Franchise Brands (LON: FRAN) is making its largest ever acquisition and it wants to raise at least £90m from a share placing at 180p. The rest of the £200m purchase price for Pirtek Europe, plus working capital adjustment of £12.2m, will come from up to £18.85m in shares issued to the owners, a management subscription of £4.8m and debt.
Pirtek Europe provides on-site hydraulic hose replacement and other services through 213 service centres and 838 mobile service vans. There are 70 franchisees in eight countries and the company has the right to enter eight other European countries. Franchise Brands will have operations in ten countries.
Net cash was £8m at the end of 2022 and there are plans to sell the B2C franchise businesses. The continuing operations also continue to generate cash. This, along with cash generated by Pirtek Europe, will help to reduce the debt. Net debt could fall to £55m by the end of 2024.
In 2022, AIM-quoted Franchise Brands revenues jumped from £57.7m to £99.2m, which included an initial contribution of £23.9m from former AIM-quoted fryer management services company Filta. Integration of Filta has helped to reduce costs and improve profitability. Revenues from business to consumer franchises were flat at £6.4m. Underlying pre-tax profit jumped from £6.5m to £12.8m. The dividend was raised by one-third to 2p a share.
In 2022, Pirtek Europe had system sales of £164.1m and revenues were £49.2m. Adjusted EBITDA was £14.7m, while pre-tax profit was £14m.
Forecast 2023 group revenues are £155m or £168m on a pro forma basis. Forecast 2023 group EBITDA is £29m.
There is potential to use the existing Pirtek Europe infrastructure in individual countries to launch other franchise brands. There should also be central cost savings.
