franchisees have a right of first
refusal on the order received. Operational fulfilment also rests with the
franchisee. The impact of this is to reduce revenue in the year ended 31
December 2022 by £29.3m, with an equivalent reduction in cost of sales; there
is no profit impact of this change. This affects Note 1a.
2. We have identified further transactions in the Metro Rod Limited
subsidiary that have been treated incorrectly in respect of IFRS 15. National
account revenue has historically been recognised at the point of invoice, as
we considered this to be our performance obligation. We now consider our
performance obligation to be the passing of the work order to the franchisee,
having considered the underlying contracts, facts and circumstances.
Therefore, revenue is now recognised at this point. The impact of this is to
increase revenue and profit before tax in the year ended 31 December 2022 by
£0.2m. In the Consolidated Statement of Financial Position this adjustment
increases Trade and Other Receivables for Accrued Income by £3.5m (2021:
£2.6m), increases Trade and Other Payables for Accruals by £2.7m (2021:
£2.1m) and increases Retained Earnings by £0.7m (2021: £0.6m). In the
Consolidated Statement of Cashflows the impact is an increase in profit of
£0.2m, a £0.8m reduction in cash flows from trade and other receivables and
a £0.7m reduction in cash flows to trade and other payables. This affects
Note 1a, 1b and 1d.
3. We have identified errors that certain transactions in the Group had
been incorrectly treated in respect of IFRS 15 in regard to the timing of
recognising franchise sales and related training fees. Within Metro Rod
Limited, ChipsAway International Limited, Ovenclean Limited and Barking Mad
Limited in the past we have recognised the initial franchise fee when we have
delivered the training for the new franchises to operate in line with the
necessary standards on completion of the franchise sale (at a point in time).
This is however considered a pre-opening activity necessary for the franchisee
to operate and not a distinct performance obligation in the franchisee
contracts of these subsidiaries. We are now recognising this revenue over the
life of the franchise agreement on a straight line basis, as our obligation is
to provide a licence for the franchise to operate, which extends over the life
of the agreement. The impact of this is to reduce revenue and profit before
tax in the year ended 31 December 2022 by £0.2m. At 31 December 2022 this
also created current deferred income of £0.1m (2021: £0.3m) and non-current
deferred income of £0.1m (2021: £0.5m), increased liabilities held for sale
by £0.8m (2021: nil), decreased assets held for sale by £0.1m (2021: nil),
reversed previously held other debtors of nil (2021: £0.1m) and decreased
Retained Earnings by £1.1m (2021: £0.9m) in the Consolidated Statement of
Financial Position. In the Consolidated statement of Cashflows this decreased
profit by £0.2m, increased cashflows from receivables by £0.0m and decreased
cashflows to payables by £0.2m. This affects Notes 1a, 1b and 1d.
4. Franchise Brands plc acquired Filta Group Holdings plc in March 2022. A
valuation exercise was completed in the prior year as part of the purchase
price allocation exercise as required by IFRS 3. Errors were identified in
this valuation including incorrect rates being applied and unsuitable
valuation models being used for certain intangibles. Another valuation was
completed to correct these errors subsequent to the 12 month measurement
period. The review occurred outside the permitted time period, and as such
this is an error in the prior year accounts and requires amendment as a prior
year adjustment not as fair value adjustment. The revaluation decreased the
fair value of intangibles acquired by £1.0m (reduced software acquired by
£2.7m, reduced indefinite life brands by £0.1m, patent technology by £0.4m
and customer relations by £0.6m; however increased franchise agreements by
£2.8m) and reduced the deferred tax liability by £0.3m at recognition with
the corresponding impact being a £0.7m increase in goodwill. The impact on
the Consolidated Statement of Income is a £0.2m increase in amortisation of
acquired intangibles and a £0.0m increase in relation to the deferred tax
credit. The impact on the Consolidated Statement of Financial Position is a
£0.4m reduction in intangible assets, a £0.3m decrease in deferred tax
liability and a £0.1m reduction in Retained Earnings. The impact on the
Consolidated Statement of Cash Flows is a £0.1m reduction in profit, a £0.2m
increase in the adjustment for amortisation of acquired intangibles and a
£0.0m decrease in the adjustment for income tax with nil impact to operating
cash flows. This affects Notes 1a, 1b and 1d.
5. In previous periods cash transferred to the Employee Benefit Trust
("EBT") which is under the control of the Group, was assumed to be used
immediately, and therefore part of the EBT reserve. However, some of this cash
is held on our behalf, and as we have immediate access to this cash, it is now
accounted for in cash and cash equivalents. This has increased cash at 31
December 2022 by £0.1m and increased cash at 31 December 2021 by £0.0m in
the Consolidated and Company Statement of Financial Position with the
corresponding decrease in the EBT reserve. In both the Consolidated and
Company Statement of Cash Flows this has decreased the purchase of shares by
the EBT by £0.1m, increased cash at the beginning of the period by £0.0m and
increased cash at the end of the period by £0.1m. This affects Notes 1b, 1c,
1d, 1e and the reconciliation of cash flow to the net debt position of the
Group and the Company.
6. Cash outflows of £1.7m for the year ended 31 December 2022 with
regards to deferred consideration were incorrectly presented as operating cash
outflows. As the deferred consideration was related to the purchase of Willow
Pumps Limited these should be recorded as investing activities. As a result
these have been reclassified in the Consolidated and Company Statement of Cash
Flows for the year ended 31 December 2022 decreasing cash flows to trade and
other payables by £1.7m and increasing cash outflows for deferred
consideration by £1.7m with no overall impact on cash flows. This affects
Notes 1d and 1e.
7. The Company incurred costs of £1.0m in the acquisition of Filta Group
Holdings, expensed as non-recurring costs. However, of this £0.9m were
directly attributable costs therefore the treatment of this was incorrect, in
accordance with IAS 27 that requires measurement of investment in subsidiaries
at cost for the Company. The correction removes these non-recurring costs and
increases the investment in Group companies. This change is reversed on
consolidation in line with IFRS 3 and therefore has no impact on the
Consolidated Statement of Comprehensive Income. In the Company Statement of
Comprehensive Income it decreases non-recurring costs by £0.9m and increases
profit by £0.9m. In the Company Statement of Financial Position, it increases
investment in subsidiaries by £0.9m and retained earnings by £0.9m. The
impact on the Company Statement of Cash Flows is a £0.9m increase in cash
flows used in the acquisition of subsidiaries with an increase in profit for
the year of £0.9m. This affects Notes 1c and 1e.
8. It was identified that an error had been made recording intercompany
debtors in the Company, whereby they had been incorrectly netted off against
creditors in the prior periods. These were originally shown within Trade and
Other Payables, so adjustments to the Company Statement of Financial Position
were required to increase both Trade and Other Receivables and Trade and Other
Payables by £0.6m (2021: £0.3m). There is no change to profit or reserves.
The adjustments had no overall impact on cash flows. In the Company Statement
of Cash Flows it decreased cash flows from trade and other receivables by
£0.3m, with an equivalent decrease in cash flows to trade and other payables.
This affects Notes 1c and 1e.
9. We have identified errors in relation to the treatment of trade debtors
recognised in Metro Rod Limited for local account sales. In such transactions,
the work is sourced by the franchisee but billed by Metro Rod Limited. The
Group is obtaining royalty income only on the transaction and does not have
the credit risk for the full amount. Trade debtors should therefore reflect
only the amounts due to the Group being the royalty fee. If advanced payments
are made to the franchisee before receipt of the full payment from the
customer, this should be recorded as a franchisee loan debtor. Given this is a
contractual obligation to the franchisee, the Group has recorded the open
commitments at year end in Note 22. When payment is collected from the
customer the assets recorded are de-recognised and a trade payable recorded
for the amounts due to the franchisee. The total impact to the Consolidated
Statement of Financial Position is a £0.1m (2021: £0.4m) reduction in trade
and other receivables and a reduction of £0.1m (2021: £0.4m) in trade and
other payables. This is broken down as a reduction in trade receivables of
£2.4m (2021: £2.1m), and increase in other debtors of £2.3m (2021: £1.7m);
an increase in trade payables of £0.1m (2021: a reduction of £0.1m), an
increase in other creditors of £1.4m (2021: £1.1m), a reduction in accruals
of £1.4m (2021: £1.2m) and a reduction in social security and other taxes of
£0.2m (2021: £0.1m). The impact on the Consolidated Statement of Cash Flows
is a £0.2m reduction in cash flows from trade and other receivables and a
£0.2m reduction in cash flows to trade and other payables. This affects Notes
1b and 1d.
Restatements have been made to the following notes to improve disclosures:
1. Within Note 7 of the financial statements prior year revenue has been
disaggregated further to give a greater understanding of the Group's revenue
streams to ensure compliance with the requirements of IFRS 15. There is no
impact on revenue.
2. Within Note 14 of the financial statements prior year intangible assets
with indefinite useful lives have been disaggregated further, to show Filta
International and Filta UK as separate CGUs in line with the conclusions
reached by Group management in the prior year. There is no impact on
intangibles. The note now also includes the recoverable amount for all CGUs as
required by IFRS (UK).
3. Within Note 5 of the financial statements, we have restated the segment
reporting note to show the assets arising from consolidation as unallocated
assets as opposed to within the other segment.
4. Within Note 6 of the financial statements additional disclosures have
been made within the Filta Group Holdings section regarding the primary
reasons for the business combination, and the amounts of revenue and profit or
loss of the acquiree since the acquisition date included in the Consolidated
Statement of Comprehensive Income for 2022 as required by IFRS 3.
5. Within Note 4 of the financial statements we have restated trade and
other payables within the categories of financial instruments table, as it
previously included deferred income, which is not defined as a financial
instrument.
2a Consolidated Statement of Comprehensive Income (restated)
For the year ended 31 December 2022
Restatement number As previously reported Correction (Restated)
31 December 2022
of errors
31 December
£'000
2022
£'000
£'000
Revenue 1, 2, 3 99,152 (29,313) 69,839
Cost of sales 1 (63,187) 29,289 (33,898)
Gross profit 35,965 (24) 35,941
Adjusted earnings before interest, tax, depreciation, amortisation, 15,281 (24) 15,257
share-based payments & non-recurring items ("Adjusted EBITDA")
Depreciation (1,781) - (1,781)
Amortisation of software (500) - (500)
Amortisation of acquired intangibles 4 (1,504) (189) (1,693)
Share-based payment expense (535) - (535)
Non-recurring items (475) - (475)
Total administrative expenses (25,479) (189) (25,668)
Operating profit 10,486 (213) 10,273
Finance expense (235) - (235)
Profit before tax 10,251 (213) 10,038
Tax expense 4 (1,961) 49 (1,912)
Profit for the year attributable to equity holders of the Parent Company 8,290 (164) 8,126
Other comprehensive income
Exchange differences on translation of foreign operations 28 - 28
Total comprehensive income attributable to equity holders of the Parent 28 - 28
Company
Earnings per share
Basic 6.81 (0.16) 6.65
Diluted 6.70 (0.16) 6.54
2b Consolidated Statement of Financial Position (restated)
As at 1 January 2022 and 31 December 2022
Restatement number As previously reported Correction As at 31 December As previously reported Correction As at 1 January 2022
of errors
of errors
31 December 2022
2022 1 January
(restated)
£'000
£'000
£'000 (restated) 2022 £'000
£'000 £'000
Assets
Non-current assets
Intangible assets 4 85,113 (449) 84,664 35,278 - 35,278
Property, plant and equipment 3,208 - 3,208 2,609 - 2,609
Right-of-use assets 2,568 - 2,568 2,723 - 2,723
Contract acquisition costs 402 - 402 - - -
Trade and other receivables 811 - 811 182 - 182
Total non-current assets 92,102 (449) 91,653 40,792 - 40,792
Assets in disposal groups classified as held for sale 3 5,576 (121) 5,455 - - -
Current assets
Inventories 1,989 - 1,989 908 - 908
Trade and other receivables 2, 3, 9 21,660 3,331 24,991 16,514 2,171 18,685
Contract acquisition costs 92 - 92 - - -
Current tax asset 220 - 220 - - -
Cash and cash equivalents 5 10,799 136 10,935 9,054 3 9,057
Total current assets 34,760 3,467 38,227 26,476 2,174 28,650
Total assets 132,438 2,897 135,335 67,268 2,174 69,442
Liabilities
Current liabilities
Trade and other payables 2, 9 18,160 2,618 20,778 12,144 1,738 13,882
Obligations under leases 831 - 831 754 - 754
Deferred income 3 807 66 873 - 302 302
Current tax liability - - - 213 - 213
Contingent consideration - - - 345 - 345
Total current liabilities 19,798 2,684 22,482 13,456 2,040 15,496
Liabilities directly associated with assets in disposal groups classified as 3 1,786 775 2,561 - - -
held for sale
Non-current liabilities
Obligations under leases 1,626 - 1,626 1,780 - 1,780
Deferred income 3 1,744 104 1,848 - 460 460
Contingent consideration - - - 2,567 - 2,567
Deferred tax liability 4 4,444 (310) 4,134 2,139 - 2,139
Total non-current liabilities 7,814 (206) 7,608 6,486 460 6,946
Total liabilities 29,398 3,253 32,651 19,942 2,500 22,442
Total net assets 103,040 (356) 102,684 47,325 (326) 46,999
Issued capital and reserves attributable to owners of the Company
Share capital 652 - 652 480 - 480
Share premium 37,293 - 37,293 36,966 - 36,966
Share-based payment reserve 1,217 - 1,217 789 - 789
Merger reserve 52,212 - 52,212 1,390 - 1,390
Translation reserve 155 - 155 - - -
EBT reserve 5 (3,007) 136 (2,871) (504) 3 (501)
Retained earnings 2, 3, 4 14,518 (492) 14,026 8,204 (329) 7,875
Total equity attributable to equity holders 103,040 (356) 102,684 47,325 (326) 46,999
2c Company Statement of Financial Position (restated)
As at 1 January 2022 and 31 December 2022
Restatement number As previously reported Correction of errors (Restated) As previously reported Correction of errors (Restated)
31 December 2022 £'000 31 December 2022 31 December 2021 £'000 31 December 2021
£'000 £'000 £'000 £'000
Assets
Non-current assets
Investment in Group companies 7 91,590 924 92,514 42,823 - 42,823
Total non-current assets 91,590 924 92,514 42,823 - 42,823
Assets in disposal groups classified as held for sale 2,564 - 2,564 - - -
Current assets
Trade and other receivables 8 1,268 608 1,876 859 299 1,158
Cash and cash equivalents 5 3,282 136 3,418 3,958 3 3,961
Total current assets 4,550 744 5,294 4,817 302 5,119
Total assets 98,704 1,668 100,372 47,640 302 47,942
Liabilities
Current liabilities
Trade and other payables 8 4,531 608 5,139 1,181 299 1,480
Contingent consideration - - - 344 - 344
Total current liabilities 4,531 608 5,139 1,525 299 1,824
Non-current liabilities
Contingent consideration - - - 2,568 - 2,568
Total non-current liabilities - - - 2,568 - 2,568
Total liabilities 4,531 608 5,139 4,093 299 4,392
Net assets 94,173 1,060 95,233 43,547 3 43,550
Issued capital and reserves attributable to owners of the Company
Share capital 652 - 652 480 - 480
Share premium 37,293 - 37,293 36,966 - 36,966
Share-based payment reserve 1,217 - 1,217 789 - 789
Merger reserve 52,092 - 52,092 1,270 - 1,270
Translation reserve - - - - - -
EBT reserve 5 (3,007) 136 (2,871) (504) 3 (501)
Retained earnings 7 5,926 924 6,850 4,546 - 4,546
Total equity attributable to equity holders 94,173 1,060 95,233 43,547 3 43,550
2d Consolidated Statement of Cash Flows (restated)
For the year ended 31 December 2022
Restatement number As previously reported Correction (Restated)
31 December 2022
of errors
£'000
£'000 31 December 2022
£'000
Cash flows from operating activities
Profit for the year 2, 3, 4 8,318 (164) 8,154
Adjustments for:
Depreciation of property, plant and equipment 756 - 756
Depreciation of right-of-use assets 1,025 - 1,025
Amortisation of software 500 - 500
Amortisation of acquired intangibles 4 1,504 189 1,693
Share-based payment expense 535 - 535
Willow Pumps contingent consideration (1,232) - (1,232)
Finance expense 235 - 235
Exchange differences on translation of foreign operations (28) - (28)
Tax expense 4 1,961 (49) 1,912
Operating cash flow before movements in working capital 13,574 (24) 13,550
(Increase)/decrease in trade and other receivables 2, 3, 9 (2,022) (1,040) (3,062)
(Increase) in inventories (401) - (401)
Increase/(decrease) in trade and other payables 2, 3, 6, 9 (794) 2,744 1,950
Cash generated from operations 10,357 1,680 12,037
Corporation taxes paid (2,629) - (2,629)
Net cash generated from operating activities 7,728 1,680 9,408
Cash flows from investing activities
Purchases of property, plant and equipment (422) - (422)
Proceeds from the sale of property, plant and equipment 259 - 259
Purchase of software (1,088) - (1,088)
Loans to franchisees (1,062) - (1,062)
Franchisee loans repaid 548 - 548
Deferred consideration 6 - (1,680) (1,680)
Acquisition of subsidiaries including costs, net of cash acquired 4,320 - 4,320
Net cash used in investing activities 2,555 (1,680) 875
Cash flows from financing activities
Bank loans - repaid (2,953) - (2,953)
Capital element of lease liability repaid (1,037) - (1,037)
Interest paid - bank and other loan (116) - (116)
Interest paid - leases (119) - (119)
Proceed from issue of shares 330 - 330
Purchase of shares by the Employee Benefit Trust 5 (2,503) 133 (2,370)
Dividends paid (2,339) - (2,339)
Net cash generated from financing activities (8,737) 133 (8,604)
Net increase in cash and cash equivalents 1,546 133 1,679
Cash and cash equivalents at beginning of year 5 9,054 3 9,057
Exchange differences on cash and cash equivalents 199 - 199
Cash and cash equivalents at end of year 10,799 136 10,935
2e Company Statement of Cash Flows (restated)
For the year ended 31 December 2022
Restatement number As previously reported Correction of errors (Restated)
31 December 2022 £'000 31 December 2022
£'000 £'000
Cash flows from operating activities
Profit for the year 7 3,715 924 4,639
Adjustments for: -
Finance expenses 40 - 40
Willow Pumps contingent consideration (1,232) - (1,232)
Tax expense (108) - (108)
Share-based payment expense 90 - 90
Operating cash flow before movements in working capital 2,505 924 3,429
Decrease/(increase) in trade and other receivables 8 (2) (309) (311)
Increase/(decrease) in trade and other payables 6, 8 2,303 1,989 4,292
Cash generated from operations 4,806 2,604 7,410
Corporation taxes paid (930) - (930)
Net cash generated from operating activities 3,876 2,604 6,480
Cash flows from investing activities
Deferred consideration 6 - (1,680) (1,680)
Acquisition of subsidiaries including costs 7 - (924) (924)
Net cash used in investing activities - (2,604) (2,604)
Cash flows from financing activities
Interest paid - bank and other loans (40) - (40)
Proceed from issue of shares 330 - 330
Purchase of shares by the Employee Benefit Trust 5 (2,503) 133 (2,370)
Dividends paid (2,339) - (2,339)
Net cash flows (used)/generated by financing activities (4,552) 133 (4,419)
Net (decrease)/increase in cash and cash equivalents (676) 133 (543)
Cash and cash equivalents at beginning of year 5 3,958 3 3,961
Cash and cash equivalents at end of year 3,282 136 3,418
3. Operating segments
The Group's operating segments are determined based on the Group's internal
reporting to the Chief Operating Decision Maker ("CODM"). The CODM has been
determined to be the Executive Chairman, with support from the Board of
Directors, as the function primarily responsible for the allocation of
resources to segments and assessment of performance of the segments. The
business is organised along the lines of our Pirtek, Water & Waste
Services, Filta International and B2C businesses.
Therefore, the Board has determined that we have six different operating
segments:
· Pirtek Europe, the franchise and direct labour operations of
Pirtek across eight European countries;
· Water & Waste Services, which is made up of Metro Rod and
Metro Plumb, Willow Pumps and Filta UK;
· Filta International, which is made up of Filta US and Filta
Europe;
· B2C, which is made up of ChipsAway, Ovenclean and Barking Mad;
· Azura, which is made up of the software business of Azura; and
· Other operations including central administration costs and
non-trading companies.
The CODM uses Adjusted EBITDA, as reviewed at Board meetings and as part of
the Managing Directors' and Chief Financial Officer's weekly report to the
senior management team, as the key measure of segments' results as it reflects
the underlying performance for the financial year under evaluation.
2023 Pirtek Water & Waste Filta International B2C Azura Unallocated assets Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Revenue 41,947 48,880 27,117 6,106 745 (3,530) 121,265
Gross profit 30,539 25,597 9,768 4,899 745 (343) 71,205
Adjusted EBITDA* 13,318 10,907 6,097 2,316 214 (2,751) 30,101
Depreciation & amortisation of software (1,808) (2,147) (222) (178) (89) 27 (4,417)
Amortisation of acquired intangibles (5,468) - (35) - - (2,215) (7,718)
Share-based payment expense (290) (329) (86) (28) (4) (101) (838)
Non-recurring costs (1,864) (1,189) (98) (16) (43) (2,949) (6,159)
Finance expense (403) (54) (93) (12) (2) (5,389) (5,953)
Other gains and losses - - - - - - -
Profit before tax* 3,485 7,188 5,563 2,082 76 (13,378) 5,016
Tax expense (1,042) (1,315) (1,605) (409) (20) 2,412 (1,979)
Profit after tax* 2,443 5,873 3,958 1,673 56 (10,966) 3,037
Additions to non-current assets 2,573 1,928 319 136 270 223,539 228,765
Reportable segment assets 88,141 49,315 8,013 3,836 545 232,592 382,442
Reportable segment liabilities (115,533) (30,165) (6,910) (2,322) (206) (12,913) (168,049)
* Operating segments presented before inter-company management
recharges which eliminate on consolidation.
2022 (restated)** Pirtek Water & Waste Filta International B2C Azura Unallocated assets Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Revenue - 42,473 23,749 6,138 797 (3,318) 69,839
Gross profit - 22,362 8,090 5,076 796 (383) 35,941
Adjusted EBITDA* - 9,250 5,214 2,457 171 (1,835) 15,257
Depreciation & amortisation of software - (1,998) (180) (188) (32) 117 (2,281)
Amortisation of acquired intangibles - (4,620) (30) - - 2,957 (1,693)
Share-based payment expense - (303) (107) (25) (10) (90) (535)
Non-recurring costs - (363) (11) - - (101) (475)
Finance expense - (210) 31 (14) (2) (40) (235)
Other gains and losses - - - - - - -
Profit before tax* - 1,756 4,917 2,230 127 1,008 10,038
Tax expense - (75) (1,203) (405) (16) (213) (1,912)
Profit after tax* - 1,681 3,714 1,825 111 795 8,126
Additions to non-current assets - 1,593 798 55 212 52,564 55,222
Reportable segment assets - 34,866 9,189 5,456 328 85,496 135,335
Reportable segment liabilities - (16,397) (4,871) (2,562) (9) (8,812) (32,651)
* Operating segments presented before inter-company management
recharges which eliminate on consolidation.
** See Note 1.
4. Business combination
Acquisition of Pirtek
At close of business on 20 April 2023, the Company completed the acquisition
of the entire share capital of Hydraulic Authority I Limited ("HAI") and its
subsidiaries (together "Pirtek Europe") for consideration of £73,527,000.
Accordingly, the Company owns 100% of the entire issued share capital of
Hydraulic Authority I Limited. The acquisition was announced to the Stock
Exchange on 21 April 2023.
Pirtek Europe was acquired to purchase a complementary high growth B2B
essential services business in a franchise and direct labour operation with
operations throughout Europe so increasing the Group footprint. Pirtek Europe
is also the clear market leader in Europe, with a long-standing and highly
regarded brand, excellent customer services and a range of long-standing
customers across a wide range of industries. Pirtek Europe has multiple growth
opportunities itself as well as potential synergies through cross selling to
Group customers and operational leverage in purchasing, IT and finance with
the rest of the Group.
£'000
Cash 55,936
Consideration shares 17,591
Fair value of consideration 73,527
Cash flows Group Company
£'000 £'000
Cash (55,936) (55,936)
Cash acquired 7,042 -
Capitalised acquisition costs - (1,919)
Acquisition of subsidiaries including costs, net of cash acquired (48,894) (57,855)
The gross cost of the acquisition of £210.8m was funded through a combination
of cash and equity. Cash was raised via £100.0m debt, £94.1m from the issue
of new shares (after costs), and £17.6m new shares were given as
consideration shares. Immediately following the acquisition Franchise Brands
settled Pirtek Europe's preference shares as well as loans and borrowings in
order to consolidate Group borrowings. The total value of this
post-acquisition settlement is £137.3m comprising of £78.2m loans and
borrowings, £0.6m acquisition costs paid by HAI on behalf of the Company
(recorded as an intercompany payable in the Company and an intercompany
receivable in HAI), £21.7m interest on preference shares (recorded as an
intercompany receivable in the Company and an intercompany payable in HAI),
and £36.8m in relation to the nominal value of the preference shares (which
were converted to ordinary shares in HAI); these were recorded as an
investment in subsidiary in the Company and reallocated to eliminate share
capital on consolidation.
In total £7.6m costs were incurred relating to this transaction. £2.6m of
these costs related to the new share issue have been disclosed as a reduction
in share premium with the remaining £5.0m disclosed within the consolidated
statement of comprehensive income in non-recurring costs. Of the £5.0m
non-recurring costs £3.5m were acquisition-related costs and £1.5m were
reorganisation costs.
The Company incurred costs totalling £6.1m; £1.6m has been disclosed within
the Company statement of comprehensive income in non-recurring costs, £2.6m
as a reduction in share premium and £1.9m of directly attributable costs were
capitalised as investment in Group companies and reallocated to non-recurring
costs on consolidation.
Details of the fair value of the identifiable assets and liabilities acquired,
purchase consideration and goodwill were as follows:
Book value Adjustments Fair value
£'000 £'000 £'000
Intangible assets 64,927 50,418 115,345
IT systems 768 - 768
Property, plant and equipment 1,219 - 1,219
Right-of-use assets 6,127 - 6,127
Inventories 5,225 - 5,225
Trade and other receivables 14,577 - 14,577
Cash 7,042 - 7,042
Trade and other payables (10,969) 152 (10,817)
Deferred income (1,126) - (1,126)
Loans and borrowings (78,227) - (78,227)
Lease liability (6,127) - (6,127)
Dilapidation provision - (334) (334)
Preference shares (58,520) - (58,520)
Deferred tax liability (10,669) (20,519) (31,188)
Total fair value of the identifiable assets and liabilities acquired (65,753) 29,717 (36,036)
Fair value of consideration 73,527
Goodwill 109,563
On acquisition net assets have been reviewed and adjusted to Fair value.
Adjustments have been made to intangible assets, which were revalued at
acquisition, giving rise to a £50.4m adjustment. Adjustments have also been
made to trade and other payables to remove pre-acquisition tax charges at the
point of acquisition and a dilapidation provision has been created for
warehouse relocation costs. The book value acquired has been amended to align
with the relevant IFRS standards for rights-of-use assets, lease liabilities,
IT systems and deferred income.
A deferred tax liability adjustment has been calculated on the value of
intangible assets using a blended deferred tax rate of 27.3% followed by the
deduction of the existing deferred tax liability relating to acquired
intangibles. Two deferred tax assets were created in relation to the
adjustment of IT systems at 25% and the dilapidation provision at 30%. An
additional deferred tax asset was created in relation to pre-acquisition tax
credits not recognised.
The fair value of consideration was calculated using a 13.6 times earnings
multiple (and discounted future cash flows), which is comparable with other
entities within the Group. The rationale behind this allowed for significant
growth and performance enhancement in the future due to operational leverage
that management believe can be achieved given the similar business model to
current operations.
The goodwill recognised includes certain intangible assets that cannot be
separately identified and measured due to their nature, such as the assembled
workforce and synergies that are expected to be achieved. This includes
control over the acquired business, and the scale and the future growth
opportunities that it provides to the Group's operations. If the acquisition
had occurred on 1 January 2023 Group revenue would have been £139.2m and
Group loss before tax would have been £2.4m; the revenue for Pirtek Europe
would have been £59.9m and loss before tax would have been £5.0m (both
profit figures include a £5.8m goodwill amortisation adjustment in Pirtek in
March 2023). Since acquisition Pirtek Europe has contributed £41.9m revenue
and profit before tax of £2.4m to the Group.
In Austria, Pirtek 24/7 HydraulikService GmbH is a subsidiary where Pirtek
Austria GmbH (acquired by Franchise Brands) owns 51% of the ordinary shares.
This gives rise to an immaterial non-controlling interest which has not been
disclosed within these accounts.
Acquisition of Filta Group Holdings Plc
On 10 March 2022, the Company announced that its all-share offer for Filta
Group Holdings Plc and its subsidiaries (together, "Filta") became
unconditional. On 1 June 2022 the Company announced that the compulsory
acquisition of the remaining Filta shares was completed. Accordingly, the
Company owns 100% of the entire issued share capital of Filta.
Filta was purchased to buy a high growth complementary B2B franchisee
business, in a niche market with no direct competitor. Filta delivers cost
savings to clients and distinct positive environmental outcomes. Filta has
opportunity to grow complementary services, increase revenue per customer,
upgrade existing franchisees and achieve operational leverage as it grows. It
also increases the Group's presence in North America.
£'000
Consideration shares 50,991
Fair value of consideration 50,991
The consideration paid was made up of £50,991,000 through the issue of
33,788,008 new ordinary shares of 0.5p each in the Company at 151 pence per
share.
Acquisition costs relating to this transaction amounted to £1,011,000 and
have been disclosed within the consolidated statement of comprehensive income
in non-recurring items. The Company's financial statements have been amended
for the period to capitalise £924,000 of directly attributable acquisition
costs as investment in subsidiaries that were previously reported as
non-recurring costs; this change has no impact on the Group financial
statements.
Details of the fair value of the identifiable assets and liabilities acquired,
purchase consideration and goodwill were as follows:
Book value *Restated Adjustments *Restated
£'000 £'000 Fair value
£'000
Intangible assets 6,701 9,594 16,295
Property, plant and equipment 1,191 (44) 1,147
Right-of-use assets 656 - 656
Inventories 1,466 - 1,466
Trade and other receivables 4,436 (250) 4,186
Cash 4,229 91 4,320
Trade and other payables (7,507) 33 (7,474)
Loans and borrowings (2,953) - (2,953)
Deferred tax asset/(liability) 570 (3,458) (2,888)
Total fair value of the identifiable assets and liabilities acquired 8,789 5,966 14,755
Fair value of consideration 50,991
Goodwill 36,236
* See Note 1 for further information.
On acquisition intangible assets were reviewed and adjusted by £10.6m to a
deemed fair value. In 2023 we completed a further review of the fair value of
intangible assets at acquisition and subsequently reduced this by £1.0m; this
has reduced the deferred tax liability by £0.3m, and increased goodwill by
£0.7m. There were no changes to the original forecasts used at acquisition
date. The review reduced software acquired by £2.7m, reduced indefinite life
brands by £0.1m, patent technology by £0.5m and customer relations by
£0.5m; however it has increased franchise agreements by £2.8m. As this
review was performed more than 12 months after the date of acquisition this
adjustment has been processed as a prior period correction and further
information can be seen in Note 1.
On acquisition adjustments were made to write off £0.25m of other receivables
which management does not believe to be supported at the acquisition date; to
cash and other payables for pre-acquisition share option exercises that were
not reflected in the financial statements at acquisition; and to PPE to better
reflect the fair value of assets acquired.
A deferred tax liability adjustment has been calculated on the fair value of
intangible assets using a blended deferred tax rate of 26% followed by the
deduction of the existing deferred tax liability relating to acquired
intangibles.
The fair value of consideration was calculated as the present value of future
expected free cash flows using a discount rate of 18.9%, slightly above our
WACC of 16.6% at acquisition. The rationale behind this allowed for
significant growth and performance enhancement in the future due to synergies
that management believe can be achieved given the similar business model to
current operations.
The goodwill recognised includes certain intangible assets that cannot be
separately identified and measured due to their nature, such as the assembled
workforce and synergies that are expected to be achieved. This includes
control over the acquired business, and the scale and the future growth
opportunities that it provides to the Group's operations. If the acquisition
had occurred on 1 January 2022, Group revenue would have been £74.5m and
Group profit before tax would have been £10.0m; the revenue for Filta would
have been £37.1m and loss before tax would have been £0.0m.
As at 9 March 2022 the Company had received acceptances equal to 82% from the
holders of Filta Group Holdings plc shares. As at 25 March 2022 this had risen
to above 90%. This gave rise to an immaterial non-controlling interest which
has not been disclosed within these accounts.
5. Revenue
2023 2022
£'000 (*restated)
£'000
Management service fee income - commission agent revenue 7,393 5,358
Management service fee income - royalty fee income 32,827 11,339
Franchise sales and resales - licence fees - recognised over time 1,754 1,209
Franchise sales and resales - termination fees and immediate sales - 1,030 787
recognised at point in time
Product sales 18,415 3,605
Waste oil 17,469 16,139
Direct labour income 39,165 29,017
IT Contribution SAAS 436 433
National advertising funds 1,632 1,446
Central billing fee 268 -
Training facility income 304 41
Other income 572 465
121,265 69,839
The table shows revenue from contracts disaggregated into major classes of
revenue and reconciled to the Group revenue reported.
Revenue and non-current assets by origin of geographical segment for all
entities in the Group are as follows:
Revenue 2023 2022
(*restated)
£'000
£'000
North America 26,507 23,273
United Kingdom 68,327 46,089
Europe 26,431 477
121,265 69,839
Non-current assets 2023 2022
(*restated)
£'000
£'000
North America 44,251 44,985
United Kingdom 167,989 47,605
Europe 107,414 (937)
319,654 91,653
Contract assets 2023 2022
£'000 £'000
At 1 January - 53
Revenue recognised in the year - (53)
At 31 December - -
* See Note 1 for further information.
Contract assets are included within trade and other receivables. They have
historically arisen from advance payments made to our franchisees.
6. Operating profit
Operating profit is stated after charging: 2023 2022
£'000 (*restated)
£'000
Depreciation 3,492 1,781
Amortisation 8,643 2,193
Share-based payment expense 838 535
Auditors' remuneration:
Fees for audit of the Company 44 24
Fees for the audit of the Group 618 249
Fees for non-audit services:
Taxation services 113 80
Corporate finance services 726 106
Other services 66 10
* See Note 1 for further information.
Of the total fee for the audit of the Group, £662,000 (2022: £273,000) was
paid to the Group statutory auditors BDO LLP. No non-audit services were
provided on a contingent fee basis.
The following costs have been drawn to the attention of the users of the
accounts due to their nature and materiality within the accounts.
2023 2022
£'000 £'000
Acquisition-related costs 3,514 1,011
Reorganisation expense 1,496 686
Intellectual property dispute 516 -
Write-off software intangibles 314 -
Other exceptional costs 319 -
6,159 1,697
A summary of the separately disclosed items for the current year is as
follows:
Acquisition-related costs £3,514,000 (2022: £1,011,000).
At close of business on 20 April 2023, the Group acquired the entire share
capital of Hydraulic Authority I Limited and its subsidiaries (together
"Pirtek" or "Pirtek Europe"). The Group incurred total professional costs of
£2,855,000 for the acquisition of Pirtek. These fees were primarily related
to legal, financial and IT due diligence £763,000, Group legal fees including
legal due diligence £756,000, stamp duty £659,000, Pirtek legal fees funded
by the Group £343,000, legal fees paid by the Group on behalf of the four
bank lending syndicate £201,000, legal fees paid by the Group on behalf of
the Group brokers £77,000 that helped raise the equity to part fund the
acquisition, debt advisory fees £435,000 for raising the debt to partially
fund acquisition, underwriting and other debt costs fees £91,000, and other
professional costs of £189,000 including the AIM stock exchange fee for
listing the shares. In addition to these costs, which have been separately
disclosed as non-recurring costs in the Consolidated Statement of
Comprehensive Income additional costs of £2,554,000 have been charged to the
share premium account as these costs directly related to the equity issuance
on the acquisition of Pirtek. The 2022 acquisition related fees all relate to
the acquisition of Filta Group Holdings PLC.
Reorganisation costs £1,496,000 (2022: £686,000)
Following the acquisition of Pirtek, a restructuring plan has been completed
that has been the departure from the Group of several long-serving Directors
of Pirtek including the Chief Executive, Chief Financial Officer, Financial
Controller, IT Director and Operations Director. The total cost of this
restructuring is £1,350,000 and the legal and other associated costs are
£146,000. The 2022 restructuring costs of £686,000 were for redundancies
£250,000, loss of office for the Chief Financial Officer £319,000 and other
reorganisation costs of £117,000.
Intellectual property dispute £516,000 (2022: Nil)
The Group has been in a long-standing relationship with Fog Fellow Designs
Limited ("FF") that manufactures the cyclone GRU used by Filta UK. The dispute
arose over ownership of the intellectual property and loans to FF to enable
the development of GRU. The total separately disclosed costs for this dispute
were £516,000 broken down as loan written off to FF when this went into
administration in the second half of 2023 £233,000, write-off of
non-compliant GRU inventory £220,000, legal fees £23,000 and other
associated costs £40,000.
Software costs £314,000 (2022: Nil)
The Group's accounting policy has historically been to capitalise all costs
related to the configuration or customisation of software as intangible
assets. Following the agenda decision of the International Financial Reporting
Standards Interpretations Committee (IFRIC) certain previously recognised
intangible assets have been treated as an expense.
Other costs £319,000 (2022: Nil)
Other exceptional costs are made up of costs such as relocation fees,
redundancies and the abortive sale of B2C.
7. Earnings per share
Basic earnings per share amounts are calculated by dividing profit for the
year attributable to ordinary equity holders of the Parent Company by the
weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share are calculated by dividing the profit attributable
to ordinary equity holders of the Parent Company 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 share options at the start of the period or, if
later, the date of issue.
2023 *Restated
2022
£'000
£'000
Profit attributable to owners of the Parent Company 3,037 8,126
Non-recurring costs (Note 8) 6,159 1,708
Amortisation of acquired intangibles (Note 14) 7,718 1,693
Change in the fair value of deferred consideration (Note 24) - (1,232)
Share-based payment expense (Note 10) 838 535
Tax on adjusting items (3,174) (649)
Adjusted profit attributable to owners of the Parent Company 14,578 10,181
2023 Total 2022 Total
Number Number
Basic weighted average number of shares 173,090,691 122,126,350
Dilutive effect of share options 2,241,161 2,042,848
Diluted weighted average number of shares 175,331,852 124,169,198
Pence *Restated
Pence
Basic earnings per share 1.75 6.65
Diluted earnings per share 1.73 6.54
Adjusted earnings per share 8.42 8.34
Adjusted diluted earnings per share 8.31 8.20
* See Note 1 for further information.
8. Dividends
2023 2022
£'000 £'000
Final 2022 dividend of 1.1p per ordinary share paid and declared (2022: Final 1,433 1,169
2021 dividend of 0.9p)
Interim dividend of 1.0p per ordinary share paid and declared (2022: 0.9p) 1,938 1,170
3,371 2,339
A final dividend of 1.2 pence per ordinary share is proposed.
9. Annual Report & Accounts
The annual report and accounts for the year ended 31 December 2023 will be
available on the Company's website
at www.franchisebrands.co.uk/investor-relations
(https://protect.checkpoint.com/v2/___http:/www.franchisebrands.co.uk/investor-relations___.bXQtcHJvZC1jcC1ldXcyLTE6bmV4dDE1OmM6bzozMDA5M2U4NTBmNGMzMWVlMDVkNWM3MjU0OGZjOTIyYTo2OjY0N2U6OWI4ZTk3ZTk0NTQ2MWJkZTljNGZjOTgxNWUwNWU4ODc1N2JhZTkwNGJjNDAxODRiZDk3NGFjNGEyNDFjNmVkZDpwOkY)
from 21 June 2024, and copies will be sent to those shareholders who have
elected to receive hard copy communications on 24 June.
10. Annual General Meeting
Under the Companies Act 2006 (the "Act"), the Company is required to convene
its AGM by 30 June 2024 on at least 21 clear days' notice and the notice of
AGM, which is on the Company's website, was sent to shareholders on 3 June to
convene a meeting on 27 June 2024. The Act also requires that the annual
report and accounts for the year ended 31 December 2023 ("Annual Report") is
laid before shareholders at a general meeting and that the document must be
posted at least 21 clear days before the meeting at which it is to be laid.
The Company intends to post the Annual Report to relevant shareholders on 24
June. Since that date is less than 21 clear days before the date of the AGM,
the Company intends to immediately adjourn the AGM when it commences on 27
June 2024, with no formal business being transacted, and then resume the
meeting on 18 July 2024. Full details of the business of the AGM, all of
which will be considered on 18 July 2024, was set out in the letter to
shareholders accompanying the notice of AGM published on 3 June.
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