Macclesfield’s Franchise Brands recovers in Q3

Stephen Hemsley

Macclesfield-based Franchise Brands plc said on Wednesday it saw a steady recovery in trading in its third quarter “from the previous quarter’s lockdown-impacted performance, which had followed a strong Q1.”

The firm’s chairman said the strength of the group “provides a platform for organic and acquisitive growth” as the economic environment recovers from the pandemic.

The multi-brand franchise business said: “Whilst the environment is still uncertain, the board is confident of meeting current consensus market expectations for revenue and adjusted EBITDA for the year to 31 December 2020.”

Consensus market expectations are £48.6 million for revenue and £6.1 million for adjusted EBITDA.

In a trading update for the three months to September 30, 2020, Franchise Brands said of its B2B division, which comprises Metro Rod, Metro Plumb, Willow Pumps and Kemac: “At the height of the lockdown in April and May, system sales at Metro Rod and Metro Plumb were down by nearly 30% against the comparative period in 2019.

“From June onwards, system sales have grown by an average of 8% per month as the economy has emerged from the lockdown.

“By September, system sales for the month were 9% higher than in the comparative month in the prior year.

“As a result, system sales in Q3 were down only 6% against the same quarter in the prior year. 

“Revenues at Willow Pumps (which was acquired in October 2019) and Kemac grew by 48% in Q3 compared to Q2, but are still 20% down on Q1. However, Q3 revenues have been weighted towards higher margin service work resulting in gross profit in Q3 being down by only 10% on Q1.”

Franchise Brands added: “The B2C brands have recovered at different speeds, driven by new franchisee recruitment.

“ChipsAway and Ovenclean, which in aggregate generated 89% of divisional income in 2019, are trading at pre-COVID-19 levels. 

“Trading at Barking Mad, the group’s smallest network, continues to be well below pre-COVID-19 levels given its heavy dependency on the foreign holiday market. 

“Recruitment during Q3 was robust, with 21 new franchisees joining the B2C brands (Q3 2019: 20), meaning that for the year-to-date the division has recruited 48 new franchises (Q3 YTD 2019: 54).

“However, given the lower levels of trading in the underlying networks, especially at Barking Mad, there has been a slight increase in the level of franchisees leaving the brands, meaning that at the end of September there were 394 franchisees in the B2C division (31 December 2019: 404).”

In its outlook, Franchise Brands said: “Q3 saw a welcome recovery from the reduced levels of activity in Q2 and trading in October has continued to follow that trend. 

“If the ‘second wave’ COVID-19 restrictions persist for any length of time, or become tighter, or more widespread, this could have an impact on the group and reduce activity levels …”

Franchise Brands executive chairman Stephen Hemsley said: “I am very pleased that the group saw a return to more normal levels of trading during Q3. 

“Our key priority remains the safety of our team members, particularly our engineers, customers and the public whilst continuing to provide the best possible service we can in a challenging environment. 

“The resilience and resourcefulness of our people and franchisees is allowing us to navigate through these difficult times. 

“The strength of the group provides a platform for organic and acquisitive growth as the economic environment recovers from the pandemic.

“I remain optimistic for the future growth and prosperity of Franchise Brands.”