Delivering on
our ambitions
Franchise Brands plc
Annual Report and Accounts 2023
Strategic Report
Strategic Report Governance Financial Statements
Our purpose
If they grow,
we grow.
We are focused on
building, developing and
growing market-leading
franchise businesses.
Build
Our purpose is to build market-
leading businesses primarily
via a franchise model.
Develop
We support our franchisees
to successfully develop their
businesses and achieve their goals.
Grow
This provides unity behind our
purpose and theirs – if they grow,
we grow.
Scan to view the
investor section
on our website
Franchise Brands plc
Annual Report and Accounts 2023
Financial Statements
110 Independent Auditor’s
Report to the members
of Franchise Brands plc
118 Consolidated Statement
of Comprehensive Income
119 Consolidated Statement
of Financial Position
120 Company Statement
of Financial Position
121 Consolidated Statement
of Cash Flows
124 Company Statement
of Cash Flows
125 Consolidated Statement
of Changes in Equity
126 Company Statement
of Changes in Equity
127 Notes forming part of the
Financial Statements
Contents
Strategic Report
01
Financial &
Operational Highlights
02 At a Glance
04 Investment Case
06 Chairman’s Statement
12 Strategy
14 Strategy in Action
20 Pirtek Review
26 Water & Waste
Services Review
30 Filta International Review
34 B2C Review
36 Working Responsibly
56 Engaging with
our stakeholders
62 Financial Review
76 Risk Management
Governance
81 Chairman’s Introduction to
Governance
82 Board of Directors
84 Management Board
86 Our Governance Framework
88 Corporate Governance
in Action
93 Audit Committee Report
98 Remuneration Committee
Report
104 Directors’ Report
109 Directors’ Responsibilities
Statement
Contents Generation – Sub Page Financial & Operational Highlights
Strategic Report Governance Financial Statements
Financial Highlights
£350.1m
+88% 2022: £186.4m ●●
System sales ●
£121.3m
+74% 2022: £69.8m ●●
Revenue
£30.1m
+97% 2022: £15.3m ●●
Adjusted EBITDA* ●
£5.0m
-50% 2022: £10.0m ●●
Profit before tax
8.42p
+1% 2022: 8.34p ●●
Adjusted basic earnings per share** ●
1.75p
-74% 2022: 6.65p ●●
Basic earnings per share
8.31p
+1% 2022: 8.20p ●●
Adjusted diluted earnings per share** ●
1.73p
-74% 2022: 6.54p ●●
Diluted earnings per share
01
Franchise Brands plc
Annual Report and Accounts 2023
£74.7m
Net debt***
2022: Net cash £9.8m ●●
2.20p
+10% 2022: 2.00p
Dividend per share
● Alternative Performance Measures (see Note 2)
●● Prior Year Adjustment
Note: The results include, for the first time, several
prior year adjustments which are set out in Note 1.
These impact all of the above measures with the
exception of dividends.
*
**
***
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 excludes debt on right-of-use
assets and is the debt measure used for testing
bank covenants.
Operational Highlights
Another year of momentous change for the
business with the acquisition of Pirtek which
has again doubled the size of the Group.
The enlarged Group performed strongly in the
period generating both the profitability and the
cash flow 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 over 18.2% to
£106.7m (statutory revenue: £48.9m), 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.
Contents Generation – Sub PageContents Generation – Section
At a Glance
33%
41%
Proportion of Adjusted
EBITDA before Group
overheads of £2.7m
Our leading brands
7%
19%
1%
See our Business Building
Strategy for more detail on
pages 12 and 13.
Pirtek*
Leading European
provider of on-site
hydraulic hose
replacement services.
Water &
Waste Services
Drainage, plumbing,
pump maintenance and
installation, and services
to commercial kitchens.
Filta
International
Cooking oil filtration,
biodiesel recycling, bulk
new oil delivery and
cleaning services for
commercial kitchens.
B2C
Azura
Leading home
service brands.
Leading franchise
software systems
developer with over
30 franchise customers.
See our divisional review
on pages 20-25.
See our divisional review
on pages 26-29.
See our divisional review
on pages 30-33.
See our divisional review
on pages 34 and 35.
£13.3m
Adjusted EBITDA**
£10.9m
Adjusted EBITDA**
73
Total franchisees
85
Total franchisees
£6.1m
Adjusted EBITDA**
159
Total franchisees
£2.3m
Adjusted EBITDA**
327
Total franchisees
£0.2m
Adjusted EBITDA**
Contribution in period of ownership from 21 April 2023.
*
** Adjusted EBITDA is earnings before interest, tax, depreciation, amortisation, exchange differences, share-based payment expense, non-recurring items.
Strategic Report Governance Financial Statements
At a Glance
Building our
businesses
We are a multi-brand franchisor, focused on
B2B van-based service, with a presence in
ten countries across the UK, North America
and Europe. We are focused on building
market-leading businesses primarily via
a franchise model and have over 625
franchisees across seven franchise brands
and System sales of £350m, of which 88%
is as a franchisor.
The underlying demand for our mostly essential
services is resilient. Our strategy is to grow our
franchisees’ businesses as we believe “if they
grow, we grow”.
Group total
Adjusted EBITDA**
£30.1m
£5.0m
644Total franchisees
Profit before tax
02 Franchise Brands plc
Annual Report and Accounts 2023
Contents Generation – Sub PageContents Generation – Section
Strategic Report Governance Financial Statements
At a Glance continued
Increasing geographical footprint
North America
How the services
are delivered
The Filta International
services of
cooking oil filtration,
biodiesel recycling,
bulk new oil delivery
and cleaning services
for commercial kitchens
are provided by
127 franchisees.
Filta has 124 franchisees
in the US and three
franchisees in Canada.
03 Franchise Brands plc
Annual Report and Accounts 2023
United Kingdom & Ireland
Revenue**
System sales*
£87m
£26.5m
£6.3m
127Franchisees
Adjusted EBITDA***
How the services
are delivered
The Water & Waste division’s
range of services are delivered
by a combination of franchisees
and direct labour. 85 franchisees
across Metro Rod, Metro
Plumb and Filta Environmental
provide drainage, plumbing,
fryer management and related
services. Willow Pumps is a direct
labour organisation (“DLO”).
The Pirtek services in the
UK and Ireland are delivered
by 40 franchisees.
The B2C division’s services are
delivered by 327 franchisees.
Revenue**
System sales*
£189m
£68.3m
£17.9m
452Franchisees
Adjusted EBITDA***
Continental Europe
How the services
are delivered
Pirtek’s services in Germany,
Austria, the Netherlands and
Belgium are mostly delivered
by a total of 33 franchisees.
Six centres in Benelux are
corporately owned.
Pirtek’s operations in the
start-up markets of France
and Sweden are DLOs.
The FiltaFry service is
delivered by 32 franchisees.
Revenue**
System sales*
£74m
£26.4m
£5.9m
65Franchisees
Adjusted EBITDA***
* Sales to customers by franchisees, corporate and DLOs.
** Revenue is before intercompany eliminations.
*** Earnings before interest, tax, depreciation, amortisation, exchange differences,
share-based payment expense and non-recurring items.
Contents Generation – PageContents Generation – Sub PageContents Generation – Section Investment Case
Strategic Report Governance Financial Statements
Investment Case
We build
market-
leading
businesses
We have a strong track record of growth and
have built market leading franchise businesses
where the underlying demand for our services
is highly resilient. We have a small share of
large, fragmented markets with significant
opportunities for growth.
04
Franchise Brands plc
Annual Report and Accounts 2023
Our ambition is to build a market
leading international B2B multi-
brand franchisor that generates its
income equally from the UK, North
America and Continental Europe.”
Stephen Hemsley
Executive Chairman
aContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Investment Case continued
Provider of essential
reactive services
Provider of B2B van-based essential reactive services, with
resilient underlying demand. Diversification through seven
market leading franchise businesses in 10 countries.
Long-established brands with a successful trading history.
Significant opportunities
for growth
Experienced team,
strong track record
Small share of all key markets with “manageable” competition.
Our Maximum Potential Model shows the potential for system
sales of £1.8bn for Pirtek, Metro Rod and Filta International
compared to current System sales of £332m for these
businesses (on an annualised basis).
Proven track record of successfully acquiring and
integrating businesses to unlock growth. Management
team and Board are substantial shareholders, with an
over 30% shareholding.
7Franchise brands in ten countries
£1.8bn
The Group’s Maximum Potential Model
>30%
Shareholding of Management & Board
For further reading, see pages 14, 15 and 20-35
For further reading, see pages 16 & 17
For further reading, see pages 7-11, 18-23
Highly cash
generative business
Capital light as franchisees make investments to expand their
capacity and grow system sales. Cash generation supports
deleveraging. Anticipate a net cash position in 2027 through
only organic growth.
Operational
gearing
Operational gearing is a significant driver of organic growth
in franchise businesses. Accelerated by the continued
consolidation of functions which are common to all businesses.
Progressive
dividend policy
The cash generative nature of the business supports
deleveraging and a progressive dividend policy.
97%Average cash conversion* 2021-2023
For further reading, see pages 62-75
05
Franchise Brands plc
Annual Report and Accounts 2023
13%Sales per head, Water & Waste Services
division franchise Support Centre staff CAGR
2017-2023
47%Dividend growth 2021-2023
For further reading, see pages 10, 62-75
*
Cash from operations + costs of acquisition and re-organisation /
Adjusted EBITDA.
Contents Generation – Sub PageContents Generation – Section Chairman’s Statement
Strategic Report Governance Financial Statements
Chairman’s Statement
Strong
performance
in another
year of
momentous
change
£30.1m
Adjusted EBITDA
Scan to see what
Stephen has to say
on our website
06
Franchise Brands plc
Annual Report and Accounts 2023
*
Adjusted EBITDA is earnings before interest, tax, depreciation, amortisation,
exchange differences, share-based payment expense and non-recurring items.
Strategic Report Governance Financial Statements
Chairman’s Statement continued
The enlarged Group performed strongly in the period,
generating both the anticipated profitability and the
cash flow required to service and reduce the debt
taken on to fund the Pirtek acquisition.”
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.
Maximum Potential Model and medium-term target
We have applied our Maximum Potential Model to the Group as a whole,
including Pirtek for the first time, and have updated the model for Metro
Rod. This shows the maximum potential for System sales based on our
current range of services is £1.8bn compared to £332m currently for the
businesses that have been modelled.
We have incorporated this methodology into a medium-term strategic
model potential for the Group as we integrate our portfolio of businesses
and grow them organically. The model shows the potential for Adjusted
EBITDA to reach £60m in 2027.
The Group’s Maximum Potential Model analysis is on pages 16 and 17
£60m
Medium-term target of adjusted EBITDA in 2027
Financial targets set out herein are the aspirations of the Group and are not provided as forecasts or
formal guidance. Actual results may differ.
07
Franchise Brands plc
Annual Report and Accounts 2023
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Chairman’s Statement continued
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.
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.
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.
08 Franchise Brands plc
Annual Report and Accounts 2023
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 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.
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%).
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.
Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Chairman’s Statement continued
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 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 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 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.
09 Franchise Brands plc
Annual Report and Accounts 2023
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Chairman’s Statement continued
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.
10 Franchise Brands plc
Annual Report and Accounts 2023
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.
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Chairman’s Statement continued
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.
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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
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.
Building the Board:
Non-executive Director profile
Nigel Wray
While I have been a Director since
well before the IPO in 2016, I am
still as enthusiastic as ever about
the opportunities ahead for all our
businesses. All our brands currently
have small market shares of relatively
large addressable markets, so the
potential for the business is real.
The Maximum Potential Model described
on pages 16 and 17 gives us a toolkit to
help drive growth throughout the Group.
The beauty of the Maximum Potential
Model is that it is entirely practical
and realistic: it’s simply a question of
everyone aspiring to do what the best
of their peers is already doing. I saw the
model in action when I was a Director
of Domino’s Pizza Group, and look
forward to seeing the results when
applied to Franchise Brands’ portfolio
of businesses. We also have a team
of really good, committed people, which
is the starting point of any business.
Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategy
Expanding and developing
our services
Developing a Group
technology platform
Widening and deepening our range
of services enables us to drive penetration
and revenue per customer. We have
a small share of large, fragmented
markets as illustrated by the Maximum
Potential Model.
Our Group-wide digital platform helps
enhance the customer experience
service and increase sales. It also helps
improve retention, drive efficiency and
productivity and assists people in doing
their jobs, in particular our engineers.
Progress in 2023
In our Water & Waste Services division, pump
sales increased by 21% and tanker sales by
23%. Metro Plumb also experienced strong
growth. Pirtek increased technical sales and
Total Hose Management (“THM”) in its main
markets of Germany, the UK and Benelux.
Filta International launched FiltaGold and
FiltaClean, both royalty-based services.
Progress in 2023
We added further functionality to our core
Vision works management system which
included the start of the rollout of advanced
scheduling to engineers. We continue to
automate manual, repetitive processes,
particularly in our Support Centres. We started
the process to integrate Pirtek onto the
Group’s IT platform.
Priorities for 2024
Continue to drive pump and tanker sales and
grow Metro Plumb. Drive THM and technical
sales at Pirtek. In Filta International, upsell
FiltaGold and FiltaClean to existing customers
and target new customers.
Priorities for 2024
Further strengthen cyber-security of the
Group. Roll-out our Vision works management
system across Pirtek’s business. Commence
establishment of a shared group-wide
Customer Relationship Management
(“CRM”) system.
Strategic Report Governance Financial Statements
Strategy
Business
building
strategy
We build market-leading
businesses primarily via
a franchise model. Our
business-building strategy
has five engines of growth.
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Governance Financial Statements
Strategy continued
Leveraging shared
central services
Optimising our
service delivery
Developing
our businesses
Leverage the investment in technology
and other central services such as
marketing and finance to optimise the
effectiveness of the business across
functions and geographies.
Our objective is to grow our business
with a franchise model. However, we will
invest in DLOs where they accelerates
the growth of our franchise businesses.
Ability to benefit from cross selling
and upselling opportunities across
our brands, and launch our brands
into new markets.
Progress in 2023
Established centralised international IT structure
guided by the “Star Chamber” to approve and
prioritise major IT projects. Group marketing
team formed which co-ordinates activity and
shares ideas across the Group. A Group finance
function is in the process of being developed.
Progress in 2023
Willow Pumps continues to enhance the
pump service provided by Metro Rod. The
franchise channel of Filta UK is replacing the
direct labour channel in the servicing of GRUs.
Pirtek is strengthening its central team to
support franchisees in offering higher value
“technical” sales.
Progress in 2023
We started to see the benefits of cross selling
and upselling the complementary services
within the Water & Waste Services division.
Cross selling steering group between Pirtek
and Water & Waste Services division formed
post the Growth Summit.
Priorities for 2024
Complete formation of centralised IT
function with further recruitment for
prioritised projects. Strengthen the Group
finance function to anticipate ever growing
audit and compliance requirements, whilst still
providing relevant management information
to commercial managers.
Priorities for 2024
Continue using Willow Pumps in the training
and support of Metro Rod franchisees in
the provision of pump services. Expand
the Filta UK franchise system to allow the
migration of more services from the DLO.
Investigate how we can further support
Pirtek franchisees in the expansion and
diversification of the services they offer.
Priorities for 2024
Target key customers for our range of
services. Salespeople tasked with selling
all Group’s range of services. Developing
the Group CRM will assist the cross selling.
13 Franchise Brands plc
Annual Report and Accounts 2023
We have a proven
strategy of growing
franchise businesses,
including successfully
unlocking and then
growing businesses
we have acquired.”
Julia Choudhury
Corporate Development Director
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Strategic Report Governance Financial Statements
Strategy in Action
Pirtek
acquisition
In April 2023 we acquired Pirtek,
the market-leading European provider
of on-site hydraulic hose replacement
and associated services, operating
in eight countries.
14 Franchise Brands plc
Annual Report and Accounts 2023
Strategic
pillar
Scan to hear
more about our
Pirtek acquisition
aContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Governance Financial Statements
Strategy in Action continued
Pirtek in numbers
System sales*
£126m
£42m
Statutory revenue*
73Franchisees
217centres
Pirtek is an established provider of on-site hydraulic
hose replacement and associated services. The service
is provided through 217 service centres with over 850
mobile service units (“MSUs”). 94% of System sales is
derived from franchise channels.
The largest businesses are the UK and Germany which account
for 81% of System sales. Pirtek operates nine corporate franchises
and DLO operations in the early-stage markets of France
and Sweden.
* Contribution in period of ownership from 21 April 2023.
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Annual Report and Accounts 2023
Annual Report and Accounts 2023
The Pirtek team is like a family with our people being
the best in the business. They do the impossible
every day and they do it within the hour.”
Chris Stuckey
CEO Pirtek Europe
System sales are primarily generated by providing
an emergency response service to a wide range of
commercial customers who use hydraulic equipment
in their operations. Typically, a hydraulic hose will fail
when equipment is in use and needs replacing on site.
Pirtek targets a one-hour response time, 24/7/365,
with the demand for this time-sensitive service being
greatest in sectors with high labour costs, well evolved
customer service standards and high downtime costs.
In most cases, Pirtek’s highly trained technicians can
assemble and fit a replacement hose from the stock and
equipment held on the MSU, enabling a first time fix.
Pirtek is expanding its range of services from the critical
emergency response, allowing it to provide total
solutions to customers. These expanded services
include total hose management which involves
the inspection and cataloguing of all hoses in a
customer’s premises which are then registered and
tagged, allowing both the emergency and scheduled
replacement. Technical engineering and full preventive
maintenance programmes are also being developed.
Pirtek has a diverse portfolio of thousands of customers
across a wide range of end markets including waste
disposal, industrial, construction, plant rental, logistics,
maritime and rail.
Key points
• High degree of resilience due to emergency reactive
services. Targets a one-hour response time.
• Diverse portfolio of thousands of customers across
a wide range of end markets. The largest customer
accounts for <1% of revenues.
• Carries out approximately 500,000 jobs per annum.
• Supplies c.2,500 core products to franchisees.
• Management service fees range from 15% to 19.5%.
Product sales charged at cost plus handling fee.
Range of services
• Emergency on-site hydraulic service
• Non-urgent hose replacement
• Trade counter service and support
• Planned maintenance and servicing
• Total hose management (THM)
• Hose flushing, testing and fluid analysis
• Ram repair and manufacture, oil spill products
Pirtek’s perpetual, royalty-free master license agreement
enables trade in a further eight European markets which
will be developed when the existing early-stage markets
become more mature and profitable.
Read the Pirtek divisional review on pages 20-25
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Strategy in Action
System sales in 2023
System sales of the Group’s main
businesses of Metro Rod, Filta
International and Pirtek* in 2023.
Metro Rod
Filta International
£72m
£90m
£170m*
Pirtek
Total
£332m
*
Pirtek 2023 system sales of £170m are annualised figures
for UK & Ireland, Germany & Austria, Benelux.
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Annual Report and Accounts 2023
Strategic
pillar
Maximum
Potential
Model
Our Maximum Potential Model allows us to estimate
the potential System sales using our current data
of how franchisees are performing in each territory.
The methodology is based on “best of the best”
metrics being achieved by franchisees in each
territory including market penetration and revenue
per site or address. We multiply these metrics out
against third party data for the total potential number
of customers to establish maximum potential System
sales for each business.
The model allows us to map the potential by franchise
territory and optimise territories by developing plans
for increasing penetration and spend.
Scan to read more
about our maximum
potential model
a Strategic Report Governance Financial Statements
Strategy in Action continued
What’s the potential?
Our modelling shows maximum potential System
sales of £1.8bn for Metro Rod, Filta International
and Pirtek compared to only £332m currently.
Metro Rod
Filta International
£293m
£752m
£746m
Pirtek
Total Group maximum
potential System sales
£1.8bn
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Maximum Potential Model
Methodology
The Maximum Potential
Model in action
We map total potential customers through the
most appropriate data measure for each brand.
A combination of third party data extracted using
Standard Industrial Classification (“SIC”) codes and
existing customer data are used to estimate the total
number of potential customers.
For Pirtek, we have made some modifications due
to the non-fixed or mobile nature of its customer base.
For example, a construction company has multiple
sites and work is carried out across a number of
franchise territories.
Using industry data, we have split Pirtek’s UK market
into mobile and technical sales. THM and technical
sales are relatively new services and under-exploited
sectors, hence their impact is under-represented
in the data.
A number of the Group’s businesses have been
excluded from this analysis, for example, if the
operation is sub-scale, as the data would not be
meaningful. The following are excluded: Metro Plumb,
Willow Pumps, Metro Rod B2B2C (Business to Business
to Consumer) and domestic customers, Pirtek France,
Pirtek Sweden, the B2C division and Azura. Hence the
current market size of £332m is less than the Group’s
total System sales of £350m.
Strategic drivers
These strategic drivers can be applied to all the
Group’s franchise brands:
• Map potential by franchise territory.
• Franchise territory development: “Hot spot” and “not spot”
territory penetration.
• “Use it or lose it” to focus franchisees on developing
under-exploited areas.
• Long-term territory development plan for increasing
penetration and spend per customer.
Growth drivers
These drivers help grow sales for each of
our businesses:
• Widen and deepen the range of services.
• Industry sector expansion based on margin expectations.
• Deepen custom relationships and grow share of wallet.
• Cross sell and upsell services across the Group’s brands.
• Contact strategy for lapsed or low-spend businesses.
• Optimise franchise networks.
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Strategy in Action continued
Growth
Summit
In November 2023, we held our inaugural
Growth Summit in Amsterdam, bringing
together some 65 leaders from ten countries.
The main objective was to connect everyone
across the Group and develop ideas to grow
the business.
“If they grow, we grow”.
Focus
Generating ideas to
grow System sales
Optimising and
growing our
franchise networks
Identifying
Group technology
opportunities
Integration and
efficiencies to drive
operational gearing
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Annual Report and Accounts 2023
Strategic
pillar
Scan to read
more about our
growth summit
a
Strategic Report Governance Financial Statements
Strategy in Action continued
Live poll result for attendees
96%
felt more connected to each
other, the Group, the strategy
and our culture
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Franchise Brands plc
Annual Report and Accounts 2023
We have big ambitions and a clear growth strategy. This event
was a great success and helped everyone connect with each
other, our strategy and our culture.”
Stephen Hemsley
Executive Chairman
Connecting with each other
and developing growth ideas
We hosted an inaugural Growth Summit in
November 2023 in Amsterdam. Some 65
leaders from across ten countries got together
for two days joined by the plc Board. Given
we have doubled in size twice over the past
two years, and grown from 290 to more than
650 people in the Support Centres and DLOs,
it was a great opportunity to get our leaders
together face to face to develop relationships.
We developed ideas to grow sales, accelerate
the growth of the business, shared experiences
and ideas.
The format was highly participatory and
interactive with breakout groups and
presentations by the team on their best
growth ideas with prizes given out for the
best ones. We hosted panel discussions
with the leadership team to discuss the
growth opportunities for each division, our
development which included our guiding
principles, and how we bring these to life.
The feedback
What an inspirational event we had.
Great to meet a lot of new colleagues
and establish relationships to share
ideas and cooperate to grow the
business further!”
Peter de Ru
Operations Director,
Pirtek Benelux
A fantastic, thought-provoking event.
It was great to see everyone and meet
the wider Franchise Brands team.’’
Above all it was energetic and fun and
a number of the growth ideas the team
generated are already being implemented.
Abigail Smith
Group Marketing Manager,
Water & Waste Services
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Pirtek Review
Strategic Report Governance Financial Statements
Pirtek Review
Contributing
as expected
Pirtek traded at record levels, contributing
as expected to the Group’s results during
just over eight months of ownership in 2023.
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Pirtek Review continued
Priorities in 2024
Integration within the
Group, in particular
consolidation of
technology
Leverage best practice
within Pirtek, develop
cross selling
Implement the Maximum
Potential Model
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The integration of Pirtek is progressing well, and the Maximum
Potential Model has shown significant opportunities for growth.
With Franchise Brands as permanent owners of the business,
we are optimistic that these opportunities can be realised.”
Chris Stuckey, CEO Pirtek Europe
Pirtek traded at record levels
During just over eight months of ownership in
2023, Pirtek traded at record levels, contributing
as expected at the time of the acquisition. The
Pirtek division generated total System sales of
£126m, statutory revenue of £42m and Adjusted
EBITDA of £13.3m in this period.
The largest businesses of the UK & Ireland,
Germany & Austria and Benelux which have
national coverage and are substantially
franchised, performed well and contributed
94% of System sales. The start-up markets
of Sweden and France, which are DLOs,
contributed 6% of System sales. They have
regional coverage and make a small profit.
New management and integration
During the year, Chris Stuckey, previously
Managing Director of Pirtek UK, was promoted
to CEO of Pirtek Europe. Adam Burrows,
previously Sales Director of Pirtek UK, was
promoted to Managing Director of Pirtek UK.
The Pirtek businesses have historically
operated on a more stand-alone basis.
Following the senior management changes,
we are integrating Pirtek more closely and
encouraging the sharing of resources,
systems, knowledge and customers. An
area of particular focus is IT and we are
customising our Vision works management
system to replace outdated Pirtek third party
systems. We expect this will result in improved
functionality and cost savings for both the
franchisees and corporate.
Significant opportunities for growth
The Maximum Potential Model has shown that
Pirtek has a significant opportunity to grow its
developed markets through the expansion
of its reactive business and by broadening
the range of services offered in existing and
adjacent markets. The earlier-stage markets
also have huge potential to reach critical mass,
particularly as competition is fragmented.
Cross selling opportunities
We also see a significant opportunity for
co-operation with the Metro Rod and Filta
businesses at both the franchisee and
corporate levels. We believe this will lead to
an acceleration of System sales growth for the
Group and efficiencies will lead to a reduction
in overheads and drive operational gearing.
£126.0m
system sales*
£41.9m
revenue*
£13.3m
adjusted EBITDA*
*
Contribution in period of ownership from 21 April 2023.
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Pirtek Review continued
UK & Ireland
The UK & Ireland business generated
System sales of £56m and statutory
revenue of £16m in the period of
ownership. Established in 1988,
it is the largest business in the
Pirtek division with 86 service centres
and 40 franchisees providing full
national coverage operating with
333 mobile service vehicles.
Pirtek is the market leader in reactive hose
replacement and repair, and is actively
expanding its range of services to grow
planned work including THM and technical
sales which currently account for less than
10% of total sales. The top three sectors are
plant and rental (13%), waste management
(12%) and transport and logistics (10%).
The business renewed and won a number
of important contracts during the year, in
sectors such as rail and waste management.
A number of these contracts diversified
the sector focus away from construction
and plant hire, a key area of focus. We also
carried out large scale (>£50k) project work
for customers in the aerospace, food and
beverage, engineering and metals and
recycling industries.
The ethos of Pirtek is to build relationships,
create opportunities and increase sales.
A key area of focus in 2023 was rolling
out the Growth Tools, originally developed
in the UK to grow national accounts,
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Annual Report and Accounts 2023
Priorities in 2024
Pirtek UK & Ireland
Implement Maximum
Potential Model
Continued focus on technical sales
and THM
Sales growth initiatives including
further development of the
customer portal and local sales
Cross selling to Metro Rod customers
to franchisees to grow their local customer
base. The tools help franchisees drive
opportunities in their local markets.
The growth tools include CRM sales calls,
local marketing, promotion of the customer
portal, technical sales and THM. The customer
portal has proved very popular, with 50% of
our national account customers now using it
and 45% of portal customers having placed
orders on the platform.
70 service centres now offer technical sales
which increased 30% in 2023. 41 service
centres offer THM and the number of hose
lines recorded increased 50%.
Three service centres were sold by
franchisees to centre managers, and Pirtek
bought back one underperforming franchise
which is now managed corporately. Fee
income is generated on each of these resales.
Pirtek UK has two franchise territories that are
managed corporately.
£56m
system sales*
£16m
revenue*
40
franchisees
*
Contribution in period of ownership from 21 April 2023.
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Pirtek Review continued
Germany & Austria
The German and Austrian business
generated System sales of £47m
and statutory revenue of £11m in the
period of ownership. It is the second
largest business in the Pirtek division
with 98 service centres and 22
franchisees providing full national
coverage in Germany operating
with 350 mobile service vehicles.
The German business accounted for 36%
of the Pirtek division’s System sales. The
top three sectors are construction (36%),
industrial (20%) and logistics (12%).
THM accounts for 18% of sales and grew
strongly by 20% in 2023. We expanded
the range of THM customers carrying out
some large scale works. For example,
we replaced all outdated and defective
hydraulic hose lines on a number of injection
moulding machines and recorded those in
the THM database. We also retrofitted safety
components. In another project, we are
replacing outdated and defective hoses on
tooling machines for a global market leader
in rail components. We expanded our range
of THM services with a pressure accumulator
management service. We also carried out
a number of larger (>£50k) projects for an
industrial equipment manufacturer, and rail
and construction customers.
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Annual Report and Accounts 2023
Priorities in 2024
Pirtek Germany and Austria
Drive further geographic
expansion of service centres
and vans
Continued expansion of THM and
technical sales through additional
sales resource
Use the Maximum Potential
Model to help optimise the
franchise network
£47m
system sales*
£11m
revenue*
22
franchisees
*
Contribution in period of ownership from 21 April 2023.
We opened a new centre in Trier, near
the Luxembourg border, which gained
tremendous traction during the year. We also
rolled out initiatives to help franchisees buy vans
and open new centres. The concentration of
physical Pirtek locations in Germany has yet
to reach the critical mass achieved in the UK
and Ireland. We therefore continue to work
with franchisees to expand the number of
physical locations to optimise service delivery.
We are supporting franchisees to split their
existing territories and add additional centres
and vans which will continue to drive System
sales going forward.
In response to demand, we expanded our
central billing of national account customers,
This reduces the administrative burden
for customers, making it easier for them
to transact with Pirtek. This will be further
developed in 2024.
Our Austrian operation is sub-scale, with
three franchisees operating in the five largest
cities in Austria. This includes two service
centres in Vienna and an owned centre
in Graz.
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Pirtek Review continued
Benelux
Benelux
The Pirtek business in the Netherlands
and Belgium generated System sales
of £16m and statutory revenue of £8m
in the period of ownership. It has 11
franchisees, 24 service centres and
108 vans.
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Annual Report and Accounts 2023
Pirtek Benelux traded well in 2023 driven
by strong sales growth which was assisted
by a substantial increase in project work.
The business operates six service centres
corporately, two in Rotterdam and four
in Belgium. The Dutch owned service
centres performed well, in particular the
Europoort centre.
Pirtek Benelux has a diversified client
base with the top 15 customers accounting
for 14% of total sales. The business carried
out a number of major (>£100k) projects for
a range of customers in the engineering,
maritime, offshore contracting, aerospace and
defence, elevator & escalator and equipment
rental. The client base was further diversified
during the year with increases in offshore
transportation and waste management.
By the end of the year all franchisees were
converted to a royalty model which aligns
our interests with that of the franchisees.
Total hose management is an important
part of the growth potential following the
conversion to the royalty-model and sales
increased by nearly 80% in 2023. 22 service
centres are using the THM portal.
We built on our position in Belgium, opening
a new service centre in Antwerp harbour.
We introduced outbound CRM following its
success in the UK and a number of service
centres are now participating.
Priorities in 2024
Pirtek Benelux
Focus on driving technical sales
and non core products with
additional sales focus
Grow System sales in owned
centres in the Netherlands
and Belgium
Use Maximum Potential
Model to identify potential new
customers and increase spend
of existing customers
£16m
System sales*
£8m
Revenue*
11
franchisees
*
Contribution in period of ownership from 21 April 2023.
Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Pirtek Review continued
France
Pirtek France generated System sales
and statutory revenue of £5m each in
the period of ownership.
The French business, which is a DLO, is
at an early-stage having been established
in 2021 and 2022 through three
small acquisitions.
The business has eight service centres,
six of which are in the Île de France region,
with two in Lyon and Grenoble. The service
centres operate 42 vans. The three main
sectors are construction (40%), rental (20%)
and industrial (8%). A priority is to diversify
the customer base.
In 2023 we optimised our coverage in the
Île de France region, ensuring engineers
and vans were most effectively located.
We also closed the centre in Bondoufle
and acquired a new centre in Étampes,
which is some 50km to the south west
of Paris.
25 Franchise Brands plc
Annual Report and Accounts 2023
This represented our first expansion outside
of the Greater Paris area, although still within
the Île de France region. The service centre
in Étampes allows us to service a proven
industrial area in addition to the cities of
Chartres and Orleans. We also made good
progress building up the service centre in
the east of the Île de France.
During the year we focused on building up
the MST base by recruiting new engineers
and increased numbers substantially over
the course of the year. However, the
environment to recruit and retain MSTs
remains challenging.
During the year the management team
was completed with the recruitment of
sales and IT managers. This is facilitating
a rapid integration with the wider Group,
particularly in the area of technology,
where plans are underway to roll out
the Vision works management system.
The French market provides significant
potential for expansion given its size, which
is between that of the UK and Germany,
and where mobile services are advanced
but less so than the UK and Germany.
Sweden
Priorities in 2024
Pirtek France
Expand geographic coverage
around the Île de France and
Rhône-Alpes region
Increase capacity of vans
and technicians and expand
service offering
Diversify customer base away
from construction
£5m
System sales*
£5m
Revenue*
42
vans
Pirtek Sweden
Expand regional coverage
in Stockholm
Expand THM
Diversify the customer base
£2m
System sales*
£2m
Revenue*
25
vans
*
Contribution in period of ownership from 21 April 2023.
Pirtek Sweden generated System sales
and statutory revenue of £2m each in
the period of ownership.
The Swedish business is at a relatively early
stage having been established through the
acquisition of a DLO in 2017. It continues to
operate as a DLO with an office in Stockholm,
a service centre in Gothenberg and operates
a total of 25 vans.
During the year, we added additional vans
in Malmo and Östergötland to increase
the geographic reach and we continue to
optimise the service delivery footprint.
We made good progress diversifying our
sector coverage from construction to waste
management and other less cyclical sectors.
We also won our first THM client in the injection
moulding sector. We are now focused on rolling
out the proven growth tools with the initial focus
on outbound CRM.
Contents Generation – PageContents Generation – Sub PageContents Generation – Section Water & Waste
Services Review
Strategic Report Governance Financial Statements
Water & Waste Services Review
Continued
strong
growth
The newly named Water & Waste Services division
had an excellent year. The main drivers of growth
were Metro Rod and Metro Plumb. The division also
experienced integration and cross selling benefits.
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Contents Generation – Sub PageContents Generation – Section
Strategic Report Governance Financial Statements
Water & Waste Services Review continued
I was very pleased by the continued strong growth of the newly
named Water & Waste Services division. The main drivers of growth
were Metro Rod and Metro Plumb. The division also benefited from
the integration of shared services and cross selling.”
Peter Molloy, CEO Water & Waste Services division
An excellent year
The newly named Water & Waste Services
division, which includes Metro Rod, Metro
Plumb, Kemac, Willow Pumps and Filta UK, had
another excellent year, growing System sales
by over 18% to £106.7m and statutory revenue
by 16% to £48.9m. Renaming the division
provides more clarity and differentiates the
business from Pirtek.
Continued strong growth
2023 was a year of significant progress on
multiple fronts. The Metro Rod and Metro
Plumb businesses performed particularly
strongly with System sales growing by 20%
to £72m and statutory revenue growing by
23% to £15.2m. This was driven by a 12.5%
increase in average order value as higher
value tankering and pump work grew faster
than reactive repair work.
Divisional integration and cross selling
We increasingly realised the benefits of
integration and cross selling across the division.
The journey to integrate and share central
services such as marketing, finance, HR,
technical, health & safety is well underway.
We have also transferred some activities to
centres of excellence in the division such as
the Metro Rod contact centre which now deals
with Willow Pumps and Filta’s out of hours calls,
resulting in improved administrative efficiencies.
Increased levels of cooperation across the
business resulted in £3.2m of work being
subcontracted by one business to another
within the division.
We continued to grow pump sales with the
expert help of Willow Pumps. 113 national
account customers bought two or more
services across the division, an increase
of 82%. This resulted in a 36% increase in
System sales from cross selling from £16m
to £22m. We see significant opportunities
to introduce customers to other services,
including those offered by Pirtek.
Diversifying the customer base
As planned, we have reduced our dependency
on certain sectors, in particular hospitality, to
have a more diversified customer profile.
£106.7m
system sales
£48.9m
revenue
£10.9m
adjusted EBITDA
Priorities in 2024
Accelerate cross selling,
including to the Pirtek
customer base
Continue to grow Metro
Plumb through focused
management and
acceleration of sales
Further drive efficiency and
productivity for franchisees
and Support Centre
through automation and
labour optimisation
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Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Water & Waste Services Review continued
Metro Rod experienced continued
momentum in 2023 driven by initiatives
to widen and deepen our range of
services to higher value work.
One of the faster growing revenue streams
was local drainage which really ties into
the principle of “if they grow, we grow”.
We continued to expand our range of services
to higher value tanker work (up 23%) and pump
work (up 21%). Tanker work now accounts for
17% of System sales and pump work for 4% of
System sales.
Our franchisees are seeing the benefit of their
investment in growing System sales, with 31
(out of 42) franchisees exceeding £1m in sales,
two exceeding £3m and 11 exceeding £2m.
The average size of a Metro Rod franchisee in
2023 was £1.6m.
We benefited from new franchisees joining the
business by acquiring businesses from exiting
franchisees. These new franchisees grew
their System sales at 30-35%. We continued
to drive operational gearing into the business
through increased automation.
We sold part of the Kent & Sussex corporate
franchise to franchisees who have the ability
to accelerate the growth of the business.
Finally, we set up a new recruitment function
to help franchisees hire labour, with good
initial results.
28 Franchise Brands plc
Annual Report and Accounts 2023
Priorities in 2024
Continue to drive
local sales
Continue to accelerate
tanker and pump sales
Accelerate our
recruitment capability
for franchisees and
support centre
Metro Plumb, which includes Kemac,
our specialist plumbing business,
remains our fastest growing revenue
stream.
System sales increased by 22% and
we attracted a net five new Metro Plumb
franchisees during the year, taking the
total of independent franchisees to 18. In
addition, 19 Metro Rod franchisees operate a
Metro Plumb franchise.
A total of 821 clients used our plumbing
service in 2023, an increase of 10%. We are
helping our franchisees to win more local
work through sales and marketing support,
including our first ever TV advert. 20% of
the sales from our dedicated Metro Plumb
franchisees are generated locally. We have
reduced our dependence on lower value
insurance work.
We have 91 NVQ plumbers in the network and
a growing number of these have specialist
skills. We expanded our range of services
during the year and 21 franchisees now offer
leak detection services.
Our strategy of creating independent
Metro Plumb franchisees as opposed to
having combined Metro Rod and Metro Plumb
franchisees is proving successful. Eight Metro
Plumb businesses achieved over £200,000
in sales, and three businesses achieved sales
of over £500,000.
Priorities in 2024
Recruit more new
stand-alone Metro
Plumb franchisees
Help franchisees sell
locally by increasing
marketing and
online sales
Recruit dedicated
corporate management
for Metro Plumb
Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Water & Waste Services Review continued
Filta UK is on a journey from being
predominantly a DLO to a franchised
business and a highlight of the year was
the continued development and growth
of the franchise network.
Seven new franchisees joined the network
taking the total to 25 and more work was
carried out by the franchisees as they took
on more of the servicing of GRUs previously
undertaken by direct labour. By Q4, 75% of
all Filta’s Fats Oil and Grease maintenance
work was completed by the franchise
network, including reactive and extra works,
a 47% increase from the period immediately
following the acquisition of Filta.
Towards the end of the year, we acquired
the intellectual property rights of our market-
leading GRU and the supply of units from
the sub-contract manufacturer was restored
following nearly a year of disrupted sales. We
expect to reap the benefits of having a secure
supply chain in 2024.
Overall, Filta UK System sales increased by
35% to £12.3m and revenue increased by
27% to £11.0m. The business continued to be
integrated into the Water & Waste Services
division in 2023, benefiting from improved
health and safety, technical and HR.
Priorities in 2024
Continue to grow and
develop the franchise
network enabling more
work to be passed
to franchisees
Expand and develop the
FiltaSeal customer base
Roll out Vision works
management system
Priorities in 2024
Accelerate expansion
of Metro Rod
pump expertise
Deliver and expand
strong order book for
Special Projects division
Expand the core
Service and Supply &
Installation business
The new management team shifted
the business towards higher margin
activities while continuing to build
on initiatives with Metro Rod to drive
pump sales.
A significant investment was made into the
newly formed special projects division. This
activity represents a slight change of direction
but we are using our skills to develop capital
light, higher margin business by managing
larger projects using a well-established supply
chain. This is expanding our customer base
and our markets from our traditional service
and installation sectors.
Pump service work average order value
increased by 11% year on year across 15,241
completed jobs, increasing revenue by £1.3m.
Willow Pumps continued to build on initiatives
with Metro Rod to deliver pump services in
an optimum way and a record £3.1m of sales
was delivered by the Metro Rod network to
external customers. Willow Pumps helped
to upskill 18 new pump engineers across 15
Metro Rod franchises, delivering 720 hours of
in-house and field training.
Finally, the Metro Rod Kent & Sussex
territory that was managed by Willow Pumps
was re-franchised in November allowing
Willow Pumps to focus on its core business.
Overall, revenue increased 3% to £18.7m.
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Annual Report and Accounts 2023
Contents Generation – PageContents Generation – Sub PageContents Generation – Section Filta International Review
Strategic Report Governance Financial Statements
Filta International Review
Implementing
FiltaMax
Filta 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.
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Contents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Filta International Review continued
Priorities in 2024
Convert more franchise
owners from a fixed to a
percentage based royalty
Roll out FiltaGold and
upsell FiltaClean
Recruit high quality
and ambitious franchise
owners in over 50 key
metro markets to build
businesses of scale
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Annual Report and Accounts 2023
Filta North America experienced a year of robust activity,
with strong growth in System sales, the roll out of two new
services and the development of the FiltaMax strategic growth
initiatives based on the Maximum Potential Model.”
Jason Sayers, CEO Filta International
A year of robust activity
Filta North America System sales increased
37% 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. Excluding the revenue from
used oil sales and on a like-for-like basis,
System sales in North America increased by
19% in US dollars and 12% in sterling.
25% growth in waste oil recycling volumes
Waste oil recycling volumes increased over
25% to 6.2m gallons assisted by the continued
roll-out of larger 6,000 gallon holding tanks in
the franchisees’ depots to total 65. However,
growth in volumes was more than offset by a
21% fall year-on-year in the average weighted
selling price, resulting in a year-on-year
reduction of 1% in revenue in local currency
revenue and a 3% reduction in sterling terms.
Transitioning to a full royalty model
We are transitioning towards an income model
based on MSF to better align us with our
franchisees and to reduce our reliance on
used oil sales. This will be introduced as fast
as practicable, but worst case, will have to wait
until the renewal of the franchise agreement.
FiltaClean and FiltaGold Bulk Oil
We expanded our range of services during
the year with the launch of FiltaClean, a new
steam-based, eco-friendly deep cleaning
service for commercial kitchens. We also
launched FiltaGold Bulk Oil, a new bulk virgin
oil supply service which includes the roll-out
of handling equipment to franchisees. Both
are royalty-based services which will help
drive MSF income and further improve our
ESG credentials.
Implementing FiltaMax strategy
We continued to develop the FiltaMax
strategic growth initiatives based on the
Maximum Potential Model with a focus on
territory optimisation in the over 50 key
metro markets identified for major growth.
Strengthening the corporate team
We were pleased to appoint John Michals
as the new Chief Operating Officer to help
execute the FiltaMax growth plan. John
became a Filta franchise owner in 2019 and
grew his business rapidly from a start-up to
over $3m of sales. See page 42.
£90.5m
system sales
£27.4m
revenue
£6.1m
adjusted EBITDA
Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Filta International Review continued
Expanding our range of services
Our range of services continued to develop
in 2023 with the launch of FiltaGold Bulk Oil
and FiltaClean, both royalty-based services.
• FiltaFry, the microfiltration of cooking
oil and full fryer management is our core
service. This can help double the usable life
of cooking oil, saving customers money as
well as reducing labour costs and improving
employee health & safety. In 2023 Filta
carried out services at over 8,500 customers
every week.
• FiltaBio is provided as part of FiltaFry’s
filtration service. Once the oil comes to
the end of its useful life, franchisees collect
the oil and store it in holding tanks at their
depots prior to collection for recycling
into biodiesel. Customers benefit by
not having to store and dispose of the
oil themselves and the environmental
benefits of recycling the oil.
• FiltaGold Bulk Oil was launched in
2023. While many franchise owners have
supplied virgin cooking oil to customers,
with FiltaGold Bulk Oil we have developed
bulk-oil handling equipment for franchisees
which allows them to buy virgin oil in bulk
and more profitably supply it to customers
at a competitive price.
• FiltaClean was also launched in 2023.
We see a substantial opportunity
to vertically expand by upselling to
existing FiltaFry customers who are
natural customers of the service.
The maximum potential for Filta
is significant
Filta is an almost unique business, with
virtually no direct competition. In the US, it has
a less than a 1% share of a large, fragmented
market and a substantial opportunity for
growth. Our Maximum Potential Model shows
the potential to service 1.1m potential sites
and generate System sales of $925m
compared to $109m in 2023.
We made good progress in 2023
implementing FiltaMax. We are upgrading
and optimising the franchise network,
seeking to replicate the success of the
larger franchisees.
We attracted new high-quality franchisees
during 2023. Six existing franchise owners
expanded by buying additional territories;
six sales of new territories took place
and seven resales, five of which were in
key metro areas. As a result, the number
of franchise owners decreased from 133
to 127 demonstrating the commitment of
the FiltaMax strategy of growing with our
higher quality franchise owners.
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Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Filta International Review continued
Our new bulk virgin oil supply service
launched in 2023 provides substantial
environmental benefits through reduced
packaging waste.
How FiltaGold works
The FiltaGold service allows us to competitively
buy virgin oil in bulk, deliver it to franchisees in
a tanker for storage in new 27,000 litre tanks
and for them to dispense it via a machine (see
photo) into reusable 17-litre eco jugs. The jugs
are delivered to the customer and empty jugs
returned to the depot to be washed and refilled.
FiltaGold has significant environmental
benefits which are valued by our customers.
Cooking oil is traditionally sold in “jugs-in-a-
box” which consist of a plastic jug supported
by a cardboard outer layer. When the oil is
used, the “jugs-in-a box” are thrown away.
Each time a reusable eco jug is used, plastic
and cardboard is saved.
While 67 franchise owners sell fresh oil to
customers, five franchise owners now sell fresh
oil to customers in bulk through FiltaGold at a
higher margin. Filta benefits from a royalty on
sales. Filta is experiencing strong demand for
the service from franchisees and customers.
33 Franchise Brands plc
Annual Report and Accounts 2023
FiltaClean was also launched in 2023
and offers a steam-based, eco-friendly
and safe deep cleaning service for
commercial kitchens.
How FiltaClean works
FiltaClean uses a combination of kitchen-
rated cleaning products and steam-based
cleaning techniques to remove grease and
grime from equipment. The service is eco-
friendly as steam cleaning minimises the
use of chemicals.
FiltaClean helps our customers improve
cleanliness and sanitation and comply with
health and safety regulations. The thorough
and effective steam-powered cleaning can
also help increase kitchen efficiency and
productivity, including extending the life
of equipment. Our service is flexible and we
work with customers to schedule effectively
to ensure minimal downtime.
We see a significant opportunity for Filta
franchise owners to upsell FiltaClean to
existing customers as well as attract new
customers. 33 franchisees have already
signed up for the FiltaClean royalty-
based service.
FiltaGold Benefits
Quality and convenience
for customers
Reduced packaging
waste for customers,
reported in their
Environmental
Impact Reports
Higher margin for
franchisees and royalty
income for Filta
FiltaClean Benefits
Eco-friendly kitchen
cleaning
Enhanced hygiene
and compliance with
regulations
Substantial opportunity
to sell royalty-based
service to existing and
new customers
Contents Generation – PageContents Generation – Sub PageContents Generation – Section B2C Review
Strategic Report Governance Financial Statements
B2C Review
A creditable
performance
The B2C division performed creditably against
the backdrop of a challenging labour market
which impacted franchise recruitment and
retention. ChipsAway, which accounts for 81%
of the division’s profits, performed more robustly.
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Contents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
B2C Review continued
Priorities in 2024
Migration of B2C to
Vision platform
Further testing of Artificial
Intelligence for quotations
Continue to invest in
training for franchisees
and technicians for electric
vehicles and ADAS
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Annual Report and Accounts 2023
The B2C division comprises ChipsAway, Ovenclean and Barking Mad,
three leading home-service brands and has over 320 franchisees.
My team was pleased to deliver a creditable performance in a
challenging environment.”
Tim Harris, Managing Director, B2C Division
The B2C division comprises the ChipsAway,
Ovenclean and Barking Mad franchise
businesses. The franchise recruitment and
retention environment in which the B2C division
operates continues to be challenging, with
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.
ChipsAway performed more robustly, recruiting
25 new franchisees (2022: 20) with 30 leavers
(2022: 40). 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.
Underlying trading in the franchise communities
of all three brands remained robust, as our
generally older and more financially secure
customer base is reasonably resilient to the
current cost-of-living pressures.
The average turnover of a ChipsAway franchisee
increased 12% to £103,294, breaking £100,000
for the first time (2022: £92,547). Our franchisees
continued to benefit from a substantial quantity
of leads which are generated by our national
marketing activity. The team delivered 361,000
consumer leads during the year.
Against a difficult trading environment,
we maintained divisional revenue at £6.1m
for 2023 (2022: £6.1m). Adjusted EBITDA at
£2.3m was slightly lower than 2022 but higher
than our cautious forecast. The previous year
also benefited from £100,000 of exceptional
revenue from a domain name sale. ChipsAway
continues to be our largest brand, generating
81% of the B2C division’s Adjusted EBITDA
(2022: 76%).
Earlier in 2023 we announced that we intended
to seek a buyer for the B2C division, and whilst
offers were received, these did not meet our
expectations, and we decided to suspend
marketing activity until further notice. This
remains the current position.
£26.2m
system sales
£6.1m
revenue
£2.3m
adjusted EBITDA
Contents Generation – PageContents Generation – Sub PageContents Generation – Section Working Responsibly
Strategic Report Governance Financial Statements
Working Responsibly
Our guiding
principles
We have five guiding principles
that inform the way we work
with each other, support our
franchisees, and serve our
customers and communities.
We demand integrity
We are professional
in everything we do
and treat people
with respect.
We empower people
We empower our
people and expect them
to take ownership of
a situation and to be
accountable for their
actions and the results
they generate.
We are fair
We consider that fairness
and transparency are
essential to creating high-
trust working relationships
with each other, and with
our franchisees, partners,
suppliers, and customers.
We challenge ourselves
We set high standards,
are demanding of
ourselves, prepared to
challenge the norm and
have a relentless focus
on continuous
improvement.
We work as a team
We place a huge
amount of importance
on teamwork
between our
colleagues and our
franchisees to create
a dynamic business.
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Working Responsibly continued
Overview
Working responsibly is an imperative and we are
committed to doing what we can to contribute to a
more sustainable future. Our focus is on developing
a business that builds economic and social value
and protects our environment in everything we do.
Our goal is to create an inclusive, fair and rewarding
environment where our colleagues and franchisees
can thrive. We also want to have a positive impact
on the communities in which we work and live,
and operate to the highest standards of integrity,
transparency and accountability. We acknowledge
the significant risk posed by climate change and
that we have a part to play in addressing the impact
this will have. We are committed to reducing our
environmental impact wherever we can.
Our approach to ESG
We progressed our ESG journey in 2023. We support
the aims and recommendations of the Taskforce on
Climate-related Financial Disclosures (“TCFD”), and
we are pleased to present our first TCFD report. The
Board fully supports the TCFD Recommendations
and is bringing the Company’s disclosures and
reporting fully in line with its methodology.
UN goal:
How we principally contribute:
Good health
and wellbeing
– Mental Health First Aiders training.
– Employee assistance programme for all staff.
– Highly developed health and safety processes and training.
– Flexible working arrangements.
Gender
equality
– High proportion of females in our Support Centres:
60% in Metro Rod and 59% in B2C.
– Leadership development opportunities for female managers.
Decent work
and economic
growth
– Development opportunities, rewards and recognition.
– Share option scheme which covers c250 people.
– Create local employment in the community.
– Opportunities through apprenticeship scheme.
Sustainable
cities and
communities
– High standards of quality and sustainability.
– Manage and commitment to reduce environmental impact.
– Accreditations and certifications.
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Annual Report and Accounts 2023
In April 2023, we acquired Pirtek, a business with
a strong commitment to sustainability and which
is implementing a number of initiatives with the
objective of reducing the environmental impact
of delivering its range of services. Pirtek also
prides itself on a strong health and safety culture,
and its high standards are reflected in its range
of accreditations.
In late 2023 we extended Filta’s range of services
with the introduction of FiltaGold. We are committed
to reducing plastic and cardboard waste. Through
FiltaGold bulk oil we are able to buy virgin oil in bulk,
dispense it at our depots into reusable 17-litre “jugs”,
and supply it to our customers. Each time an Eco-Jug
is used, plastic and cardboard is saved. An additional
benefit to our customers is the ESG benefits arising
from the reduction in the waste they generate from
the use of recycled jugs, which we report to them in
our monthly Environmental Impact Reports.
We were delighted to welcome nearly 300 more
people to the Franchise Brands family with the
acquisition of Pirtek. Our support centre teams play a
key role in our success by supporting our franchisees
and helping them to grow their business.
We believe in providing everyone with a great working
environment and opportunities to develop, learn and
grow in an environment which promotes diversity
and inclusion, equality and well being. With over
650 people in Franchise Brands across ten different
countries, the career development opportunities for
our people have never been greater.
Helping our
franchisees and
employees work
more responsibly
Environment
+ Reduce, Re-Use,
Recycle
+ High quality
and sustainable
service delivery
+ Education and high
standards of training
+ Environmental
Impact Reports for
Filta customers
Social
+ Creating local
employment
+ Apprenticeships and
work experience
+ Contribution to
community projects,
charities and activities
Governance
+ Upholding
high standards
+ Being transparent
+ Being accountable
Contents Generation – PageContents Generation – Sub PageContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Working Responsibly continued
Social
A great working environment
Our commitment to diversity and inclusion
We believe in the importance of creating and maintaining
a diverse and inclusive working environment where team
members feel welcome and can be themselves. We are
committed to promoting equality of opportunity for all our
people. In 2023 we rolled out equality, diversity and inclusion
(“EDI”) training in the Water & Waste Services division. We aim
to create a working environment in which all individuals are
able to make best use of their skills, free from discrimination
or harassment, and in which all decisions are based on merit.
Gender pay gap
We reward our people fairly. This includes upholding equal pay.
As part of our commitment to be an Employer of Choice we report
on our Gender Pay Gap. Our gender pay gap reduced slightly to
26% in 2023 (2022: 28%). Our gender pay gap is due largely to
the nature of our business with predominantly male engineers
who command a higher salary than office workers and the fact
we, so far, have fewer women in senior management.
Share ownership
Our strong ownership culture is one of the keys to our success
and around 250 people in the Group have share options.
Women in the business
We continue to be proud of the number of women we have in
the Metro Rod & Metro Plumb Support Centres. We also have
a growing number of women in management positions across
the business.
38 Franchise Brands plc
Annual Report and Accounts 2023
At 31 December 2023
Metro Rod and Metro Plumb Support Centre
Water & Waste Services DLO and corporate
franchises
Pirtek Support Centres
Pirtek DLO and corporate franchises
Filta International
B2C Support Centre
Azura
Franchise Brands plc
Total
Full-time equivalent members of staff
Total number
of Full Time
Equivalents
% of male
employees
% of female
employees
103
207
179
107
40
17
14
13
680
40%
78%
75%
88%
68%
41%
86%
77%
72%
60%
22%
25%
12%
33%
59%
14%
23%
28%
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Creating a great work
environment
Our people are at the heart of our
business and our most valuable
resource. They play a key role in
supporting our franchisees and helping
them to grow their businesses. We
support our people in a number of
ways, are always receptive to ideas
and feedback and encourage our
people to get involved.
In 2023, the Water & Waste Services
division set up a Leadership Team Focus
Group to develop staff engagement aid
retention and develop their Employee
Value Proposition. It included a particular
emphasis on pride and purpose,
empowerment and ownership and
satisfying work. We are looking forward
to more of the initiatives discussed by the
focus group being rolled out.
39 Franchise Brands plc
Annual Report and Accounts 2023
Some of the ways we create a great work environment
Information sharing and meeting management
• All staff briefings, Q&As and weekly calls
• All staff lunches with guest speakers
• “Meet and greets” and coffee with the
Making a difference
• Charity and volunteering opportunities
• Paid charity volunteer programme
• Team days out volunteering
Managing Director initiatives
Reward & Recognition
• Share options
• Incentives for cross selling and referring
• Long service awards
• Employee of the month awards
Making things easier
• Access to Electric Vehicle pool cars and
Cycle to Work scheme
• Work wear laundry service
• Employee benefits and discounts platform
to buy everyday goods and services
Flexible working
• Four-day shift pattern trial at Pirtek DLOs
• Pirtek Germany initiatives
Health and wellbeing
• Mental health first aiders
• Healthcare services, assistance programmes
• Health and safety inductions for employees
Personal development
• Manager and leadership development
training
• One-on-one coaching for high potential
individuals
• Pirtek University, online portal for externally
hosted seminars on various topics
• Opportunities to attend external events
and conferences
• EDI, respect in the workplace programmes
Helping our franchisees recruit
and retain people
The recruitment and retention of labour, in
particular engineers and technicians, is the
biggest constraint on our growth. So it’s important
we do as much as we can to help our franchisees
hire the labour they need.
In 2023, the Water & Waste Services division
established an in-house recruitment capability
centralising all recruitment for the Metro Rod
and Metro Plumb franchise networks, as well
as support centre roles across the division.
The initial results have been very promising in
terms of improved candidate recruitment quality
and quantity together with cost savings by not
using external agencies.
Pirtek Germany rolled out initiatives to help
franchisees hire mobile service technicians (“MSTs”).
They launched an online funnel on social media for
fast and easy job applications and also produced a
new video highlighting the benefits of the MST role.
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Interviews with our senior leaders
I come from an engineering background, so
being able to lead a franchise business in this
sector with a market-leading brand is fantastic.
As Sales Director over the past few years,
my main focus was building up the national
accounts for our franchise network. I really
enjoyed contributing towards franchise
business owners’ growth and seeing the
results in their local territories.
Experiencing how we can positively impact a
family or small business with a large contract
is very motivating. For example, you can take
on a substantial, £1m+ contract for a large
customer where a small franchise receives
£10,000 of work and it makes a massive
difference to the franchisee’s business.
Another benefit for me was personal
development. What attracted me to the
role was the opportunity to manage various
functions within the business, whether that be
CRM, marketing, sales or operations. It really
stretched me from a personal point of view.
Working for people like Chris Stuckey, formerly
Managing Director of Pirtek UK, helped me to
understand the softer sides of developing as a
manager. The experience I took from the team
was something I really enjoyed. Coming to
Pirtek from a larger organisation, it was great
to be able to put structures in place for our
sales presence and culture in order to build
a high performing sales team.
In every business, it always comes down to
the people. In my new role I am keen to help
my leadership team grow, so one of my main
priorities now is people development.
I think this is a really great time for me to learn
from people across different functions. After
all, the excitement of franchising is that you
get to influence people across all sorts of
businesses. It still really fascinates me!
Over the last 30 plus years, Pirtek has built
a very good business in the UK and Ireland.
However, Franchise Brands’ Maximum Potential
Model has highlighted the significant potential
for growth in these markets. We have many
different growth opportunities, in particular
through the broadening of the range of
services. With the right mindset and culture,
I see huge potential for Pirtek UK and Ireland
in the next three to five years.
Technology will play a key role in this. We see
technological advances every day, week
and month that will help our business. Prior
to joining Franchise Brands, we weren’t very
forthcoming about innovation and trying new
things, but there are group systems we can
benefit from that will help drive efficiencies,
productivity and operational gearing. We’ve
also got some great untapped talent, that
over the next few years can come through
this business and become the next leaders
to help drive success.
Working with Franchise Brands has been
supportive, but not restrictive. There’s so much
support available and everyone is willing to
share their experiences and provide advice.
I really love the collaborative approach. It was
great to meet the team in Amsterdam at the
Growth Summit, to come together and share
ideas. With Franchise Brands, I feel really
empowered and so does my team.
Adam Burrows
Managing Director, Pirtek UK
Growing
together
I find it fascinating that there are
businesses of different sizes in the Pirtek
franchise network all of which are pushing
in the same direction. While an important
part of our competitive edge is the full
national service we can provide, we are
reliant on the franchise business owners
to deliver these services locally and we
help make a real difference to them as
they realise and maximise their potential.
“If they grow, we grow”.
40 Franchise Brands plc
Annual Report and Accounts 2023
I’ve been with Pirtek since
2017. The franchise model
is what really fascinates
me and it was the reason
I originally joined Pirtek.
I enjoy making a real
difference to our franchisees
as we grow together.”
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Harald Overwater
Managing Director, Pirtek Benelux
Leading by
example
I previously held a Managing Director role
for 20+ years but I had never worked in
franchising. I thought, how great would
it be to work with intrinsically motivated
self‑employed business owners? So that
was something that attracted me to the role.
41
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Annual Report and Accounts 2023
Interviews with our senior leaders continued
The key strength of Pirtek is that the service
we offer is required in all sorts of businesses
and industries – from transportation to
construction, healthcare and everything
in between. This creates a wealth of
opportunities, and makes our business
resilient, and less vulnerable to economic
downturn. When the economy is up, we
prosper from increasing equipment installation
and a shortage of technical skilled labour.
When the economy is down, we benefit
from higher demand for repairs, because
of companies postponing replacements.
This is how we have been able to grow.
We are the market leader in reactive
maintenance. A key factor behind our growth
is the value of the mission-critical service we
provide to customers, targeting to be on site
within an hour. When you need an urgent
repair, you call the company that you trust.
Our national coverage that we have built up
over the years, with 24 centres and over 100
vans, is very difficult for competitors to replicate
and would require a huge investment. We also
monitor our performance, and report it to our
customers continuously. This helps us keep
existing customers and attract new ones.
We are expanding our range of services,
offering preventive maintenance services to our
reactive customers, showing them how it can
help lower operational costs. Looking forward,
we have predictive maintenance, where our
technology can help predict a potential failure.
This “stepping stone” approach is how we
grow our business and ensure customers
understand the range of services we offer.
My team is small, focused and multifunctional so
it’s easy for us to step in for each other when
needed. I have a strong legal background so
can advise on labour and customer contracts.
While my main role is advising and coaching
my team, I often chip in on the sales side to
support my team wherever I can.
With our expanding range of services, we
provide our people with opportunities to
grow. That means technicians who work
well in reactive maintenance are able to
develop their skill set and gain experience
in preventive and predictive maintenance.
We’re all about offering new challenges and
experiences. This is how we retain talent: we
offer them opportunities to grow alongside a
positive work-life balance.
Leading by example is an effective way to
help franchisees to grow their businesses.
So if you want to launch new initiatives, it either
requires a leap of faith from franchisees, or you
can just show them. My best tool: if I want to try
out something new, I use my own centres and
demonstrate how it works.
My experience with Franchise Brands has
opened a whole different world. They are truly
interested in helping you grow your business
and having Franchise Brands as our forever
home means we can develop some longer-
term plans to build a truly great business. The
Franchise Brands team radiates a lot of energy
and that cascades down into the local teams,
stimulating ideas which we all saw first-hand at
the Growth Summit in Amsterdam. Suddenly,
sparks fly, which for me for me is a lot of fun!
I joined Pirtek seven
years ago and felt I could
make a great contribution
given its blend of technical
and service nature. Helping
franchisees to grow
their businesses was
a huge plus.”
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John Michals
Chief Operating Officer,
The Filta Group Inc.
From franchisee
to franchisor
My background is in financial commodities
and I appreciated its customer centric
qualities. Filta has an immense customer
value proposition and having seen this for
myself first hand out on a job with a former
colleague, I immediate said, how can I buy
a franchise and when can I start?
42 Franchise Brands plc
Annual Report and Accounts 2023
Interviews with our senior leaders continued
I bought the New Jersey franchise business in
2019 which was a start-up. Basically, I walked
off the commodity desk on a Friday and
started with Filta on Monday!
We grew the business very quickly – from $170k
revenue in 2019 to $3.5m last year. How did
I achieve this? By breaking down all barriers
– real and artificial. Access to capital was
also an important factor. And then of course,
making strategic decisions around how to
utilise that capital in the New Jersey business.
We invested heavily in operations, ensuring we
had capacity. We never left a customer waiting
for anything. As we started to fill up, we just
developed more vans and routes. And then
we started to focus more on optimising cash
collection, furthering growth.
The referral side of our business is a proven
way to sell. We’re bringing a fresh approach
to a traditionally old-fashioned industry.
There are some chefs and kitchen managers,
especially the more established and seasoned
ones, who have a certain way of doing things.
They’re not as innovative or willing to hear
new approaches until they see them in action.
And then they wonder why didn’t they make
the change to Filta sooner.
The key is to get in front of customers and talk
to them about the value propositions for our
range of services. Customers understand the
importance of disposing of a smelly waste bin;
health & safety in the kitchen, and how much
oil they are using. We focus the conversation
on how to assist them to solve these issues
and work with them without even talking about
the cost of a service. From there, it’s referral
based, and the word spreads quickly.
When FiltaMax was introduced to the network last
year I was really excited at the opportunity to say,
wow, this is what Filta could look like in the future.
Franchisees were saying “I thought I was at the end
of my run, but I’m actually right in the middle or I’ve
actually got a lot more to go here”. So it was a good
– what I call – “gut check” moment for everybody
in the network when they saw the potential,
and a wake-up call for some franchisees too.
On 1 January 2024 I joined Filta’s corporate
team in Orlando as Chief Operating Officer, with
responsibility for operations and sales. What
attracted me to the role was the opportunity
to put my stamp on the brand. I’ve always
been an advocate of a rising tide lifts all boats
mentality. If we strengthen the entire network
and continue to build revenue and brand
awareness, that helps everybody on a bigger
level. However, what’s attractive about Filta
Max is that it has a measurement of objective
success, irrespective of the type and location
of the business.
It’s a unique experience, being both part
of the corporate leadership team but also
a franchisee. While I still own my Filta
franchise, my general manager has taken
the management of the business from me,
operating on an arm’s-length basis.
Attending the Growth Summit in Amsterdam
was really a decision point for me in becoming
Filta’s COO. I was able to experience what
Franchise Brands was about, something that
was new to me being a franchisee. Seeing how
each business integrates with each other and the
growth opportunities was very exciting. So I’m
very positive about the future and look forward
to playing my part in achieving great success.
A Filta franchisee who
was a former colleague
invited me to go out
on a job with him and
I immediately saw the
immensity of the customer
value proposition…”
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Our contribution to the communities in which we operate
2023 was a busy year for our Water & Waste Services division which contributed in numerous ways
Helping raise awareness of important
environmental issues
Metro Rod produced a number of reports
and articles on helping customers and the
community to raise awareness of the risks
of neglected drainage systems, pollution
prevention advice and the effects of water
pollution to their businesses.
Metro Rod undertook research among
manufacturing businesses to raise awareness
of the role industry may play in polluting water.
The findings revealed that although 90% of
respondents saw pollution prevention as
important to their business, many are unaware
of the specific manufacturing activities that can
contaminate water.
Furthermore, two fifths (41%) are unaware they
are responsible for the correct disposal of
hazardous substances and 35% are unaware
they are responsible for the correct disposal
of commercial waste and recycling.
Three out of five businesses (63%) don’t have
a pollution incident response plan in place,
outlining the actions they should take to reduce
the level of pollution created by an accident on
site, meaning that if an issue does arise, they
aren’t fully prepared to prevent the environment
from unnecessary harm.
43 Franchise Brands plc
Annual Report and Accounts 2023
Supporting charities and
community interests
We supported a wide range of charitable
causes. The Metro Rod annual conference
culminated with a charity auction for two
causes which are close to the hearts of our
franchise network. The first was to raise funds
for a Bionic Hero Arm for the granddaughter
of one of our franchisees, and the second to
raise funds for Parkinson’s Foundation. In total,
we raised over £15,500.
Metro Rod marked 40th
anniversary with celebrations
and charity commitment
In 2023, Metro Rod celebrated its 40th
anniversary. Established in 1983 by Gill
Walker with a single depot in Cheshire,
Metro Rod has grown significantly since then.
To celebrate the milestone, staff from the
business’s support centre and the plc Board
met together with Gill at its Macclesfield
headquarters in June for a summer party.
Combining Breast Cancer Now’s annual “wear
it pink” day with Halloween, we ran a bake-
off style competition and bake sale to raise
funds. The day also included a best-dressed
competition where anyone who entered
would donate to the charity.
Metro Rod partnered with DOSportUK to be a
season partner for the 2023/2024 basketball
season alongside committing to DOSportUK’s
“Starting 5” project, where the company is
looking to bring on board five new partners
for the new season. Since being established
as a community interest company in 2017,
DOSportUK has had one clear mission –
to provide sporting and physical activity
opportunities to people with a disability.
Keen to use the anniversary as an opportunity
to give back to the communities we operate
in, Metro Rod launched a ‘40,000 meals for 40
years’ initiative where each of our franchisees
will donate 40 bags of food to local food
banks – equating to more than 2,000
packages provided to people in need.
The initiative culminated with a volunteer day
at FareShare in Manchester. FareShare is the
UK’s largest charity fighting hunger and food
waste and their mission to save good food
from going to waste and redistribute it to
frontline charities. Our team was grateful for
the opportunity to help out in the warehouse
and on deliveries. They gained a first hand
appreciation of how much food waste and
food insecurity there is in the UK, and how
FareShare is working with charities across the
UK to tackle this.
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Our contribution to the communities in which we operate
Tree planting update
Metro Rod continued with its tree
planting initiative during 2023, working with
ReviewForest and their tree planting partner,
Eden Reforestation Project. A tree is planted
for each Google review received.
1,448
trees planted
For every review
we’ll plant a tree
Each and every written review
for Metro Rod plants a new tree.
We are committed to contributing positively to
the communities we are part of, and through
this support, we aspire to empower these
children with the confidence and skills needed
to thrive in competitive environments. This effort
reflects our dedication to making a meaningful
difference in their lives, aligning with our broader
mission to promote sustainability, inclusivity, and
growth within our community engagements.
Filta International
In the US, Filta International raised money
for two charities at their annual conference.
Children’s Burn Foundation ($8k) and UCP
Autism School ($8k).
Pirtek also partnered with a local rugby team
they sponsor, Burntwood FC, to plant trees
to offset the carbon footprint of the Pirtek
National Training Centre. They are planting
over 300 trees in the grounds of the club.
Fluthilfe-Ahr is committed to the ongoing
reconstruction projects on site, such as the
establishment of a new children’s and youth
centre and playgrounds for different age
groups in a residential area.
Pirtek’s charitable initiatives
In the UK and Ireland, Pirtek are huge
supporters of grass roots sports and teams
and believe sport is an excellent way to
unite people and foster a strong sense of
community and belonging. In 2023, Pirtek UK
and Ireland helped local rugby, football and
boxing clubs, and girls youth teams.
We encourage our employees to participate
in charity work and our support extends
from helping fundraise for marathons to local
partnerships such as Pirtek Norwich’s food
collection work with the Trussell Trust and
Norwich foodbank.
As part of various Pirtek Germany
anniversaries, the franchisees of the Pirtek
Centres Saar/Palatinate, Rhineland and Wesel/
Rees, with the support of the franchisor team
in Cologne, collected donations to support
further reconstruction measures for the flood
disaster in the Ahr valley. A total of €7,000
was collected which was presented to the
chairwomen of Fluthilfe-Ahr.
The franchise partners of Pirtek Wesel/Rees,
Pirtek Rhineland, Pirtek Ruhr Region and
Pirtek Germany were busy in 2023 collecting
donations to support Club Kohlenwäsche
in Essen. Club Kohlenwäsche focuses its
support on humanitarian, social, medical,
cultural and educational purposes. The aid
benefits needy and disadvantaged children
and young people directly on site in the Ruhr
region. A total of €6,500 was raised.
Pirtek Benelux was pleased to extend its support
to a local pony farm that serves to help young
children develop key skills. They are introduced
to equine care and riding skills that foster
discipline, responsibility, and a strong work ethic.
Our sponsorship seeks to equip these young
individuals with experiences that not only enrich
their emotional and personal development but
also prepare them for competitive opportunities
in equestrian sports and beyond.
44 Franchise Brands plc
Annual Report and Accounts 2023
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Environmental
Priorities in 2024
Approach and performance
We acknowledge the significant
environmental risk posed by climate
change and are committed to reducing
our environmental impact. This is the third
year we have reported Scope 1, 2 and 3
GHG emissions and we have identified
measures to help tackle our top three high
emitting areas of liquid fuels, fuel used
within road travel, and electricity use.
Actions taken in 2023
The nature of our van-based businesses
means vehicle emissions are an important
area of focus. We made significant progress
developing and trialled a scheduling tool
to improve labour utilisation and efficiency
which is helping reduce mileage and fuel
consumption for our engineers.
Activities planned for 2024
Further development of the labour
scheduling tool which has the potential
to be rolled out across all our networks.
Continued monitoring and trialling of the
viability of electric and hybrid vehicles and
equipment. Campaigns on safe, and fuel-
efficient driving (“SAFED”) across the Group
with a view to improving miles per gallon
across all vehicles.
45 Franchise Brands plc
Annual Report and Accounts 2023
Franchise Brands plc Streamlined
Energy and Carbon Reporting 2023
This SECR report reflects the period 1 January
2023 – 31 December 2023. This is Franchise
Brands plc’s fourth reporting year, the first
being 1 January 2020 – 31 December 2020.
The 2020 and 2021, and 2022 data points
have also been included in this report to
allow for direct year-on-year comparison.
Methodology
Franchise Brands plc was responsible for
the internal management controls governing
the data collection process. Compare
Your Footprint and Green Element were
responsible for the data aggregation, any
estimations and extrapolations applied (as
required), the GHG calculations and the
resultant emissions statements.
Greenhouse gas emissions were
calculated according to the Greenhouse
Gas Protocol Corporate Greenhouse Gas
Accounting and Reporting Standard. This
standard is internationally accepted as
best practice. The figures were calculated
using UK government 2022 carbon factors,
expressed as tonnes of carbon dioxide
equivalent (tCO2e).
Scope and subject matter
The report includes sources of environmental
impacts under the operational control
of Franchise Brands plc which are
Support Centres for each brand and
corporate operations.
Greenhouse Gas sources included in the process:
GHG Protocol
Category
Scope 1:
Fuel used in Fuel
used in company
vehicles, natural
gas (boilers), diesel
for electricity
generation,
other fuels
Scope 2:
Purchased
electricity*
Scope 3:
Fuel used for
business travel in
employee owned
or hired vehicles
Data Source
Natural gas consumption was reported in one of two ways: kWh and spend in GBP.
Those in spend were converted into kWh, using the average price per kWh in 2023, at
the time of this report (6.21p/kWh in the UK, 10.56p/kWh in the Netherlands, 5.84p/kWh
in Belgium, 7.65p/kWh in Germany, and 8.65p/kWh in France.
Companies reported their fuels used in company vehicles in litres or spend metrics.
For data available in spend on diesel fuel, this was converted to litres using the average
fuel price in 2023: 158p/L for diesel in the UK.
Litres of both fuels were converted to kWh using 2023 conversion factors calculated
by DEFRA.
Companies provided their 2023 annual electricity consumption in kWh.
Only three locations (Kemac- Homestead, Filta EU – Germany, Filta EU – the Netherlands)
did not provide in kWh, and instead only provided a total spend. To convert the spend
into kWh, the average cost per kWh at time of reporting for each country in 2023 was
used. According to the Department for Energy Security and Net Zero and the Energy
Guide, the average cost for standard electricity in the UK in 2023 was 26.5 p/kWh. In
the Netherlands, the average cost in 2023 was 26.5p/kWh, and 24.9p/kWh in Germany,
according to the Statistical Office of the European Union (Eurostat).
Many Franchise Brands’ companies utilise leased or employee-owned vehicles for
business travel.
Expensed mileage in employee-owned or rental vehicles was reported in a spend
format rather than by consumption (e.g. litres of fuel or distance). The reimbursement
rate of 45p per mile was utilised to convert the spend to distance, which was then
converted into kWh using 2023 conversion factors calculated by the UK Government.
Companies reported fuels used in leased vehicles either in a spend format or in litres.
When the data was only provided in a spend format, the average fuel price per litre in
2023 was used to convert the spend into litres. In 2023 the average price for diesel
was 158p/L in the UK.
Litres were converted to kWh using 2023 conversion factors provided
by the UK Government.
*
Dual reporting of electricity emissions have been presented in line with the GHG Protocol. Location-based electricity
emissions use the average grid fuel mix in the region/country where the electricity was purchased and consumed
– for SECR, location-based is mandatory. Market-based electricity emissions use where provided the supplier’s tariff-
specific intensity factor and fuel mix, and where this is unavailable, the local grid’s residual fuel mix intensity factor is
used. For SECR, market-based is optional, and has been calculated for 2022 and 2023 only.
The Kyoto Protocol seven groups of GHGs are included in the emissions calculations: CO2, N2O, CH4, HFCs, PFCs,
SF6, and NF3. The greenhouse gas emissions were calculated using UK government 2023 conversion factors,
expressed as tonnes of carbon dioxide equivalent (tCO2e).
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Environmental continued
Franchise Brands Year-on-Year Energy and Greenhouse Gas Performance
Location
Energy consumption: (kWh)
– Electricity
– Gas
– Transport fuel
– Other fuels (heating oil)
Total energy consumption
GHG Emissions (tCO2e)
Scope 1
Emissions from combustion of gas in buildings
Emissions from heating oil
Emissions from combustion of fuel for transport purposes
Scope 2
Emissions from purchased electricity – Location Based
Emissions from purchased electricity – Market Based
Scope 1 & 2
Total Scope 1+2 emissions – Location Based
Total Scope 1+2 emissions – Market Based
Scope 3
Category 6: Business travel (Emissions from business travel in rental cars or employee
vehicles where company is responsible for purchasing the fuel)
Category 3: Emissions from upstream transport and distribution losses and excavation
and transport of fuels not included in scope 1 – Location Based
Category 3: Emissions from upstream transport and distribution losses and excavation
and transport of fuels not included in scope 1 – Market Based
Total emissions – Location Based
Total emissions – Market Based
Intensity (tCO2e / £ million EBITDA)
EBITDA £m
Intensity ratio: tCO2e / £ million EBITDA (location based)
Intensity ratio: tCO2e / £ million EBITDA (market based)
2023 Data
UK
Europe
USA
Total
640,044
119,694
7,132,497
40,634
214,032
1,065,094
3,994,897
–
83,165
–
1,202
–
937,241
1,184,788
11,128,596
40,634
7,932,869
5,274,023
84,367
13,291,259
21.90
10.02
1,021.37
132.54
245.36
1,185.83
1,298.65
194.86
–
–
28.65
68.35
223.51
263.21
–
–
–
31.55
31.55
31.55
31.55
216.76
10.02
1,021.37
192.74
345.26
1,440.89
1,593.41
677.93
947.36
0.29
1,625.58
465.11
275.48
489.18
283.94
2,328.87
2,465.76
1,446.35
1,494.51
77.37
81.92
30.1
48.05
49.65
7.08
7.08
38.92
38.92
1.29
1.29
747.67
780.20
3,814.14
3,999.19
126.71
132.86
Methodology: GHG Protocol Corporate Accounting and Reporting Standard.
Calculated and verified as accurate by Green Element Limited and Compare Your Footprint Limited, UK.
46 Franchise Brands plc
Annual Report and Accounts 2023
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Working Responsibly continued
Environmental continued
Franchise Brands year-on-year energy and greenhouse gas performance
Location
Energy consumption: (kWh)
– Electricity
– Gas
– Transport fuel
– Other fuels
Total energy consumption
GHG Emissions (tCO2e)
Scope 1
Emissions from combustion of gas in buildings
Emissions from heating oil
Emissions from combustion of fuel for transport purposes
Scope 2
Emissions from purchased electricity – Location Based
Emissions from purchased electricity – Market Based
Scope 1 & 2
Total Scope 1+2 emissions – Location Based
Total Scope 1+2 emissions – Market Based
Scope 3
Category 6: Business travel (Emissions from business travel in rental cars or
employee vehicles where company is responsible for purchasing the fuel)
Category 3: Emissions from upstream transport and distribution losses and
excavation and transport of fuels not included in Scope 1 – Location Based
Category 3: Emissions from upstream transport and distribution losses and
excavation and transport of fuels not included in Scope 1 – Market Based
Total emissions – location based
Total emissions – market based
Intensity (tCO2e / £ million EBITDA)
Adjusted EBITDA £m
Intensity ratio: tCO2e / £m (location based)
Intensity ratio: tCO2e / £m (market based)
59.6%
602.7%
(2.5)%
96.3%
9.0%
604.2%
97.3%
(59.5)%
39.2%
37.2%
2020
2021
2022
2023
Franchise Brands had UK-only
operations in 2020 and 2021
Global total
Global total
2022 to
2023
% Change
460,927
133,507
335,859
189,632
5,045,390
5,952,495
40,199
587,263
168,610
11,417,733
20,700
937,241
1,184,788
11,128,595
40,634
6,518,185
12,194,306
13,291,258
39,609
5,679,433
24.5
9.7
895.70
107.50
–
34.7
9.9
30.78
5.08
1,138.20
2,523.16
71.30
–
138.47
251.69
2,697.49
2,810.71
216.75
10.02
1,021.37
192.73
345.26
1,037.40
1,254.10
–
–
1,440.88
1,593.41
(46.6)%
(43.3)%
118.40
271.30
437.10
1,625.58
271.9%
274.10
378.50
777.11
747.68
(3.8)%
–
–
782.88
780.21
(0.3)%
1,429.90
1,903.90
–
6.64
215.3
–
–
8.47
224.7
–
3,911.70
4,030.68
3,814.14
3,999.20
15.26
256.32
264.12
30.01
127.10
133.26
(2.5)%
(0.8)%
96.6%
(50.4)%
(49.5)%
Methodology: GHG Protocol Corporate Accounting and Reporting Standard.
Calculated and verified as accurate by Green Element Limited and Compare Your Footprint Limited, UK.
47 Franchise Brands plc
Annual Report and Accounts 2023
Franchise Brands year-on-year normalised
GHG emissions by scope
)
m
£
/
e
2
O
C
t
(
300
250
i
I
A
D
T
B
E
g
n
s
u
s
n
o
s
s
m
e
G
H
G
d
e
s
i
i
i
l
a
m
r
o
N
200
150
100
50
0
2020
2021
2022
2023
Scope 1
Scope 2
Scope 3
Figure 1: Franchise Brands’ year-on-year normalised GHG Emissions,
split by Scope. Emissions have been normalised by Adjusted EBITDA.
The intensity ratios reduced significantly in 2023 as
adjusted EBITDA increased by 96.6% but total energy
consumption increased by only 9%.
Restating of 2022 results
The 2022 international electricity conversion factors,
excluding the UK, became available after the creation and
submission of the 2022 SECR. As such, 2021 conversion
factors had been used to calculate the emissions for
electricity purchased outside the UK. Following the UK
government’s environmental reporting guidance, the
2022 figures have been recalculated using the 2022
conversion factors and are restated in the table shown.
Contents Generation – PageContents Generation – Sub PageContents Generation – Sub PageContents Generation – Section
– Metro Rod and Pirtek UK have both been
awarded a silver medal as a recognition of their
EcoVadis sustainability rating for 2023. Metro
Rod also has a Supply Chain Sustainability
School Silver award.
– These accreditations reflect the level of
engagement in the School rather than how
advanced a business is in addressing the
sustainability agenda.
Strategic Report Governance Financial Statements
Working Responsibly continued
Environmental continued
Energy efficiency actions
Over the financial year 1 January 2023 to 31 December 2023, Franchise Brands has implemented several energy efficiency
measures across all of its companies. These include:
Water & Waste Services division:
– Scheduling tool for engineers which is being actively
used in Metro Rod is reducing travel time and carbon
emissions.
– An electric pool car is based at the Metro Rod
Support Centre together with charging points.
Pirtek:
– Pirtek UK has five leased electric cars as part of a
process to move all the fleet to electric.
– Pirtek UK’s National Training Centre has been converted
to 100% solar power with unused energy released back
to the grid.
– Second year of “leave a review and we plant a tree” scheme.
– PV solar panels installed on Pirtek Belgium’s
– Willow Pumps added three electric vans and two hybrid
corporate centre.
cars to the fleet.
– Willow Pumps installed LED lighting sensors in their office.
Filta International:
– We acquire blocks of solar energy for the Orlando
support centre.
B2C division
– We have evaluated three different brands of electric vans
and are moving to commissioning fully fitted electric vans
for a trial.
– Pirtek Germany uses eco-electricity power supply.
The business is also testing electric vans.
– Sweden has two electric cars and a monthly fuel mileage
control scheme to encourage eco-friendly driving.
– Pirtek Austria has one electric car in the business.
Azura
– Azura operates a predominantly remote working model
which saves business travel and energy.
Franchise Brands will continue to measure Scope 1, 2 and aspects of Scope 3 and are
looking to continue to improve energy efficiency throughout 2024. Actions we are taking to
help reduce our carbon footprint are included in activities planned in 2024, see page 45.
48 Franchise Brands plc
Annual Report and Accounts 2023
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Working Responsibly continued
Taskforce on Climate-related Financial
Disclosures (TCFD)
The Company Secretary, Rob Bellhouse, will
coordinate the activities of the working group,
which will start its work during 2024.
The Board recognises that they, and the
businesses, should make significant progress
in developing a deeper understanding of
the potential impacts of climate change on
the business during 2024 and beyond. The
intention is to approach climate change and
the implementation of TCFD in a responsible
and diligent manner, whilst taking into account
the resources available to the Group.
The Board is therefore bringing the
Company’s disclosures and reporting in line
with the TCFD methodology. This first TCFD
report is consistent with the requirements
of the Regulations and aligns with the TCFD
Recommendations and Recommended
Disclosures. However, we are aware that there
is more work needed before we are able to
align fully with the requirements to which the
Group is now subject.
Everyone has a part to play in addressing
the impact of climate change and Franchise
Brands is no exception. We anticipate that
there will be both risks and opportunities for
our business as the effects of climate change
become more pronounced. We support the
aims and recommendations of the TCFD,
which aims to improve the reporting of
climate-related risks and opportunities. While
we are not adopting TCFD, that initiative sets
out eleven Recommended Disclosures against
its four central Recommendations.
The acquired businesses have been, or are in
the process of being, fully integrated into the
Group. The impacts of climate change, both as
risks and opportunities, were not considered
explicitly by the Group until this year. Based
on our current understanding, the Board and
senior management team do not consider
those risks and opportunities to be material
to the Group’s strategy and growth ambitions.
However, this is a matter of growing importance
which we will continue to evaluate and we are
keeping that initial conclusion under review.
The Companies (Strategic Report) (Climate-
related Financial Disclosure) Regulations
2022 (the Regulations) came into force in
2022 and require UK companies in scope
to report on a basis aligned with the TCFD
Recommendations. Over the past two years,
the Group has grown significantly, both
organically and through the acquisitions
of Filta in 2022 and Pirtek Europe in April
2023. As a result of the latest acquisition,
we now have more than 500 employees
and are therefore required to report under
the Regulations. The Board and senior
management team have been focused
on delivering the significant growth in our
business seen over recent years, including
the two major acquisitions referenced
above, each of which effectively doubled
the size of the Group at the relevant time.
We have engaged specialist consultants to
help us plan and deliver our climate change
and TCFD journey. In the second half of 2023
the management board reviewed the TCFD
Recommendations and the need to report in
line with the Regulations. Proposals for how
we might best approach these obligations
were considered and approved by the
Board in December 2023. The Board has
agreed that climate change should now
be considered as an integral part of the
strategy, risks and operations of the Group.
A Climate Change Working Group was created
to consider the potential impacts of climate
change, both as risks and opportunities, to the
Group’s businesses. To reflect the importance
of the issue, the working group will be chaired
by an Executive Director, Mark Fryer, and will
report through him directly to the Board.
49 Franchise Brands plc
Annual Report and Accounts 2023
Non-Financial and Sustainability
Information Statement
Franchise Brands plc is a UK-incorporated
company with shares admitted to trading on the
AIM market and had more than 500 employees
during the year ended 31 December 2023.
As such, it is within the scope of the changes
to the Companies Act 2006 made by the
Companies (Strategic Report) (Climate-related
Financial Disclosure) Regulations 2022
(the Regulations).
The disclosures we are required to make by
the Regulations are set out on pages 49 to 55
within this Strategic Report. The Company is
not obliged to make the additional disclosures
contemplated in the Regulations as it is not a
traded company and due to the nature of the
Group’s business activities.
TCFD at a glance
The table on the following pages sets out
our current status in relation to each of the
TCFD Recommended Disclosures (with the
corresponding requirement of the Regulations
in brackets):
R
P
A
C
M
Review and improve
Partially aligned with
the Recommendations
Aligned with the Recommendations
Continuous improvement
Maintain
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Working Responsibly continued
Taskforce on Climate-related Financial Disclosures (TCFD) continued
TCFD Pillar and Recommended
Disclosure (Regulations requirement)
Governance
Describe the Board’s oversight
of climate-related risks
and opportunities
(A description of the governance
arrangements of the company
in relation to assessing and
managing climate-related risks
and opportunities)
Actions taken in 2023
Current status
Current
status
rating
Actions to be taken in 2024 and beyond
• Board review of the importance of climate
change to the Group.
• The agreement to create a Climate Change
Working Group from across the business,
directly accountable to the Board.
The Board has recently assumed overall responsibility and accountability
for the management of climate-related risks and opportunities. The Board
has put in place appropriate oversight arrangements. Mark Fryer, an
Executive Director, will provide regular updates to the Board in his role
as chair of the Climate Change Working Group. The remit of the Working
Group is explained in the introduction on the previous page.
P
The Board formally reviews the risk register at least twice annually
(with the register being updated ahead of those reviews) and the Board
will consider, as and when relevant, the potential impact of climate change
to the Group.
During 2024 the Board will oversee the
work of the Climate Change Working
Group. The first step will be to refine our
understanding of the potential materiality
of climate-related risks and opportunities
to the Group, which will be considered
by the Board during the year.
Where judged to be of strategic
importance to the Group, the Board
will consider the potential risks and
opportunities arising from climate
change in its strategic planning and
decision-making.
Describe management’s role
in assessing and managing
climate-related risks
and opportunities
(A description of how the
company identifies, assesses,
and manages climate-related
risks and opportunities)
• Management Board review of the
importance of climate change to the Group
and how best to approach the risks and
opportunities that this presents, now and
in future years.
The Management Board has agreed to ‘own’ the Group’s practical
response to climate-related issues. It will review the findings and
recommendations of the Climate Change Working Group and decide how
best these can be implemented and integrated across all parts of the
business. The Management Board will also decide when systems and
processes need to be updated or introduced to support our response
to climate change.
The Working Group will use our risk management framework at each
quarterly meeting to evaluate the likelihood and potential impact of all risks
identified on a ‘bottom up’ basis at subsidiary company level and also flag
any opportunities for review by senior management.
The individual members of the Management Board, as business leaders
or heads of central functions, are responsible for developing the response
to climate change for their own part of the organisation. This will include
responsibility or the mitigation of identified risks and developing strategies
and plans to pursue opportunities.
R
During 2024 the Management Board
will supervise the further development of
the Group’s approach to climate change.
Senior management will ensure that all
climate-related risks and opportunities
are added to our corporate risk
register and that all material risks
and opportunities are incorporated
into our business plan and budgets.
50 Franchise Brands plc
Annual Report and Accounts 2023
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Working Responsibly continued
Taskforce on Climate-related Financial Disclosures (TCFD) continued
Actions taken in 2023
Current status
Current
status
rating
Actions to be taken in 2024 and beyond
• The risk reviews undertaken in 2023
identified climate change as a potential key
corporate risk for the first time.
• Our reviews highlighted lower levels of
risk linked to climate change, primarily cost
pressures due to regulatory intervention.
• Some of our existing business activities
already address climate change risks and
opportunities – for example, Filta in the US
supplies used cooking oil for conversion
into biodiesel fuel.
As already highlighted, the potential impacts of climate change on our
businesses are only beginning to be assessed. Post year-end, we have
completed an initial high-level ‘top down’ review of risks and opportunities,
over each of the short-, medium- and longer-term. We regard the short-
term as the next 12-18 months, the medium-term as the end of the Group’s
four-year strategic planning horizon (therefore the end of 2027) and the
longer-term as being anything beyond that.
P
The principal climate-related risks and opportunities that we have identified
are set out in the table on page 55 below. Based on our initial high-level
review, we do not currently judge any of these to be material to the Group.
• Certain of our businesses are already
addressing risks and opportunities arising
from climate change, none of which is
having a material impact on the Group.
Our initial assessment of climate-related risks and opportunities did not
identify any that have, or that we currently expect will have, a material
impact on the business model or strategy of the Company.
P
Accordingly, the Directors do not believe that the disclosure of
actual and potential impacts is necessary for an understanding of the
Company’s business.
During 2024 we intend to undertake
more detailed ‘bottom up’ reviews of
climate-related risks and opportunities at
subsidiary company level throughout the
year, which will consider these over each
of the time horizons explained opposite.
We intend to work with external TCFD
specialists to refine and deepen our
understanding of climate-related risks
and opportunities, further assess their
materiality and impact on our business,
strategy and financial planning.
A strategic priority for the company
during 2024 is to develop further our
understanding of climate-related risks
and opportunities and ensure that, where
material, these are incorporated into our
business, strategy, and financial planning
in the short-, medium-, and long-term.
TCFD Pillar and Recommended
Disclosure (Regulations requirement)
Strategy
Describe the climate-related
risks and opportunities the
organisation has identified
over the short, medium,
and long term
(A description of (i) the
principal climate-related risks
and opportunities arising in
connection with the operations
of the company, and (ii) the time
periods by reference to which
those risks and opportunities
are assessed)
Describe the impact
of climate-related risks
and opportunities on
the organisation’s
businesses, strategy,
and financial planning
(A description of the actual
and potential impacts of the
principal climate-related risks
and opportunities on the
business model and strategy
of the Company)
51
Franchise Brands plc
Annual Report and Accounts 2023
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Working Responsibly continued
Taskforce on Climate-related Financial Disclosures (TCFD) continued
Actions taken in 2023
Current status
Current
status
rating
Actions to be taken in 2024 and beyond
Based on our current understanding of the likelihood and impact of
climate-related risks and opportunities over the short-, medium- and
long-term, we believe that our business model and strategy is resilient.
Our businesses are diverse, both geographically and by business sector.
A number of our businesses have identified upside opportunities as well as
downside risks, none of which are currently viewed as material to the long-
term performance of the Group.
R
In subsequent years we will reassess the
resilience of our strategy using scenario
analysis, starting with a scenario aligned
with the Paris Agreement of 1.5-2.0°C
of climate change. Once completed,
we will undertake further analysis
across a range of possible scenarios.
Accordingly, the Directors do not believe that this disclosure is necessary
for an understanding of the Company’s business.
• The revision of the Group’s risk
management framework in 2023 enables
all categories of risk to be rated and
directly compared.
• The process for the identification,
assessment and management of climate-
related risks is therefore fully integrated into
the Group’s risk management framework.
• For further details of the risk management
framework, please see page 76 of this
annual report
Franchise Brands has policies and procedures in place for the timely
identification, assessment and management of risk. Risk management
is an integral part of the Group’s business and risks. Managing the
business implicitly includes managing risks and vice versa, at every level
of management and across all business activities. The risk framework is
reviewed regularly and the corporate risk register is updated and reviewed
at least twice annually by the Board.
P
Until recently, climate change has not been considered explicitly as
part of these identified risks. By utilising our standard approach to risk
management, as described above and further explained on page 76 the
identification, assessment and management of climate-related risks will be
fully integrated into the Group’s risk management framework.
During 2024 the Climate Change
Working Group members will utilise
the Group’s existing risk management
processes to identify and assess climate-
related risks and opportunities, on a
‘bottom-up’ basis. All material risks and
opportunities identified will be raised
directly with senior management and
brought to the Board’s attention.
We anticipate that this will be complete
by the end of 2024.
In future years, the Working Group will
undertake scenario analysis modelling
to help plan our climate change strategy,
which will form part of the Group’s
strategic and financial planning.
TCFD Pillar and Recommended
Disclosure (Regulations requirement)
Strategy continued
Describe the resilience of
the organisation’s strategy,
taking into consideration
different climate-related
scenarios, including a
2°C or lower scenario.
(An analysis of the resilience
of the business model and
strategy of the company, taking
into consideration of different
climate-related scenarios)
Risk management
Describe the organisation’s
processes for identifying,
assessing, managing climate-
related risks and how
these are integrated into
the organisation’s overall
risk management.
(A description of how processes
for identifying, assessing, and
managing climate-related risks
are integrated into the overall
risk management process in
the company)
52 Franchise Brands plc
Annual Report and Accounts 2023
Contents Generation – PageContents Generation – Sub PageContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Working Responsibly continued
Taskforce on Climate-related Financial Disclosures (TCFD) continued
Actions taken in 2023
Current status
The Group measures and reports on a wide range of energy consumption
data. The associated GHG emissions across Scope 1 and 2 and estimated
Scope 3 data are on page 46 of this Annual Report. The calculation
of emissions is in line with the Greenhouse Gas Protocol and shows
performance against the prior years’ performance. The Group also
reports in line with the Streamlined Energy and Carbon Reporting (SECR)
regulations, supporting the disclosure on how the Group manages its
energy consumption and carbon emissions. This data forms the principal
metrics and KPIs used to monitor the impact of climate change on our
business, and vice versa.
Current
status
rating
P
Actions to be taken in 2024 and beyond
Our key focus for the next few reporting
periods will be developing a deeper
understanding of the key climate-related
issues which will or could impact the
business in a range of scenarios.
As we develop our response to climate
change, including the implementation of
TCFD, we expect to identify and disclose
additional metrics and KPIs.
• During 2023 we have developed
our measurement of GHG emissions,
including Scope 3.
• During 2023 we have implemented the
Group methodology for the reporting of
Scope 1, 2 and Scope 3 emissions in the
Pirtek Europe business.
Detailed reporting of the Group’s energy consumption and the Scope 1,
2 and 3 GHG emissions are on page 46 of this Annual Report.
P
As we are not a significant GHG emitter, and do not believe that our
suppliers and customers are significant emitters, we do not currently
believe that we face material risk in this area.
Whilst the Group already reports its
Scope 1, 2 and 3 GHG emissions,
during 2024 we intend to undertake
further work to enhance our Scope 3
emissions calculations.
We will also determine the most useful
metrics and targets for the Group to
adopt when reporting against the
TCFD recommendations.
TCFD Pillar and Recommended
Disclosure (Regulations requirement)
Metrics and targets
Disclose the metrics used
by the organisation to
assess climate-related risks
and opportunities in line
with its strategy and risk
management process.
(The key performance indicators
used to assess progress
against targets used to
manage climate-related risks
and realise climate-related
opportunities and a description
of the calculations on which
those KPIs are based)
Disclose Scope 1, Scope 2,
and, if appropriate,
Scope 3 greenhouse gas
(GHG) emissions, and the
related risks.
53 Franchise Brands plc
Annual Report and Accounts 2023
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Working Responsibly continued
Taskforce on Climate-related Financial Disclosures (TCFD) continued
TCFD Pillar and Recommended
Disclosure (Regulations requirement)
Actions taken in 2023
Current status
Current
status
rating
Actions to be taken in 2024 and beyond
Metrics and targets continued
Describe the targets used
by the organisation to
manage climate-related
risks and opportunities and
performance against targets.
• We have been measuring and reporting
Scope 1 and 2 emissions and estimating
and reporting our Scope 3 emissions for
a number of years.
(A description of the targets
used by the company to
manage climate-related
risks and to realise climate-
related opportunities and
of performance against
those targets)
We expect that the reporting of Scope 1, 2 and 3 emissions will continue
to be the bedrock of our reporting. As the Group develops its response to
climate-change risks and opportunities, we will identify other metrics we
can use to track these and monitor progress.
R
It is important to recognise that most of the Group’s operations are
delivered by mobile engineers and service technicians, or ‘man in a van’.
As our business grows, it inherently requires more vans on the road
to support the increased volume of orders that we anticipate. At the
present time, electric vehicles have proven to be impractical for many of
our operations. While we continue to explore the possible use of hybrid
vehicles and remain open to advances in EV technology, we anticipate
that our emissions are likely to increase in absolute terms, in line with our
growth ambitions.
Our initial target is likely to be to limit the growth in our GHG emissions
within our own operations (excluding future acquisitions) to a rate that is
lower than the growth in the business, most probably as measured by
system sales and/or numbers of vans on the road. We will refine these
targets in subsequent years.
The priority for 2024 is to improve our
understanding of the potential impacts
of climate change and to identify any
potential key metrics that we can
use to measure these, and our own
environmental impact.
Once we have better defined the
impacts, we will be able to set more
granular targets for each of our
businesses and then define the key
performance indicators that we can use
to track performance against these.
Over the following years we expect
to develop a carbon reduction plan
that can put us on a journey leading to
net zero. Initially, this will be a roadmap
to net zero for Scope 1 and 2, and for
Scope 3 following that.
Principal climate‑related risks and opportunities
As noted in the table above, we have conducted an initial high-level review of the risks and opportunities associated with climate change, including informal consideration of different climate
change scenarios. We intend to undertake a deeper ‘bottom-up’ analysis during 2024, which we will report on in next year’s Annual Report. We regard the short-term (S, in the table below) as the
next 12-18 months, the medium-term (M) as the end of the Group’s four-year strategic planning horizon (therefore the end of 2027) and the longer-term (L) as being anything beyond that. Based on
our current understanding, none of the risks or opportunities is believed to be material to the Group at this time under any realistic scenario.
54 Franchise Brands plc
Annual Report and Accounts 2023
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Working Responsibly continued
Taskforce on Climate-related Financial Disclosures (TCFD) continued
The risks and opportunities identified to date, and the time horizons over which we currently anticipate these could appear, are:
Operating segment
Risks
Opportunities
Group-wide
(central and
multi-segment)
S/M/L Changing weather patterns create more seasonality in our business, making forecasting more challenging
and creating the risk of under- or over-supply of engineer and technician capacity at times in the year
M/L
Use of solar power for offices and our direct labour
organisations’ premises
M/L
Ability for mobile engineers and technicians to work outdoors throughout the year, if extremes of
temperature or rainfall become normal
S/M Rising costs of, or restrictions on, accessing ultra-low emission zones, including having to invest in
Euro 6/VI compliant vehicles
M/L
Rising costs or reduced availability of materials due to disruption of national and international supply
chains due to extreme weather events affecting production and distribution facilities
S/M/L Cost of meeting new legal or regulatory requirements implemented in response to climate change
Pirtek Europe
S/M/L Disruption in ability to service customers due to extreme weather
Water & Waste
Services
M/L
Prolonged spells of dry weather reduces demand for reactive drainage work
L
If electric vehicle technology does not improve, costs of owning and operating diesel-fuelled vehicles
could increase
S/M/L Susceptibility of hydraulic hoses to increased temperatures,
plus opportunities to offer Total Hose Management services
S/M/L Resilience projects (flood defences against rising sea levels,
storm surges etc) often use hydraulics extensively, so increase
market opportunities
M/L
M/L
M/L
Increased frequency and severity of wet weather increases
demand for reactive drainage work
Increased frequency and severity of cold weather increases
demand for reactive plumbing work
Possible increase in demand for installation and servicing
of ground- and air-sourced heat pumps
Filta International L
US coastal cities become at risk of flooding leading to population migration, disrupting existing franchise network M/L
Food becomes more expensive and people eat out less than at present, or dietary habits change, in either
case reducing demand for oil filtration
Increased frequency and severity of wet weather
reveals blocked drains and increases demand for FOG
management solutions
Oil for paint manufacture becomes expensive or supply-constrained, leading OEMs to adopt alternative
technologies, or making paint sufficiently expensive to undermine franchise economics
S/M/L Ability to perform SMART repairs on electric vehicles, with
circa 125 technicians already trained
Dietary habits change so that ovens and hobs no longer require such frequent cleaning
B2C
L
L
L
Key: S = short term M = medium term L = long term
55 Franchise Brands plc
Annual Report and Accounts 2023
Contents Generation – PageContents Generation – Sub PageContents Generation – Sub PageContents Generation – Section Engaging with
our stakeholders
Strategic Report Governance Financial Statements
Engaging
with our
stakeholders
How we engage with our business partners
and counterparties and how our business
affects others matters to us. Our goal is to
be a good corporate citizen.
56
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Section 172 statement
In performing their duties, the Directors of
the company always act in the way they
consider, in good faith, would be most likely
to promote the success of the Company for
the benefit of its members as a whole. But
the Directors also reflect on the potentially
competing interests of a wide range of other
stakeholders and considerations.
As the law requires, these include:
• the need to foster the company’s business
relationships with suppliers, customers
and others;
• the impact of the Company’s operations
on the community and the environment;
• the desirability of the company maintaining
a reputation for high standards of
business conduct;
• the need to act fairly as between members
• the likely consequences of any decision
of the Company; and
in the long term;
• the interests of our franchisees and
• the interests of the company’s employees
their employees.
and the wider workforce;
Read about key decisions our Board has taken in
light of the Section 172 factors on pages 60 & 61
Our stakeholders
Within the wider universe of all potential
stakeholders, the Directors have a clear
understanding of who can correctly be
regarded as a key stakeholder. Processes
are in place to engage with these parties to
understand their perspectives and to ensure
that these are considered in our decision-
making and the actions we take.
As a progressive, principle-led Group, we are
committed to working in partnership with all
our stakeholders. In 2023, the groups that
we regarded as our key stakeholders and how
we engaged with them are shown overleaf:
The Board is provided with regular updates
on stakeholders’ views at its meetings.
In particular, the views of our employees,
our franchisees, as well as the shareholders
and lending banks who fund our business,
are discussed in detail on a regular basis.
57
Franchise Brands plc
Annual Report and Accounts 2023
Principal stakeholders
Employees
Franchisees
Shareholders
Lending banks
Customers and
local communities
Suppliers
Contents Generation – Sub PageContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Our stakeholders
Employees and the wider workforce
Franchisees
Shareholders
Importance to the Group
Our committed and dedicated employees are our most
important resource. They play a key role in supporting
our franchisees and helping provide them with the
tools they need to grow their businesses.
We aim to cultivate and maintain a positive working
environment and provide learning and development
opportunities, recognition and rewards.
How we engaged
• Presentations, forums, visits, webinars, social and
charity events, updates and communication bulletins.
• Visits by senior management to all of our
group businesses.
• Providing support for hybrid and flexible working.
• Share options granted and exercised.
Importance to the Group
Our franchisees are the very backbone of the Group.
It is their commitment, hard work and entrepreneurialism
that helps us grow our business. Our teams provide
all the support and development they need to grow
their businesses and maintain the highest brand and
operational standards.
Importance to the Group
Our shareholders finance our development and growth
plans to support the long-term development of the Group.
Engaging with them regularly to communicate progress,
understand their perspectives, discuss short- and long-term
issues, and ensure their views are taken into account is
critical to the long-term success of the Group.
How we engaged
• Conferences and award dinners for Metro Rod,
Metro Plumb, Filta and Pirtek franchisees.
How we engaged
• Formal reporting (Annual Report, Interim Report and
trading updates).
• Regional meetings, one-on-one meetings, franchisee
• Capital Markets Day and Investor Presentations open
forums, calls, webinars, franchisee visits.
to all investors.
• “Together we’re stronger” podcast.
• Regular meetings and calls with institutional investors
on a 1:1 basis.
• Regular engagement on digital platforms.
• Retail investor presentations, both virtual and in person.
58 Franchise Brands plc
Annual Report and Accounts 2023
Contents Generation – Sub PageContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Our stakeholders continued
Lending banks
Customers and local communities
Suppliers
Importance to the Group
During the year we took out a new, significant bank
facility to part-fund the acquisition of Pirtek and provide
us with funding for working capital and other purposes.
The facilities provides us with long-term capital that we
are using to accelerate the growth of our business. We
engage with them at senior management levels to ensure
that they know how our business is performing and we
can learn their views and future intentions.
How we engaged
• Formal reporting (submission of reports, accounts,
budgets and forecasts).
• Regular meetings with all of the lenders.
• Regular calls with the banks, individually and
collectively, to discuss progress in implementing
our plans.
Importance to the Group
We are passionate about providing the highest possible
customer service. Understanding the needs of our
customers, evaluating our performance delivery against
KPIs and evaluating feedback helps us continually improve.
We are committed to making a positive contribution to the
communities we work in.
How we engaged
• Meetings, reviews, calls, surveys, performance ratings.
• Our “Connect” portal allows customers to self-serve.
• Customer and industry conferences and seminars.
• Extensive community initiatives, including
school engagement, sports sponsorships
and charitable causes.
• “Meet the buyer” events.
Importance to the Group
Our suppliers provide us and our franchisees with
the highest possible quality of products, equipment and
services. This allows us to deliver a first-class service to
our customers. Regular reviews take place to ensure a
supply chain free of slavery and human trafficking.
How we engaged
• Supplier expos at franchise conferences.
• Demonstrations and site visits.
• Expansion of supplier relationships.
• Continued introduction of new suppliers
to franchise networks.
59 Franchise Brands plc
Annual Report and Accounts 2023
Contents Generation – PageContents Generation – Sub PageContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Our stakeholders continued
Key Board decisions in the year
How we considered these wider
interests in 2023
Like all companies, our Directors make
decisions throughout each working day and
consider the range of stakeholder interests
as part of their role. To illustrate this, there
were a number of significant decisions made
by the Board, acting collectively, during 2023
that took into account a wide range of factors,
including those required by section 172(1)
of the Companies Act:
Key of factors considered:
Financial
impact
Long-term
impact
Community and
the environment
Reputation
Employees and
wider workforce
Acting fairly
between members
Fostering business
relationships
60 Franchise Brands plc
Annual Report and Accounts 2023
Acquisition of Pirtek
Bank debt to part-fund the
acquisition of Pirtek
How the Directors fulfilled their duties
How the Directors fulfilled their duties
We believe that our ‘buy and build’ strategy is in our
shareholders’ best interests, and that our focus on essential,
reactive, van-based services is what we are best at doing.
We also buy businesses for the long-term, not to make a
short-term turn.
Pirtek is a business we have followed for some time that
fits perfectly into our strategy and business model. It has
an unmatched customer USP and strong market reputation.
There are overlaps between its customer base and that of
our Water & Waste Services division.
While the vendors of Pirtek Europe wanted to receive cash
as most of the consideration for the acquisition, this also fitted
with how the Board wished to manage our balance sheet.
The carefully considered use of debt enables businesses to
accelerate growth and to improve the long-term returns to
equity investors. We have also strengthened our relationships
with a group of high-quality lending banks which should have
long-term benefits.
Key considerations:
Key considerations:
Contents Generation – PageContents Generation – Sub PageContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Our stakeholders continued
Key Board decisions in the year continued
Placing to part-fund the
acquisition of Pirtek
Decision to retain the B2C division
Changing the governance structure
of the Group
How the Directors fulfilled their duties
How the Directors fulfilled their duties
How the Directors fulfilled their duties
The Board wished to part-fund the acquisition of Pirtek
through an issue of equity. As well as issuing shares
as vendor consideration, we undertook an institutional
placing to open up the opportunity to a wide range of
professional investors. The placing also enabled the
management shareholders of Pirtek Europe and our
own Directors and senior management team to invest.
Having marketed the B2C division for sale, the Board
concluded that the offers received did not properly
reflect our belief in the long-term value of the business.
Leaving the business for sale for an extended period of
time was also unsettling and demotivating for the B2C
team. We will therefore retain this profitable and cash-
generative set of businesses.
The previous Board was dominated by executives with
operational accountability. Through the changes we have
made, the plc Board is now more clearly focused on strategic-
level risks and opportunities, with a stronger non-executive
component to bring enhanced independent scrutiny and
challenge. The introduction of the Management Board has
created a forum focused on the opportunities available
across the Group, and where operational performance can
be scrutinised in more depth, including in relation to ESG
plans and performance.
Key considerations:
Key considerations:
Key considerations:
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Annual Report and Accounts 2023
Contents Generation – PageContents Generation – Sub PageContents Generation – Sub PageContents Generation – Section Financial Review
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.”
Mark Fryer, Chief Financial Officer
Adjusted EBITDA
£30.1m
£5.0m
Profit before tax
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.
Strategic Report Governance Financial Statements
Financial Review
2023 highlights
System sales increased
by 88% to £350.1m
Adjusted EBITDA/
System sales for 2023
increased to 8.6%
Cash conversion increased
to 100% (2022: 90%)
62 Franchise Brands plc
Annual Report and Accounts 2023
Contents Generation – Sub PageContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Financial Review continued
Alternative Performance
Measures explained
Why do we use System sales?
Systems sales comprise the underlying
sales of our franchisees and the
statutory sales of our DLOs.
System sales is a KPI of the Group
and is 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.
63 Franchise Brands plc
Annual Report and Accounts 2023
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.
Contents Generation – PageContents Generation – Sub PageContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Financial Review continued
Prior Year Adjustments continued
• 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.
64 Franchise Brands plc
Annual Report and Accounts 2023
• 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.
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Financial Review continued
Summary statement of income
System sales
Statutory revenue
Cost of sales
Gross profit
Administrative expenses
Adjusted EBITDA
Depreciation & amortisation of software
Finance expense
Impairment loss
Foreign Exchange
Adjusted profit before tax
Tax expense
Adjusted profit after tax
Amortisation of acquired intangibles
Share-based payment expense
Non-recurring items
Other gains and losses
Tax on adjusting items
Statutory profit
65 Franchise Brands plc
Annual Report and Accounts 2023
2023
£’000
350,053
121,265
(50,060)
71,205
(41,104)
30,101
(4,417)
(5,711)
(96)
(146)
19,731
(5,153)
14,578
(7,718)
(838)
(6,159)
—
3,174
3,037
2022
(restated)
£’000
186,353
69,839
(33,898)
35,941
(20,684)
15,257
(2,281)
(235)
—
—
12,741
(2,560)
10,181
(1,693)
(535)
(1,708)
1,232
649
8,126
Change
£’000
163,700
51,426
(16,162)
35,264
(20,420)
14,844
(2,136)
(5,476)
(96)
(146)
6,990
(2,593)
4,397
(6,025)
(303)
(4,451)
(1,232)
2,525
(5,089)
Change
%
88%
74%
48%
98%
99%
97%
94%
2330%
100%
100%
55%
101%
43%
(63%)
Contents Generation – PageContents Generation – Sub PageContents Generation – Sub PageContents Generation – Section
Strategic Report Governance Financial Statements
Financial Review continued
Summary statement of income continued
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:
System sales
Statutory revenue
Cost of sales
Gross profit
GP%
Administrative expenses
Divisional EBITDA
Group overheads
Adjusted EBITDA
System sales
Statutory revenue
Cost of sales
Gross profit
GP%
Administrative expenses
Divisional EBITDA
Group overheads
Adjusted EBITDA
Pirtek
£’000
Water & Waste
Services
£’000
Filta
International
£’000
125,976
41,947
(11,408)
30,539
73%
(17,221)
13,318
—
—
106,661
48,880
(23,284)
25,596
52%
(14,689)
10,907
—
—
90,482
27,117
(17,349)
9,768
36%
(3,671)
6,097
—
—
Water & Waste
Services
(restated)
£’000
Pirtek
£’000
Filta
International
£’000
—
—
—
—
—
—
—
—
90,223
42,473
(20,111)
22,362
53%
(13,112)
9,250
—
—
69,560
23,750
(15,659)
8,091
34%
(2,877)
5,214
—
—
B2C
£’000
26,189
6,106
(1,207)
4,899
80%
(2,583)
2,316
—
—
B2C
(restated)
£’000
25,773
6,138
(1,063)
5,075
83%
(2,618)
2,457
—
—
Azura
£’000
Inter-company
£’000
2023
£’000
745
745
(0)
745
100%
(531)
214
—
—
Azura
£’000
797
797
(1)
796
100%
(625)
171
—
—
—
(3,530)
3,188
(342)
10%
342
—
—
—
Inter-company
£’000
—
(3,319)
2,936
(383)
12%
383
—
—
—
350,053
121,265
(50,060)
71,205
59%
(38,353)
32,852
(2,751)
30,101
2022
(restated)
£’000
186,353
69,839
(33,898)
35,941
51%
(18,849)
17,092
(1,835)
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.
66 Franchise Brands plc
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Financial Review continued
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.
System sales
Statutory revenue
Cost of sales
Gross profit
GP%
Administrative expenses
Adjusted EBITDA
Franchise
£’000
118,687
34,771
(9,954)
24,817
71%
(11,178)
13,639
DLO
£’000
Central Costs
£’000
2023
£’000
7,289
7,292
(1,570)
5,722
78%
(5,305)
417
—
(116)
116
0
0%
(738)
(738)
125,976
41,947
(11,408)
30,539
73%
(17,221)
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.
67 Franchise Brands plc
Annual Report and Accounts 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.
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Financial Review continued
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:
System sales
Statutory revenue
Cost of sales
Gross profit
GP%
Administrative expenses
Adjusted EBITDA
Metro Rod
£’000
Willow Pumps
£’000
75,671
19,203
(4,020)
15,183
79%
(7,595)
7,588
18,659
18,659
(12,399)
6,260
34%
(4,406)
1,854
Filta UK
£’000
12,331
11,018
(6,865)
4,153
38%
(2,688)
1,465
2023
£’000
106,661
48,880
(23,284)
25,596
52%
(14,689)
10,907
Metro Rod
(restated)
£’000
62,916
15,641
(2,747)
12,894
82%
(6,556)
6,338
Willow Pumps
£’000
18,175
18,175
(12,196)
5,979
33%
(4,134)
1,845
Filta UK
(restated)
£’000
9,132
8,657
(5,168)
3,489
40%
(2,422)
1,067
2022 (restated)
£’000
90,223
42,473
(20,111)
22,362
53%
(13,112)
9,250
Change
£’000
16,438
6,407
(3,173)
3,234
(0%)
(1,577)
1,657
Change
%
18%
15%
16%
14%
(1%)
12%
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:
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:
System sales
Statutory revenue
Cost of sales
Gross profit
GP%
Administrative expenses
Adjusted EBITDA
2023
£’000
2022 (restated)
£’000
75,671
19,203
(4,020)
15,183
79%
(7,595)
7,588
62,916
15,641
(2,747)
12,894
82%
(6,556)
6,338
Change
£’000
12,755
3,562
(1,273)
2,289
(3%)
(1,039)
1,250
Change
%
20%
23%
46%
18%
(4%)
16%
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.
System sales
MSF income
Effective MSF %
Other gross profit
Gross profit
2023
£’000
2022 (restated)
£’000
71,616
13,404
18.7%
1,779
15,183
59,814
11,085
18.5%
1,809
12,894
Change
£’000
11,802
2,319
—
(30)
2,289
Change
%
20%
21%
0.2%
(2%)
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.
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Water & Waste Services division continued
Metro Rod continued
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.
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.
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).
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.
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:
Statutory revenue
Cost of sales
Gross profit
GP%
Administrative expenses
Adjusted EBITDA
2023
£’000
18,659
(12,399)
6,260
34%
(4,406)
1,854
2022
£’000
18,175
(12,196)
5,979
33%
(4,134)
1,845
Change
£’000
484
(203)
281
1%
(272)
9
Change
%
3%
2%
5%
2%
7%
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.
69 Franchise Brands plc
Annual Report and Accounts 2023
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:
System sales
Statutory revenue
Cost of sales
Gross profit
GP%
Administrative expenses
Adjusted EBITDA
2023
£’000
2022 (restated)
£’000
12,331
11,018
(6,865)
4,153
38%
(2,688)
1,465
9,132
8,657
(5,168)
3,489
40%
(2,422)
1,067
Change
£’000
3,199
2,361
(1,697)
664
(2%)
(266)
398
Change
%
35%
27%
33%
19%
(6%)
11%
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.
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Financial Review continued
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:
System sales
Statutory revenue
Cost of sales
Gross profit
GP%
Administrative expenses
Adjusted EBITDA
North America
£’000
87,004
26,506
(17,011)
9,495
36%
(3,171)
6,324
Europe
£’000
3,478
611
(338)
273
29%
(500)
(227)
2023
£’000
North America
£’000
90,482
27,117
(17,349)
9,768
36%
(3,671)
6,097
66,700
23,273
(15,398)
7,875
34%
(2,516)
5,359
Europe
£’000
2,860
477
(261)
216
36%
(361)
(145)
2022
£’000
69,560
23,750
(15,659)
8,091
34%
(2,877)
5,214
Change
£’000
20,922
3,367
(1,690)
1,677
2%
(794)
883
Change
%
30%
14%
11%
21%
6%
28%
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.
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.
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 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
70 Franchise Brands plc
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Filta International continued
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:
System sales
Statutory revenue
Cost of sales
Gross profit
GP%
Administrative expenses
Adjusted EBITDA
2023
£’000
2022 (restated)
£’000
Change
£’000
Change
%
26,189
6,106
(1,207)
4,899
80%
(2,583)
2,316
25,773
6,138
(1,063)
5,075
83%
(2,618)
2,457
416
(32)
(144)
(176)
(2%)
35
(141)
2%
(1%)
14%
(3%)
(3%)
(1%)
(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.
71
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Financial Review continued
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:
Adjusted & statutory profit
Statutory revenue
Cost of sales
Gross profit
GP%
Administrative expenses
Adjusted EBITDA
2023
£’000
745
(0)
745
100%
(531)
214
2022
£’000
797
(1)
796
100%
(625)
171
Change £’000
(52)
1
(51)
0%
94
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.
72 Franchise Brands plc
Annual Report and Accounts 2023
Adjusted EBITDA
Depreciation & amortisation
of software
Finance expense
Foreign exchange
Adjusted profit before tax
Tax expense
Adjusted profit after tax
Amortisation of acquired intangibles
Share-based payment expense
Non-recurring costs
Other gains and losses
Tax on adjusting items
Statutory profit
2023
£’000
2022 (restated)
£’000
Change
£’000
30,101
15,257
14,844
(4,417)
(5,807)
(146)
19,731
(5,153)
14,578
(7,718)
(838)
(6,159)
—
3,174
3,037
(2,281)
(235)
—
12,741
(2,560)
10,181
(1,693)
(535)
(1,708)
1,232
649
8,126
(2,136)
(5,572)
(146)
6,990
(2,593)
4,397
(6,025)
(303)
(4,451)
(1,232)
2,525
(5,089)
Change
%
97%
94%
2371%
100%
55%
101%
43%
(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.
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Financial Review continued
Adjusted & statutory profit continued
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:
Adjusted profit after tax /
Adjusted EPS
Amortisation of acquired intangibles
Share-based payment expense
Non-recurring costs
Other gains and losses
Tax on adjusting items
Statutory profit after tax / Basic EPS
2023
£’000
EPS
p
14,578
(7,718)
(838)
(6,159)
—
3,174
3,037
8.42
(4.46)
(0.48)
(3.56)
—
1.83
1.75
2022
(restated)
£’000
10,181
(1,693)
(535)
(1,708)
1,232
649
8,126
EPS
p
8.34
(1.39)
(0.44)
(1.40)
1.01
0.53
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).
73 Franchise Brands plc
Annual Report and Accounts 2023
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Financial Review continued
Financing and cash flow
A summary of the Group cash flow for the period is set out in the table below.
2023
£’000
30,101
(6,159)
(61)
23,881
(4,498)
(986)
(1,350)
(522)
(48,894)
(136,747)
—
100,012
94,106
(13,000)
(5,374)
(2,687)
192
(3,371)
859
1,621
10,935
(278)
12,278
2022
(restated)
£’000
15,257
(1,708)
(1,512)
12,037
(2,629)
(422)
(1,088)
—
4,320
—
(1,680)
—
—
(2,953)
—
(1,156)
(2,370)
(2,339)
(41)
1,679
9,057
199
10,935
Adjusted EBITDA
Acquisition and reorganisation costs
Working capital movements
Cash generated from operations
Taxes paid
Purchases of property, plant and equipment
Purchase of software
Purchase of IP
Acquisition of subsidiaries net of cash
Acquired debt repaid
Deferred consideration
Funds raised via debt
Funds raised via equity
Bank loans repaid
Interest Paid
Lease payments
Funds supplied to EBT
Dividends paid
Other net movements
Net cash movement
Net cash at beginning of year
Exchange differences on cash and cash equivalents
Net cash at end of year
74 Franchise Brands plc
Annual Report and Accounts 2023
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.
Cash
Term loan
RCF
Loan fee
Hire purchase debt
Adjusted (net debt)/net cash
Other lease debt
(Net Debt) / Net cash
31 Dec 2023
£’000
12,278
(50,000)
(36,908)
749
(837)
(74,718)
(7,567)
(82,285)
31 Dec 2022
(restated)
£’000
10,935
—
—
—
(1,132)
9,803
(1,624)
8,179
Change
£’000
1,343
(50,000)
(36,908)
749
295
(84,521)
(5,943)
(90,464)
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Financial Review continued
Financing and cash flow continued
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
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Annual Report and Accounts 2023
Contents Generation – PageContents Generation – Sub PageContents Generation – Sub PageContents Generation – Section Risk Management
Strategic Report Governance Financial Statements
Risk Management
A proactive approach to risk management
In 2023 the Board approved a revision of
our risk management framework, designed
to enhance and clarify the process for
assessing the impact and likelihood of the
risks we face. The methodology is designed
to be applicable across all categories of risk,
including strategic, operational, financial and
reputational risks, and regardless of whether
the underlying source of the risk is internal or
external to Franchise Brands.
The identification, assessment and
mitigation of risk is the responsibility of
management. Our approach is to embed
risk management principles and processes
within our businesses so that managing risk
is part of the everyday activity of managing
the business, and vice versa.
• we then monitor the impact of the identified
risks, and the effectiveness of our risk
management strategies and mitigations.
These are then reported on and reviewed
as part of the ongoing monitoring process.
• we repeat the risk identification process, to
identify new potential risks or any change in
those we have already identified.
During the year, we conducted a ‘bottom-up’
risk assessment involving all of the members
of the management board. Through the use
of a standardised risk rating system across
all risk categories we were able to compare
and rank these. The Board subsequently
undertook a ‘top-down’ review of the risk
register, to provide their perspective on the
risks facing the business.
• we review the likelihood and potential
impact of the risk, which could be
financial, operational disruption or
reputational damage.
• we model the likelihood and potential
impact against our risk appetite and
tolerance, and decide whether we will
accept, manage or seek to eliminate
the risk. In some cases, the availability
of insurance for the particular risk may
be a factor.
Risk and return are two sides of the same
coin. Like all businesses, we take levels of
risk that we judge to be acceptable in order
to deliver a return to our investors. But we
also face risks that are we are not prepared to
take, either due to the nature of the impact of
those risks or if their financial consequences
have the potential to prevent us meeting our
strategic objectives.
Effective risk management therefore
underpins our business model and
strategy. We identify the risks inherent in
the businesses we operate and decide
which of these we will actively seek in the
expectation of making a return (our risk
appetite), which risks we will seek to manage
(our risk tolerance) and which risks we are not
prepared to face. The latter are the risks that,
if they materialise, will prevent us delivering on
our business plans or have other impacts that
we cannot live with.
At Franchise Brands, the Board is ultimately
responsible for the systems of risk management
and the effectiveness of those processes.
The Board meets regularly to review business
performance and the impact of risk, both
operationally and financially.
76 Franchise Brands plc
Annual Report and Accounts 2023
Key roles and responsibilities
Board
Approves the framework for the
identification, assessment and
management of risk
Assesses the effectiveness of the
risk management framework
Monitors operational and financial
performance to identify emerging
risks to the delivery of strategic
goals and business plans
Management Board
Responsible for implementing the
risk management framework into
the business and ensuring this is
embedded in day‑to‑day operations
Oversees controls to mitigate
and manage the impact of risk
on the Group
Reviews the impact of risk on
operational and financial performance
and implements mitigation strategies
where appropriate
Operational (line) management
Responsible for embedding risk
management within the parts
of the business for which they
are accountable
Designs and implements controls
to mitigate and manage the impact
of risk locally
Monitors risk in their business and
reports this to senior management
and the management board
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Principal risks and uncertainties
Based on the risk management work undertaken during the year, the Board believes that these are the principal risks and uncertainties that the Group currently faces. There are a number of other
risks, in addition to those listed below, which could affect our business. We operate in a dynamic environment that is also affected by macro-economic events, so it is possible that new risks might
emerge or the nature or impact of existing risks may evolve over time. The risks are therefore presented alphabetically rather than using the ratings of impact and probability determined at any
arbitrary point in time. While mitigations are listed in the table below, due to the nature of risk there can be no certainty or assurance that those actions, or any additional planned actions, will be
wholly effective.
Risk description and impacts
Underlying cause(s)
Mitigations in place
Change in the year Link to strategy
Ability to grow our businesses
Failure to deliver organic growth in our
existing businesses in line with our
strategic plans and market commitments
• Failure to attract or retain franchisees of
the required calibre
• Diversification of the risk, geographically and across business sectors
• Multiple levers for organic growth, with all businesses having small shares
• Failure of our franchisees to attract and
retain the skilled technicians needed to
deliver the growth in the business
• Inability to grow our business with
existing customers, or to attract or retain
new customers
of large markets
• Focus on areas where we have a proven track record
• Clear understanding of what successful franchisees do (including through
the Maximum Potential Model) and recruiting with this in mind
• Supporting our franchisees with the recruitment of technicians,
including direct recruitment support and referral of candidates from our
existing technicians
• Strong customer relationships, with cross-selling opportunities identified
and being pursued
Ability to pursue strategic options
Inability to deliver on our buy-and-build
strategy through lack of organic growth,
lack of suitable acquisition opportunities
or our inability to finance an acquisition
• Operational execution fails to deliver
cash flow to pay down debt, leading to
inability to fund an acquisition
• Strong and empowered management teams running each business with
clear focus on growth, using operational gearing to drive profitability and
cash flow
• Lack of suitable acquisition
• Relationships with investment banks and other agents acting on
opportunities in the market at a price
we are prepared to pay
business sales
• Relationships with our institutional shareholders and lending banks
Attraction and retention of customers
Loss of key national or regional account
customers could lead to failure to deliver
on our strategic plans
• Poor delivery to existing customers
leading to reputational damage
in the market
• Failure to secure or retain new
customers as a consequence
• Diversification of the risk, geographically and across business sectors
• Experienced management teams who are actively engaged in the
business, with weekly reporting of trends and market developments
• Strong customer relationships, supported by robust data gathering
and analysis
Strategy:
Expanding and developing our services Developing a technology platform Developing synergies through shared central services Optimising our service delivery Developing our businesses
Risk direction:
Increase Decrease No change
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Annual Report and Accounts 2023
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Strategic Report Governance Financial Statements
Principal risks and uncertainties continued
Risk description and impacts
Underlying cause(s)
Mitigations in place
Change in the year Link to strategy
Climate change
Ability to operate from current locations
of our (or our franchisees’) businesses,
due to the impact of climate change;
structural changes to cost base driven
by legal or regulatory change could
affect the economic viability of certain
of our businesses
• Cost pressures linked to climate
change, including from central or local
government-led initiatives (replacing
vehicles with Euro 6/VI compliant
models, ULEZ charges, future carbon
pricing etc)
• Potential inability to source equipment
or materials due to impacts of climate
change (physical and transition risks)
• Developing an understanding of the potential impact of the physical and
transition risks of climate change in the short-, medium- and long-term
• Choosing long-term locations for our businesses with physical risks
(eg. flood, wildfire or storm) in mind and advising franchisees to consider
these risks
Cyber‑risks
Loss of access to systems or data,
disruption to the business(es),
costs of incident management and
rehabilitation, possible GDPR fines
plus reputational damage
H&S or environmental incident
Human, social and operational impact
of a serious incident, in terms of
direct and indirect costs and potential
reputational damage
• Malicious parties seeking to hack
our IT systems, either for extortion
or otherwise
• Accidental loss of unencrypted
customer or personal data
• Migration of IT systems onto shared centrally managed infrastructure
• Use of information security specialists
• Staff training and the raising of awareness on good cyber
security practices
• Unsafe behaviour by our workforce
or that of our franchisees
• Unsafe conditions in the workplaces
where our technicians operate
• Diversification of the risk, geographically and across business sectors
• Well developed H&S and environmental systems and processes
• Training for franchisees and, where relevant, their technicians
• Operations manuals for each franchisee, explaining what is expected
of them
• Compliance with customers’ on-site HSE procedures
• Near miss and incident reporting used to drive awareness-raising
communications
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Annual Report and Accounts 2023
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Strategic Report Governance Financial Statements
Principal risks and uncertainties continued
Risk description and impacts
Underlying cause(s)
Mitigations in place
Change in the year Link to strategy
Legislative or regulatory change
Government or regulator-led change
constrains the ability of one or more of
our businesses to operate either at all,
or at viable levels of profitability
• Change driven by a perception of
weakness or excessive risk in current
business practices
• Diversification of the risk, geographically and across business sectors
• Managing our operations in line with best practices
• Awareness of legal and regulatory agenda and proposed changes
• Lobbying and influencing, where necessary, either on a company
or industry-wide basis
Macro‑economic environment
External geopolitical and economic
environment adversely impacts our
operations and prevents us fulfilling our
strategic plans and market commitments
• Geopolitical tensions lead to an adverse
international climate, with disruptions to
supply chains
• Uncertainty leads to adverse economic
backdrop, including inflationary
pressures and higher interest rates
• Diversification of the risk, geographically and across business sectors
• Fundamentally conservative approach to planning, budgeting
and forecasting
• Monitoring external macro-economic forecasts on key variables affecting
our businesses
• Relationships with our key customers to enable us to understand the
pressures on their businesses
• Continuous monitoring of business performance to identify macro-
impacts and need for contingency plans
People risks
Lack of skilled and experienced people
to deliver the growth in our business that
we aim to deliver. Potential loss of key
individuals who will underpin and drive
our growth initiatives, if succession plans
do not deliver suitable replacements
• We have significant growth plans, which
require that our franchisees and DLOs
retain and recruit significant numbers
of technicians
• We have a wide range of growth
projects underway, some of which rely
on key individuals
• Like any business, we may find that
our succession plans for the loss of a
key person, particularly in unexpected
circumstances, are not effective
• Diversification of the risk, geographically and across business sectors
and low reliance on any individual franchisee
• Well established and high-quality franchise brands and investment
to support our franchisees in growing their businesses
• Significant experience in franchisee recruitment
• Management bench strength and optionality increases as new
businesses are acquired
• Focus on identifying and nurturing high potential talent and retaining
key individuals
• Continuous monitoring of staff turnover, by a stable management team
which has seen very low ‘churn’
This Strategic Report (comprising pages 1 to 79 inclusive) was approved by the Board on 19 June 2024 and is signed on its behalf.
Rob Bellhouse
Company Secretary
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Annual Report and Accounts 2023
Contents Generation – PageContents Generation – Sub PageContents Generation – Sub PageContents Generation – Section
Governance
Strategic Report Governance Financial Statements
Supporting
shareholder
value
We believe good governance is vital in
supporting our Company’s growth strategy
and in turn its long-term success.
80
80
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Contents Generation – PageContents Generation – Sub Page Chairman’s Introduction to Governance
Strategic Report Governance Financial Statements
Chairman’s Introduction to Governance
• In January 2024 we also took the decision
to disband the AIM Rules Compliance
Committee. In practice, the matters within its
remit had always been considered by the full
board, which was an approach more aligned
to the regulatory requirements. We also
revised the terms of reference of the Audit
and Remuneration Committees, in anticipation
of the 2023 QCA Code coming into effect
and adopted a formal schedule of matters
reserved for the Board’s decision.
I believe that the structural changes we have
made and the continued application of the
QCA Code will continue to provide strong
support for the development of the Group as
we embark on the next phase of our journey
and look to deliver significant organic growth.
Stephen Hemsley
Executive Chairman
Dear fellow shareholder,
As an AIM quoted company we have chosen
to follow the QCA’s Corporate Governance
Code (the Code). We believe that this widely
recognised guide on how to structure
governance arrangements is both practical and
proportionate and we have been able to apply
all of its principles throughout the year and to
the date of this report.
The Code invites me to prepare a corporate
governance statement, which I welcome.
As Chairman of the Board, I am ultimately
accountable and personally responsible for
our governance arrangements.
We have applied each of the ten principles in the
2018 edition of the Code throughout the year
and there is a table on pages 88-92 explaining
how we did this. The application of the Code is
important – while a governance framework is
unlikely to create value, having robust structures
and processes in place should help minimise the
risk that unwanted outcomes materialise and so
it helps us to protect the value that our business
creates. We believe that the approach we have
taken is sustainable and should support the
delivery of value to our shareholders, and help
us meet our obligations to stakeholders more
generally, over the medium- and long-term.
The size and scale of the Group has changed
considerably over the last two years. In 2022
we effectively doubled the size of the Group
when we acquired Filta, and in 2023 we
doubled in size again when we acquired Pirtek.
We delivered around £350m of system sales
in 2023 across seven franchise brands in ten
countries, with over 700 employees and a
market capitalisation of over £300m.
In response to this change in scale, we
made some very significant changes to our
governance arrangements during 2023 and this
has continued in early 2024:
• In October 2023 a number of our Executive
Directors and two of our Non-executive
Directors retired from the Board – my thanks
go to each of them for their significant
contribution during their time in office, which
has helped deliver the growth in our business.
We had reached a scale where we needed to
separate the strategic and operational roles
that the previous board structure combined,
and took the decision to create two bodies –
the plc Board and a Management Board. We
also welcomed Pete Kear as our new Senior
Independent Director, who brings a wealth
of knowledge of IT and vast experience of
growing a quoted business globally.
• In November 2023 the Management Board
had its first meeting, having already agreed its
terms of reference. At its first meetings we are
developing its ways of working to make sure
that the forum is value-adding for both the
Group and the individual attendees. The early
signs are promising.
• In January 2024 we created a Nomination
Committee, which will be chaired by Pete Kear.
This body will oversee succession planning
for plc Board and Management Board roles,
and also recommend the appointment of
Directors to the plc Board, including running
any recruitment processes. We are now at
a scale where we can successfully manage
personal and professional development
opportunities for our most able people and
it is important that they know that they can
develop their careers within the Group.
Priorities in 2024
Embed effective ways
of working for the Board
and Management Board
Further refine our
succession planning
Implement our response
to the new QCA Corporate
Governance Code 2023
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Contents Generation – Sub PageContents Generation – Section Board of Directors
Stephen Hemsley
Executive Chairman
N
Stephen co-founded Franchise Brands in
2008 and has since led the development of
the business, including the IPO and external
growth. He is a Chartered Accountant
by training and spent nine years with 3i
becoming an Investment Director. He then
joined Domino’s Pizza Group as Finance
Director, progressing to CEO, Executive
Chairman and Non-executive Chairman.
During this time he took Domino’s Pizza
Group from private ownership to a market
capitalisation of almost £1.5bn. He retired
as Non-executive Chairman in 2019
after 21 years with the business to focus
exclusively on Franchise Brands.
Mark Fryer
Chief Financial Officer
Mark Fryer is an experienced CFO with
25 years of public company and private
equity experience as CFO in global
manufacturing and business service
companies. He has been CFO of FTSE
Small Cap and FTSE 250 companies, as
well as companies quoted on the AIM
market. Mark’s recent roles include Group
CFO of Augean plc, Dialight plc and
Manganese Bronze Holdings plc. Prior to
this Mark had a variety of Divisional Finance
Director roles for GKN Plc and Cable &
Wireless plc. Mark was appointed as a
Director of the Company on 2 August 2023.
Peter Kear
Senior Independent Non‑executive Director
A N R
Peter is a highly experienced public company
director with substantial experience in
business building and management in the
technology sector. He co-founded Celebrus
Technologies plc (originally IS Solutions
plc, then D4t4 Solutions plc) in 1985 and
was responsible for sales and business
development before being appointed CEO
in 2016. During his tenure as CEO, Celebrus
achieved substantial growth in revenue and
profits, growing from a market capitalisation
of c.£40m to c.£160m when he stood down
in 2022. Peter has experience of both the
London Stock Exchange’s Main Market and
AIM. Peter was appointed as a Director of the
Company on 2 October 2023.
Strategic Report Governance Financial Statements
Board of Directors
Board Composition
The charts below illustrate the
composition and the relevant skills and
experience of the Board of Directors
Executive/Non-executive
40%
60%
Non-executive
Executive
Tenure
40%
40%
20%
0-1 year
1-3 years
3+ years
82
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Annual Report and Accounts 2023
Annual Report and Accounts 2023
Contents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Board of Directors continued
Non-executive independence
33%
67%
Independent
Non-independent
Andy Brattesani
Independent Non‑executive Director
Nigel Wray
Non‑executive Director
Rob Bellhouse
Company Secretary (non‑Board)
A
N
R
N
Skills and experience
Finance
Franchising
International growth
3/5
3/5
Marketing
2/5
Operational management
4/5
People
Strategic management
3/5
Technology
2/5
5/5
5/5
Andy is an experienced banking
professional with extensive experience
in the franchising sector. From 2016 until
recently he was UK Head of Franchise at
HSBC, the market leader in the UK franchise
sector. As well as supporting the growth
of HSBC’s franchise business in the UK,
Andy has also led the expansion of HSBC’s
franchise model internationally. Andy’s
career in banking over the past 30 years
has also encompassed roles with HBOS,
RBS and Standard Chartered. Andy was
appointed as a Director of the Company
on 12 September 2022.
Nigel co-founded Franchise Brands in 2008.
He is an entrepreneurial investor in both
public and private companies. Currently he
is a substantial shareholder and Director at
Chapel Down Group plc and is a significant
investor in a wide ranging number of AIM
quoted companies, as well as a number
of private companies, including Saracens
Rugby Club. He is a former Director and
was a significant shareholder in Domino’s
Pizza. He was appointed as a Director of the
Company on 15 July 2016.
Rob is a commercially focused chartered
governance professional who previously
served as an independent Non-executive
Director of the Group from the IPO in
July 2016 until 1 October 2023. He was
appointed as Company Secretary on
2 October 2023 and has over 30 years’
experience gained in FTSE listed and AIM
quoted companies. Rob was previously
company secretary of Greene King, Lonmin
and, most recently, De La Rue. He also
held a number of company secretary
appointments during an interim/freelance
career, including Domino’s Pizza Group.
Rob was chosen as his professional body’s
Company Secretary of the Year in 2014.
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Annual Report and Accounts 2023
Committee membership A Audit Committee N Nomination Committee R Remuneration Committee Denotes Committee Chair
Contents Generation – PageContents Generation – Sub PageContents Generation – Section Management Board
Strategic Report Governance Financial Statements
Management Board
In addition to the two Executive Directors and the Company Secretary, the following serve as members of the Management Board:
Chris Stuckey
CEO, Pirtek Europe
Peter Molloy
CEO, Water & Waste Services division
Jason Sayers
CEO, Filta International
Tim Harris
Managing Director, B2C division
Chris joined the business in 2017 as
Managing Director for Pirtek UK and Ireland
and over the past six years the business
has grown strongly under his leadership.
Following Franchise Brands’ acquisition
of Pirtek, Chris was appointed as CEO of
Pirtek Europe. He was previously Managing
Director of Brammer Group between 2014
and 2017 and between 2010 and 2013
held senior management positions in
business development and strategy with
Harsco Metals. His roles with Brammer
and Harsco Metals included substantial
international experience.
Peter has over 35 years of management
and commercial experience. Peter joined
Metro Rod in 2003 and was promoted
to Commercial Director in 2005 and to
Managing Director in 2017 following the
acquisition by Franchise Brands. In June
2022 Peter was promoted to CEO of the
Water & Waste Services division (previously
B2B) with responsibility for Metro Rod,
Metro Plumb, Willow Pumps and Filta UK.
Prior to joining Metro Rod, he was Managing
Director of Solaglas Replacement Glazing,
part of the Saint-Gobain Group.
Jason Sayers founded Filta in 1996 and took
the business to the US in 2003. Prior to the
merger with Franchise Brands he was Group
CEO. He is now Managing Director of Filta
International with responsibility for growing
the Filta businesses in the US and Europe.
Tim is a seasoned franchise professional
with 30 years’ experience of successfully
developing automotive, commercial and
domestic franchise businesses in both
international and UK markets. Tim joined the
Group in 2008 and is the Managing Director
of the B2C Division. Prior to joining the Group,
Tim held senior sales positions at a number
of franchisor companies.
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Contents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Management Board continued
Colin Rees
Chief Information Officer
Robin Auld
Group Marketing Director
Julia Choudhury
Corporate Development Director
Andrew Mallows
Group Commercial Director
Colin is a highly experienced IT professional.
He was appointed to the new position of
Chief Information Officer in April 2017. Colin
was previously Director of IT at Domino’s
Pizza where he was responsible for all
IT systems. He previously held a number of
senior IT roles at EasyJet including Head of
Software Delivery. Colin started his career
at Argos plc and held a number of positions
over a ten-year period.
Robin oversees consumer, trade and
franchise recruitment marketing activity
ensuring continual evolution of strategy
and best practice in execution. He joined
Franchise Brands in 2010 and has a
successful track record of marketing success
over 25 years. He is best known for his
work at Domino’s Pizza Group as Sales &
Marketing Director.
Julia has 35 years of commercial, finance
and investment experience. Julia joined the
Group at its formation in 2008 and has a
particular focus on corporate development,
which includes acquisitions. Between 1997
and 2005, Julia held a number of senior
management roles at AXA Investment
Managers, including Managing Director
of the UK operation. Her early career was
spent in corporate finance and investment
management with BZW in London and Asia.
Andrew originally joined Franchise Brands
in 2016 as Finance Director, and since 2017
has been the Group’s Commercial Director.
He has significant experience in franchising
and business development and was Finance
Director of Domino’s Pizza Group from 2001 to
2004 before being appointed as its Business
Development Director.
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Contents Generation – PageContents Generation – Sub PageContents Generation – Section Our Governance Framework
Strategic Report Governance Financial Statements
Our Governance Framework
Board of Directors
Audit Committee
Remuneration Committee
Nomination Committee
Board of Directors
This is responsible to the Company’s
shareholders for:
The role of the Audit Committee
is to check:
The role of the Remuneration
Committee is to:
The role of the Nomination Committee
is to:
Audit Committee
Remuneration Committee
Nomination Committee
“Star Chamber”
(IT Steering Group)
TCFD/Climate Change
Working Group
Management Board
• Setting the Group’s strategy, business
• that the Board maintains sound
plans and budgets;
• Ensuring that necessary financial
and human resources are in place to
meet the strategic aims of the Group;
• Setting the corporate culture, guiding
principles and values;
• Maintaining the policy framework and
decision-making processes through
which the strategy and business
plans are implemented;
• Providing entrepreneurial
leadership within a framework
of good governance and sound
risk management;
• Oversight of the Group’s businesses
and their performance against key
financial and non-financial indicators,
supporting and challenging
management to deliver long-term
sustainable success;
• Checking that obligations to
shareholders and other key
stakeholders are understood and
met; and
• Overseeing the systems of risk
management and internal control.
There is a formal schedule of matters
reserved for the Board’s decision.
The names and biographical details
of the current Directors are on pages
82 and 83.
policies and procedures to satisfy
itself on the integrity of financial
and narrative statements and
other public reporting and that
these present a fair, balanced and
understandable assessment of the
Company’s position and prospects;
• that the Company maintains sound
procedures to identify and manage
risk and to oversee the internal
control framework and systems;
• whether the Company’s enterprise-
wide internal controls are sufficiently
robust to support the effective
management of identified risks
and whether there are appropriate
assurance activities in place;
• that there is an appropriate
relationship with the external auditor,
such that they are able to deliver
an effective and objective external
audit; and
• whether there is a need for an
internal audit function or, where
there is such a function, that its
remit, independence, objectivity
and independence is secured.
The members of the Audit Committee
are Andy Brattesani (Chairman)
and Peter Kear, each of whom is an
independent Non-executive Director.
• ensure that the Company
establishes an effective
remuneration policy aligned with
the Company’s purpose, strategy
and culture as well as its stage
of development and that the
remuneration policy (i) motivates
management and promotes the
long-term growth of shareholder
value and (ii) supports and reinforces
the desired corporate culture
and promote the right behaviours
and decisions;
• check that remuneration policies
and practices support the successful
delivery of the Company’s long-term
strategy and in particular that a
significant proportion of Executive
Directors’ and senior managers’
remuneration is structured to clearly
link rewards to corporate and
individual performance; and
• that there is a formal and transparent
procedure for developing policy
on executive remuneration and for
setting the remuneration packages
of individual Directors, including
the granting of share awards and
other equity incentives through the
Group’s employee share schemes.
The members of the Remuneration
Committee are: Peter Kear (Chairman)
and Andy Brattesani, each of whom is
an independent Non-executive Director.
• make recommendations to the
plc Board for the appointment
of Directors;
• to manage any recruitment
processes for Board roles to ensure
that these are objective and that
diversity factors are considered; and
• to monitor and review succession
planning for Board and Management
Board roles.
The members of the Committee
are Peter Kear (Chairman), Stephen
Hemsley, Andy Brattesani and Nigel
Wray. As recommended in the QCA
Corporate Governance Code, at least
one member of the committee is an
independent Non-executive Director.
Key: Board/NED Committees Management Committees
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Contents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Our Governance Framework continued
Management Board
“Star Chamber”
Climate Change Working Group
Building the Board:
Non-executive Director profile
This supports the Board of Directors,
which sets business plans and budgets
and monitors the delivery of results. The
Management Board is responsible for
co-ordinating and driving the operational
performance of the Group’s businesses.
The Management Board is accountable
to the plc Board through the Executive
Chairman, Stephen Hemsley, supported
by the Chief Financial Officer, Mark Fryer.
The names and biographical details of
the current members of the Management
Board are on pages 84 and 85.
The role of this body is to oversee the
considerable investment we are making
in IT, ensuring that the projects being
prioritised are those that will make the
greatest difference to the business and
checking that the delivery of those initiatives
remains on track and on budget. Having
a forum separate from the management
board enables us to have more focused
and deeper conversations on the use
of technology in our business, which we
see as a key differentiator and source of
competitive advantage and a profit driver
in the medium term and beyond.
The “Star Chamber” comprises a number
of members of the Management Board plus
Pete Kear, a Non-executive Director who
has vast experience and understanding
of IT issues.
This group will oversee the Group’s
response to climate change. Its initial
workload will be to identify the risks and
opportunities arising from or associated
with climate change, and to assess the
materiality of these over the short-, medium-
and long-term. Once this is understood, we
can model the impacts in various climate
change scenarios, starting with the Paris
Agreement assumption of 1.5-2.0°C and
then across a wider range of outcomes.
The Working Group is chaired by Mark
Fryer, an Executive Director and our CFO,
and is coordinated by Rob Bellhouse, our
Company Secretary, who is responsible for
risk management within the Group. It also
comprises a number of relevant managers
drawn from across the business. Given the
importance of the issues it is managing,
the Working Group reports directly
to the Board.
Pete Kear
I joined the Board in October 2023 and
almost immediately met the top 65 or
so operational executives at the Growth
Summit. I was hugely impressed by the
energy and enthusiasm from across the
Group and the plethora of ideas for how
we could make the most of our potential.
The opportunities are real, and the Group
is proposing to use IT as an enabler and
differentiator in a very practical way.
Having built a global IT company from a
start-up to a sizeable quoted company, I
am happy to share my experience. So in
addition to my role as a Non-executive
Director, I work very closely with the CIO,
Colin Rees, to help him drive what is a
very significant programme of investment
in IT, that should help propel the Group’s
growth ambitions.
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Contents Generation – PageContents Generation – Sub PageContents Generation – Section Corporate Governance
in Action
Strategic Report Governance Financial Statements
Corporate Governance in Action
Corporate governance plays a crucial role in helping to preserve value for shareholders by providing a structure and process for decision-making which should ensure
that all major decisions are considered in good time, that the relevant body is provided with good-quality briefing materials which cover all relevant factors, and that
its deliberations consider the risks, as well as the opportunities, in the issue.
It is for these reasons that the Board is committed to achieving high standards of corporate governance across the Group’s operations.
The Board of Directors has chosen to apply the QCA Corporate Governance Code (the Code) as it believes that this provides an appropriate governance framework for a group of our size and
should help support our growth and success. In this section of the report, we explain how we have applied the ten Principles of the 2018 edition of the Code. In some areas we have also reported
in line with the 2023 version of the Code, though that will only apply for us from the financial year commencing on 1 January 2025. In addition to choosing to apply the Code, Franchise Brands
is a member of the QCA in order to support the work it does in promoting good corporate governance.
We applied each of the Code’s ten principles throughout 2023 and expect to continue to do so in 2024. There may be circumstances where the interests of the Company and its shareholders
are better served by diverging from the Code’s recommendations. If this is ever the case, we will always explain the rationale for why we are choosing to do this.
QCA PRINCIPLE 1
Establish a strategy and business model which
promote long-term value for shareholders
We are focused on building market-leading businesses,
primarily using a franchise model. In general, we prefer to
invest in established brands which can benefit from our
shared support services and Group expertise and resources.
Further information:
Strategy on pages 12-19
Implementation during the year and any key challenges experienced,
on pages 20-35
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QCA PRINCIPLE 2
Seek to understand and meet shareholder needs and expectations
The Executive Chairman, Chief Financial Officer and Corporate
Development Director meet regularly with institutional shareholders
and provide feedback to the Board and management board.
The Board and management board are provided with research
notes from sell-side analysts plus insight into shareholders’
views from the Company’s brokers and nominated adviser.
Detailed reports on trading, financial and ESG performance
are provided through our interim and annual financial reports,
trading updates are issued regularly via RNS, and through our
Capital Markets Day and other investor presentations, retail
digital platforms and at shareholder meetings. The Group also
exhibits and presents at events attended by retail investors
and provides content to retail financial news websites. All
our material shareholder communications are available
on the website.
The Group welcomes the personal investment in its equity
that many employees and franchisees have made, as well as
our retail investors. All of these personal shareholders benefit
from website updates, which include all presentations we
make to institutional shareholders and at investor conferences.
We regularly update the Investor Relations section of the
Group’s website with the aim of providing useful information
for all investors, but particularly our retail shareholders. We use
our Annual Report to provide shareholders with details of
the Group, operations, performance, strategy and policies.
The Group also exhibits and presents at events attended by
retail investors (whether virtually or in person) and subscribes,
and provides content to, retail financial news websites.
All Directors attend the AGM, at which there is an opportunity for
shareholders to ask questions formally. Voting at the AGM is by poll,
to ensure that the votes of all shareholders are taken into account,
regardless of whether they are able to attend the meeting.
We were pleased that all of the resolutions proposed at our
AGM received the support of more than 99% of the votes cast,
other than in relation to the management of our share capital
where there is an increasing divergence of views among
investors. Even on these resolutions, we received the support
of more than 90% of the votes cast.
Further information:
Major shareholders, page 106
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Corporate Governance in Action continued
QCA PRINCIPLE 3
Take into account wider stakeholder and social
responsibilities and the long-term
QCA PRINCIPLE 4
Embed effective risk management throughout
the organisation
QCA PRINCIPLE 5
Maintain a well-functioning,
balanced Board
In making decisions, the Company’s Directors are cognisant of
all their legal duties and obligations, including the requirement
under Section 172(1) of the Companies Act 2006 to act in the
way that is most likely to promote the success of the Company
for the benefit of its members as a whole and to have regard
(among other matters) to the factors set out in that section.
The Board has a clear understanding of the key stakeholders
in our business, both internal and external. The Board and the
Management Board consider the factors that are important
for all its stakeholders, seeks to maintain strong relationships,
solicits feedback and fosters responsible working practices.
As a progressive, principle-led Group, we are committed to
working in partnership with all our stakeholders. We place
particular importance on directly engaging and collaborating
with our employees, franchisees, suppliers, customers
and local communities and shareholders. Their views and
feedback are important to us and are used to inform our
decision making.
Further information:
Stakeholders, see pages 58-59
How we consider wider interests in decision making, see pages 60-61
ESG performance, see pages 37-55
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The Board reviewed its risk management framework during
2023 and adopted a new methodology for rating the impact
and likelihood for risks. This methodology was specifically
designed to ensure that all risks could be rated on a
comparable basis. The Board has also defined the risks it is
prepared to take in the expectation of earning a return (its risk
appetite), the risks it expects the business to seek to manage
(its risk tolerance) and which risks it is not prepared to face.
The latter are the risks that, if they materialise, will prevent us
delivering on our business plans or have other impacts that
we cannot live with.
The Company is run by the Board of Directors. The Board
members have a collective responsibility and legal obligation
to promote the interests of the company, and are collectively
responsible for establishing and maintaining effective
corporate governance arrangements.
The names and biographical details of the current Directors
are on pages 82 and 83. The Board judges that Pete Kear
and Andy Brattesani are independent directors. While he
demonstrates complete independence of thought, Nigel Wray
is not considered by the Board to be independent in view of
his significant shareholding and long tenure with the Group.
The management board and the Board each review the
corporate risk register at least biannually and the Board reviews
the effectiveness of the systems of risk management annually.
Further information:
Risk management, see page 76
Management of climate-change related risks, see pages 49-55
Principal risks and uncertainties, see pages 77-79
The two Executive Directors work full-time in the business.
We expect the Non-executive Directors to commit sufficient
time as is necessary for the proper performance of their
duties, including attending all scheduled Board and committee
meetings, the AGM, site visits and other non-scheduled calls
and meetings. In addition, they are expected to devote time
to reading papers and being prepared fully for each of these
meetings or events. In total, we estimate that this should
amount to two-three days per month, but the actual time
commitment is open-ended.
All Directors receive regular and timely information on the
Group’s operational and financial performance. Detailed Board
papers are sent out in advance of Board meetings, and the
Board receive the monthly management accounts detailing the
performance of our brands.
Further information:
Directors’ biographies, see pages 82-83
The role of the Board, see pages 86-87
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Corporate Governance in Action continued
QCA PRINCIPLE 5
Maintain a well-functioning, balanced Board
continued
The Board held eight scheduled meetings during 2023, plus a number of additional calls and
meetings in connection with the Pirtek acquisition and associated fund-raising. Attendance
at the scheduled meetings was as follows:
Jan Mar
Apr
Jun
Jul
Sep
Nov
Dec
Total
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● 8/8
– 5/5
● 3/3
– 6/6
– 6/6
– 6/6
– 6/6
– 6/6
– 6/6
● 8/8
● 2/2
– 5/6
● 8/8
Director
Stephen Hemsley
Andrew Mallows1
Mark Fryer2
Julia Choudhury3
Tim Harris3
Peter Molloy3
Colin Rees3
Jason Sayers3
Rob Bellhouse3
Andy Brattesani
Pete Kear4
David Poutney3
Nigel Wray
1 Resigned 2 August 2023.
2 Resigned 2 August 2023.
3 Resigned 2 October 2023.
4 Appointed 2 October 2023.
Further information:
Key decisions taken in 2023, see pages 60-61
The role of the Board, see pages 86-87
Board Committees, see pages 82-83 and 86-87
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QCA PRINCIPLE 6
Ensure that the Directors collectively have the necessary,
up-to-date experience, skills and capabilities
The current Directors of the company and an outline of their relevant experience and skills
is on pages 82 and 83.
Our Directors are drawn from a wide range of backgrounds, skills and experiences. We
are confident that collectively our Board members possess the necessary mix of capabilities
to deliver the Company’s strategy for the benefit of our shareholders over the medium- and
long-term. Directors are encouraged and supported to ensure their skills remain up to date,
including training courses and continuing professional development.
The Board recognises that as the Group evolves, the mix of skills, knowledge and experience
required on the Board will need to change, and Board composition will need to evolve in response.
New appointments will always be considered against objective, merit-based criteria and have due
regard for the benefits of diversity in all its forms. In early 2024 the Board created a Nomination
Committee with specific responsibilities around succession planning and managing the process for
Board appointments.
The Board is supported by the Company Secretary, who advises and supports the Chairman
and Board on corporate governance, risk, legal and regulatory matters and is available to any
Director to provide advice.
Directors are provided with access to the Company’s Nominated Advisor, who provide briefings
on necessary legislation and regulations from time to time. In addition, the Company’s external
legal counsel is available to the Board and individual Directors as needed. The Remuneration
Committee is supported by an external remuneration consultant, who provides detailed insight
into peer group practice and the views of proxy advisory firms, institutional investors and their
representative bodies.
There were no specific matters on which any Director sought external advice during the year.
Further information:
Directors’ biographies, see pages 82-83
Remuneration Committee report, see pages 98-103
Contents Generation – PageContents Generation – Sub PageContents Generation – Section
QCA PRINCIPLE 8
Promote a culture based on ethical values and behaviour
Franchise Brands has five well-established guiding principles
that inform the way we work with each other, support our
franchisees and serve our customers and communities:
• We demand integrity: We are professional in everything we
do and treat people with respect.
• We empower our people: We empower our people and
expect them to take ownership of a situation and to be
accountable for their actions and the results they generate.
• We are challenging of ourselves: We set high standards,
are demanding of ourselves, are prepared to challenge the
norm and have a relentless focus on continual improvement.
• We are fair: We consider that fairness and transparency are
essential to creating high trust working relationships with
each other, and with our franchisees, partners, suppliers
and customers.
• We work as a team: We place a huge amount of importance
on teamwork between our colleagues and our franchisees
in creating a dynamic business.
We pride ourselves on having a dynamic and entrepreneurial
culture with tone set from the top. Our ethos is “do more
of what works, and less of what doesn’t”. At every level of
management our people are encouraged to try out new
approaches and ideas and to test whether these work;
our only stipulation is that we form a view on the success
(or otherwise) of an initiative quickly and dispassionately.
During the year, all of the Directors participated in the
company’s Growth Summit, which was attended by around 65
senior managers drawn from all parts of the Group. By getting
to meet such a wide range of people face-to-face both formally
and informally, they are able to assure themselves that there
is a healthy corporate culture. The Directors also meet with
management board members very regularly, which provides
further insight into the culture of the organisation.
Further information:
Strategy, see pages 12-19
Our guiding principles, see page 36
Risk management, see pages 76-79
Strategic Report Governance Financial Statements
Corporate Governance in Action continued
QCA PRINCIPLE 7
Evaluate Board performance and seek
continuous improvement
The Board has carried out performance effectiveness reviews on
a biennial basis since 2018, with the last review being undertaken
in 2022. Each of these was conducted by an independent
Non-executive Director with expertise in corporate governance,
with the results being shared with the full Board. Agreed actions
arising from these reviews have been completed and continue
to inform how the Board operates.
No review was undertaken by the Board in 2023 and no
decision has yet been taken on whether to carry out a
performance evaluation in 2024, or whether this should
be externally facilitated.
We are fully aware of the need for progressive refreshing
of the Board, and succession planning is a key focus.
The composition of the Board has continued to evolve in
recent years. In October 2022 we appointed an additional
independent Non-executive Director, Andy Brattesani, who
brings immense experience of franchising in the UK and
overseas. In October 2023 two Non-executive Directors retired
from the Board, having each completed seven years’ service,
and we appointed Pete Kear. He brings vast knowledge of IT
and experience of building an international software business
quoted on the AIM market. In January 2024 a Nomination
Committee was created to formalise and better oversee our
approach to succession planning.
Further information:
Directors’ biographies, see pages 82-83
Nomination Committee remit, see page 86
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Corporate Governance in Action continued
QCA PRINCIPLE 9
Maintain fit-for-purpose governance structures and processes
For details of our governance framework, please see pages
86-87. That section summarises the remit of each of our
governance bodies and how these interact. There has
been significant change in our governance structure during
the latter part of 2023 and into early 2024. Please refer to
the Chairman’s introduction to this corporate governance
section of the Annual Report on page 81.
The roles and responsibilities of specific Directors are
clearly understood:
Executive Chairman
• Lead the Board and the Management Board
• Propose strategy for agreement by the Board and
business plans and budgets aligned with that strategy
for Board approval
• Lead the implementation of Board-approved business
plans and budgets, and provide transparent reporting
on operational and financial performance
• Ensure that shareholder and other key stakeholders’
interests are taken into account when managing the
Group’s business
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Chief Financial Officer
• Lead the Finance function
• Ensure that accounting policies and practices are aligned
with IFRS and other GAAP and applied consistently across
the Group
• Ensure that appropriate internal financial controls are
implemented and maintained
• Ensure that the Group’s financial reporting is of a high quality
and presents a true and fair view of business performance
• Engage with our shareholders and lending banks
Non‑executive Directors
• Challenge constructively and help develop proposals
on strategy
• Satisfy themselves as to the integrity of the financial
reporting systems and the information they provide
• Satisfy themselves as to the robustness of the
internal controls
• Ensure that the systems of risk management are robust
and defensible
• Review management performance and the reporting of
such performance to shareholders
The Senior Independent Director is a Non-executive
Director with additional responsibilities. They are available
to shareholders to discuss any matters that it may not be
possible or appropriate to raise with the Executive Chairman
or the CFO. In addition, they will lead Board discussions on
the performance of the Executive Chairman.
Further information:
Changes made in 2023 and to date, see pages 81 and 104
Directors’ biographies, see pages 82-83
Governance framework, see pages 86-87
QCA PRINCIPLE 10
Communicate our governance performance to
shareholders and other relevant stakeholders
We engage regularly with our shareholders. We explain how
we communicate trading and financial performance under
QCA Principle 2 above.
The Board uses the Annual Report and the associated website
disclosures as the primary way to provide shareholders
with details of the Group’s governance framework and
the effectiveness of this in supporting operational and
financial performance. The Executive Chairman and, if
appropriate, the Senior Independent Director are available
to shareholders to discuss governance matters as needed.
Further information:
Changes made in 2023 and to date, see pages 81 and 104
Governance framework, see pages 86-87
Audit Committee report, see pages 93-97
Remuneration Committee report, see pages 98-103
Contents Generation – PageContents Generation – Sub PageContents Generation – Section Audit Committee Report
Strategic Report Governance Financial Statements
Audit Committee Report
Robust reporting
of strong performance
Operation of the Audit Committee
Role of the Audit Committee
The role of the Audit Committee is to check:
• that the Board maintains sound policies and procedures to satisfy itself on the integrity of
financial and narrative statements and other public reporting and that these present a fair,
balanced and understandable assessment of the Company’s position and prospects;
• that the Company maintains sound procedures to identify and manage risk and to oversee
the internal control framework and systems;
• whether the Company’s enterprise-wide internal controls are sufficiently robust to support
the effective management of identified risks and whether there are appropriate assurance
activities in place;
• that there is an appropriate relationship with the external auditor, such that they are able
to deliver an effective and objective external audit; and
• whether there is a need for an internal audit function or, where there is such a function, that
its remit, independence, objectivity and independence is secured.
Membership
The members of the Committee at the date of this report are Andy Brattesani (Chairman) and
Peter Kear, each of whom is an independent Non-executive Director. In addition, during the year
David Poutney served as Chairman, and Rob Bellhouse served as a member of the Committee
until each of them retired from the Board on 2 October 2023.
Andy Brattesani is an experienced banking executive with more than 30 years’ professional
experience. Pete Kear has extensive business experience as both an executive and non-
executive director, including serving as CEO of a quoted company with a market capitalisation
of £160m. Andy Brattesani was provided with full induction training when he became Chairman
of the Committee in October 2023.
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Meetings and attendance records
The Committee met twice in 2023 and attendance was as follows:
Director
David Poutney (resigned 2 October 2023)
Rob Bellhouse (resigned 2 October 2023)
Andy Brattesani
Pete Kear (appointed 2 October 2023)
Mar
Dec
●
●
●
–
–
–
●
●
Total
1/1
1/1
2/2
1/1
In addition to the Committee members, the Executive Chairman and Chief Financial Officer
are invited to attend all meetings, with other senior financial managers invited to attend when
necessary. The external auditors attend meetings to discuss the planning and conclusions
of their work and meet with the members of the Committee without any members of the
executive team present after each meeting. The Committee is able to call for information
from management and consults with the external auditors directly as required.
Building the Board: Non-executive Director profile
Andy Brattesani
I became Chair of the Audit Committee in October 2023. While I’ve been a user of
statutory accounts throughout my 30+ year career in banking, I’m not an accountant
by training.
The company has supported my transition into the role. The Company Secretary, Rob
Bellhouse, provided a detailed briefing on the responsibilities throughout the year and
guidance on what would ensure success. The CFO, Mark Fryer, gave me a detailed
understanding of the accounting policies, judgements and assumptions that underpin
the areas in our financial statements that were likely to be a focus in the audit. The audit
partner, Sakib Isa, took me through the issues that he felt would be regarded as key
audit matters and significant audit risks, ahead of the start of the statutory audit.
The shared understanding and relationships that we’ve developed enabled us to
work together transparently and successfully in my first year-end as Chair of the
Audit Committee.
Contents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Audit Committee Report continued
Financial reporting
Key matters considered by the Audit Committee
The integrity of the Group’s financial reporting is of critical importance and it is a core responsibility of the Committee to review this reporting and the key accounting contained in the financial statements.
Key accounting matters considered in relation to 2023
The Committee considered a number of issues in relation to the Annual Report and Accounts, including significant estimates and key accounting judgements. How these were handled and the
decisions reached are set out in the table below. For further information on the work of the external auditor in relation to these matters, please see their report on pages 110-117.
Topic
What is the risk?
Revenue recognition and application of IFRS 15
The Group has a number of revenue streams and transacts
with its customers both directly (as principal), and indirectly
acting as either a commission agent or where services
are delivered through its franchise networks. The risk
is that revenue and cost of sales are not recognised
correctly in the financial statements. While the profitability
would be unaffected, the profit margins earned would be
stated erroneously.
What did the Committee do?
What conclusion did it reach?
The Committee was provided with a summary of
management’s paper on the application of IFRS 15 on key
revenue streams within the Group and discussed this with
the finance team.
The Committee also reviewed the findings contained in the
external auditor’s reporting to the Board and discussed the work
performed by the audit team with the senior statutory auditor.
To the extent that prior period adjustments were required, the
Committee ensured that it understood the rationale for this
and the reasons for the particular amount of the adjustment.
The Committee is satisfied that management is accounting for
all key revenue streams in an appropriate way and that IFRS15
is being applied correctly within the Group.
The Committee is also satisfied that the external auditor has
reviewed the accounting approach with an appropriate level
of professional scepticism and conducted a thorough review
of the Group’s accounting practices in this area.
Acquisition accounting for Pirtek Europe
The Group acquired the holding company of the Pirtek Europe
group on 20 April 2023. As with any major acquisition, there
is a risk of material misstatement in the fair value allocated to
assets and liabilities acquired including intangible assets and
the balance of goodwill recognised. To the extent that any of
these items is amortised, it would result in a mis-statement of
the income statement in subsequent years.
The Committee reviewed management’s approach to the
valuation of the acquired assets and liabilities and the key
inputs, assumptions and methodologies used by management
and their external expert in valuing the acquired businesses.
The Committee also reviewed the findings contained in
the external auditor’s reporting to the Board and discussed
the work performed by the audit team with the senior
statutory auditor.
The Committee is satisfied that management has valued
and accounted for the acquired assets and liabilities in an
appropriate way.
The Committee is also satisfied that the external auditor has
reviewed the accounting approach with an appropriate level
of professional scepticism and conducted a thorough review
of the Group’s approach.
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Audit Committee Report continued
Financial reporting continued
Key matters considered by the Audit Committee continued
Topic
What is the risk?
What did the Committee do?
What conclusion did it reach?
Consideration of potential impairment of goodwill and intangible assets
Management has determined that the Group has goodwill and
intangible assets with indefinite lifespan, which must therefore
be tested annually for indications of impairment. The risk is
that carrying values are overstated and the profits for the year
similarly overstated, if those asset values are not impaired
when this would be the appropriate treatment.
The Committee reviewed management’s approach to the
annual test for indications of impairment, noting that there is a
high degree of judgement in assessing the value in use of the
Cash Generating Units to which the goodwill and intangible
assets are allocated.
The Committee also reviewed the findings contained in the
external auditor’s reporting to the Board and discussed the work
performed by the audit team with the senior statutory auditor.
The Committee is satisfied that management’s judgements
in this area are reasonable and that the carrying values of
goodwill and intangible assets continue to be justified.
The Committee is also satisfied that the external auditor has
provided an appropriate level of scrutiny to the assessment
of whether there is any requirement to impair.
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Audit Committee Report continued
External audit
Relationship with the external auditor
BDO LLP has served as the Company’s external auditor since the IPO in 2016. Senior members
of the audit team have been rotated in line with regulatory requirements and best practices.
Sakib Isa is the lead audit engagement partner and he took on this role in 2023, having had
no previous connection with the Group. The Audit Committee maintains a strong relationship
with the lead audit engagement partner, who acts as the senior statutory auditor, and with
other senior members of the audit team. In particular, the Committee Chairman has regular
contact with the audit partner, both formally and informally, to understand the relationships
between the auditor and the senior members of the Company’s finance team and whether
there are any accounting or financial reporting issues that need to be discussed and resolved.
Non‑audit services
The Group became an Other Entity of Public Interest (“OEPI”) on 31 December 2023. Prior to this
date, the Company and Group sourced a number of non-audit services from the BDO network.
All such services were provided by separate teams from the audit team with suitable safeguards
in place. The cumulative non-audit fees paid were more than the audit fee, primarily reflecting a
significant single engagement to provide financial and tax due diligence reviews ahead of the
acquisition of Pirtek Europe as a one-off engagement prior to the Group becoming an OEPI.
No further non-audit services are being provided by the Group’s auditor following the Group
becoming an OEPI in line with the FRC ethical standard.
The fees paid to BDO during or in respect of 2023 are:
Auditor objectivity and independence
The Committee places great emphasis on audit quality. This encompasses monitoring the skills
and knowledge of the audit team, their mindset and culture and the quality of the judgements
reached by the senior members of the audit team. In all of their dealings with the key members
of the audit team, the Committee members look for evidence that their work is being done from a
position of independence, with an entirely objective eye and appropriate professional scepticism.
The Committee also seeks the views of senior members of the finance team on their, and their
teams’, dealings with the external auditors and whether there are any indications that audit quality
is being compromised in any way, or any means by which it could be further enhanced.
In turn, BDO puts safeguards in place to avoid compromising their objectivity and independence.
They provide a written report to the Committee on how they comply with professional and
regulatory requirements and best practice designed to ensure their independence. As noted
above, key members of the audit team have been rotated in line with regulatory requirements.
The objectivity and independence of the external auditors is safeguarded by reviewing the
auditors’ formal declarations, monitoring relationships between key audit staff and the Company
and tracking the level of fees payable to the auditors for non-audit services, and the nature of
those services.
Statutory audit fees:
Group/UK
BDO component audits – overseas
Total: Audit fees
Non-audit services:
Financial and tax due diligence reviews (one-off exercises)
Tax compliance services (now discontinued)
Tax advisory services (now discontinued)
Payroll services (now discontinued)
Other assurance services (now discontinued)
Total: Non‑audit services
2023
£’000
2022
£’000
585
77
662
726
82
31
66
—
905
160
113
273
106
80
—
—
10
196
The Committee is satisfied that the non-audit services provided by the BDO network during
2023 do not compromise the objectivity and independence of the firm as Group auditor. None
of the non-audit services listed above are now being provided by the Group auditor and an
agreement has been reached that the Group will not use the BDO network for any non-audit
services going given their role as the Group’s auditor.
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Audit Committee Report continued
External audit continued
Effectiveness of the external audit process
Following the conclusion of the audit process the Audit Committee undertook a review of
the effectiveness of the external auditors at its meeting in June 2024. This took into account
the views of the Executive Directors and other senior executives with direct experience of
the audit of the 2023 financial statements. The conclusions reached were shared with the
external auditor.
Based on its assessment of the audit of the 2023 financial statements and the results
of the effectiveness review, the Audit Committee is satisfied that BDO provided a
comprehensive audit and demonstrated appropriate levels of independence, objectivity
and professional scepticism.
Audit tender
The Board has considered its strategy in relation to future audits. BDO has now served as the
Group’s auditor for around 16 years. While we are not a public interest entity and therefore not
subject to the mandatory rotation of audit firms after 20 years’ tenure, we are conscious of the
need to be able to demonstrate the independence and objectivity of our external auditors.
We therefore intend to conduct an audit tender during the summer months of 2024. We have
already opened discussions with three other statutory auditors, including firms from outside
the ‘Big 4’, all of whom we believe could deliver a high-quality audit.
Risk management and internal control
Systems of risk management and internal control
The Group has reviewed its systems of risk management in the course of 2023. For details
of this, please see page 76. The system of internal control continues to develop and evolve.
The Group intends to implement a new company-wide accounting system during 2024 and
2025 to consolidate the Group’s financial reporting and financial management systems onto a
single, modern cloud-based platform. We envisage that this will materially enhance the Group’s
internal financial control environment and that the wider universe of internal controls more
generally will also be improved by implementing this system.
Effectiveness review
The Committee has not undertaken a formal review of the effectiveness of the systems of risk
management and internal control during the year. However, based on its members’ knowledge of
the Group’s operations and performance it is satisfied that the arrangements currently in place are
fit-for-purpose and that the risk and control framework and processes are operating as intended.
Internal audit
The Group does not have an internal audit function at this stage of its journey. The Committee is
satisfied that this does not compromise the quality of, or confidence in, its internal and external
reporting and that the absence of an internal audit function does not have any detrimental effect
on the work of the external auditor.
The Company will comply with all relevant laws and regulations in relation to audit tender and
the mandatory rotation of the firm. There are no contractual restrictions in place that would limit
the Company’s freedom to choose its auditor.
Andy Brattesani
Chairman, Audit Committee
Proposed re‑election of the auditor at the 2024 AGM
As a public company, Franchise Brands is obliged in law to have an external auditor holding
office at all times. The Committee has therefore recommended to the Board that BDO should
be proposed for re-election as the external auditor at the 2024 AGM. The Board has accepted
that recommendation and resolutions will be proposed for their re-election and to empower the
Directors to approve the auditor’s fees for the next statutory audit.
Once the audit tender process has been completed we will announce the name of the firm
to be appointed by the Board, who will hold office until the conclusion of the Annual General
Meeting in 2025.
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Contents Generation – PageContents Generation – Sub PageContents Generation – Section Remuneration Committee Report
Strategic Report Governance Financial Statements
Remuneration Committee Report
Paying responsibly
to reward strong
performance
Introduction by the Chairman of the Remuneration Committee
Dear fellow shareholder
I was appointed as Chairman of the Remuneration Committee when I joined the Board in October
2023. At that time the Company had largely completed the initial integration of Pirtek Europe,
acquired in April 2023, and significant changes had just been made to the management structure.
The Pirtek business had been owned by private equity for some years and we inherited a very
capable management team whose remuneration packages were aligned to the PE model of
ownership. In addition, we had recruited other senior executives from listed companies, whose
remuneration included both short- and long-term incentives. We therefore undertook a review
of senior management pay, led by the Executive Chairman and which was supported by external
views and market data from FIT Remuneration Consultants and other sources, to ensure our
future remuneration arrangements were capable of attracting and retaining senior executives.
The review showed that a correction was required to the levels of remuneration for our senior
management team. The increases took effect from 1 October 2023 and we are satisfied that we
are not paying above market levels and certainly paying no more than is warranted. The next
pay review will be with effect from 1 January 2025. We also took the decision to introduce a
short-term cash bonus scheme, from the year commencing 1 January 2024 onwards. Franchise
Brands has never had a short-term incentive scheme of any sort, and we had fallen behind
market in this regard, which was inhibiting our ability to integrate acquired businesses. The
bonus plan is designed only to generate reward if there is genuine outperformance of budgets
and/or City forecasts, and to be entirely self-funding. There is more detail on the design of the
bonus plan later in this report on page 103.
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We continue to use share options as our primary motivational tool, using market-value options with
a three-year vesting date subject to achieving material compound growth in EPS. Executives are
encouraged to take a long-term view and, subject to vesting, options can be exercised at any
time up to the tenth anniversary of granting. The senior management team is highly focused on
generating sustainable growth in our share price, and we believe that the current tools available
to the Committee are the most appropriate at this stage of the Company’s evolution. In early
2024 we introduced malus and clawback wording into the rules of the employee share option
scheme, which mirrors that included in the short-term bonus plan and which will apply to awards
granted from 2024 onwards.
Overall, the Remuneration Committee is satisfied that it is providing attractive, but not excessive,
levels of reward and that the short- and long-term incentives we now offer promote responsible
behaviour, including consideration of wider stakeholder interests, effective risk management
and the longer-term. The introduction of malus and clawback into our employee share schemes
gives us a further means of protecting shareholders’ interests, should this ever be needed.
We have reviewed the 2023 edition of the QCA Corporate Governance Code and will introduce the
shareholder votes on remuneration matters recommended by the Code when it becomes effective for
us, which is from the financial year commencing on 1 January 2025. As Chairman of the Committee,
I am always available to shareholders to discuss remuneration matters whenever felt necessary.
Operation of the Remuneration Committee
Role of the Remuneration Committee
The role of the Remuneration Committee is to:
• ensure that the Company establishes an effective remuneration policy aligned with the
Company’s purpose, strategy and culture as well as its stage of development and that
the remuneration policy (i) motivates management and promotes the long-term growth
of shareholder value and (ii) supports and reinforces the desired corporate culture and
promote the right behaviours and decisions;
• check that remuneration policies and practices support the successful delivery of the
Company’s long-term strategy and, in particular, that a significant proportion of Executive
Directors’ and senior managers’ remuneration is structured to clearly link rewards to
corporate and individual performance; and
• ensure that there is a formal and transparent procedure for developing policy on executive
remuneration and for setting the remuneration packages of individual Directors, including the
granting of share awards and other equity incentives through the Group’s employee share schemes.
Contents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Remuneration Committee Report continued
Operation of the Remuneration Committee continued
Membership
The members of the Committee at the date of this report are Peter Kear (Chairman) and
Andy Brattesani, each of whom is an independent Non-executive Director. In addition, during
the year Rob Bellhouse served as Chairman, and David Poutney served as a member of the
Committee until each of them retired from the Board on 2 October 2023.
Meetings and attendance records
The Committee met formally once in 2023 and attendance was as follows:
Director
Andy Brattesani
Pete Kear (appointed 2 October 2023)
Oct
●
●
Total
1/1
1/1
In addition to the Committee members, the Executive Chairman is invited to attend meetings
of the Remuneration Committee but does not participate when his own remuneration is being
discussed. The Committee is also able to access external advice, which it obtains from a variety
of sources. There is no retained advisor to the Committee, though we do tend to use FIT
Remuneration Consultants LLP, who have considerable knowledge of market practice amongst
our AIM quoted peers.
Directors’ remuneration in 2023
Remuneration policy
The objective of the Company’s remuneration policy is to facilitate the recruitment and retention
of executives of an appropriate calibre. In addition, we ensure that the senior executives of the
Company are provided with appropriate incentives to encourage enhanced performance and
are, in a fair and responsible manner, rewarded for their individual contributions to the success
of the Company.
Strategic alignment
The Remuneration Committee is satisfied that the pay that can be earned is appropriate for a
company of comparable size and complexity, at each level of performance and that the pay
structure is aligned with the Company’s purpose, strategy and culture.
All of the Executive Directors have significant exposure to the Company’s share price:
Stephen Hemsley, as co-founder of the Company, has a significant personal shareholding in the
Company, but does not have any options.
Most of our senior management team members, including the other Executive Director, have
material personal investments in our shares, supplemented by options granted under our ESOP.
The vesting of options is subject to a performance condition requiring a pre-determined and
challenging rate of compound annual growth in adjusted earnings per share, which the Board
regards as the key performance metric. As a result, there is a clear incentive to drive earnings
per share growth over the longer term and also to mitigate downside risks that could affect the
Company’s profitability. Reputational risks could reasonably be expected to affect the share
price, which means the Executive Directors are further incentivised to mitigate these exposures to
maximise the potential value of their options. We expect that our share-settled incentives will foster
alignment with shareholders through the building and holding of a meaningful shareholding in
the Company.
How we structured executive pay in 2023
The remuneration that the Company offers to its Executive Directors has three
principal components:
• Fixed pay (basic salaries and benefits in kind) – Basic salaries are determined by the
Remuneration Committee bearing in mind the salaries paid in AIM-quoted companies of
similar size and complexity. Benefits in kind may include a car or car allowance, healthcare
and life assurance.
• Pensions – The Company operates a uniform defined contribution scheme available to all
Executive Directors and employees, or will offer a cash supplement if executives are unable
to participate in the scheme. Only basic salaries are pensionable. The Company has never
operated a defined benefits scheme. No Director or former Director received any benefits from
a retirement benefits scheme that were not otherwise available to all members of the scheme.
• Variable pay – The Company operates a share option scheme covering permanent employees
(including Executive Directors, other than Stephen Hemsley). Subject to achieving compound
EPS growth targets, options can vest no earlier than the third anniversary of the date of grant
and, once vested, may be exercised until the tenth anniversary. The exercise price of the
options is generally set at the market value of the Company’s shares at the time of grant, so
that the individual only benefits if there has been share price growth. The exception to this
is for an historic (and now discontinued) matching scheme, where certain Directors were
granted nominal value options if they purchased an equal number of shares in the market.
Those nominal value options could only vest if performance targets were met. All of our share
option schemes are overseen by the Remuneration Committee which determines the terms
under which eligible individuals may be invited to participate, including the level of awards.
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Remuneration Committee Report continued
Directors’ remuneration in 2023 continued
Employee share schemes
The Executive Directors of the Company are eligible to participate in our employee share
schemes. The Group’s principal scheme is the Employee Share Option Plan (“ESOP”), which is
used to grant share options to employees in the UK and other European countries. In addition,
the Company operates separate plans to grant cash-settled Share Appreciation Rights to
its employees in the United States, Netherlands and Germany. Finally, some awards remain
outstanding under a legacy UK employee share scheme, the Long Term Incentive Plan (“LTIP”).
Long term incentive plan (“LTIP”)
The LTIP was adopted upon the Company’s IPO in 2016. It is a flexible plan, that could be
operated as a tax-advantaged EMI plan, but which was also capable of granting non-EMI options
either at the market value of the Company’s shares at the date of grant, or their nominal value
of 0.5p. We have used the LTIP in different ways at different times in the past, including as a
matching scheme where senior executives invested in the Company’s shares, as described
above. All options granted have been subject to standard performance conditions, requiring
material growth in the Company’s audited Adjusted EPS. For more details of the performance
condition, please see below.
We do not expect to issue any further options or awards under this plan.
Performance conditions
All of the historic and current options and awards granted under the LTIP, the ESOP and our
SARs plans have been subject to the achievement of stretching yet realistic targets for growth
in adjusted diluted earnings per share. This is measured over three financial years, using the
EPS figure for the year of grant as the base and is calculated using audited results. Employees,
including Executive Directors, are only able to exercise their options and awards as follows:
1.
In respect of 20% of their shares, if reported adjusted EPS achieves compound annual
growth of 8% over each of the next three financial years;
2. In respect of 100% of their shares, if reported adjusted EPS achieves compound annual
growth of 15% over each of the next three financial years; and
3.
Between 20% to 100% of their shares, on a straight-line basis, if EPS growth is between
the targets in 1 and 2.
We expect to utilise the same performance conditions for any options and awards that may
be granted in 2024.
Directors’ service contracts
All Executive Directors are employed under service contracts. The services of the Executive
Directors may be terminated by the Company, on the expiry of six months’ notice.
Employee share option plan (“ESOP”)
In 2020 the Company established the ESOP for employees and Executive Directors, which will
enable them to acquire shares in the Company subject to stretching yet realistic performance
criteria being met. The plan is a UK market standard tax-advantaged Company Share Option Plan,
with supplementary sections to create an Unapproved Share Option Plan and a Share Appreciation
Rights Plan on equivalent terms to the main plan. All options and awards are granted with an
exercise price set at the market value of the Company’s shares as at the date of grant. In each case,
vesting is (or has been) subject to our standard performance conditions, requiring material growth in
the Company’s audited Adjusted diluted EPS.
Non‑executive Directors’ remuneration
The Non-executive Directors receive a fixed fee for their service, with the Senior Independent
Director receiving a supplement to recognise the additional contributions that he has been asked
to provide. They receive no benefits in kind, no pension contributions and no performance-related
pay. They are not eligible to participate in any of the Company’s incentive arrangements.
The Non-executive Directors are retained under letters of engagement which may be terminated
by the Company (i) giving three months’ notice or (ii) immediately, in the event that the Director is
not re-elected by shareholders at an AGM.
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Annual Report and Accounts 2023
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Remuneration Committee Report continued
Directors’ remuneration in 2023 – single figure table (audited)
The remuneration payable to the Directors for the year ended 31 December 2023 was as
follows:
Salary
or fees £
Benefits
in kind £
Pension
contributions
£
Total for
2023
Comparison
for 2022
£
£
256,563
112,000
117,796
120,000
111,000
180,000
120,000
166,442
26,250
36,250
12,500
26,250
36,250
1,321,301
10,500
3,750
5,563
6,750
2,220
12,645
3,750
19,993
–
–
–
–
–
65,171
–
–
–
3,600
3,330
5,400
3,600
–
267,063
115,750
123,359
130,350
116,550
198,045
127,350
186,435
196,500
138,750
–
158,350
47,250
203,053
150,488
215,297
–
–
–
–
–
33,750
26,250
10,769
36,250
–
12,500
33,750
26,250
33,750
36,250
15,930 1,402,402 1,221,707
Director
Executive Directors
Stephen Hemsley
Julia Choudhury3
Mark Fryer2
Tim Harris3
Andrew Mallows1
Peter Molloy3
Colin Rees3
Jason Sayers3
Non‑executive Directors
Rob Bellhouse3
Andy Brattesani
Pete Kear4
David Poutney3
Nigel Wray
Total
1 Resigned 2 August 2023.
2 Appointed 2 August 2023.
3 Resigned 2 October 2023.
4 Appointed 2 October 2023.
Jason Sayers is employed in the USA and remunerated in US dollars. The numbers above are
translated at the monthly average USD:GBP rates for the year. No Executive Director exercises
share options during the year, so there were no gains to be reported.
No Director received any remuneration from a third party in respect of their service as a Director
of the Company.
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Annual Report and Accounts 2023
No Director received any compensation for loss of office upon resignation and no payments
were made to them in respect of qualifying services after the date on which they ceased to
serve as a Director.
Directors’ share options (audited)
The table below shows the interests of those who serve, or have served, as Directors in share
options granted under the Company’s employee share schemes. For details of those schemes
and of the performance conditions to which the vesting of awards are subject, please see page
100. The dates shown in the table during which currently unvested options can be exercised are
dependent on upon the performance conditions being met, at least in part. If these conditions
are not satisfied then the option will lapse on the third anniversary of the date of grant.
Stephen Hemsley and Jason Sayers both have significant personal shareholdings in the
Company. As a result, they have not been granted options or awards under the Company’s
employee share schemes. For details of the interests of the Directors in the Company’s shares
during the year please see the Directors’ Report on page 105.
No Non-executive Director participates, or has participated, in the Company’s employee
share schemes.
During 2023 the closing mid-market quote for the Company’s shares ranged from a low of
132.5p to a high of 245p. The closing mid-market price on 29 December 2023 (being the last
dealing day during the financial year) was 161.5p.
No Directors exercised options over the Company’s shares during the year.
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Remuneration Committee Report continued
Directors’ share options (audited) continued
Details of options held under the Company’s employee share schemes by the Directors who served during the year are as follows:
Executive Director
Date of grant
Plan
Exercise
price
(pence)
Performance
condition
Number of
shares (31.12.22
or later date
of appointment)
Changes in the year
Granted
Exercised
Lapsed
Number of
shares (31.12.23
or earlier date
of retirement)
Status
Exercisable from
Exercisable to
Julia Choudhury (resigned 2 October 2023)
Mark Fryer (appointed 2 August 2023)
Tim Harris (resigned 2 October 2023)
Andrew Mallows (resigned 2 August 2023)
Peter Molloy (resigned 2 October 2023)
Colin Rees (resigned 2 October 2023)
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11-Dec-18
15-Sep-20
10-Mar-22
10-May-23
2-Aug-23
11-Dec-18
15-Sep-20
10-Mar-22
10-May-23
12-Dec-17
11-Dec-18
15-Sep-20
15-Sep-20
10-Mar-22
30-Sep-22
10-May-23
11-Apr-17
12-Dec-17
11-Dec-18
15-Sep-20
15-Sep-20
10-Mar-22
10-May-23
11-Dec-18
15-Sep-20
15-Sep-20
10-Mar-22
10-May-23
LTIP
ESOP
ESOP
ESOP
ESOP
LTIP
ESOP
ESOP
ESOP
LTIP
LTIP
ESOP
LTIP
ESOP
ESOP
ESOP
LTIP
LTIP
LTIP
ESOP
LTIP
ESOP
ESOP
LTIP
ESOP
LTIP
ESOP
ESOP
69
88
150
180
132.5
69
88
150
180
49.5
69
88
0.5
150
151.5
180
67
49.5
69
88
0.5
150
180
69
88
0.5
150
180
EPS growth
EPS growth
EPS growth
EPS growth
EPS growth
EPS growth
EPS growth
EPS growth
EPS growth
EPS growth
EPS growth
EPS growth
EPS growth
EPS growth
EPS growth
EPS growth
EPS growth
EPS growth
EPS growth
EPS growth
EPS growth
EPS growth
EPS growth
EPS growth
EPS growth
EPS growth
EPS growth
EPS growth
71,970
34,091
60,000
–
–
–
– 100,000
807,641
–
–
71,970
–
34,091
–
60,000
– 100,000
–
–
–
–
–
–
50,000
–
–
–
–
–
–
– 150,000
–
–
–
–
– 100,000
75,758
99,242
34,091
96,591
75,000
120,000
–
150,000
153,030
106,000
34,091
28,409
155,000
71,970
34,091
39,773
90,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Vested
71,970
Vested
34,091
60,000 Unvested
100,000 Unvested
807,641 Unvested
Vested
71,970
Vested
34,091
60,000 Unvested
100,000 Unvested
Vested
75,758
Vested
99,242
Vested
34,091
Vested
96,591
75,000 Unvested
120,000 Unvested
50,000 Unvested
Vested
150,000
Vested
153,030
Vested
106,000
Vested
34,091
Vested
28,409
155,000 Unvested
150,000 Unvested
Vested
71,970
Vested
34,091
Vested
39,773
90,000 Unvested
100,000 Unvested
11-Dec-21
15-Sep-23
10-Mar-25
10-May-26
2-Aug-26
11-Dec-21
15-Sep-23
10-Mar-25
10-May-26
12-Dec-20
11-Dec-21
15-Sep-23
15-Sep-23
10-Mar-25
30-Sep-25
10-May-26
11-Apr-20
12-Dec-20
11-Dec-21
15-Sep-23
15-Sep-23
10-Mar-25
10-May-26
11-Dec-21
15-Sep-23
15-Sep-23
10-Mar-25
10-May-26
10-Dec-28
14-Sep-30
9-Mar-32
9-May-33
1-Aug-33
10-Dec-28
14-Sep-30
9-Mar-32
9-May-33
11-Dec-27
10-Dec-28
14-Sep-30
14-Sep-30
9-Mar-32
29-Sep-32
9-May-33
10-Apr-27
11-Dec-27
10-Dec-28
14-Sep-30
14-Sep-30
9-Mar-32
9-May-33
10-Dec-28
14-Sep-30
14-Sep-30
9-Mar-32
9-May-33
Contents Generation – PageContents Generation – Sub PageContents Generation – Section
Strategic Report Governance Financial Statements
Remuneration Committee Report continued
Directors’ remuneration in 2024
As noted in my introductory remarks, the acquisition of Pirtek has caused us to revise the basis
of remuneration for our most senior executives, including the Executive Directors from 1 October
2023 and to amend the fees payable to the Non-executive Directors from the same date.
Fixed pay – base salaries and benefits in kind
The Executive Chairman, Stephen Hemsley, receives a salary of £375,000 which our data
confirms is no higher than the market rate for this role in a £300m market capitalisation
company. The material in-year increase in his pay reflects the growth in the company which
he has driven: Franchise Brands doubled in size in 2022 and again in 2023 taking adjusted
EBITDA from £8.5m in 2021 to £30m in 2023, and is now a much more diverse, international
and complex business. As I explained in the opening paragraphs of this report and again in
the introduction to this section, the need to accommodate the senior management of Pirtek
within our remuneration structures has resulted in a re-basing of pay for our entire leadership
team. This was supported by benchmarking work undertaken by FIT Remuneration Consultants.
The Chief Financial Officer, Mark Fryer, receives a salary of £275,000 which was set when he
was recruited, using an external search firm, in August 2023. The next scheduled pay review
date for our senior executives is 1 January 2025.
The fees payable to the Non-executive Directors were reviewed by the Board during the
year, with each conflicted Director recusing themselves from the discussion and decision. The
base fee payable is now £40,000 and the Senior Executive Director receives an overall fee
of £50,000 reflecting the additional duties he performs, including serving as a member of the
“Star Chamber”. The next scheduled review date for NED fees is 1 January 2025.
Introduction of a short‑term incentive plan
We are currently finalising the design of a new cash-settled annual bonus plan. We believe this is
necessary to create the strongest possible alignment of our Executive Directors and key employees
with short term financial and non-financial goals. The bonus scheme, in tandem with share options,
will ensure there is appropriate focus on delivering short-, medium- and long-term objectives.
Our intention is to calculate a bonus pool as a percentage of Adjusted EBITDA achieved beyond
budget or the City consensus expectation. Our belief is that senior executives should not
receive a bonus payment for delivering an on-budget performance. The use of the Adjusted
EBITDA metric reflects the measure of profit that best reflects that which is under the control or
influence of operational management, as it excludes the effects of corporate funding decisions
taken by the Board. It also complements the Adjusted EPS target used in determining the
vesting of options.
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The maximum bonus payable to any one individual, including the Executive Directors, will be
capped at 50% of salary, with lower levels of maximum bonus set for some management board
members (primarily those with functional, rather than business responsibilities). Targets will be
set for delivery of Group profitability, the delivery of profits in any part of the business for which
the relevant executive is accountable, and personal elements linked to specific deliverables.
We will report fully on the bonus plan as it relates to the Executive Directors in future
remuneration reports.
The rules of our bonus plan include market-normal malus and clawback provisions.
Grants of options under the employee share schemes
We expect to make a grant of market-value share options and awards under the ESOP in 2024,
to a range of employees including eligible Executive Directors. The vesting of these awards is
likely to be subject to our normal performance conditions, requiring the delivery of EPS growth.
We regard this as a critical metric for shareholders, as it reflects all aspects of the Company’s
performance and influences both our share price and our ability to pay a dividend.
We have recently amended the rules of the ESOP so that the 2024 grant will be subject to market-
normal malus and clawback provisions. We cannot retrospectively impose those forfeiture rights
on existing options, but these will be applied to all options and awards made in future years.
Strategic alignment
We are satisfied that we have developed an effective remuneration policy which is aligned with the
Company’s purpose, strategy and culture, and relevant to this stage of its development. We expect
that the remuneration we offer should motivate management and promote the long-term growth of
shareholder value. There is a clear and easily understood link between performance and pay, with
a significant proportion of potential reward being related to the growth in the Company’s share price
over the longer term. We are therefore comfortable that the interests of shareholders and senior
management, including the Executive Directors, are fully aligned.
Peter Kear
Chairman, Remuneration Committee
Contents Generation – PageContents Generation – Sub PageContents Generation – Section Directors’ Report
Strategic Report Governance Financial Statements
Directors’ Report
The Directors present their annual report on the affairs of the Group
for the year ended 31 December 2023.
Introduction
Franchise Brands plc is a public limited company, registered in England and Wales as company
number 10281033 and has its registered office at Ashwood Court, Springwood Close, Tytherington
Business Park, Macclesfield, Cheshire, SK10 2XF. As such, it is subject to the reporting
requirements set out in the Companies Act 2006. In addition, the ordinary shares of 0.5 pence
each of the Company are admitted to trading on the Alternative Investment Market of the
London Stock Exchange. As a result, the Company is obliged to report in accordance with the
requirements of the AIM Rules for Companies. We have chosen to apply the QCA Corporate
Governance Code, and our reporting is in line with the 2018 edition of that document.
Principal activities
The principal activity of the Group is building market-leading businesses in selected customer
segments, primarily via a franchised model. Our focus is on established brands which can
benefit from our shared support services, specialist sector expertise, management experience
and Group resources. The principal activity of the Company is to act as a holding company and
to provide management services to its subsidiary companies.
Directors
Names, biographical details and appointment dates of the Directors of the Company at the date
of this report are shown on pages 82 to 83. In addition, the following served as Directors of the
Company during the year:
• Rob Bellhouse – served as a Non-executive Director until 2 October 2023
• Julia Choudhury – served as an Executive Director until 2 October 2023
• Tim Harris – served as an Executive Director until 2 October 2023
• Andrew Mallows – served as an Executive Director until 2 August 2023
• Peter Molloy – served as an Executive Director until 2 October 2023
• David Poutney – served as a Non-executive Director until 2 October 2023
• Colin Rees – served as an Executive Director until 2 October 2023
• Jason Sayers – served as an Executive Director until 2 October 2023
Our reporting to shareholders
The Strategic Report on pages 1 to 79 of this Annual Report provides an overview of the
development and performance of the Group’s business for the year ended 31 December 2023
and likely future developments in the business of the Group. That information is presented in
that part of the Annual Report, rather than this Directors’ Report, as permitted by Regulations
made under the Companies Act 2006. The various sections of the Strategic Report together
provide the information which the Directors consider to be of strategic importance to the Group.
The following disclosures are hereby incorporated by reference into, and form part of,
this Directors’ Report:
• Data on greenhouse gas emissions and other climate change-related disclosures from page
45 onwards. This information was included in the Strategic Report as the Directors consider
those matters to be of strategic importance to the Group;
• The reporting on corporate governance on pages 81-92, including the Directors’ biographies
on pages 82 and 83;
• Information relating to financial instruments and financial risk management, as provided
in note 4 to the financial statements; and
• Related party transactions as set out in note 29 to the financial statements.
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Contents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Directors’ Report continued
Directors continued
Directors’ interests
The following table shows the interests of the Directors (and their spouses and minor children)
in the shares of the Company:
Director
Executive Directors
Stephen Hemsley1
Mark Fryer (appointed 2 August 2023)
Julia Choudhury (resigned 2 October 2023)2
Tim Harris (resigned 2 October 2023)3
Andrew Mallows (resigned 2 August 2023)4
Peter Molloy (resigned 2 October 2023)5
Colin Rees (resigned 2 October 2023)
Jason Sayers (resigned 2 October 2023)6
Non‑executive Directors
Rob Bellhouse (resigned 2 October 2023)
Andy Brattesani
Pete Kear (appointed 2 October 2023)
David Poutney (resigned 2 October 2023)7
Nigel Wray8
As at 31 December 2022
or later date of appointment
As at 31 December 2023
or earlier date of resignation
22,179,844
–
1,546,701
1,385,365
115,957
71,956
706,039
13,438,183
111,260
–
25,000
3,696,495
22,366,303
22,750,000
185,000
1,580,034
1,393,939
124,290
71,956
706,039
13,288,183
152,926
5,555
25,000
3,696,495
22,921,858
1
2
3
4
5
6
7
8
Included in the holding of Stephen Hemsley are 1,800,000 ordinary shares held by his wife, 9,000,000 Ordinary Shares
held by CTG Investment Limited, a company owned by a discretionary trust of which Mr Hemsley and his family are potential
beneficiaries, and 2,600,000 ordinary shares held by his Self-Invested Personal Pension (“SIPP”).
Included in the holding of Julia Choudhury are 384,286 ordinary shares held jointly with her husband, 431,500 ordinary
shares held by her SIPP and 37,554 ordinary shares held by Winsham Capital Partners Ltd, a Company controlled by
Julia Choudhury and her husband.
Included in the holding of Tim Harris are 74,156 ordinary shares held by his SIPP.
Included in the holding of Andrew Mallows are 99,007 ordinary shares held by his SIPP.
Included in the holding of Peter Molloy are 38,095 ordinary shares held by his SIPP.
Included in the holding of Jason Sayers are 9,171,029 ordinary shares held by The Meredian Settlement Trust. Roy Sayers
is the settlor and a trustee of the Trust. Jason Sayers is a life tenant and he and Mrs. Dawn Sayers, wife of Roy Sayers, are the
beneficiaries of the Trust.
Included in the holding of David Poutney are 2,800,109 ordinary shares held by his SIPP and an interest in 761,386 ordinary
shares held by his wife and adult daughters. David Poutney controls the interest held by his wife and adult daughters but is
not the beneficial owner of these shares.
Included in the holding of Nigel Wray are 2,371,318 ordinary shares held by Vidacos Nominees Limited, acting as nominee
for RBC Trustees (Jersey) Limited as trustee of Nigel Wray’s family trust. Also included are 11,631,782 ordinary shares and
8,085,248 ordinary shares held by Euroblue Investments Limited and Glengrace Limited, respectively, companies wholly
owned by Nigel Wray. Also included in Nigel Wray’s interest are 223,880 ordinary shares owned by The Priory Foundation,
a charitable trust of which he is the settlor and a trustee. Nigel Wray is not the beneficial owner of these shares.
105
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Annual Report and Accounts 2023
In addition, during their tenure as Directors each of Julia Choudhury, Tim Harris, Andrew Mallows,
Peter Molloy and Colin Rees held options over shares of the Company through their participation
in the Company’s employee share schemes. These are detailed in the Remuneration Committee
Report on pages 98 to 103. Stephen Hemsley and Jason Sayers do not participate in the
employee share schemes given their significant personal investments in the Company’s shares.
Directors’ and officers’ liability insurance and indemnification of Directors
The Company maintains Directors’ and Officers’ liability insurance which gives appropriate cover
for any legal action brought against its Directors.
The Company has also granted indemnities to each of its Directors to the extent permitted
by law. Qualifying third-party indemnity provisions (as defined in Section 324 of the Companies
Act 2006) have been given in favour of all Directors on the Board. These indemnities remain
in force and relate to certain losses and liabilities which the Directors may incur to third parties
in the course of acting as Directors of the Company.
Shares and shareholders
Share capital
The Company’s entire issued share capital comprises ordinary shares of 0.5 pence each.
Note 28 to the financial statements summarises the number in issue during 2023.
The Company has granted options to acquire its shares under its employee share schemes,
as detailed in Note 10 to the financial statements and explained in the Remuneration Committee
report on page 100. However, if and when these options are exercised, we anticipate that the
vast majority of these requests will be satisfied by the transfer of existing shares held in the
Company’s employee benefit trust.
All of the Company’s shares are freely transferable and carry the same rights in relation
to voting, to appoint a proxy or proxies (or where relevant a corporate representative) to
attend meetings, speak and vote, and to participate in distributions including the right to
receive dividends. The rights attaching to the Company’s shares are set out in the Articles of
Association, which can only be amended with the approval of at least 75% of the votes cast
at a General Meeting.
To the Directors’ best knowledge, there are no restrictions on voting rights nor any agreement
between holders of securities that result in restrictions on the transfer of securities or
on voting rights.
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Strategic Report Governance Financial Statements
Directors’ Report continued
Shares and shareholders continued
Major shareholders
In addition to the holdings of the Directors set out on the previous page, to the date of this
report the Company has received formal notification of the following holdings in its shares
pursuant to DTR 5 (being broadly a direct or indirect interest of 3% or more of the share
capital). It should be noted that these holdings, or the percentage of the issued share capital
they represent, may have changed since the Company was notified, but no further notification is
required until the relevant threshold is crossed:
Shareholder
Date of last notification
Number of
shares
Percentage of
capital (at time
of notification)
Slater Investments Limited
BGF Investment Management Limited
Rathbone Investment Management Limited
Gresham House Asset Management Limited
Victor Clewes
Canaccord Genuity Group Inc
4 April 2024 21,236,266
9,996,103
17 May 2023
9,768,179
16 January 2024
8,409,812
25 April 2023
5,274,473
10 March 2022
4,867,364
11 March 2022
10.96%
5.16%
5.04%
4.34%
4.27%
3.94%
Dividends
A final dividend of 1.1 pence per share was paid on 12 May 2023 in respect of the 2022
financial year.
An interim dividend of 1.0 pence per share was paid in respect of the 2023 financial year
on 13 October 2023. The Directors are recommending a final dividend of 1.2 pence per
share which, subject to shareholders’ approval at the AGM, will be paid on 25 July 2024
to shareholders on the register at the close of business on 28 June 2024.
Our employees and wider workforce
Employment of disabled persons
The Group gives full and fair consideration to applications for employment from disabled
persons, where the requirements of the job can be adequately fulfilled by that person. Where
existing employees become disabled it is the Group’s policy, wherever practicable, to provide
continuing employment under normal terms and conditions and to provide training, career
development and promotion to disabled employees wherever appropriate.
Employee communications and engagement
The Group provides its entire workforce (including employees) with information on matters that
could be of concern to them as our workforce. We regard it as crucial that our employees and
wider workforce are aware of the factors affecting the performance of the Company, so that
they can help us drive its future success. These communications are generally delivered at a
brand level, with the CEO or other senior executives of that brand holding open forums with
their employees and other workforce members. These are deliberately structured to facilitate
and encourage two-way communications. In addition, informal communication takes place
on a daily basis.
Where appropriate, we consult members of our workforce or their representatives on a regular
basis so that their views can be taken into account in making decisions which are likely to affect
their interests.
We encourage involvement in the Company’s performance by our employees and workforce
and offer awards under our employee share schemes to a wide range of employees who are
best placed to influence that performance. Of our circa 700 employees, around 250 participate
in our employee share schemes. We are implementing an online portal in 2024 to improve
those employees’ access to information on their share options and awards and company
performance.
Board engagement with the wider workforce
All of the Directors are encouraged to engage with our employees, contractors and franchisees
wherever possible. We arrange site visits for the Non-executive Directors and the Executive
Directors will come into contact with a wide range of employees, franchisees and others as a
matter of course, in their normal roles.
All of the Non-executive Directors attended the Growth Summit held in November 2023 in which
around 65 of our senior managers participated. In addition, all Directors are invited to attend
franchisee conferences for each of our brands and are encouraged to undertake personal visits
whenever possible.
This mix of formal and informal interactions with a wide range of employees, contractors
and franchisees enables the Directors to have regard to their interests in their deliberations,
including on the principal decisions taken by the Company.
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Annual Report and Accounts 2023
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Directors’ Report continued
Disclosures relating to the audited financial statements
Subsidiary audit exemption
Certain UK subsidiaries of the Company are exempt from the requirements of the Companies
Act 2006 relating to the audit of individual accounts by virtue of s479A of the Act. A full list of
the Company’s subsidiaries is provided in note 27 to the financial statements.
The outstanding liabilities at 31 December 2023 of those UK subsidiaries have been or will
be guaranteed by the Company pursuant to s479A to s479C of the Act. In the opinion of the
Directors, the possibility of the parent company guarantees being called upon is remote.
Going concern
In assessing the appropriateness of adopting the going concern basis in preparing the Annual
Report and financial statements, the Directors have considered the current financial position of
the Group, alongside its principal risks and uncertainties.
The review performed considers plausible financial and operational issues that could reasonably
arise within a period of 12 months from the date of approval of the financial statements.
This included credit risk, dependency on key suppliers and/or customers and economic risk.
The budgets and business plans prepared for the next 12 months and beyond have been
subjected to sensitivity analysis, considering the impact of a downturn in trade; and changes to
the Group’s financing costs.
On an individual customer basis, we do not have a concentration of credit risk. We have taken
account of the bad debt risk in our expected credit loss provisions and believe this is sufficient.
The Group is not overly dependent on any one key customer or supplier. As at 31 December
2023, we had 644 franchisees spread over seven different franchise networks, operating
collectively in ten jurisdictions. Within each network, there is no particular concentration of risk
in any individual franchisee. We therefore regard each franchisee as posing relatively low risk
to the Company. In addition, our networks are characterised by having a large number of small
value jobs being completed for a wide variety of customers.
The acquisition of Filta in 2022 and Pirtek in 2023 has left the Group less reliant on the UK
economy, with less than 60% of our revenues and profits being derived from the UK.
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Franchise Brands plc
Annual Report and Accounts 2023
In April 2023 we entered into new bank facilities with a syndicate of four lending banks,
comprising a term loan and a revolving credit facility. These facilities were initially stated to run
to 3 April 2027, but in early 2024 we exercised an option to extend these by a further 12 month
period. Subject to compliance with the terms of the facilities, we therefore have access to working
capital until early April 2028. The facilities have only two covenants and the Group has significant
headroom on each of these when tested on a quarterly basis.
We have modelled the Group’s financial performance in a range of realistic downside scenarios,
including combinations of risks, and applied sensitivities to this testing with regard to overall
debt level and compliance with banking covenants. The Group’s business is profitable and cash-
generative and this provides resilience against the principal risks and uncertainties to which the
Group is exposed. Following this modelling work, we concluded that in all realistically plausible
scenarios the Group would maintain access to sufficient current financial assets to meet its
current liabilities as they fall due.
We also undertook reverse stress-testing to identify the scenarios in which the materialisation
of risk, or the combination of risks, could cause the Group to fail financially. We concluded that
none of these scenarios was realistically plausible during the period covered by our review.
Given the fact that the Group and the Company continues to be profitable, continues to have
net assets and has access to cash and funding, the Directors have made appropriate enquiries
and consider that the Company has adequate resources to continue in operational existence for
the foreseeable future. Accordingly, the Directors continue to adopt the going concern basis in
preparing the financial statements.
Financial instruments and financial risk management
The Company’s use of financial instruments and its financial risk management objectives and
policies are set out in note 4 to the financial statements.
Relevant audit information
The Directors confirm that:
• so far as each of the Directors is aware, there is no relevant audit information (as that term
is defined in the Companies Act 2006) of which the Company’s auditor is unaware; and
• they have each taken all the steps that they ought to have taken as Directors to make
themselves aware of any relevant audit information and to establish that the auditors
are aware of that information.
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Directors’ Report continued
Disclosures relating to the audited financial statements continued
Auditor
A resolution to re-appoint BDO LLP as auditor will be proposed at the AGM. As noted on page 93,
the Company intends to undertake an audit tender during the summer of 2024.
For further information on how we manage the relationship with the external auditor,
please refer to the Audit Committee report on pages 96 and 97.
Other statutory disclosures
Branches
There are no branches of the Company in existence. Subsidiaries of the Company operate
businesses in the UK, a number of continental European countries, Canada and the USA. For details
of the subsidiary undertakings of the Company, please see note 27 to the financial statements.
The Large and Medium-sized Companies and Groups (Accounts and Reports)
Regulations 2008
In compliance with the Regulations the Directors make, in addition to the material contained
elsewhere in this report, the following disclosures:
• The Company has not made any purchases of its own shares during the year;
Annual General Meeting
The Annual General Meeting of the Company will be held at 9:30 a.m. on Thursday 27 June 2024
at the offices of Gateley plc, 1 Paternoster Square, London, EC4M 7DX. The business of the
AGM is set out in a circular containing the Notice of Meeting and an explanatory letter from the
Chairman, which is being issued to shareholders with this Annual Report and is also available
on the Company’s website.
As noted in the AGM circular, when the meeting opens on 27 June 2024 it will immediately
be adjourned to 11:00 a.m. on Thursday 18 July 2024. No business will be transacted on
Thursday 27 June 2024 and shareholders are strongly advised not to attend the meeting
on that date.
All of the business set out in the notice of meeting will be transacted upon the resumption of the
AGM at 11:00 a.m. on Thursday 18 July 2024 at the offices of Gateley plc, 1 Paternoster Square,
London, EC4M 7DX. We encourage our shareholders to attend the meeting when it re-convenes
on that date.
The Directors of the Company regret the inconvenience that this may cause to shareholders.
• There were no material research and development activities undertaken by the Company
This Directors’ Report was approved by the Board on 19 June 2024 and is signed on its behalf.
or its subsidiaries during the year;
• A description of the actions taken to foster the Company’s business relationships with suppliers,
customers and others, and the effect of those actions, including on the principal decisions taken
by the Company can be found in the section 172 statement on pages 57 to 61; and
• There have been no post-balance sheet events of the Company or its subsidiaries which the
Directors believe need to be brought to the attention of its shareholders.
Rob Bellhouse
Company Secretary
Political contributions
No political contributions were made during the period. The Company has not sought an
authority from its shareholders to make political contributions and does not intend to do so.
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Strategic Report Governance Financial Statements
Directors’ Responsibilities Statement
The Directors are responsible for preparing the Annual Report and the Directors’ Report
and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year.
Under that law the Directors have elected to prepare the Group and Company financial
statements in accordance with international accounting standards in conformity with the
requirements of the Companies Act 2006. Under company law the Directors must not approve
the financial statements unless they are satisfied that they give a true and fair view of the
state of affairs of the Company and the Group and of the Group’s profit or loss for that period.
The Directors are also required to prepare financial statements in accordance with the rules
of the London Stock Exchange for companies trading securities on AIM.
In preparing these financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether applicable IFRSs have been followed, subject to any material departures
disclosed and explained in the financial statements; and
• prepare the financial statements on the going concern basis unless it is inappropriate
to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to
show and explain the Company’s transactions and disclose with reasonable accuracy at any
time the financial position of the Group and the Company and enable them to ensure that the
financial statements comply with the Companies Act 2006.
They are also responsible for safeguarding the assets of the Group and the Company and hence
for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial
information included on the Company’s website. Legislation in the United Kingdom governing
the preparation and dissemination of financial statements may differ from legislation in other
jurisdictions. The maintenance and integrity of the Company’s website is the responsibility of
the Directors, as is the ongoing integrity of the financial statements contained therein.
This statement was approved by the Board on 19 June 2024.
Mark Fryer
Chief Financial Officer
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Contents Generation – Sub PageContents Generation – Section Financial Statements
Independent Auditor’s Report to the members
of Franchise Brands plc
Strategic Report
Governance Financial Statements
Independent Auditor’s Report
to the members of Franchise Brands plc
Opinion on the financial statements
In our opinion:
• the financial statements give a true and fair view of the state of the Group’s and of the Parent
Company’s affairs as at 31 December 2023 and of the Group’s profit for the year then ended;
• the Group financial statements have been properly prepared in accordance with UK adopted
international accounting standards;
• the Parent Company financial statements have been properly prepared in accordance with UK
adopted international accounting standards and as applied in accordance with the provisions
of the Companies Act 2006; and
• the financial statements have been prepared in accordance with the requirements of the
Companies Act 2006.
We have audited the financial statements of Franchise Brands Plc (the ‘Parent Company’)
and its subsidiaries (the ‘Group’) for the year ended 31 December 2023 which comprise the
consolidated statement of comprehensive income, the consolidated statement of financial
position, the company statement of financial position, the consolidated statement of cash
flows, the company statement of cash flows, the consolidated statement of changes in equity,
the company statement of changes in equity, and notes to the financial statements, including
material accounting policy information. The financial reporting framework that has been applied
in their preparation is applicable law and UK adopted international accounting standards and, as
regards the Parent Company financial statements, as applied in accordance with the provisions
of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs(UK)) and
applicable law. Our responsibilities under those standards are further described in the Auditor’s
responsibilities for the audit of the financial statements section of our report. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remain independent of the Group and the Parent Company in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the UK, including
the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
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Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going
concern basis of accounting in the preparation of the financial statements is appropriate. Our
evaluation of the Directors’ assessment of the Group and the Parent Company’s ability to
continue to adopt the going concern basis of accounting included:
We obtained the Directors’ assessment that supports the Board’s conclusion with respect to
going concern and performed the following:
• We considered the consistency of the Directors’ cash flow forecasts with other areas of the
audit, such as the impairment model;
• We challenged the rationale for the assumptions utilised in the forecasts, using our knowledge
of the business with the support of our internal business restructuring experts;
• We considered the appropriateness of the Directors’ forecasts by testing their mathematical
accuracy, assessing historical forecasting accuracy and understanding the Directors’
consideration of downside sensitivity analysis and reverse stress testing;
• We reperformed sensitivities on the Directors’ base case and stressed case scenarios,
considered the likelihood of these occurring and understood and challenged the mitigating
actions the Directors’ would take under these scenarios;
• We obtained an understanding of the new financing facilities, including the nature of the
facilities, repayment terms, covenants and attached conditions;
• We assessed whether the terms and conditions therein were consistent with those applied by
the Directors’ in their base case and downside scenario forecasts;
• We reviewed the facility and covenant headroom calculations, and reperformed sensitivities
on the Directors’ base case and downside scenarios; and
• We assessed the going concern disclosures against the requirements of the accounting
standards, and assessed the consistency of the disclosures with the Directors’ forecasts.
Based on the work we have performed, we have not identified any material uncertainties
relating to events or conditions that, individually or collectively, may cast significant doubt on the
Group and the Parent Company’s ability to continue as a going concern for a period of at least
twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the Directors with respect to going concern are
described in the relevant sections of this report.
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Governance Financial Statements
Independent Auditor’s Report continued
to the members of Franchise Brands plc
Overview
Coverage
Key audit matters
91% (2022: 99%) of Group profit before tax
86% (2022: 94%) of Group revenue
88% (2022: 92%) of Group total assets
Revenue recognition
Acquisition accounting
Impairment of goodwill and intangible assets
Materiality
Group financial statements as a whole
2023
2022
X
X
X
—
X
X
£546,950 (2022: £485,000) based on 5% of adjusted profit before tax
(2022: 5% of profit before tax).
Profit before tax was adjusted for non-recurring current year costs.
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its environment,
including the Group’s system of internal control, and assessing the risks of material misstatement
in the financial statements. We also addressed the risk of management override of internal
controls, including assessing whether there was evidence of bias by the Directors that may have
represented a risk of material misstatement.
Based on that assessment, our Group audit scope focused primarily on the audit work of the
following significant components of the Group, all of which were subject to full scope audits:
• Franchise Brands Plc – the Parent Company,
• Metro Rod Limited,
• Willow Pumps Limited,
• Chips Away International Limited,
• The Filta Group Inc.
• Pirtek UK
• Pirtek Deutschland GmbH
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Each of these entities were audited by the Group engagement team, apart from The Filta Group
Inc. & Pirtek Deutschland GmbH whereby a non-BDO member firm & BDO Member firm were
used as component auditors respectively.
In addition to the above, three components of the Group, The Filta Group Limited, Pirtek
Hydraulique Services SAS and Kemac, were subject to an audit of specified account balances
which was performed by the Group engagement team. Analytical review procedures were
performed on the financial information of the remaining non–significant components of the
Group by the Group engagement team.
At the Group level, we also performed audit procedures on the consolidation journals. In
addition we carried out analytical procedures to confirm our conclusion that there were no
significant risks of material misstatement in the aggregated financial information of the remaining
components not subject to full scope audit or audit of specified account balances.
Our involvement with component auditors
For the work performed by component auditors, we determined the level of involvement
needed in order to be able to conclude whether sufficient appropriate audit evidence has
been obtained as a basis for our opinion on the Group financial statements as a whole. Our
involvement with component auditors included the following:
• We held discussions with the component auditors at the planning stage of the audit to assess
their competence and to ensure their understanding of the Group audit engagement;
• We issued referral instructions to the component auditors detailing matters inclusive of
materiality, Group audit risks and other key focus areas, and the required format of reporting
to us as the Group auditor;
• We directed and supervised the work of the component auditors throughout the audit;
• We visited the component auditors and reviewed their audit working papers;
• We evaluated the work performed; and
• We attended the local close meeting remotely (utilising technology) with component
management.
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Governance Financial Statements
Independent Auditor’s Report continued
to the members of Franchise Brands plc
An overview of the scope of our audit continued
Climate change
Our work on the assessment of potential impacts of climate-related risks on the Group’s
operations and financial statements included:
• Enquiries and challenge of management to understand the actions they have taken to identify
climate-related risks and their potential impacts on the financial statements and adequately
disclose climate-related risks within the annual report;
• Our own qualitative risk assessment taking into consideration the sector in which the Group
operates and how climate change affects this particular sector; and
• Review of the minutes of Board and Audit Committee meetings and other papers related
to climate change and performed a risk assessment as to how the impact of the Group’s
commitment as set out in pages 49-55 may affect the financial statements and our audit.
We also assessed the consistency of managements disclosures included as Other Information
on pages 49-55 with the financial statements and with our knowledge obtained from the audit.
Based on our risk assessment procedures, we did not identify there to be any Key Audit Matters
materially impacted by climate-related risks.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most
significance in our audit of the financial statements of the current period and include the
most significant assessed risks of material misstatement (whether or not due to fraud) that
we identified, including those which had the greatest effect on: the overall audit strategy, the
allocation of resources in the audit, and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial statements as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
Revenue
recognition
Refer to the
accounting
policies in Note 2
and further details
in Note 3 and
Note 7
The Group has a number of
revenue streams as detailed
in Note 2.
There is a level of judgement
and estimation involved
in recognising revenue
according to the requirements
of IFRS 15 Revenue from
Contracts with Customers
such as: identification of
performance obligations in
particular, whether the Group
is the principal or an agent in
the transaction; and allocation
of transaction prices. In
addition, we have identified
prior period adjustments
where the application of
IFRS 15 was incorrectly
applied. Please see note 1
where further information is
provided. For these reasons,
revenue recognition was
determined to be a Key
Audit Matter.
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How the scope of our audit addressed the key audit matter
We obtained and reviewed management’s paper on
the application of IFRS 15 on key revenue streams
within the Group by checking if this is in line with the
requirements of IFRS 15. We assessed a sample of
revenue contracts and challenged management’s key
judgements regarding identification of performance
obligations and allocation of transaction prices.
Our work included:
– Evaluating the design and implementation of key
controls within revenue systems and processes.
– Reading a sample of customer contracts to
understand the nature of these contracts and the
performance obligations, in particular, whether the
Group is the principal or an agent in the transaction;
– For a sample of contracts, we challenged
management on the identification of performance
obligations and the point at which they have been
met, and also on the allocation of transaction price
by checking how these align with the requirements
of IFRS 15 to determine if the correct revenue has
been recognised;
– In relation to the prior period errors for the year
ending 31 December 2022, we assessed the facts
and underlying transactions in relation to National
Accounts revenue, assessing the contracts in
place to consider whether the Group was acting
as a principal or commission agent in line with the
requirements of IFRS 15; and for Sales of Franchise
revenue, assessing the contracts to determine
whether the performance obligations were distinct
and being recognised in line with the requirements
of IFRS15;
– For a sample of sale of franchise revenue, we
checked if the territory fee has been correctly
deferred over the length of the franchise
agreement and released to the statement of
comprehensive income on a straight-line basis,
where it is not in relation to specific performance
obligation; and
– For National Accounts sales, where the Group
is acting as a commission agent and not as a
principal, we checked if only the agency fee has
been recognised.
Key observations:
We deem management’s application of IFRS 15 on
revenue streams to be reasonable.
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Strategic Report
Governance Financial Statements
Independent Auditor’s Report continued
to the members of Franchise Brands plc
Key audit matter
Acquisition
accounting
Refer to the
accounting
policies in Note 2
and further details
in Note 3 and
Note 6
How the scope of our audit addressed the key audit matter
Key audit matter
How the scope of our audit addressed the key audit matter
The Group acquired
Hydraulic Authority I Limited
and its subsidiaries on
20 April 2023 via a share
for share exchange and
cash consideration.
The recognition and valuation
of assets and liabilities
acquired, such as intangible
assets, is inherently complex
and requires significant
estimates, judgement and
assumptions to be made
by management on the key
inputs such as discount rate,
profit margin assumption
and revenue assumption,
and as such, there is a risk
of material misstatement
in the fair value allocated
to assets and liabilities
acquired including intangible
assets and the balance of
goodwill recognised.
Management have utilised a
third party expert to support
the preparation of detailed
calculations to determine the
fair value of the intangible
assets acquired.
For these reasons, acquisition
accounting was determined to
be a key audit matter.
We obtained and reviewed the sale and purchase
agreement (SPA) to check if the appropriate accounting
treatment had been applied in accordance with the
requirements of the applicable accounting standard.
Our work included:
– With the support of our internal valuations experts
we challenged the key inputs, assumptions and
methodology used by management and their
expert in determining the fair values of intangible
assets acquired based on our knowledge of
the industry;
– Matching assumptions such as discount rate, profit
margin and revenue and relevant data to internal
expert reports or third party evidence in order to
verify the input to the calculations.
– We have assessed management’s design and
implementation of controls relating to acquisition
accounting.
– We have reviewed the historical trend and data
along with external market data to further assist
in the reasonability of the judgements and
assumptions applied to the forecasts utilised.
– We challenged the completeness of the intangible
assets acquired by considering the criteria set out
in the applicable standard, and recalculated the
goodwill recognised.
– We assessed the competence, objectivity and
independence of managements expert.
Key observations:
Based on our procedures we found management’s
estimates, judgements and assumptions to be within
a reasonable range.
Impairment of
goodwill and
intangible assets
Refer to the
accounting
policies in Note 2
and further details
in Note 3 and
Note 14.
The Group has goodwill
and intangible assets
with indefinite life, which
management are required to
test annually for impairment.
There is a high degree of
management judgement in
assessing the value in use
of the Cash Generating Unit
(“CGU”) to which the Goodwill
and Intangible Assets are
allocated and therefore
determining any potential
impairments. There is
therefore a significant risk that
impairment of these assets is
not appropriately recognised
in accordance with applicable
financial reporting standards.
For these reasons, impairment
of goodwill and intangible
assets was considered to be
a key audit matter.
In relation to the impairment analysis performed for
each CGU we considered the reasonableness of
management’s key judgements.
Our work included:
– An assessment of whether the Goodwill and
other intangible assets were correctly allocated
to CGUs for monitoring purposes and in line
with the requirements of the applicable financial
reporting standards;
– Challenging the future trading projections by
reference to the current performance and the
accuracy of prior year forecasting;
– Determining whether the forecasts adopted in
the impairment review were approved by the
Board and consistent with those used in the
going concern assessment;
– With the assistance of our internal valuations
experts, we assessed the appropriateness of the
discount rate applied and challenged the discount
rate using a range of sensitivities;
– Checking the impairment analysis for logical and
arithmetic accuracy and assessing if it has been
undertaken in accordance with the requirements
of the applicable financial reporting standards;
– Performing sensitivity analysis to understand the
relative impact of changes in the key assumptions
within the impairment model.
Key observations:
Based on our procedures we found management’s
judgement underlying the impairment analysis to
be reasonable.
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Governance Financial Statements
Independent Auditor’s Report continued
to the members of Franchise Brands plc
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality to be the magnitude by which misstatements,
including omissions, could influence the economic decisions of reasonable users that are taken on the basis of the financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level, performance materiality, to determine the extent of
testing needed. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular
circumstances of their occurrence, when evaluating their effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as follows:
Group financial statements
Parent company financial statements
Materiality
Basis for determining materiality
Rationale for the benchmark applied
2023
2022
£546,950
5% of adjusted profit before tax.
Profit before tax is one of the principal
considerations for users of the
financial statements in assessing the
financial performance of the business.
In the current period we have was
adjusted for non-recurring current
year costs.
£485,000
5% of profit before tax.
Profit before tax is one of
the principal considerations
for users of the financial
statements in assessing the
financial performance of the
business.
2023
£6,282,360
3% of net assets
Materiality for the parent company financial statements was
determined as 3% of net assets at £6,282,360.
This was capped at £118,000 materiality given the
assessment of the component aggregation risk.
Materiality was therefore restricted to 22% Group materiality
but errors in the Company only financial statements were
assessed at the financial statement materiality determined
for the parent company.
Performance materiality
£367,900
£339,500
£76,700
Basis for determining performance materiality
65% of materiality based on the
expected low level of misstatements
however given the acquisition of
Hydraulic Authority I Ltd (“Pirtek”)
and increase in the number of
areas subject to estimation we have
reduced performance materiality from
the prior period.
70% of materiality based on
the expected low level of
misstatements however, given
the acquisition of Filta Group
Holdings Ltd and increase in
the number of areas subject
to estimation it was held at
70% of materiality.
65% of materiality based on the expected low level of
misstatements however, given an increase in areas subject
to estimation, performance materiality was set lower than the
prior period.
2022
£3,080,520
3% of net assets
Materiality for the parent
company financial statements
was determined as 3% of net
assets at £3,080,520.
This was capped at £100,000
materiality given the
assessment of the component
aggregation risk.
Materiality was therefore
restricted to 20% Group
materiality.
£70,000
70% of materiality based
on the expected low level
of misstatements however
increase in areas subject to
estimation therefore lower
than prior period.
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Governance Financial Statements
Independent Auditor’s Report continued
to the members of Franchise Brands plc
Our application of materiality continued
Component materiality
For the purposes of our Group audit opinion, we set materiality for each component of the
Group based on a percentage of between 22% and 67% (2022: 20% and 62%) of Group
materiality dependent on the size and our assessment of the risk of material misstatement of
that component. Component materiality ranged from £118,000 to £365,000 (2022: £100,000 to
£300,000). In the audit of each component, we further applied performance materiality levels
of 65% (2022: 70%) of the component materiality to our testing to ensure that the risk of errors
exceeding component materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit
differences in excess of £16,400 (2022: £14,550). We also agreed to report differences
below this threshold that, in our view, warranted reporting on qualitative grounds.
Other information
The directors are responsible for the other information. The other information comprises the
information included in the annual report and accounts 2023 other than the financial statements
and our auditor’s report thereon. Our opinion on the financial statements does not cover the
other information and, except to the extent otherwise explicitly stated in our report, we do
not express any form of assurance conclusion thereon. Our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the course of the audit, or otherwise
appears to be materially misstated. If we identify such material inconsistencies or apparent
material misstatements, we are required to determine whether this gives rise to a material
misstatement in the financial statements themselves. If, based on the work we have performed,
we conclude that there is a material misstatement of this other information, we are required to
report that fact.
We have nothing to report in this regard.
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Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the
audit, we are required by the Companies Act 2006 and ISAs (UK) to report on certain opinions
and matters as described below.
Strategic report
and Directors’
report
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the Strategic report and the Directors’ report for the
financial year for which the financial statements are prepared is consistent with
the financial statements; and
• the Strategic report and the Directors’ report have been prepared in accordance
with applicable legal requirements.
In the light of the knowledge and understanding of the Group and Parent Company
and its environment obtained in the course of the audit, we have not identified
material misstatements in the strategic report or the Directors’ report.
We have nothing to report in respect of the following matters in relation to which the
Companies Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the Parent Company, or returns
adequate for our audit have not been received from branches not visited by us; or
• the Parent Company financial statements are not in agreement with the
accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Matters on
which we
are required
to report by
exception
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement, the Directors are responsible
for the preparation of the financial statements and for being satisfied that they give a true and
fair view, and for such internal control as the Directors determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s
and the Parent Company’s ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Group or the Parent Company or to cease operations,
or have no realistic alternative but to do so.
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Governance Financial Statements
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to the members of Franchise Brands plc
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect
a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these financial statements.
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations.
We design procedures in line with our responsibilities, outlined above, to detect material
misstatements in respect of irregularities, including fraud. The extent to which our procedures
are capable of detecting irregularities, including fraud is detailed below:
Non‑compliance with laws and regulations
Based on:
Our procedures in respect of the above included:
• Review of minutes of meetings of those charged with governance for any instances of
non-compliance with laws and regulations;
• Review of correspondence with regulatory and tax authorities for any instances of
non-compliance with laws and regulations;
• Review of financial statement disclosures and agreeing to supporting documentation;
• Involvement of tax specialists in the audit;
• Made inquiries directly with external lawyers and legal counsel
• Review of legal expenditure accounts to understand the nature of expenditure incurred.
Fraud
We assessed the susceptibility of the financial statements to material misstatement, including
fraud. Our risk assessment procedures included:
• Use of forensic specialists to assist with the risk assessment at the planning stage and to help
design appropriate audit procedures;
• Our understanding of the Group and the industry in which it operates;
• Enquiry with management, those charged with governance and the Audit Committee
• Discussion with management, those charged with governance and the Audit Committee;
• Obtaining and understanding of the Group’s policies and procedures regarding compliance
regarding any known or suspected instances of fraud;
• Obtaining an understanding of the Group’s policies and procedures relating to:
with laws and regulations.
We considered the significant laws and regulations to be the applicable accounting framework,
UK tax legislation and the AIM Listing Rules.
The Group is also subject to laws and regulations where the consequence of non-compliance
could have a material effect on the amount or disclosures in the financial statements, for
example through the imposition of fines or litigations. We identified such laws and regulations
to be the UK adopted international accounting standards, the Companies Act 2006, relevant
taxation legislation, the Health and Safety, Data Protection Act, Equity Laws, Financial Services
Act, and the Bribery Act 2010.
– Detecting and responding to the risks of fraud; and
– Internal controls established to mitigate risks related to fraud.
• Review of minutes of meeting of those charged with governance for any known or suspected
instances of fraud;
• Discussion amongst the engagement team as to how and where fraud might occur in the
financial statements;
• Performing analytical procedures to identify any unusual or unexpected relationships that may
indicate risks of material misstatement due to fraud;
• Considering remuneration incentive schemes and performance targets and the related
financial statement areas impacted by these.
• Inquiring and reviewing external documentation to assess the threat of Cyber attacks within
the financial period.
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Governance Financial Statements
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Auditor’s responsibilities for the audit of the financial statements continued
Fraud continued
Based on our risk assessment, we considered the areas most susceptible to fraud to be posting
inappropriate journal entries and management bias in accounting estimates, revenue cut-off
within certain revenue streams, and the existence and accuracy of accrued income within
certain revenue streams.
Our procedures in respect of the above included:
• identifying and testing journal entries to source documentation, in particular any journal
entries posted with unusual account combinations, journals to revenue and cash that matched
certain criteria, round journals that matched certain criteria and specific keywords, to source
documentation;
• assessing revenue recognised on key revenue streams for a defined period around the
year end, selecting a sample of revenue items within this defined period and identifying if
the transactions have been reflected in the correct period in line with when the performance
obligation was met;
• incorporating an element of unpredictability into the audit procedures, by testing a sample of
credit card expenses incurred in the year to supporting documentation to assess their validity,
and performing revenue recognition testing within insignificant components of the group;
• holding discussions with those charged with governance, including consideration of known or
suspected instances of non-compliance with laws and regulation and fraud;
• reviewing minutes of Board meetings throughout the year and post year end for instances of
non-compliance with laws and regulation and fraud;
• we have directed component auditors to review monthly franchisee revenue trends for Pirtek
Deutschland GmbH for the period, for a cyber incident pre acquisition to ascertain that no
anomalies were identified.
• Obtaining an understanding and documenting of the control environment in monitoring
compliance with laws and regulations; and
• Agreement of the financial statement disclosures to underlying supporting documentation.
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We also communicated relevant identified laws and regulations and potential fraud risks to all
engagement team members including component engagement teams who were all deemed to
have appropriate competence and capabilities and remained alert to any indications of fraud or
non-compliance with laws and regulations throughout the audit. For component engagement
teams, we also reviewed the result of their work performed in this regard.
Our audit procedures were designed to respond to risks of material misstatement in the
financial statements, recognising that the risk of not detecting a material misstatement due
to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve
deliberate concealment by, for example, forgery, misrepresentations or through collusion.
There are inherent limitations in the audit procedures performed and the further removed
non-compliance with laws and regulations is from the events and transactions reflected in the
financial statements, the less likely we are to become aware of it.
A further description of our responsibilities is available on the Financial Reporting Council’s
website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our
auditor’s report.
Use of our report
This report is made solely to the Parent Company’s members, as a body, in accordance with
Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that
we might state to the Parent Company’s members those matters we are required to state to
them in an auditor’s report and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the Parent Company and the
Parent Company’s members as a body, for our audit work, for this report, or for the opinions
we have formed.
Sakib Isa (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
Manchester, UK
19 June 2024
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).
Contents Generation – PageContents Generation – Sub PageContents Generation – Section Consolidated Statement
of Comprehensive Income
Strategic Report
Governance Financial Statements
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2023
Revenue
Cost of sales
Gross profit
Adjusted earnings before interest, tax, depreciation, amortisation, share-based payments, impairment loss & non-recurring items (“Adjusted EBITDA”)
Depreciation
Amortisation of software
Amortisation of acquired intangibles
Impairment loss
Share-based payment expense
Non-recurring items
Total administrative expenses
Operating profit
Foreign exchange losses
Finance expense
Profit before tax
Tax expense
Profit for the year attributable to equity holders of the Parent Company
Other comprehensive (expense)/income
Actuarial gains
Exchange differences on translation of foreign operations
Total comprehensive (expense)/income attributable to equity holders of the Parent Company
Total Profit and other comprehensive income for the year attributable to equity holders of the Parent Company
Earnings per share
Basic
Diluted
* See Note 1 for details.
The Notes on pages 127 to 173 form part of these financial statements.
118
Franchise Brands plc
Annual Report and Accounts 2023
2023
Total
£’000
121,265
(50,060)
71,205
30,101
(3,492)
(925)
(7,718)
(96)
(838)
(6,159)
(60,332)
10,873
(146)
(5,711)
5,016
(1,979)
3,037
63
(131)
(68)
Restated*
2022
Total
£’000
69,839
(33,898)
35,941
15,257
(1,781)
(500)
(1,693)
—
(535)
(475)
(25,668)
10,273
—
(235)
10,038
(1,912)
8,126
—
28
28
2,969
8,154
1.75
1.73
6.65
6.54
Note
7
8, 15, 16
8, 14
8, 14
19
8, 10
6, 8
11
12
31
13
13
Contents Generation – Sub PageContents Generation – Section Consolidated Statement
of Financial Position
Strategic Report
Governance Financial Statements
Consolidated Statement of Financial Position
At 31 December 2023
Assets
Non‑current assets
Intangible assets
Property, plant and equipment
Right-of-use assets
Contract acquisition costs
Trade and other receivables
Total non‑current assets
Assets in disposal groups classified as held
for sale
Current assets
Inventories
Trade and other receivables
Contract acquisition costs
Current tax asset
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Loans and borrowings
Obligations under leases
Deferred income
Current tax liability
Contingent consideration
Total current liabilities
119
Franchise Brands plc
Annual Report and Accounts 2023
Note
2023
£’000
Restated*
2022
£’000
Restated*
2021
£’000
14
15
16
17
19
23
18
19
17
20
22
25
21
24
305,328
4,418
8,404
427
641
319,218
84,664
3,208
2,568
402
811
91,653
35,278
2,609
2,723
—
182
40,792
—
5,455
—
7,062
42,701
79
1,104
12,278
63,224
382,442
34,746
9,251
2,617
1,318
603
—
48,535
1,989
24,991
92
220
10,935
38,227
135,335
20,778
—
831
873
—
—
22,482
908
18,685
—
—
9,057
28,650
69,442
13,882
—
754
302
213
345
15,496
Liabilities directly associated with assets in
Disposal groups classified as held for sale
Non‑current liabilities
Loans and borrowings
Obligations under leases
Deferred income
Contingent consideration
Deferred tax liability
Total non‑current liabilities
Total liabilities
Total net assets
Issued capital and reserves attributable to
owners of the Company
Share capital
Share premium
Share-based payment reserve
Merger reserve
Translation reserve
EBT reserve
Retained earnings
Total equity attributable to equity holders
* See Note 1 for details.
Note
23
22
25
21
24
26
28
28
28
28
28
28
2023
£’000
Restated*
2022
£’000
Restated*
2021
£’000
—
2,561
—
76,908
5,787
2,894
—
33,925
119,514
168,049
214,393
969
131,131
1,936
69,754
24
(2,679)
13,258
214,393
—
1,626
1,848
—
4,134
7,608
32,651
102,684
652
37,293
1,217
52,212
155
(2,871)
14,026
102,684
—
1,780
460
2,567
2,139
6,946
22,442
46,999
480
36,966
789
1,390
—
(501)
7,875
46,999
The consolidated financial statements of Franchise Brands plc (Company number: 10281033) on
pages 118 to 173 were approved and authorised for issue by the Board of Directors on 19 June
2024 and were signed on its behalf by:
Mark Fryer
Director
Contents Generation – Sub PageContents Generation – Section Company Statement
of Financial Position
Strategic Report
Governance Financial Statements
Company Statement of Financial Position
At 31 December 2023
Note
2023
£’000
Restated*
2022
£’000
Restated*
2021
£’000
Note
2023
£’000
Restated*
2022
£’000
Restated*
2021
£’000
27
27
19
20
22
24
22
24
207,830
207,830
92,514
92,514
42,823
42,823
—
2,564
—
103,177
875
104,052
311,882
1,876
3,418
5,294
100,372
16,311
9,251
—
25,562
76,908
—
76,908
102,470
209,412
5,139
—
—
5,139
—
—
—
5,139
95,233
1,158
3,961
5,119
47,942
1,480
—
344
1,824
—
2,568
2,568
4,392
43,550
Issued capital and reserves attributable to
owners of the Company
Share capital
Share premium
Share-based payment reserve
Merger reserve
Translation reserve
EBT reserve
Retained earnings
Total equity attributable to equity holders
* See Note 1 for details.
28
28
28
28
28
28
969
131,131
1,936
69,634
—
(2,679)
8,421
209,412
652
37,293
1,217
52,092
—
(2,871)
6,850
95,233
480
36,966
789
1,270
—
(501)
4,546
43,550
No statement of comprehensive income is presented by the Company as permitted by Section
408 of the Companies Act. Franchise Brands plc reported a profit and total comprehensive
income for the financial period ended 31 December 2023 of £5.00m (restated 2022: £4.64m).
See Note 1c for further information on the restatement.
The Company financial statements of Franchise Brands plc (Company number: 10281033)
on pages 120 to 173 were approved and authorised for issue by the Board of Directors on
19 June 2024 and were signed on its behalf by:
Mark Fryer
Director
Assets
Non‑current assets
Investment in Group companies
Total non‑current assets
Assets in disposal groups classified as held
for sale
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Loans and borrowings
Contingent consideration
Total current liabilities
Non‑current liabilities
Loans and borrowings
Contingent consideration
Total non‑current liabilities
Total liabilities
Net assets
120
Franchise Brands plc
Annual Report and Accounts 2023
Contents Generation – Sub PageContents Generation – Section Consolidated Statement
of Cash Flows
Strategic Report
Governance Financial Statements
Consolidated Statement of Cash Flows
For the year ended 31 December 2023
Cash flows from operating activities
Profit for the year
Adjustments for:
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortisation of software & other intangibles
Amortisation of acquired intangibles
Non-recurring costs
Share-based payment expense
Willow Pumps contingent consideration
Gain on disposal of property, plant and equipment
Finance expense
Exchange differences on translation of foreign operations
Tax expense
Operating cash flow before movements in working capital
(Increase) in trade and other receivables
(Increase)/decrease in inventories
Increase/(decrease) in trade and other payables
Cash generated/(absorbed) from operations
Corporation taxes paid
Net cash generated from operating activities
Cash flows from investing activities
Purchases of property, plant and equipment
Proceeds from the sale of property, plant and equipment
Purchase of software
Purchase of Intellectual Property
Loans to franchisees
Loans to franchisees repaid
Deferred consideration
Acquisition of subsidiaries including costs, net of cash acquired
121
Franchise Brands plc
Annual Report and Accounts 2023
Note
2023
£’000
Restated*
2022
£’000
3,037
8,154
15
16
14
14
10
24
11
12
19
18
20
15
15
14
14
24
6
1,066
2,427
925
7,718
786
838
—
(54)
5,711
76
1,979
24,509
(3,767)
338
3,368
24,448
(4,498)
19,950
(1,183)
251
(1,350)
(522)
(149)
412
—
(48,894)
756
1,025
500
1,693
—
535
(1,232)
—
235
(28)
1,912
13,550
(3,062)
(401)
1,950
12,037
(2,629)
9,408
(422)
259
(1,088)
—
(1,062)
548
(1,680)
4,320
Contents Generation – Sub PageContents Generation – Section Strategic Report
Governance Financial Statements
Consolidated Statement of Cash Flows continued
For the year ended 31 December 2023
Net cash used in investing activities
Cash flows from financing activities
Bank loans – received
Bank loans – repaid
Loan notes – repaid
Preference shares – repaid
Capital element of lease liability repaid
Interest paid – bank and other loan
Interest paid – leases
Proceed from issue of shares
Proceeds from sale/(purchase) of shares by the Employee Benefit Trust
Dividends paid
Net cash generated/(absorbed) from financing activities
Net increase/(decreased) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Exchange differences on cash and cash equivalents
Cash and cash equivalents at end of year
*
See Note 1 for details.
122
Franchise Brands plc
Annual Report and Accounts 2023
Note
25
11
11, 25
30
2023
£’000
(51,435)
100,012
(62,097)
(29,155)
(58,520)
(2,362)
(5,374)
(325)
94,106
192
(3,371)
33,106
1,621
10,935
(278)
12,278
Restated*
2022
£’000
875
—
(2,953)
—
—
(1,037)
(116)
(119)
330
(2,370)
(2,339)
(8,604)
1,679
9,057
199
10,935
Contents Generation – PageContents Generation – Sub PageContents Generation – Section Term Loan
£’000
—
(2,953)
—
2,953
—
(55,000)
5,000
—
—
—
749
—
—
—
(49,251)
Revolving
credit facility
£’000
—
—
—
—
—
(45,012)
8,000
—
—
—
—
104
—
—
(36,908)
Loans &
borrowings
£’000
—
—
—
—
—
—
78,227
—
—
(78,227)
—
—
—
—
—
Preference
shares
£’000
—
—
—
—
—
—
58,520
—
—
(58,520)
—
—
—
—
—
Lease
liabilities
£’000
(2,534)
1,155
—
(1,377)
(2,756)
—
2,687
(325)
—
(6,127)
—
(53)
(1,925)
95
(8,404)
Total liabilities
from financing
activities
£’000
(2,534)
(1,798)
—
1,576
(2,756)
(100,012)
152,434
(325)
—
(142,874)
749
51
(1,925)
95
(94,563)
*Restated
Cash
£’000
9,057
—
1,679
199
10,935
—
—
—
(5,421)
7,042
—
(278)
—
—
12,278
*Restated
Total net cash/
(net debt)
£’000
6,523
(1,798)
1,679
1,775
8,179
(100,012)
152,434
(325)
(5,421)
(135,832)
749
(227)
(1,925)
95
(82,285)
Strategic Report
Governance Financial Statements
Consolidated Statement of Cash Flows continued
For the year ended 31 December 2023
Reconciliation of cash flow to the Group net debt position
Group
At 1 January 2022
Financing cash flows
Other cash flows*
Other changes
At 1 January 2023*
Financing cash inflows
Financing cash outflows
Leases interest expense
Other cash flows
Acquired through business combination
Amortised loan fees
Foreign exchange movements
Additions to New leases
Disposals
At 31 December 2023
* See Note 1 for details.
123
Franchise Brands plc
Annual Report and Accounts 2023
Contents Generation – PageContents Generation – Sub PageContents Generation – Section Reconciliation of cash flow to the Company net debt position
Revolving
credit facility
£’000
Total liabilities
from financing
activities
£’000
—
—
—
—
—
(45,012)
8,000
—
—
—
—
—
—
—
(100,012)
13,000
—
749
Term Loan
£’000
—
—
—
—
—
(55,000)
5,000
—
749
*Restated
cash
£’000
3,961
—
(543)
—
3,418
—
—
(2,543)
—
*Restated
Total net cash
(net debt)
£’000
3,961
—
(543)
—
3,418
(100,012)
13,000
(2,543)
749
—
(49,251)
104
(36,908)
104
(86,159)
—
875
104
(85,284)
Company Statement
of Cash Flows
Note
2023
£’000
Restated*
2022
£’000
5,000
4,639
Group
At 1 January 2022
Financing cash flows
Other cash flows*
Other changes
At 1 January 2023*
Financing cash inflows
Financing cash outflows
Other cash flows
Amortised loan fees
Foreign exchange
movements
At 31 December 2023
* See Note 1 for details.
130
(2,834)
5,384
—
(1,377)
(105)
211
6,409
3,373
11,071
20,853
(1,345)
19,508
—
(36,826)
(99,925)
(57,855)
(194,606)
100,012
(13,000)
(5,384)
94,106
192
(3,371)
172,555
(2,543)
3,418
875
19
20
24
30
—
—
40
(1,232)
(108)
—
90
3,429
(311)
4,292
7,410
(930)
6,480
(1,680)
—
—
(924)
(2,604)
—
—
(40)
330
(2,370)
(2,339)
(4,419)
(543)
3,961
3,418
Strategic Report
Governance Financial Statements
Company Statement of Cash Flows
For the year ended 31 December 2023
Cash flows from operating activities
Profit for the year
Adjustments for:
Non-recurring costs
Management charges
Finance expenses
Willow Pumps contingent consideration
Tax expense
Exchange differences on translation of foreign operations
Share-based payment expense
Operating cash flow before movements in working capital
(Increase) in trade and other receivables
Increase in trade and other payables
Cash (absorbed)/generated from operations
Corporation taxes paid
Net cash generated from operating activities
Cash flows from investing activities
Deferred consideration
Investment in subsidiary
Loan to subsidiary
Acquisition of subsidiaries including costs
Net cash used in investing activities
Cash flows from financing activities
Bank loans – received
Bank loans – repaid
Interest paid – bank and other loans
Proceed from issue of shares (net of costs)
Proceeds from sale/(purchase) of shares by the Employee
Benefit Trust
Dividends paid
Net cash flows (used)/generated by financing activities
Net (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
124
Franchise Brands plc
Annual Report and Accounts 2023
Contents Generation – Sub PageContents Generation – Section Consolidated Statement
of Changes in Equity
Share
capital
£’000
480
—
480
—
—
—
169
—
3
—
652
—
—
—
—
317
—
—
—
—
—
969
Share
premium
account
£’000
36,966
—
36,966
—
—
—
—
—
327
—
37,293
—
—
—
—
96,392
(2,554)
—
—
—
—
131,131
Share-based
payment
£’000
789
—
789
—
—
—
—
—
—
428
1,217
—
—
—
—
—
—
—
—
719
—
1,936
Merger
reserve
£’000
1,390
—
1,390
—
—
—
50,822
—
—
—
52,212
—
—
—
—
17,542
—
—
—
—
—
69,754
Strategic Report
Governance Financial Statements
Consolidated Statement of Changes in Equity
For the year ended 31 December 2023
Group
At 1 January 2022
Correction of Errors
*Restated At 1 January 2022
Profit for the year
Foreign exchange translation differences
Profit for the year and total comprehensive income
Contributions by and distributions to owners
Shares issued
Dividend paid
Contributions to Employee Benefit Trust
Share-based payment
At 1 January 2023
Profit for the year
Actuarial gain
Foreign exchange translation differences
Profit for the year and total comprehensive income
Contributions by and distributions to owners
Shares issued
Share Placing costs charged to Share Premium
Dividend paid
Contributions to Employee Benefit Trust
Share-based payment
Tax on share-based payment expense
At 31 December 2023
* See Note 1 for details.
125
Franchise Brands plc
Annual Report and Accounts 2023
Translation
reserve
£’000
*Restated
EBT reserve
£’000
*Restated
Retained
earnings
£’000
8,205
(329)
7,875
8,154
—
8,154
—
(2,339)
—
335
14,026
3,037
63
—
3,100
—
—
(3,371)
—
Total
£’000
47,325
(326)
46,999
8,154
155
8,309
50,991
(2,339)
(2,040)
763
102,684
3,037
63
(131)
2,969
114,251
(2,554)
(3,371)
192
—
719
(504)
3
(501)
—
—
—
—
—
(2,370)
—
(2,871)
—
—
—
—
—
—
—
192
—
—
(2,679)
(496)
13,258
(496)
214,393
—
—
—
—
155
155
—
—
—
—
155
—
—
(131)
(131)
—
—
—
—
—
—
24
Contents Generation – Sub PageContents Generation – Section Company Statement
of Changes in Equity
Strategic Report
Governance Financial Statements
Company Statement of Changes in Equity
For the year ended 31 December 2023
Company
At 1 January 2022
Correction of Errors
*Restated At 1 January 2022
*Restated Profit for the year and total comprehensive income
Contributions by and distributions to owners
Shares issued
Dividend paid
Contributions to Employee Benefit Trust
Share-based payment
At 1 January 2023
Profit for the year and total comprehensive income
Contributions by and distributions to owners
Shares issued
Share Placing costs charged to Share Premium
Dividend paid
Contributions to Employee Benefit Trust
Share-based payment
Tax on share-based payment expense
At 31 December 2023
* See Note 1 for details.
126
Franchise Brands plc
Annual Report and Accounts 2023
Share
capital
£’000
480
—
480
—
169
—
3
—
652
—
317
—
—
—
—
—
969
Share
premium
account
£’000
36,966
—
36,966
—
—
—
327
—
37,293
—
96,392
(2,554)
—
—
—
—
131,131
Share-based
payment
reserve
£’000
789
—
789
—
—
—
—
428
1,217
—
—
—
—
—
719
—
1,936
Merger
reserve
£’000
1,270
—
1,270
—
50,822
—
—
—
52,092
*Restated
EBT reserve
£’000
(504)
3
(501)
—
—
—
(2,370)
—
(2,871)
*Restated
Retained
earnings
£’000
4,546
—
4,546
4,639
—
(2,339)
—
4
6,850
*Restated
Total
£’000
43,547
3
43,550
4,639
50,991
(2,339)
(2,040)
432
95,233
—
—
5,000
5,000
17,542
—
—
—
—
—
69,634
—
—
—
192
—
—
—
(3,371)
—
114,251
(2,554)
(3,371)
192
—
719
—
(2,679)
(58)
8,421
(58)
209,412
Contents Generation – Sub PageContents Generation – Section Notes forming part of the
Financial Statements
Strategic Report
Governance Financial Statements
Notes forming part of the Financial Statements
For the year ended 31 December 2023
1 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
4.
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.
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.
127
Franchise Brands plc
Annual Report and Accounts 2023
Contents Generation – Sub PageContents Generation – Section Strategic Report
Governance Financial Statements
Governance Financial Statements
1 Restatements continued
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.
8.
9.
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.
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.
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
128
Franchise Brands plc
Annual Report and Accounts 2023
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.
4.
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.
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.
Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report
Governance Financial Statements
Governance Financial Statements
1a Consolidated Statement of Comprehensive Income (restated)
For the year ended 31 December 2022
Revenue
Cost of sales
Gross profit
Adjusted earnings before interest, tax, depreciation, amortisation, share-based payments & non-recurring items (“Adjusted EBITDA”)
Depreciation
Amortisation of software
Amortisation of acquired intangibles
Share-based payment expense
Non-recurring items
Total administrative expenses
Operating profit
Finance expense
Profit before tax
Tax expense
Profit for the year attributable to equity holders of the Parent Company
Other comprehensive income
Exchange differences on translation of foreign operations
Total comprehensive income attributable to equity holders of the Parent Company
Earnings per share
Basic
Diluted
129
Franchise Brands plc
Annual Report and Accounts 2023
Restatement
number
1, 2, 3
1
4
4
As previously
reported
31 December
2022
£’000
99,152
(63,187)
35,965
15,281
(1,781)
(500)
(1,504)
(535)
(475)
(25,479)
10,486
(235)
10,251
(1,961)
8,290
28
28
6.81
6.70
Correction
of errors
£’000
(29,313)
29,289
(24)
(24)
—
—
(189)
—
—
(189)
(213)
—
(213)
49
(164)
—
—
(0.16)
(0.16)
(Restated)
31 December
2022
£’000
69,839
(33,898)
35,941
15,257
(1,781)
(500)
(1,693)
(535)
(475)
(25,668)
10,273
(235)
10,038
(1,912)
8,126
28
28
6.65
6.54
Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report
Governance Financial Statements
Governance Financial Statements
1b Consolidated Statement of Financial Position (restated)
As at 1 January 2022 and 31 December 2022
Assets
Non‑current assets
Intangible assets
Property, plant and equipment
Right-of-use assets
Contract acquisition costs
Trade and other receivables
Total non‑current assets
As previously
reported
31 December
2022
£’000
Correction
of errors
£’000
As at 31
December
2022
(restated)
£’000
As previously
reported
1 January
2022
£’000
Correction
of errors
£’000
Restatement
number
4
85,113
3,208
2,568
402
811
92,102
(449)
—
—
—
—
(449)
84,664
3,208
2,568
402
811
91,653
35,278
2,609
2,723
—
182
40,792
As at
1 January
2022
(restated)
£’000
35,278
2,609
2,723
—
182
40,792
—
908
18,685
—
—
9,057
28,650
69,442
—
—
—
—
—
—
—
—
2,171
—
—
3
2,174
2,174
Assets in disposal groups classified as held for sale
3
5,576
(121)
5,455
—
Current assets
Inventories
Trade and other receivables
Contract acquisition costs
Current tax asset
Cash and cash equivalents
Total current assets
Total assets
130
Franchise Brands plc
Annual Report and Accounts 2023
2, 3, 9
5
1,989
21,660
92
220
10,799
34,760
132,438
—
3,331
—
—
136
3,467
2,897
1,989
24,991
92
220
10,935
38,227
135,335
908
16,514
—
—
9,054
26,476
67,268
Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report
Governance Financial Statements
Governance Financial Statements
1b Consolidated Statement of Financial Position (restated) continued
As at 1 January 2022 and 31 December 2022
Liabilities
Current liabilities
Trade and other payables
Obligations under leases
Deferred income
Current tax liability
Contingent consideration
Total current liabilities
Liabilities directly associated with assets in disposal groups classified as held for sale
Non‑current liabilities
Obligations under leases
Deferred income
Contingent consideration
Deferred tax liability
Total non‑current liabilities
Total liabilities
Total net assets
Issued capital and reserves attributable to owners of the Company
Share capital
Share premium
Share-based payment reserve
Merger reserve
Translation reserve
EBT reserve
Retained earnings
Total equity attributable to equity holders
131
Franchise Brands plc
Annual Report and Accounts 2023
As previously
reported
31 December
2022
£’000
Correction
of errors
£’000
As at 31
December
2022
(restated)
£’000
As previously
reported
1 January
2022
£’000
Correction
of errors
£’000
Restatement
number
2, 9
3
3
3
4
5
2, 3, 4
18,160
831
807
—
—
19,798
1,786
1,626
1,744
—
4,444
7,814
29,398
103,040
652
37,293
1,217
52,212
155
(3,007)
14,518
103,040
2,618
—
66
—
—
2,684
775
—
104
—
(310)
(206)
3,253
(356)
—
—
—
—
—
136
(492)
(356)
20,778
831
873
—
—
22,482
2,561
1,626
1,848
—
4,134
7,608
32,651
102,684
652
37,293
1,217
52,212
155
(2,871)
14,026
102,684
12,144
754
—
213
345
13,456
—
1,780
—
2,567
2,139
6,486
19,942
47,325
480
36,966
789
1,390
—
(504)
8,204
47,325
1,738
—
302
—
—
2,040
—
—
460
—
—
460
2,500
(326)
—
—
—
—
—
3
(329)
(326)
As at
1 January
2022
(restated)
£’000
13,882
754
302
213
345
15,496
—
1,780
460
2,567
2,139
6,946
22,442
46,999
480
36,966
789
1,390
—
(501)
7,875
46,999
Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report
Governance Financial Statements
Governance Financial Statements
1c Company Statement of Financial Position (restated)
As at 1 January 2022 and 31 December 2022
Assets
Non‑current assets
Investment in Group companies
Total non‑current assets
Assets in disposal groups classified as held for sale
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Contingent consideration
Total current liabilities
Non‑current liabilities
Contingent consideration
Total non‑current liabilities
Total liabilities
Net assets
Issued capital and reserves attributable to owners of the Company
Share capital
Share premium
Share-based payment reserve
Merger reserve
Translation reserve
EBT reserve
Retained earnings
Total equity attributable to equity holders
132
Franchise Brands plc
Annual Report and Accounts 2023
As previously
reported
31 December
2022
£’000
Correction of
errors
£’000
(Restated)
31 December
2022
£’000
As previously
reported
31 December
2021
£’000
Correction of
errors
£’000
(Restated)
31 December
2021
£’000
Restatement
number
7
8
5
8
5
7
91,590
91,590
2,564
1,268
3,282
4,550
98,704
4,531
—
4,531
—
—
4,531
94,173
652
37,293
1,217
52,092
—
(3,007)
5,926
94,173
924
924
92,514
92,514
42,823
42,823
—
2,564
—
608
136
744
1,668
608
—
608
—
—
608
1,060
—
—
—
—
—
136
924
1,060
1,876
3,418
5,294
100,372
5,139
—
5,139
—
—
5,139
95,233
652
37,293
1,217
52,092
—
(2,871)
6,850
95,233
859
3,958
4,817
47,640
1,181
344
1,525
2,568
2,568
4,093
43,547
480
36,966
789
1,270
—
(504)
4,546
43,547
—
—
—
299
3
302
302
299
—
299
—
—
299
3
—
—
—
—
—
3
—
3
42,823
42,823
—
1,158
3,961
5,119
47,942
1,480
344
1,824
2,568
2,568
4,392
43,550
480
36,966
789
1,270
—
(501)
4,546
43,550
Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report
Governance Financial Statements
Governance Financial Statements
1d Consolidated Statement of Cash Flows (restated)
For the year ended 31 December 2022
Cash flows from operating activities
Profit for the year
Adjustments for:
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortisation of software
Amortisation of acquired intangibles
Share-based payment expense
Willow Pumps contingent consideration
Finance expense
Exchange differences on translation of foreign operations
Tax expense
Operating cash flow before movements in working capital
(Increase)/decrease in trade and other receivables
(Increase) in inventories
Increase/(decrease) in trade and other payables
Cash generated from operations
Corporation taxes paid
Net cash generated from operating activities
Cash flows from investing activities
Purchases of property, plant and equipment
Proceeds from the sale of property, plant and equipment
Purchase of software
Loans to franchisees
Franchisee loans repaid
Deferred consideration
Acquisition of subsidiaries including costs, net of cash acquired
Net cash used in investing activities
133
Franchise Brands plc
Annual Report and Accounts 2023
As previously
reported
31 December
2022
£’000
Restatement
number
Correction
of errors
£’000
(Restated)
31 December
2022
£’000
2, 3, 4
8,318
(164)
8,154
4
4
2, 3, 9
2, 3, 6, 9
6
756
1,025
500
1,504
535
(1,232)
235
(28)
1,961
13,574
(2,022)
(401)
(794)
10,357
(2,629)
7,728
(422)
259
(1,088)
(1,062)
548
—
4,320
2,555
—
—
—
189
—
—
—
—
(49)
(24)
(1,040)
—
2,744
1,680
—
1,680
—
—
—
—
—
(1,680)
—
(1,680)
756
1,025
500
1,693
535
(1,232)
235
(28)
1,912
13,550
(3,062)
(401)
1,950
12,037
(2,629)
9,408
(422)
259
(1,088)
(1,062)
548
(1,680)
4,320
875
Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section
Strategic Report
Governance Financial Statements
Governance Financial Statements
1d Consolidated Statement of Cash Flows (restated) continued
Cash flows from financing activities
Bank loans – repaid
Capital element of lease liability repaid
Interest paid – bank and other loan
Interest paid – leases
Proceed from issue of shares
Purchase of shares by the Employee Benefit Trust
Dividends paid
Net cash generated from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Exchange differences on cash and cash equivalents
Cash and cash equivalents at end of year
134
Franchise Brands plc
Annual Report and Accounts 2023
As previously
reported
31 December
2022
£’000
Restatement
number
Correction
of errors
£’000
(Restated)
31 December
2022
£’000
(2,953)
(1,037)
(116)
(119)
330
(2,503)
(2,339)
(8,737)
1,546
9,054
199
10,799
5
5
—
—
—
—
—
133
—
133
133
3
—
136
(2,953)
(1,037)
(116)
(119)
330
(2,370)
(2,339)
(8,604)
1,679
9,057
199
10,935
Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section
Strategic Report
Governance Financial Statements
Governance Financial Statements
1e Company Statement of Cash Flows (restated)
For the year ended 31 December 2022
Cash flows from operating activities
Profit for the year
Adjustments for:
Finance expenses
Willow Pumps contingent consideration
Tax expense
Share-based payment expense
Operating cash flow before movements in working capital
Decrease/(increase) in trade and other receivables
Increase/(decrease) in trade and other payables
Cash generated from operations
Corporation taxes paid
Net cash generated from operating activities
Cash flows from investing activities
Deferred consideration
Acquisition of subsidiaries including costs
Net cash used in investing activities
Cash flows from financing activities
Interest paid – bank and other loans
Proceed from issue of shares
Purchase of shares by the Employee Benefit Trust
Dividends paid
Net cash flows (used)/generated by financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
135
Franchise Brands plc
Annual Report and Accounts 2023
As previously
reported
31 December
2022
£’000
Correction of
errors
£’000
(Restated)
31 December
2022
£’000
Restatement
number
7
3,715
40
(1,232)
(108)
90
2,505
(2)
2,303
4,806
(930)
3,876
—
—
—
(40)
330
(2,503)
(2,339)
(4,552)
(676)
3,958
3,282
8
6, 8
6
7
5
5
924
—
—
—
—
—
924
(309)
1,989
2,604
—
2,604
(1,680)
(924)
(2,604)
—
—
133
—
133
133
3
136
4,639
40
(1,232)
(108)
90
3,429
(311)
4,292
7,410
(930)
6,480
(1,680)
(924)
(2,604)
(40)
330
(2,370)
(2,339)
(4,419)
(543)
3,961
3,418
Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report
Governance Financial Statements
Governance Financial Statements
2 Significant accounting policies
General information
Franchise Brands plc (the “Company”, and together with its subsidiaries, the “Group”), is a
public company incorporated in England and Wales under the Companies Act 2006 with
Company Number 10281033. The principal activity of the Group is focused on building market-
leading businesses in selected customer segments, using primarily a franchise model. Our
focus is on established brands which can benefit from our shared support services, specialist
sector expertise, management experience and Group resources. The principal activity of the
Company is that of a holding company of a group of companies engaged in franchising and
related activities.
Basis of consolidation
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.
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.
Going concern
The Group’s financial statements have been prepared on a going concern basis as the Directors
have a reasonable expectation that the Group has adequate resources to continue in existence
for the foreseeable future. In assessing the appropriateness of adopting the going concern
basis in preparing the Annual Report and financial statements, the Directors have considered
the current financial position of the Group, alongside its principal risks and uncertainties. The
review performed considers plausible financial and operational issues that could reasonably
arise within the period. This included credit risk, dependency on key suppliers and customers;
and economic risk. The budgets and plans prepared for the next 12 months to June 2025 have
been subjected to sensitivity analysis, considering the impact of a downturn in trade.
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In all cases, the business model remained robust. The Group has generated significant profits
both during the years covered by these financial statements, and in previous years. The Group
has sufficient current financial assets to meet its current liabilities as they fall due. The Group’s
strong operating cash flow allows for expected repayment of the bank Group facilities prior
to the extended repayment date (as extended in April 2024) of April 2028; and allows for
contractual partial repayment of term loan with interest, and lease costs, in 2024. The Directors
have stress-tested the banking covenants, considered mitigating actions, and concluded
that there is sufficient headroom. All these provide resilience against these factors and other
principal risks the Group is exposed to. The Directors have made appropriate enquiries and
consider that the Group has adequate resources to continue in operational existence for the
foreseeable future. Accordingly, the Directors continue to adopt the going concern basis in
preparing the financial statements.
Segmental reporting
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 in line with the divisions of Pirtek Europe, Water &
Waste Services, Filta International and B2C. Within the Water & Waste Services division there
are two different principal activities: franchisor – management of franchisees who trade with
businesses and consumers; and direct labour organisations – trading directly with businesses
and consumers.
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.
Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report
Governance Financial Statements
Governance Financial Statements
2 Significant accounting policies continued
Business combinations
The consolidated financial statements comprise the accounts of the Company and its subsidiary
undertakings. An undertaking is regarded as a subsidiary if the Group has control over its
operating and financial policies. Control is achieved when the Company has the power over the
investee; is exposed, or has rights, to variable returns from its involvement with the investee;
and has the ability to use its power to affect its returns. The profits and losses of subsidiary
undertakings are consolidated as from the effective date of acquisition or to the effective date
of disposal.
The Group uses the purchase method of accounting to account for the acquisition of
subsidiaries. The cost of an acquisition is measured as the fair value of the assets acquired,
equity instruments issued and liabilities incurred or assumed at the date of completion,
plus costs directly attributable to the acquisition. Identifiable assets acquired, liabilities and
contingent liabilities assumed in a business combination are measured initially at their fair values
at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost
of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is
recorded as goodwill.
If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired,
the difference is recognised directly in the Income Statement.
Intercompany transactions, balances and unrealised gains on transactions between Group
companies are eliminated. Unrealised losses are also eliminated unless the transaction provides
evidence of an impairment of the asset transferred. Accounting policies of acquired subsidiaries
are changed where necessary to ensure consistency with the policies adopted by the Group.
In the Group, costs of acquisition are charged directly to the income statement as non-recurring
costs, unless directly relating to equity issuance, in which case these costs have been charged
to share premium account. In the Company, directly attributable costs of acquisition have been
capitalised as investment in subsidiaries.
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Foreign currencies
Functional and presentation currency
The consolidated financial statements are presented in Pounds Sterling, which is also the
functional currency of the parent company.
Foreign currency transactions and balances
Foreign currency transactions are translated into the functional currency of the respective Group
entity, using the exchange rates prevailing at the dates of the transactions. Foreign exchange
gains and losses resulting from the settlement of such transactions and from remeasurement of
monetary items denominated in foreign currency at year-end exchange rates are recognised in
the profit and loss.
Non-monetary items are not retranslated at year-end and are measured at historical cost, except
for non-monetary items measured at fair value which are translated using the exchange rates at
the date when fair value was determined.
Foreign operations
In the Group’s financial statements, all assets, liabilities and transactions of Group entities
with a functional currency other than Pounds Sterling are translated into Pounds Sterling
upon consolidation.
On consolidation, assets and liabilities have been translated into Pounds Sterling at the closing
rate at the reporting date. Income and expenses have been translated into Pounds Sterling
at the average monthly rate, as an approximation of the rates on the dates of the transactions
over the reporting period. Exchange differences are charged/credited to other comprehensive
income and recognised in the translation reserve in equity.
Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report
Governance Financial Statements
Governance Financial Statements
2 Significant accounting policies continued
Intangible assets
Intangible assets comprise goodwill, certain acquired separable corporate brand names,
acquired customer relationships, acquired franchise relationships, acquired licence trade
agreements and capitalised computer software not integral to a related item of hardware.
Goodwill represents the excess of fair value attributed to investments in businesses or
subsidiary undertakings over the fair value of the underlying net assets, including intangible
assets, at the date of their acquisition. Goodwill impairment reviews are undertaken annually
or more frequently if events or changes in circumstances indicate a potential impairment.
The carrying value of goodwill is compared to the net present value of future cash flows
derived from the underlying assets using a projection period of up to five years, based on the
latest approved budgets, for each cash generating unit. After the projection period a steady
growth rate representing an appropriate long-term growth rate for the industry is applied. Any
impairment is recognised immediately as an expense and is not subsequently reversed.
Corporate brand names, trademarks, customer relationships, acquired franchise relationships,
and other intangibles acquired as part of acquisitions of businesses are capitalised separately
from goodwill as intangible assets if their value can be measured reliably on initial recognition
and it is probable that the expected future economic benefits that are attributable to the asset
will flow to the Group. Certain corporate brands and trademarks of the Group are considered
to have an indefinite economic life because of the institutional nature of the corporate brand
names, their proven ability to maintain market leadership and profitable operations over long
periods of time and the Group’s commitment to develop and enhance their value.
The carrying value of these intangible assets is reviewed at least annually for impairment and
adjusted to the recoverable amount if required. Recoverable amount is the higher of fair value
less costs to sell and its value in use. Where the carrying amount of an asset or cash generating
unit exceeds its recoverable amount the asset or cash generating unit is considered impaired
and written down to its recoverable amount. Any impairment is charged to the profit and loss in
the period concerned.
Amortisation is provided at rates calculated to write-off the cost less estimated residual value
of each asset on a straight-line basis over its estimated useful life as follows. Customer-related
intangibles have a useful life of 5-10 years. Franchise contracts have a useful life of 10 years.
Others (including capitalised computer software) have a useful life of 3-10 years. Brands that
have a finite life have a useful life of 10-50 years.
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Revenue
Revenue is recognised to the extent that it is probable that the economic benefits will flow to
the Group and the revenue can be reliably measured. Revenue is measured at the fair value
of consideration received or receivable, net of returns, rebates and value-added taxes. There
have been restatements to revenue within Metro Rod, Filta UK and ChipsAway (see Note 1 ). The
following criteria must also be met before revenue is recognised:
National accounts and commission agent revenue
Within Metro Rod and Filta UK, national account revenue is recognised net, or on an agent
commission basis, as the Group only has momentary control of the work between receiving
the work and passing it to the incumbent franchise. Franchisees have right of first refusal, and
maintain operational fulfilment; if they cannot carry out the work, they must find someone else
to complete the work. Within ChipsAway the franchisees are passed a lead, which may or may
not be converted into a job, and as such we treat national account revenue in the same way
as above. In each case our performance obligation is to pass the work order or lead to the
franchisee, as such we recognise revenue at this point.
Local accounts and royalty fee income
Management service fees (“MSF”) is a sales-based royalty, charged for the continuing use of
the rights and continuing services provided during the franchise period agreements term. They
are recognised as the service is provided and the right to access the licence are used. These
are charged on a monthly basis and the values recognised are based on the performance
obligations in the relevant contracts with our franchisees.
Where the underlying transaction belongs to the franchisee MSF is recorded as a royalty fee.
The work is sourced, and jobs are priced and completed, by the franchisees. For national
account sales at Pirtek, and local account sales in all subsidiaries, this is deemed to be when the
work is invoiced, as we play no part in passing the work to the franchise (see Note 3 for critical
accounting judgements).
Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report
Governance Financial Statements
Governance Financial Statements
2 Significant accounting policies continued
Revenue continued
Sale of new franchise territories
Revenue from the sales of new franchise territories represent the charges for packages which
include start-up support and equipment, and the right to access the licence to operate in a
designated territory for a stated length of time. The territory fee is deferred over the length of
the franchise agreement and released to the combined statements of comprehensive income
on a straight-line basis, as our performance obligation is to provide a licence to operate.
If equipment or stock is provided, this is considered a distinct performance obligation and
recorded at a point in time when transferred over to the franchisee.
When a new franchise joins the Group, they are given extensive training. Within Metro Rod, Filta
UK and the B2C business the revenue associated with this training is recognised over the life of
the franchise agreement, as it is deemed to be a pre-opening activity which is fundamental for a
new franchise to begin operating.
Resale of franchise territories
Revenue from re-sales of franchise territories is recognised when the sale has been
contractually transferred. It is recognised at a point in time as a termination fee.
Training facility revenue
Revenue from training within Filta International and Pirtek is recognised at the point at which
the training is completed, as they are distinct performance obligations in the context of these
specific contracts, and at that point we have completed our performance obligations. Filta
International and Pirtek have their own training centres, providing ongoing industry-specific
training to franchisee engineers in their respective industries which go beyond training
franchisees on how to work with Filta International and Pirtek as franchisees respectively. As
such, training is a separate revenue stream in these entities and this revenue is distinct from
franchise sales.
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Product sales
Revenue from sales of products is recognised upon dispatch from the warehouse, as this is
when control is deemed to have been transferred. Where freight costs are charged to the
franchise, revenue is recognised in line with product sales. Pirtek franchisees may order direct
from suppliers on a central account; in this instance we recognise both the revenue from
recharging franchisees and cost of goods from the supplier under revenue, in a back-to-back
agreement as an agent where no profit is recorded.
Direct labour income
Direct labour income is where labour employed by the Group carry out revenue-earning work.
Revenue from our direct labour organisations is recognised at the point of which the job is
completed, with the exception of Willow Pumps.
Within Willow Pumps revenue is recognised when our performance obligations are met in
relation to an individual job. Willow Pumps performs installation and commissioning work using
its own labour as well as bought-out material by integrating them into a single performance
obligation where control over goods is transferred in advance of rendering services. Due
to the bespoke nature of work performed and contracts being non-cancellable, it meets the
requirements of IFRS 15.35c for recognising revenue on over-time basis. However, practically,
the entity recognises revenue on completion of each phase (which takes 1-2 days). This is not
considered to be material by the Group. Due to the nature of work that requires use of labour, it
is appropriate to use the input method to measure stage of completion. Also, observable inputs
to measure the stage of completion based on an output method is not available.
Due to the above, it is appropriate to recognise revenue at nil margin for transfer of control over
bought-out standard material before providing installation and commissioning services. It is to
be noted that ‘nil margin’ recognition is available only when the measure of progress is based
on input method and not output method (see Note 3). The performance obligations are defined
in our underlying contracts with customers.
Waste oil
Revenue from sales of waste oil is recognised on a principal basis; although it is the franchisees
that collect and transfer the waste oil, Filta places restrictions on the inventory, insofar as the
franchisees can only sell to Filta, and the onward sale of the waste oil is at Filta’s contractual
risk. Filta retains control over the oil for a period of time, it is not a back-to-back arrangement.
Revenue is recognised when the oil is collected by the customer, as this is when control is
deemed to have transferred.
Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report
Governance Financial Statements
Governance Financial Statements
2 Significant accounting policies continued
Revenue continued
IT contribution
Franchisees are charged a monthly fee for use of IT systems. Revenue is recognised when the
franchisees are invoiced; this is when the monthly service of providing the IT that allows the
franchise to operate their franchise has been fulfilled.
Contract acquisition costs
Internal staff-related costs to obtain a customer are expensed to the income statement as
incurred. Where these are external i.e. broker fees, these costs are capitalised and recognised
within contract assets where management expects to recover those costs. Contract assets are
amortised, through cost of sales, over the period consistent with the Group’s transfer of the
related goods and services to the customer.
Central billing
In certain circumstances the franchisees are charged a fee to invoice certain national account
customers on their behalf. This is recognised when the customer has been invoiced, at which
point we are able to invoice the franchisee for our customer invoicing.
National advertising funds
National Advertising Funds are collected from franchisees under their agreements and then
spent on their behalf on advertising which benefits the underlying franchise networks. The
management of the funds does not result in any profit or loss for the Group as all funds received
are expended on behalf of the networks. Advertising is not seen to be a separate performance
obligation from licence (local) and agency (national) sales, it is merely an add-on that the
franchisee contributes towards. Advertising of our brands, our franchisees, and the services that
they offer, does not constitute a service to the customer, hence advertising does not represent
a separate performance obligation. The Directors have concluded that the Group will recognise
the costs expended by the funds in the year, and will recognise a fixed royalty amount as
revenue, with any difference from the amount of cash received from our franchisees as accrued
or deferred revenue within the balance sheet. This is because it is the Group which controls the
expenditure of the funds, rather than the franchisees. Overall, there is no impact on profit.
Other income
The Group has a number of other revenue streams, which are immaterial for reporting purposes.
These include freight charges to franchisees, lending vans to franchisees, and other charges to
franchisees.
The costs capitalised primarily include broker fees paid to third parties where payment is
identified as relating directly to the sale of a territory licence and initially recognised upon the
signing of a customer contract. The costs are amortised over the contract life. Management is
required to determine the recoverability of contract-related assets at each reporting date. An
impairment exists if the carrying amount of any asset exceeds the amount of consideration the
Group expects to receive in exchange for providing the associated goods and services under
the relevant contract. Any impairment is recognised immediately where such losses are forecast.
The movement in the contract asset balance in the period, therefore, represents additional
payments made, subsequent amortisation and any required impairment.
Financial liabilities
Bank borrowings are initially recognised at fair value net of any transaction costs directly
attributable to the issue of the instrument. Such interest-bearing liabilities are subsequently
measured at amortised cost using the effective interest rate method, which ensures that any
interest expense over the period to repayment is at a constant rate on the balance of the
liability carried in the consolidated statement of financial position. For the purposes of each
financial liability, interest expense includes initial transaction costs and any premium payable
on redemption, as well as any interest or coupon payable while the liability is outstanding.
Trade payables and other short-term monetary liabilities are initially recognised at fair value and
subsequently carried at amortised cost using the effective interest method.
For any bank borrowings denominated in foreign currency, the balances are translated at the
relevant exchange rate at the reporting date. Any applicable gains or losses are taken through
other comprehensive income.
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Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report
Governance Financial Statements
Governance Financial Statements
2 Significant accounting policies continued
Long‑term employee benefits
A one-off bonus is payable to staff who remain with the French businesses until they retire
based on French law. Under IAS 19 obligations for one-off employee bonuses are recognised
in the balance sheet under provisions for liabilities based on assessment of the current value of
those benefits. The current value is calculated using criteria including earnings, life expectancy,
estimated length of service and wage inflation which is then discounted to give an estimated
current value. The annual movement in provision is charged to Other Comprehensive Income.
Financial assets
All of the Group’s financial assets are classified and held at amortised cost. These assets
arise principally from the provision of goods and services to customers, but also incorporate
other types of financial assets where the objective is to hold these assets in order to collect
contractual cash flows and the contractual cash flows are solely payments of principal and
interest. They are initially recognised at fair value plus transaction costs that are directly
attributable to their acquisition or issue, and are subsequently carried at amortised cost using
the effective interest rate method, less provision for impairment.
Inventories are stated at the lower of cost and net realisable value. The cost of goods for
resale is based on a weighted average cost methodology. At the end of each reporting period
inventories are assessed for impairment.
Impairment provisions for trade receivables are recognised based on the simplified approach
within IFRS 9 using a provision matrix in the determination of the lifetime expected credit losses.
During this process the probability of the non-payment of the trade receivables is assessed
based on customer type, history of payment as well as by the number of days that debt is past
due. This probability is then multiplied by the amount of the expected loss arising from default
to determine the lifetime expected credit loss for the trade receivables. For trade receivables,
which are reported net, such provisions are recorded in a separate provision account with the
loss being recognised within cost of sales in the consolidated statement of comprehensive
income. On confirmation that the trade receivable will not be collectable, the gross carrying
value of the asset is written off against the associated provision. Cash and cash equivalents
includes cash in hand.
Property, plant and equipment
Property, plant and equipment assets are carried at cost less accumulated depreciation and
any recognised impairment in value. Cost comprises the aggregate amount paid and the
fair value of any other consideration given to acquire the asset and includes cost directly
attributable to making the asset capable of operating as intended. Depreciation is provided to
write-off the cost, less the estimated residual values, of all tangible fixed assets evenly over
their expected useful lives. It is calculated at the following rates:
Leasehold property improvements
Short-term leasehold improvements
Freehold property
Motor vehicles
Plant & equipment
Fixtures & fittings
Computer equipment
–
–
–
–
–
–
–
over period of lease
over period of lease
2%-10% straight line
10%-25% straight line
10%-33% straight line
20%-33% straight line
20%-33% straight line
The assets’ residual values, useful lives and methods of depreciation are reviewed and
adjusted, if appropriate on an annual basis. Any gain or loss arising on derecognition of
an asset is included in the statement of comprehensive income in the year that the asset
is derecognised.
Share‑based payment
When equity-settled share options are awarded to employees, the fair value of the options at
the date of grant is charged to the statement of comprehensive income over the vesting period.
Share-based payment costs are charged to the subsidiary companies in line with their allocation
of share options.
Fair value is measured by the use of an appropriate valuation model, which takes into account
conditions attached to the vesting and exercise of the equity instruments. The expected life
used in the model is adjusted, based on management’s best estimate, for the effects of non-
transferability, exercise restrictions and behavioural considerations. The volatility in the model
is calculated by reference to an implied volatility of a group of listed entities that have similar
characteristics and are in the same industry sector.
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Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section
Strategic Report
Governance Financial Statements
Governance Financial Statements
2 Significant accounting policies continued
Share‑based payment continued
Additionally, all qualifying US and European employees have been awarded stock appreciation
rights (“SARs”) which are cash settled. The SARs are conditional bonuses whose value will be
calculated by reference to the amount by which the price of the Company’s ordinary shares
have risen above the base price at the date of exercise, thus providing holders of SARs the
same reward value as if the SARs were share options. The qualifying conditions and timing of
vesting are identical to those within the share options scheme for UK employees. For these
cash settled share-based payments, a liability is initially recognised at fair value based on the
estimated number of awards that are expected to vest, adjusting for market-based performance
conditions. Subsequently at each reporting period until the liability is settled, it is remeasured
to fair value with any changes in the fair value recognised in the statement of comprehensive
income. There are no SARs within the Company.
Corporation tax
Current tax assets and liabilities are measured at the amount expected to be received or paid to
the taxation authorities. Corporation tax is charged or credited to the income statement, except
when it relates to items charged directly to other comprehensive income or to equity, in which
case the corporation tax is also dealt with in other comprehensive income or equity respectively.
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or
liability in the statement of financial position differs from its tax base, except for differences
arising on the initial recognition of goodwill. Recognition of deferred tax assets is restricted
to those instances where it is probable that taxable profit will be available against which the
difference can be utilised. The amount of the asset or liability is determined using tax rates that
have been enacted or substantially enacted by the balance sheet date and are expected to
apply when the deferred tax liabilities or assets are settled or recovered. Deferred tax assets
and liabilities are offset when the Group has a legally enforceable right to offset current tax
assets and liabilities.
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Leases
In line with IFRS 16, all leases are accounted for by recognising a right-of-use asset and a lease
liability except for leases with a duration of 12 months or less.
Lease liabilities are measured at the present value of the contractual payments due to the lessor
over the lease term, with the discount rate determined by reference to the rate inherent in the
lease unless (as is typically the case) this is not readily determinable, in which case the Group’s
incremental borrowing rate on commencement of the lease is used. The range of incremental
borrowing rates used is between 2.95 and 5.5%, depending on the type of asset and its
characteristics. There are no variable lease payments to consider.
Subsequent to initial measurement lease liabilities increase as a result of interest charged at a
constant rate on the balance outstanding and are reduced for lease payments made. Right-of-
use assets are amortised on a straight-line basis over the remaining term of the lease.
When the Group revises its estimate of the term of any lease (because, for example, it re-
assesses the probability of a lessee extension or termination option being exercised), it adjusts
the carrying amount of the lease liability to reflect the payments to make over the revised term,
which are discounted using a revised discount rate. An equivalent adjustment is made to the
carrying value of the right-of-use asset, with the revised carrying amount being amortised over
the remaining (revised) lease term. If the carrying amount of the right-of-use asset is adjusted to
zero, any further reduction is recognised in profit or loss.
When the Group renegotiates the contractual terms of a lease with the lessor, the accounting
depends on the nature of the modification:
• where the renegotiation increases the scope of the lease (whether that is an extension to the
lease term, or one or more additional assets being leased), the lease liability is remeasured
using the discount rate applicable on the modification date, with the right-of-use asset being
adjusted by the same amount.
• if the renegotiation results in a decrease in the scope of the lease, both the carrying amount
of the lease liability and right-of-use asset are reduced by the same proportion to reflect the
partial or full termination of the lease with any difference recognised in profit or loss. The
lease liability is then further adjusted to ensure its carrying amount reflects the amount of
the renegotiated payments over the renegotiated term, with the modified lease payments
discounted at the rate applicable on the modification date. The right-of-use asset is adjusted
by the same amount.
Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report
Governance Financial Statements
Governance Financial Statements
2 Significant accounting policies continued
Employee benefit trust
In order to facilitate its employee share option scheme, on 1 July 2021 the Group established an
onshore discretionary employee benefit trust (the “EBT”), which is expected to conduct market
purchases of ordinary shares to satisfy potential future option exercises by employees (but not
Directors). When the Group funds the EBT the cash value is debited to a separate EBT reserve
of the Parent Company. The EBT’s assets are consolidated into the Group.
Adjusted performance measures (“APMs”)
APMs are utilised throughout this report as key performance indicators for the Group and are
calculated by adjusting the relevant IFRS measurement by amortisation of acquired intangibles,
impairment losses, share-based payments and other non-recurring items including acquisition
costs.
The three main APMs which are used are System sales, Adjusted EBITDA and Adjusted EPS.
System sales are the total aggregate sales of franchisees and the DLO operations net of VAT to
third party customers. The Directors use this measure to compare the underlying revenues of
each business.
Adjusted EBITDA is earnings before interest, tax, depreciation, amortisation, share-based
payment expenses and non-recurring items. This measure is used to give the Chief Operating
Decision Maker (“CODM”) and the Board visibility of the true operational metrics of the business.
The Directors use the Adjusted EBITDA measure when making decisions about the Group’s
activities. As these are non-GAAP measures, Adjusted EBITDA measures used by other entities
may not be calculated in the same way and are not directly comparable.
Adjusted EPS is before amortisation of acquired intangibles, share-based payment expenses,
exchange differences and non-recurring items. Once again this provides a more operationally
focused view of the relevant subsidiaries.
Non-recurring costs which are material in size and infrequent in nature are disclosed separately
in the consolidated income statement. These include acquisition-related fees, restructuring
costs and other material one-off costs. The separate recording of these items, along with the
details disclosed in Note 8 of these accounts help provide an indication of the underlying
business performance of the Group.
The reconciliation of these items to IFRS measurements can be found in the Chief Financial
Officer’s Review on page 62. APMs are non-GAAP measures and are not intended to replace
those measurements, but are the measures used by the Directors in their day-to-day operational
management of the business, and are, therefore, considered important key performance
indicators (“KPIs”).
Adoption of new standards
At the date of authorisation of these financial statements, the following standards and
interpretations that are relevant to the Group, which have not been applied in these financial
statements, were in issue but not yet effective. None of the standards are expected to have a
material impact on the Group financial statements on application.
Effective for periods
beginning on or after:
International Accounting Standards (“IAS”)
IFRS 17 insurance contracts
Disclosure of accounting policies – Amendments to IAS 1 and IFRS practice
statement 2
Definition of accounting estimates – Amendments to IAS 8
Deferred tax related to assets and liabilities arising from a single transaction –
Amendments to IAS 12
Classification of liabilities as current or non-current – Amendments to IAS 1
Non-current liabilities with covenants – Amendments to IAS 1
1 January 2023
1 January 2023
1 January 2023
1 January 2023
1 January 2024
1 January 2024
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Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Governance Financial Statements
3 Critical accounting estimates and judgements
The preparation of financial statements requires management to make judgements, estimates
and assumptions that affect the amounts reported for assets and liabilities as at the balance
sheet date and the amounts reported for revenues and expenses during the period. The
nature of estimation means that actual outcomes could differ from those estimates. Each of
the following items contain judgements and significant estimates and have the most significant
effect on amounts recognised in the financial statements.
Local account sales
Local account customers are sourced, and jobs are priced and completed, by the incumbent
franchisee. Our performance obligations are to grant the licence to operate to the franchisees;
Metro Rod also provides invoicing and cash collection services as a performance obligation,
however we have concluded these are not where the significant allocation of consideration
applies. As such we are generating royalty income, and therefore are only recognising our
management fee on a net basis.
Revenue recognition
National account sales
Within Metro Rod, and parts of Filta UK and ChipsAway, historically statutory revenue in relation
to national account customers was recognised gross, as we treated national account revenue
acting as principal. We create a national customer framework; this will set out the price of a
range of services to be provided, the service level agreement, what work should be carried out,
and how it should be carried out. Within Metro Rod and Filta UK orders are received centrally,
and this creates a contract with the customer. This work is passed to the incumbent franchisee,
who has right of first refusal, and will carry out the work. Within ChipsAway a lead is passed
to franchisees who quote for the work, and that quote may or may not be successful. The
responsibility for operational fulfilment lies with the local franchise. If they cannot carry out the
work, the franchise must find someone else to do the work or cancel the job. As such, following
an assessment of the contracts, facts and circumstances, the Group has concluded that we
are acting as a commission agent (not as principal), as we only have momentary control of the
contract as it is a back-to-back arrangement, and operational fulfilment rests with the franchisee.
Metro Rod, Filta UK and ChipsAway’s performance obligations are deemed to have been
met when the work is passed to the relevant franchise, and this is the point of recognition for
revenue. However, the value of each job is unknown as this point, therefore the revenue is
estimated using historical averages, and retrospectively assessed on the basis of the invoice
value to the customer. Metro Rod charges its franchisees a management service fee at the
rate of up to 22.5% of their underlying System sales as a commission agent, and it is this
management service fee that Metro Rod recognises as statutory sales.
Franchise fees
The territory fee is deferred over the length of the franchise agreement and released to the
combined statements of comprehensive income on a straight-line basis, as our performance
obligation is to provide a licence to operate. Internal costs are expensed to the income
statement as incurred; external costs directly related to the acquisition of a new franchisee
are deferred and released to the statement of comprehensive income to match the revenue
recognition. These are not a significant quantum, please see Note 17.
Where franchise territories are resold, on an arm's length basis between a franchisee and a
third party, it is the Group’s policy to recognise the original deferred revenue over the life of the
original franchise agreement, and the resale fee is recognised immediately, as a termination fee,
as we have completed our obligations as facilitators for the resale. If a franchise agreement is
terminated by either party the remainder of any revenue and cost is recognised immediately,
and any subsequent sale is treated as a new territory sale.
In the past Metro Rod and B2C would have recognised all franchise sales immediately. The
impact of this change to franchise fees policy is to increase revenue and statutory sales by
£0.1m (2022: £0.1m reduction).
Training fees revenue recognition
We have deemed that training fees for new franchisees in Metro Rod and Filta UK should be
recognised over the life of the franchise agreement, as this is a pre-opening activity as the
franchise cannot operate without this training.
Pirtek and Filta International have their own training centres and provide training externally wider
than the franchise network. As such, training is a distinct revenue stream in these instances. All
training revenues are judged to be revenue at the point the training takes place, as at that point
we have performed our obligations to train the franchise staff to a necessary standard.
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Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section Direct labour organisations revenue recognition
Within our direct labour organisations, we act as a principal in arranging, completing, invoicing
and cash collecting from each contract. As such, we recognise revenue gross at the point at
which our performance obligations are met, which is on invoicing the customer.
Direct sales from third party suppliers
Where a franchisee buys directly from a third party supplier, but the supplier invoices the Group
and we invoice the franchisee, no revenue is recorded. In these cases, control over the goods is
momentary: the term of the delivery from the supplier to franchisee is delivered at place.
The Group does not carry any inventory risk and the transaction is to facilitate the work of the
franchisee only.
National advertising funds revenue recognition
As per Note 2, National Advertising Funds are collected from franchisees, and then spent
on their behalf on advertising. Franchise Brands' subsidiaries performance obligations are to
receive and manage the funds, and then spend it for the benefit of the franchise community;
this is completed, and therefore recognised as revenue, at the point at which consideration
is given for the advertising. We take a judgement on estimating the amount to collect from
franchisees; this is held on the statement of financial position until it is recognised as revenue.
An assessment is made annually on whether a constraint needs to be applied, depending on
whether the amount held on the statement of financial position is in credit or debit.
Strategic Report Governance Financial Statements
Governance Financial Statements
3 Critical accounting estimates and judgements continued
Revenue recognition continued
Willow Pumps revenue recognition
As part of its range of services, Willow Pumps undertakes the supply and installation of pumps
in adoptable pump stations. These are typically projects which are performed over a number of
accounting periods. Either an input method or an output method, depending on the particular
arrangement, is used to measure progress for each performance obligation. Where a job
spans a number of accounting periods but only one performance obligation exists, revenue
and associated costs are recognised at each stage of the job using an input method. However,
profit margin is deferred until the point the single performance obligation where control over
goods is transferred in advance of rendering services. For most contractual fee arrangements,
costs incurred are used as an objective input measure of performance. The primary input for
assessing that substantially all work performed under these arrangements is labour. There
is normally a direct relationship between costs incurred and the proportion of the contract
performed to date. In other circumstances relevant output measures, such as the achievement
of any project milestones stipulated in the contract, are used to assess proportional
performance. Judgement is required regarding the timing of recognition, particularly in
assessing progress on performance obligations, in particular whether the underlying contract
contains a single or multiple performance obligations as to when revenue is recognised over
time.
Waste oil revenue recognition
Filta recognises revenue from the sale of waste oil. We have judged that this is on a principal
basis; although it is the franchisees that collect and transfer the waste oil, Filta places restrictions
on the inventory, giving it more than momentary control, insofar as the franchisees can only sell
to Filta, and the onward sale of the waste oil is at Filta's contractual risk. Filta retains control over
the oil for a period of time, it is not a back-to-back arrangement. There is no right of first refusal
for the franchisees, so Filta retains control of the sale of the oil. It is Filta that agrees the price
with the end customer. Filta invoices the customer and arranges all the relevant paperwork.
145
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Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Governance Financial Statements
3 Critical accounting estimates and judgements continued
Business combinations
Determining a value and life for assets acquired
Determining the fair value, and the life, of acquired intangible assets and goodwill acquired in
business combinations requires the use of estimates regarding the value of intangible assets.
The values are determined using discounted cash flows and based upon latest approved
budgets which include estimates concerning factors such as future growth rates, new franchise
sales and timing of such sales. Management has determined that acquired brands, licences
and trademarks are to be treated as an indefinite life asset. Management has determined
that there is nothing to suggest the future economic benefits will have a finite life, with the
exception of Barking Mad and Pirtek. Given the higher level of regulatory and legal uncertainty
in the sector the Directors have decided to amortise the Barking Mad brand over ten years
from 1 January 2023 as a change in estimate. Pirtek has already operated for over 40 years’
and has consistently grown over this period. The Directors have therefore chosen to amortise
the Pirtek perpetually licensed brand over 50 years. As with all tangible and intangible assets,
the brands and trademarks will be reviewed at the end of each reporting period to determine
whether there is any indication that they have suffered an impairment loss. More details of these
estimates can be found in Note 6.
Other intangible assets with finite lives are customer relationships and franchise contracts. In
both cases management has determined that they have a useful life of 5-10 years, based on
historic duration of customer relationships and franchise contract duration.
The intangible assets within Filta International have been remeasured, based on an external
revaluation report received more than 12 months after the original date of acquisition and
errors noted in the original valuation utilised. As such these have been treated as a prior period
adjustment. See Notes 1 and 6 for further details.
Performing impairment tests
Subsequent impairment reviews based on long-term forecasts for the Group require estimates.
The main estimates used have been the level of sales growth, gross margin, return on sales,
operational leverage, level of working capital, capital expenditure and tax rates. These estimates
have been performed on a CGU basis and when averaged have resulted in a compound annual
sales growth rate in excess of 10% across the Group, a marginal increase in return on sales from
the current level, a consistent tax rate and consistent levels of operating cash flow divided by
Adjusted EBITDA. The WACC has been sourced using key variables obtained from independent
market sources.
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Subsequent impairment reviews also require the use of estimates to value the cash generating
units to which goodwill and indefinite life intangibles have been allocated. The value in use
calculations, which are run on an annual basis for goodwill and indefinite life intangibles, or
when there is an indicator of impairment for tangible and finite life intangible fixed assets,
determine whether there is any impairment to the carrying value of assets arising from business
combinations. More details of these estimates can be found in Note 14.
4 Financial instruments – risk management
Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to meet their
financial obligations as they arise while maximising the return to stakeholders.
The capital structure of the Group consists of cash and cash equivalents and equity attributable
to equity holders of the Parent, comprising issued capital, reserves and retained earnings, and
long and medium-term debt facilities. Term loans and revolving credit facilities are used to
finance long-term investment such as acquisitions. Revolving credit facilities are used to manage
short-term cash requirements and minimise interest costs. The Group’s financing facilities have
two financial covenants: minimum interest cover and maximum net debt to Adjusted EBITDA.
The Group comfortably met these requirements throughout the year.
The Group’s dividend policy is to provide sustainable dividends to shareholders, consistent
with the Group’s earnings growth and debt gearing levels, to attract long-term investors and to
enable shareholders to enjoy returns on their investment in tandem with the Group’s growth.
The payment and amount of any dividends or distributions to shareholders is at the discretion of
the Board, and subject to shareholder approval.
Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Governance Financial Statements
4 Financial instruments – risk management continued
Categories of financial instruments
Group
Financial assets at amortised cost
Cash and cash equivalents
Trade and other receivables
Financial liabilities at amortised cost
Trade and other payables
Loans and borrowings
Financial liabilities at fair value through profit and loss (“FVTPL”)
Company
Financial assets at amortised cost
Cash and cash equivalents
Trade and other receivables
Financial liabilities at amortised cost
Trade and other payables
Loans and borrowings
Financial liabilities at fair value through profit and loss (“FVTPL”)
* See Note 1 for further information.
2023
£’000
*Restated
2022
£’000
12,278
40,117
10,935
25,380
(31,788)
(95,312)
(86)
(19,833)
(2,568)
(107)
2023
£’000
*Restated
2022
£’000
875
100,558
(15,995)
(86,908)
—
3,418
608
(5,097)
—
—
Due to their short-term nature, the carrying value of cash and cash equivalents, trade and other
receivables, and trade and other payables approximates to their fair value.
Foreign currency sensitivity
The Group is exposed to foreign currency risk on transactions and balances that are
denominated in currencies other than Pounds Sterling. The currencies giving rise to this risk
are the US Dollar, Canadian Dollar, Euro and Swedish Krona. Foreign currency risk is monitored
closely on an ongoing basis to ensure that the net exposure is at an acceptable level. The
Group maintains a natural hedge wherever possible, by matching the cash inflows (revenue
streams) and cash outgoings in foreign currencies.
The following table demonstrates the sensitivity to a reasonable possible change in Sterling
against the foreign currencies with all other variables held constant.
USD
USD
CAD
CAD
EUR
EUR
SEK
SEK
Change in
rate
%
+10%
-10%
+10%
-10%
+10%
-10%
+10%
-10%
Effect on profit
before tax
£’000
Effect on
net assets
£’000
(490)
599
(13)
15
(21)
26
(3)
4
(170)
208
(17)
21
(13)
16
(50)
61
Credit risk management
The Group has adopted a policy of only dealing with creditworthy counterparties, as a means
of mitigating the risk of financial loss from defaults. The Group only transacts with entities
after assessing credit quality using independent rating agencies and if not available, the
Group uses other publicly available financial information and its own trading records to rate its
major customers. The Group’s exposure is continuously monitored and the aggregate value
of transactions concluded is spread amongst approved counterparties. Credit exposure is
controlled by counterparty limits.
Financial and market risk management objectives
The Group does not use or trade in derivative financial instruments. The Group’s financial
instruments comprise its cash and cash equivalents and various items such as trade debtors and
trade creditors that arise directly from its operations. The main purpose of the financial assets
and liabilities is to provide finance for the Group’s operations in the year. The Group is exposed
to interest rate risk as the Group borrows funds at variable interest rates.
Ongoing credit evaluation is performed on the financial condition of accounts receivable. The
credit risk on liquid funds is limited because the counterparties are banks with high credit-
rating assigned by international credit-rating agencies. The carrying amount of financial assets
recorded in the financial statements, which is net of expected credit risk losses, represents the
Group’s maximum exposure to credit risk.
147
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Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Governance Financial Statements
4 Financial instruments – risk management continued
Interest rate sensitivity
The effect on both income and equity, based on exposure to non-derivative floating rate
instruments at the balance sheet date, is shown in the table below.
0.25% increase in interest rates
0.25% decrease in interest rates
Sensitivity
income
2023
£’000
(215)
215
Sensitivity
equity
2023
£’000
(215)
215
Sensitivity
income
2022
£’000
Sensitivity
equity
2022
£’000
—
—
—
—
Liquidity risk management
The Group’s policy throughout the year has been to ensure continuity of funds. The Group
manages liquidity risk by maintaining adequate reserves and banking facilities by continuously
monitoring forecast and actual cash flows and matching the maturity profiles of financial assets
and liabilities. The following table sets out the contractual maturities (representing undiscounted
contractual cash flows) of financial liabilities.
Trade and
other
payables
2023
£’000
—
36,000
Loans and
borrowings
2023
£’000
Total
2023
£’000
—
17,286
—
53,286
*Restated
Trade and
other
payables
2022
£’000
—
22,554
Loans and
borrowings
2022
£’000
—
1,058
*Restated
Total
2022
£’000
—
23,612
Trade and
other
payables
2023
£’000
—
15,995
Loans and
borrowings
2023
£’000
Total
2023
£’000
—
14,323
—
30,318
*Restated
Trade and
other
payables
2022
£’000
—
5,097
— 12,873
12,873
—
— 69,222
—
—
96,418
15,995
69,222
—
112,413
—
—
5,097
Loans and
borrowings
2022
£’000
—
—
—
—
—
—
Total
2022
£’000
—
5,097
—
—
—
5,097
Company
On demand
Within one year
More than one year and less
than two years
More than two year and less
than five years
In more than five years
Total
* See Note 1 for further information.
5 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:
—
15,071
15,071
—
735
735
• Pirtek Europe, the franchise and direct labour operations of Pirtek across eight European
— 72,842
453
—
36,000 105,652
72,842
453
141,652
—
—
22,554
979
186
2,958
979
186
25,512
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.
Group
On demand
Within one year
More than one year and less
than two years
More than two years and less
than five years
In more than five years
Total
* See Note 1 for further information.
148
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Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Governance Financial Statements
5 Operating segments continued
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
Revenue
Gross profit
Adjusted EBITDA*
Depreciation & amortisation of software
Amortisation of acquired intangibles
Share-based payment expense
Non-recurring costs
Finance expense
Other gains and losses
Profit before tax*
Tax expense
Profit after tax*
Additions to non-current assets
Reportable segment assets
Reportable segment liabilities
* Operating segments presented before inter-company management recharges which eliminate on consolidation.
Pirtek
£’000
Water & Waste
£’000
Filta
International
£’000
41,947
30,539
13,318
(1,808)
(5,468)
(290)
(1,864)
(403)
—
3,485
(1,042)
2,443
2,573
88,141
(115,533)
48,880
25,597
10,907
(2,147)
—
(329)
(1,189)
(54)
—
7,188
(1,315)
5,873
1,928
49,315
(30,165)
27,117
9,768
6,097
(222)
(35)
(86)
(98)
(93)
—
5,563
(1,605)
3,958
319
8,013
(6,910)
B2C
£’000
6,106
4,899
2,316
(178)
—
(28)
(16)
(12)
—
2,082
(409)
1,673
136
3,836
(2,322)
Azura
£’000
745
745
214
(89)
—
(4)
(43)
(2)
—
76
(20)
56
270
545
(206)
Unallocated
assets
£’000
(3,530)
(343)
(2,751)
27
(2,215)
(101)
(2,949)
(5,389)
—
(13,378)
2,412
(10,966)
223,539
232,592
(12,913)
Total
£’000
121,265
71,205
30,101
(4,417)
(7,718)
(838)
(6,159)
(5,953)
—
5,016
(1,979)
3,037
228,765
382,442
(168,049)
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Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Governance Financial Statements
5 Operating segments continued
2022 (restated)**
Revenue
Gross profit
Adjusted EBITDA*
Depreciation & amortisation of software
Amortisation of acquired intangibles
Share-based payment expense
Non-recurring costs
Finance expense
Other gains and losses
Profit before tax*
Tax expense
Profit after tax*
Additions to non-current assets
Reportable segment assets
Reportable segment liabilities
* Operating segments presented before inter-company management recharges which eliminate on consolidation.
** See Note 1.
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Pirtek
£’000
Water & Waste
£’000
Filta
International
£’000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
42,473
22,362
9,250
(1,998)
(4,620)
(303)
(363)
(210)
—
1,756
(75)
1,681
1,593
34,866
(16,397)
23,749
8,090
5,214
(180)
(30)
(107)
(11)
31
—
4,917
(1,203)
3,714
798
9,189
(4,871)
B2C
£’000
6,138
5,076
2,457
(188)
—
(25)
—
(14)
—
2,230
(405)
1,825
55
5,456
(2,562)
Azura
£’000
797
796
171
(32)
—
(10)
—
(2)
—
127
(16)
111
212
328
(9)
Unallocated
assets
£’000
(3,318)
(383)
(1,835)
117
2,957
(90)
(101)
(40)
—
1,008
(213)
795
52,564
85,496
(8,812)
Total
£’000
69,839
35,941
15,257
(2,281)
(1,693)
(535)
(475)
(235)
—
10,038
(1,912)
8,126
55,222
135,335
(32,651)
Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Governance Financial Statements
6 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.
Cash
Consideration shares
Fair value of consideration
Cash flows
Cash
Cash acquired
Capitalised acquisition costs
Acquisition of subsidiaries including costs, net of cash acquired
£’000
55,936
17,591
73,527
Company
£’000
(55,936)
—
(1,919)
(57,855)
Group
£’000
(55,936)
7,042
—
(48,894)
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.
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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:
Intangible assets
IT systems
Property, plant and equipment
Right-of-use assets
Inventories
Trade and other receivables
Cash
Trade and other payables
Deferred income
Loans and borrowings
Lease liability
Dilapidation provision
Preference shares
Deferred tax liability
Total fair value of the identifiable assets and
liabilities acquired
Fair value of consideration
Goodwill
Book value
£’000
Adjustments
£’000
64,927
768
1,219
6,127
5,225
14,577
7,042
(10,969)
(1,126)
(78,227)
(6,127)
—
(58,520)
(10,669)
50,418
—
—
—
—
—
—
152
—
—
—
(334)
—
(20,519)
(65,753)
29,717
Fair value
£’000
115,345
768
1,219
6,127
5,225
14,577
7,042
(10,817)
(1,126)
(78,227)
(6,127)
(334)
(58,520)
(31,188)
(36,036)
73,527
109,563
Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Governance Financial Statements
6 Business combination continued
Acquisition of Pirtek continued
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.
152
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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.
Consideration shares
Fair value of consideration
£’000
50,991
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.
Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Governance Financial Statements
6 Business combination continued
Acquisition of Filta Group Holdings Plc continued
Details of the fair value of the identifiable assets and liabilities acquired, purchase consideration
and goodwill were as follows:
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.
Intangible assets
Property, plant and equipment
Right-of-use assets
Inventories
Trade and other receivables
Cash
Trade and other payables
Loans and borrowings
Deferred tax asset/(liability)
Total fair value of the identifiable assets
and liabilities acquired
Fair value of consideration
Goodwill
* See Note 1 for further information.
Book value
£’000
*Restated
Adjustments
£’000
6,701
1,191
656
1,466
4,436
4,229
(7,507)
(2,953)
570
9,594
(44)
—
—
(250)
91
33
—
(3,458)
8,789
5,966
*Restated
Fair value
£’000
16,295
1,147
656
1,466
4,186
4,320
(7,474)
(2,953)
(2,888)
14,755
50,991
36,236
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.
153
Franchise Brands plc
Annual Report and Accounts 2023
Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Governance Financial Statements
7 Revenue
Management service fee income – commission agent revenue
Management service fee income – royalty fee income
Franchise sales and resales – licence fees – recognised over time
Franchise sales and resales – termination fees and immediate sales
– recognised at point in time
Product sales
Waste oil
Direct labour income
IT Contribution SAAS
National advertising funds
Central billing fee
Training facility income
Other income
2023
£’000
7,393
32,827
1,754
1,030
18,415
17,469
39,165
436
1,632
268
304
572
121,265
2022
(*restated)
£’000
5,358
11,339
1,209
787
3,605
16,139
29,017
433
1,446
—
41
465
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:
2023
£’000
26,507
68,327
26,431
121,265
2022
(*restated)
£’000
23,273
46,089
477
69,839
Revenue
North America
United Kingdom
Europe
154
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Annual Report and Accounts 2023
Non-current assets
North America
United Kingdom
Europe
Contract assets
At 1 January
Revenue recognised in the year
At 31 December
* See Note 1 for further information.
2023
£’000
44,251
167,989
107,414
319,654
2023
£’000
—
—
—
2022
(*restated)
£’000
44,985
47,605
(937)
91,653
2022
£’000
53
(53)
—
Contract assets are included within trade and other receivables. They have historically arisen
from advance payments made to our franchisees.
8 Operating profit
Operating profit is stated after charging:
Depreciation
Amortisation
Share-based payment expense
Auditors’ remuneration:
Fees for audit of the Company
Fees for the audit of the Group
Fees for non‑audit services:
Taxation services
Corporate finance services
Other services
* See Note 1 for further information.
2023
£’000
3,492
8,643
838
44
618
113
726
66
2022
(*restated)
£’000
1,781
2,193
535
24
249
80
106
10
Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Governance Financial Statements
8 Operating profit continued
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.
Acquisition-related costs
Reorganisation expense
Intellectual property dispute
Write-off software intangibles
Other exceptional costs
2023
£’000
3,514
1,496
516
314
319
6,159
2022
£’000
1,011
686
—
—
—
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.
155
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Annual Report and Accounts 2023
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.
Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Governance Financial Statements
9 Staff costs
Wages and salaries
Social security costs
Defined contribution pension cost
Share-based payment expense (see Note 10 for further information)
2023
£’000
28,783
3,764
805
838
34,190
2022
£’000
15,927
1,618
302
535
18,382
The average monthly number of persons (including Directors) employed by the Group was:
Administration
Sales
Operations
Directors
Directors’ remuneration
Directors’ emoluments
Share-based payment expense
285
64
313
10
672
2023
£’000
1,402
204
1,606
193
37
170
11
411
2022
£’000
1,649
169
1,818
The highest paid Director’s remuneration was £267,063 (2022: £485,336 which included
£334,848 for gain on share exercises). The costs to the Group for the Directors is £1,550,384
(2022: £1,948,154), after including employer’s National Insurance. The Company had an average
of four employees during the period (2022: four) (other than the Directors) incurring staff costs
of £550,000 (2022: £351,000). Directors’ emoluments include £151,398 (2022: £173,373) paid to
companies controlled by Directors (see Note 29).
156
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Annual Report and Accounts 2023
Key management personnel are those persons having authority and responsibility for planning,
directing and controlling the activities of the Group. These are considered to be the Directors
of the Company. Directors’ emoluments above comprise of: £1,321,000 salary and fees (2022:
£1,242,000), £39,000 car allowance/benefit (2022: £40,000), £26,000 healthcare benefits
(2022: £42,000), £16,000 defined pension contributions (2022: 16,000) and £nil compensation
for loss of office (2022: £310,000). In addition to the emoluments the Directors benefitted from
£nil gain on share exercises (2022: £689,000).
10 Share-based payments
The Company has established an LTIP in the form of an equity-settled share option scheme.
Awards are granted and approved at the discretion of the Remuneration Committee. Awards
vest on or after the third anniversary of their issue, based on compound growth in the underlying
earnings per share of the Group for the three-year period. If the compound annual growth rate
is below 8%, then none of these options will vest; if the compound annual growth rate is above
15%, then all of these options will vest; between 8% and 15% then a proportion of these options
will vest on a straight-line basis. Currently 284 (2022: 277) members of staff hold options for
shares in the Company under the scheme. The share-based payments expense recognised in
respect of employee services received during the year was £752,000 (2022: £428,000). This all
arises on equity-settled share-based payment transactions.
Additionally, all qualifying US and European employees have been awarded stock appreciation
rights ("SARs"), which are conditional bonuses whose value is calculated by reference to the
amount by which the price of the Company’s ordinary shares has risen above the base price
at the date of exercise. The qualifying conditions and timing of vesting are identical to the LTIP
above. Currently 36 (2022: 19) members of staff hold options for shares in the Company under
the scheme. A total of £86,000 (2022: £107,000) was recognised during the year in respect of
SARs. This all arises on cash-settled share-based payment transactions.
Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Governance Financial Statements
10 Share-based payments continued
Outstanding at the beginning of the period
Granted during the period
Lapsed during the period
Exercised during the period
Outstanding at the end of the period
Exercisable at the end of the period
Share options
SARs
2023
Weighted average
exercise price
6,009,014
5,862,641
(1,303,774)
(220,650)
10,347,231
3,207,666
558,000
618,000
(5,000)
—
1,171,000
—
6,567,014
6,480,641
(1,308,774)
(220,650)
11,518,231
3,207,666
106p
167p
148p
87p
136p
71p
Share options
5,219,376
2,437,924
(701,596)
(946,690)
6,009,014
1,457,576
SARs
—
1,126,000
(568,000)
—
558,000
—
2022
Weighted average
exercise price
5,219,376
3,563,924
(1,269,596)
(946,690)
6,567,014
1,457,576
71p
150p
125p
54p
106p
63p
The fair value of the options and SARs granted is estimated at the date of grant using a Black-Scholes model, after taking into account the terms and conditions upon which they were granted. For
options outstanding at the end of the period the range of exercise prices was 33p-180p (2022: 33p-156.5p), and the weighted average remaining contractual life was 8.1 years (2022: 7.7 years).
In order to facilitate the scheme, the Company established an onshore discretionary employee benefit trust (the “EBT”), which conducts market purchases of ordinary shares to satisfy potential
future option exercises by employees (but not Directors). The Black-Scholes pricing model is applied on the granting dates of options, as shown in the table below.
Expected volatility for the Black-Scholes valuations has been determined using the Company’s share price in the 6.5 years preceding the grant date; and for the Mark-to-Market using the
Company’s share price from 6.5 years prior to date of grant to 31 December 2023.
The total carrying amount at the end of the period for liabilities arising from share-based payment transactions is £193,000 (2022: £107,000). The total intrinsic value at the end of the period for the
3,207,666 (2022: 1,457,576) exercisable share options is £2,899,000 (2022: £1,955,000).
Option pricing models
Closing share price, £
Exercise price, £
Risk-free interest rate
Expected life of option (years)
Volatility
Dividend yield
157
Franchise Brands plc
Annual Report and Accounts 2023
Black-Scholes
10 May
2023
Black-Scholes
2 August
2023
Black-Scholes
2 November
2023
Black-Scholes
4 December
2023
Mark-to-Market
10 May
2023
Mark-to-Market
18 December
2023
1.80
1.80
3.70%
5.5
36.2%
1.1%
1.325
1.325
4.38%
5.5
35.8%
1.5%
1.340
1.325
4.22%
5.5
35.6%
1.5%
1.525
1.525
4.05%
5.5
35.8%
1.3%
1.80
1.80
3.70%
5.5
36.4%
1.1%
1.62
1.64
3.37%
5.5
35.7%
1.2%
Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Governance Financial Statements
11 Finance expense
12 Corporation tax
Interest element on lease agreements
Interest expense on defined benefit obligation
Loan interest
For further information please see Notes 16, 22 and 31.
2023
£’000
325
12
5,374
5,711
2022
£’000
119
—
116
235
Current tax expense
Current tax on profits for the period
Adjustment for prior period
Deferred tax expense
Origination and reversal (see Note 26)
Adjustment for prior period
Total tax expense
Accounting profit multiplied by the UK statutory rate of
corporation tax of 23.52% (2022: 19%)
Expenses not deductible / (income not taxable) in determining
taxable profits
Deferred tax assets not recognised
Effect of UK tax rate change
Different tax rates applied in overseas jurisdictions
Adjustment for prior period
Effects of additional tax relief
Total tax expense
Effective tax rate
2023
£’000
4,169
(325)
(1,853)
(12)
1,979
1,180
795
222
10
109
(336)
(1)
1,979
39%
*Restated
2022
£’000
2,509
(44)
(553)
—
1,912
1,913
(410)
—
—
453
(44)
—
1,912
19%
*
The prior period reconciliation has been restated in line with corrections seen in Note 1, the deferred tax expense change
relates to intangibles acquired, see Note 1 for further information.
The Finance Act 2021, which was substantively enacted in May 2021, increased the UK rate of
corporation tax from 19% to 25% from April 2023. Therefore, the future rate of UK corporation
tax of 25% has been used when calculating UK deferred tax balances at the reporting date.
Deferred tax balances relating to overseas entities have been calculated using the latest
substantively enacted relevant overseas tax rates, including a rate of approximately 28% for
balances relating to the Group’s US business. Deferred tax balances relating to intangible assets
have been calculated at rates between 25% - 27.3% based on the geography of the underlying
intangible assets.
158
Franchise Brands plc
Annual Report and Accounts 2023
Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Governance Financial Statements
13 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.
Profit attributable to owners of the Parent Company
Non-recurring costs (Note 8)
Amortisation of acquired intangibles (Note 14)
Change in the fair value of deferred consideration (Note 24)
Share-based payment expense (Note 10)
Tax on adjusting items
Adjusted profit attributable to owners of the Parent Company
2023
£’000
3,037
6,159
7,718
—
838
(3,174)
14,578
*Restated
2022
£’000
8,126
1,708
1,693
(1,232)
535
(649)
10,181
Basic weighted average number of shares
Dilutive effect of share options
Diluted weighted average number of shares
Basic earnings per share
Diluted earnings per share
Adjusted earnings per share
Adjusted diluted earnings per share
* See Note 1 for further information.
2023 Total
Number
2022 Total
Number
173,090,691
2,241,161
175,331,852
122,126,350
2,042,848
124,169,198
Pence
1.75
1.73
8.42
8.31
*Restated
Pence
6.65
6.54
8.34
8.20
159
Franchise Brands plc
Annual Report and Accounts 2023
Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Governance Financial Statements
14 Intangible assets
Carrying amount of assets with indefinite useful lives
Cost
At 1 January 2022
Additions*
Transfer to assets held for sale
Foreign exchange rate movements
At 31 December 2022*
Additions on acquisition
Additions
Disposals
Transfer from assets held for sale
Foreign exchange rate movements
At 31 December 2023
Amortisation
At 1 January 2022
Charge for year*
Transfer to assets held for sale
Foreign exchange rate movements
At 31 December 2022*
Charge for year
Disposals
Transfer from assets held for sale
Foreign exchange rate movements
At 31 December 2023
Net book value
At 31 December 2023
At 31 December 2022*
At 1 January 2022
*Restated
Brands, trade-
marks & other
intangibles
£’000
*Restated
Customer
relationships
£’000
*Restated
Goodwill
£’000
*Restated
Software
£’000
*Restated
Total
£’000
24,125
36,269
(1,315)
5
59,084
—
109,563
—
1,315
(5)
169,957
10,081
14,225
(763)
—
23,543
—
81,683
—
763
—
105,989
—
—
—
—
—
—
—
—
—
—
(1,791)
(1,006)
—
—
(2,797)
(4,604)
—
—
—
(7,401)
3,022
610
—
5
3,637
—
34,184
—
—
(5)
37,816
(1,418)
(444)
—
(1)
(1,863)
(2,828)
—
—
1
(4,690)
1,980
2,549
(53)
11
4,487
768
1,351
(502)
53
(20)
6,137
(721)
(743)
37
—
(1,427)
(1,211)
194
(37)
1
(2,480)
39,208
53,653
(2,131)
21
90,751
768
226,781
(502)
2,131
(30)
319,899
(3,930)
(2,193)
37
(1)
(6,087)
(8,643)
194
(37)
2
(14,571)
169,957
59,084
24,125
98,588
20,746
8,290
33,126
1,774
1,604
3,657 305,328
84,664
3,060
35,278
1,259
*
The prior period restatement is due to a remeasurement of Filta’s intangibles acquired, see Notes 1 and 6 for further information.
160
Franchise Brands plc
Annual Report and Accounts 2023
Pirtek –
Franchisor
Pirtek – DLO
Metro Rod
Willow Pumps
Filta UK*
Filta
International*
B2C
Azura
Foreign
exchange
movement
Goodwill
£’000
Indefinite life
intangibles
£’000
109,563
—
18,174
3,812
6,156
30,080
1,315
856
—
—
4,750
2,777
367
1,789
—
—
2023
£’000
109,563
—
22,924
6,589
6,523
31,869
1,315
856
*Restated
Goodwill
£’000
*Restated
Indefinite life
intangibles
£’000
*Restated 2022
£’000
—
—
18,174
3,812
6,156
30,080
—
856
—
—
4,750
2,777
367
1,789
—
—
—
—
22,924
6,589
6,523
31,869
—
856
—
169,957
—
9,683
—
179,639
5
59,084
—
9,683
5
68,767
*
Prior year has been restated to display Filta International as a separate CGU, rather than aggregated with Filta UK. The value
of goodwill and indefinite life intangibles within Filta has also been restated, see Notes 1 and 6 for further information.
Given the higher level of regulatory and legal uncertainty in the sector the Directors have
decided to amortise the Barking Mad brand over ten years from 1 January 2023. In the prior
period this was £763,000 held for sale in discontinuing operations.
The key assumptions for the value-in-use calculations are those regarding the discount rates
and expected changes to operating results and cash flows during the period of four years from
the statement of financial position dates.
Management estimates discount rates using pre-tax rates that reflect current market
assessments of the time value of money and the risks in relation to the CGU. The WACC for
each CGU is shown in the table below.
Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Governance Financial Statements
14 Intangible assets continued
Carrying amount of assets with indefinite useful lives continued
Changes in operating results and cash flows including the sales of franchises and the level of
sales of the franchisees, are based on past results and expectations of future performance.
The Group prepares cash flow forecasts for the next four years derived from the most recent
budgets and long-term business plans which have been approved by the Board of Directors.
The key assumptions used for estimating cash flow projections are those relating to revenue
growth and profit margin.
For the Metro Rod, Willow Pumps, Filta UK and Pirtek businesses, revenue growth rates
have been set at between 7% and 21%, which is consistent with historical averages. Greater
opportunities are perceived in Filta International, with growth rates between 19% and 21% in the
future, as there is greater market opportunity in the USA given our modest existing footprint. For
the B2C brands franchisee recruitment and churn is consistent with historical averages, with the
revenue growth of between 0% and 8% per annum being driven by the net new franchisees
being introduced to the networks. Historic and future investment in IT will result in profit margins
continually improving in all CGUs. A 2% perpetual growth rate has been assumed when
extrapolating cash flow projections beyond the four-year period used in the long-term business
plans, on the basis that this is a reasonable long-term growth rate for the UK, European and US
economies. Based on the calculations prepared the recoverable amount for all CGUs exceed
their carrying amount.
Sensitivity analysis
The recoverable amounts are not considered to be sensitive to reasonably possible changes
in the discount rate or growth rates. The Directors do not believe that there is currently a
reasonably possible change of key assumptions that would cause the CGUs carrying amount
to exceed its recoverable amount. However, a sensitivity analysis has been performed on the
base case assumptions used for assessing the level of headroom in each CGU. These are
summarised as follows:
• A 5% reduction in annual sales in perpetuity, with all other assumptions remaining the same.
All CGUs would have headroom, with the exception of Pirtek DLO, where a 5% reduction in
revenue would cause the carrying value of the unit to exceed the recoverable amount. We do
not believe this to be an issue; whilst any reduction in revenue would be partially offset by a
reduction in revenue-related costs, the Board would also take actions to mitigate the loss of
gross profit by reducing other costs.
• Changing the WACC to 11% for each CGU, with all other assumptions remaining the same.
At this rate there remains headroom in all CGUs, including Pirtek DLO.
• Increasing the WACC to the point at which all headroom is eliminated in each CGU. The most
sensitive CGU to this is Pirtek Franchisor, with an elimination WACC of 12.0%. As this is
an established profitable business across multiple countries we do not believe that this is
a reasonable WACC. Pirtek DLO would need a WACC of 15.7% to have no headroom.
WACC
%
Value in group
£’000
Value in use
£’000
9.3%
10.5%
10.1%
12.0%
12.0%
10.5%
10.4%
10.4%
230,314
3,200
36,654
11,572
11,423
42,388
3,001
1,323
339,875
317,506
5,361
106,208
22,931
24,826
115,741
19,851
7,376
619,800
Headroom
£’000
87,192
2,161
69,554
11,359
13,403
73,353
16,850
6,053
279,925
Pirtek – Franchisor
Pirtek – DLO
Metro Rod
Willow Pumps
Filta UK
Filta International
B2C
Azura
Total
161
Franchise Brands plc
Annual Report and Accounts 2023
Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Governance Financial Statements
15 Property, plant and equipment
Freehold property
£’000
Leasehold improvements
£’000
Fixtures and fittings
£’000
Computer equipment
£’000
Motor vehicles
£’000
Plant and equipment
£’000
—
—
758
—
—
—
63
821
—
202
16
—
—
(35)
1,004
Cost
At 1 January 2022
Reclassified (to)/from ROU
Additions on acquisition
Additions
Disposals
Transfer to assets held for sale
Foreign exchange movements
At 31 December 2022
Reclassified (to)/from ROU
Additions on acquisition
Additions
Disposals
Transfer from assets held for sale
Foreign exchange movements
At 31 December 2023
Depreciation
At 1 January 2022
Reclassified (to)/from ROU
Charge for year
Disposals
Transfer to assets held for sale
Foreign exchange movements
At 31 December 2022
Reclassified (to)/from ROU
Charge for year
Disposals
Transfer from assets held for sale
Foreign exchange movements
At 31 December 2023
Net book value
At 31 December 2023
At 31 December 2022
At 1 January 2022
The Company has no fixed assets at 31 December 2023 or 31 December 2022.
“ROU” assets are those categorised as Right-of-Use. Please see Note 16.
—
—
(26)
—
—
—
(26)
—
(55)
—
—
2
(79)
925
795
—
162
Franchise Brands plc
Annual Report and Accounts 2023
346
—
20
3
—
(113)
—
256
—
—
53
—
113
—
422
(193)
—
(26)
—
113
—
(106)
—
(45)
—
(113)
—
(264)
158
150
153
196
—
20
30
—
(63)
1
184
—
124
32
(1)
63
(1)
401
(177)
—
(32)
—
63
—
(146)
—
(31)
1
(63)
—
(239)
162
38
19
509
—
63
87
—
(110)
2
551
—
311
196
—
110
(4)
1,164
(361)
—
(86)
—
107
—
(340)
—
(176)
—
(107)
—
(623)
541
211
148
2,481
169
29
168
(399)
(50)
3
2,401
123
51
719
(476)
50
(5)
2,863
(630)
(94)
(378)
194
36
—-
(872)
(123)
(444)
318
(36)
—
(1,157)
1,706
1,529
1,851
929
—
257
134
(100)
(138)
4
1,086
—
531
167
(113)
138
(7)
1,802
(490)
—
(218)
48
60
(1)
(601)
—
(315)
100
(60)
—
(876)
926
485
439
Total
£’000
4,461
169
1,147
422
(499)
(474)
73
5,299
123
1,219
1,183
(590)
474
(52)
7,656
(1,851)
(94)
(766)
242
379
(1)
(2,091)
(123)
(1,066)
419
(379)
2
(3,238)
4,418
3,208
2,610
Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Governance Financial Statements
16 Right-of-use assets
Cost
At 1 January 2022
Reclassified (to)/from PPE
Additions on acquisition
Additions
Disposals
Transfer to assets held for sale
Foreign exchange movements
At 31 December 2022
Reclassified (to)/from PPE
Additions on acquisition
Additions
Disposals
Transfer from assets held for sale
Foreign exchange movements
At 31 December 2023
Depreciation
At 1 January 2022
Reclassified (to)/from PPE
Charge for year
Disposals
Transfer to assets held for sale
Foreign exchange movements
At 31 December 2022
Reclassified (to)/from PPE
Charge for year
Disposals
Transfer from assets held for sale
Foreign exchange movements
At 31 December 2023
Net book value
At 31 December 2023
At 31 December 2022
At 1 January 2022
“PPE” assets are those categorised as Property, Plant & Equipment. Please see Note 15.
163
Franchise Brands plc
Annual Report and Accounts 2023
Land and buildings
£’000
Motor vehicles
£’000
Plant and equipment
£’000
2,709
—
119
266
(34)
(316)
—
2,744
—
3,726
1,092
(168)
316
37
7,747
(1,487)
—
(425)
34
264
—
(1,614)
—
(1,106)
91
(264)
(3)
(2,896)
4,851
1,130
1,222
2,452
(169)
534
302
(113)
(960)
7
2,053
(123)
2,246
782
(203)
960
21
5,736
(1,270)
94
(538)
98
736
(1)
(881)
123
(1,215)
163
(736)
(5)
(2,551)
3,185
1,172
1,182
392
—
3
7
—
(32)
—
370
—
155
52
—
32
1
610
(73)
—
(62)
—
31
—
(104)
—
(107)
—
(31)
—
(242)
368
266
319
Total
£’000
5,553
(169)
656
575
(147)
(1,308)
7
5,167
(123)
6,127
1,926
(371)
1,308
59
14,093
(2,830)
94
(1,025)
132
1,031
(1)
(2,599)
123
(2,428)
254
(1,031)
(8)
(5,689)
8,404
2,568
2,723
Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Governance Financial Statements
16 Right-of-use assets continued
Amounts recognised in profit and loss
Depreciation expense on right-of-use assets
Interest expense on lease liabilities
Expense relating to short-term leases
Expense relating to leases of low value assets
Expense relating to variable lease payments not included in the
measurement of the lease liability
Income from sub-leasing right-of-use assets
For further information please see Notes 11 and 25.
2023
£’000
2,427
325
314
—
—
109
2022
£’000
1,025
119
277
—
—
—
17 Contracts acquisition costs
The Group capitalises incremental costs to obtain contracts with customers where it is
expected these costs will be recoverable. Incremental costs to obtain contracts with customers
are considered those which would not have been incurred if the contract had not been
obtained. For the Group, these costs relate primarily to third party broker fees. The Group
has elected to use the practical expedient as allowed by IFRS 15 whereby such costs will be
expensed as incurred where the expected amortisation period is one year or less. Where the
amortisation period is greater than one year, these costs are amortised over the contractual
term on a systematic basis consistent with the transfer of the underlying goods and services
to which these costs relate. Expense recognised in 2023 was £113,000 (2022: £110,000) whilst
impairment of capitalised contract costs was £nil in 2023 (2022: £nil).
The amount of capitalised contract cost expected to be recovered within one year is £79,000
(2022: £92,000); after more than one year it is £427,000 (2022: £402,000).
18 Inventories
Group
Finished goods and goods for resale
2023
£’000
7,062
2022
£’000
1,989
All amounts are carried at cost and therefore no amounts are carried at fair value less costs to
sell. There is a provision of £1.5m against stock at the period end (2022: £0.1m) with the increase
due to the acquisition of Pirtek. No material amounts have been written off in either year ended
31 December 2023 or 31 December 2022. Within the income statement of the Group £21.0m of
inventories were recognised as an expense within the year (2022: £9.5m).
19 Trade and other receivables
The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a
lifetime expected credit loss provision for trade receivables and contract assets. The expected
credit loss rates are based on the Group’s subsidiaries’ historic credit losses experience and
a 12 month assessment of expected credit loss on a franchisee-by-franchisee and customer-
by-customer basis. As there has been no significant increase in credit risk a longer-term
assessment is not required. The differing segmental risks to which the Group is exposed in
respect of the franchisee and customer base have been considered.
2023
£’000
Gross
2023
%
2023
£’000
2023
£’000
*Restated
2022
£’000
2022
%
2022
£’000
*Restated
2022
£’000
Provision
Net
Gross
Provision
Net
No provision* 24,830
Low risk
2,763
Medium risk
821
High risk
1,345
Total*
29,759
0%
6%
38%
70%
5%
— 24,830
2,600
507
398
(1,424) 28,335
(163)
(314)
(947)
12,966
2,795
741
596
17,098
0%
6%
32%
84%
5%
— 12,966
2,638
503
98
16,205
(157)
(238)
(498)
(893)
*
The prior period restatement relates to Metro Rod debtors, further information can be seen in Note 1.
In relation to the Company, the credit risk for amounts owed by Group undertakings has not
increased significantly since their initial recognition. No expected credit loss provision has been
recognised on the basis of the significant net assets and positive cash flows of subsidiaries.
Group
Non-current other receivables
Trade receivables*
Provision at the year end
Other receivables*
Total current financial assets other than cash and cash equivalents*
Prepayments
Total current trade and other receivables*
Total trade and other receivables*
2023
£’000
*Restated 2022
£’000
641
29,759
(1,424)
11,141
39,476
3,225
42,701
43,342
811
17,098
(893)
8,364
24,569
422
24,991
25,802
*
The prior period restatement relates to Metro Rod debtors and point of revenue recognition; further information can be seen in Note 1.
164
Franchise Brands plc
Annual Report and Accounts 2023
Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Governance Financial Statements
19 Trade and other receivables continued
Credit loss provision:
Brought forward
Transfer from assets held for sale
Additions on acquisition
Provision for the year
Utilised
Foreign exchange movement
Carried forward
The ageing of the trade receivables is as follows:
Due*
Past due*
0-30 days*
31-60 days*
61-90 days*
91-120 days*
121+ days*
Past due and impaired
Due
0-30 days
31-60 days
61-90 days
91-120 days
121+ days
Total*
2023
£’000
(893)
(65)
(538)
(96)
163
5
(1,424)
2022
£’000
(532)
—
(259)
(341)
244
(5)
(893)
2023
£’000
*Restated 2022
£’000
12,392
9,077
5,055
5,370
1,093
959
3,529
—
10
45
145
41
1,120
29,759
2,643
784
580
444
3,021
—
7
7
5
3
527
17,098
Company
Amounts owed by Group undertakings*
Prepayments
Corporation tax
Total current trade and other receivables
2023
£’000
100,558
4
2,615
103,177
* Restated
2022
£’000
608
11
1,257
1,876
*
The prior period restatement relates to intercompany debtors and creditors, further information can be seen in Note 1c.
Company amounts owed by Group undertakings are interest free and due on demand.
20 Trade and other payables
Group
Current
Trade payables*
Accruals*
Other creditors*
Social security and other taxes*
Total trade and other payables*
2023
£’000
*Restated 2022
£’000
12,234
14,123
5,431
2,958
34,746
6,634
9,102
4,097
945
20,778
*
The prior period restatement relates to Metro Rod debtors and point of revenue recognition; further information can be seen
in Note 1.
Company
Trade payables
Accruals
Other creditors
Social security and other taxes
Amounts owed to Group undertakings*
Total trade and other payables
2023
£’000
169
1,506
14
315
14,307
16,311
* Restated
2022
£’000
122
293
11
42
4,671
5,139
*
The prior period restatement relates to Metro Rod debtors, further information can be seen in Note 1.
*
The prior period restatement relates to intercompany debtors and creditors, further information can be seen in note 1c.
165
Franchise Brands plc
Annual Report and Accounts 2023
Carrying values approximate to fair value. Included within Group other creditors is an amount
of £135,000 (2022: £192,000) which represents the net payable in relation to the National
Advertising Funds.
Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Governance Financial Statements
21 Deferred income
Within the franchise subsidiaries deferred income relates to certain performance obligations
from franchise sales that are deferred over the life of the franchise agreement. The deferral
period is determined by the length of the franchise agreement. Revenue is recognised equally
over the deferral period.
At 1 January
Additions on acquisition
Additions in the year
Utilisation
Transfer (to)/from liabilities held for sale
Foreign exchange
At 31 December
Current
Non-current
Total deferred income
2023
£’000
2,721
1,126
2,251
(2,552)
776
(110)
4,212
2023
£’000
1,318
2,894
4,212
*
The prior period restatement relates to the franchise sales, further information can be seen in Note 1.
22 Loans and borrowings
Group and Company
Current
Term loan
Total current loans and borrowings
Non‑current
Revolving credit facility
Term loan
Total non‑current loans and borrowings
166
Franchise Brands plc
Annual Report and Accounts 2023
2023
£’000
9,251
9,251
36,908
40,000
76,908
*Restated
2022
£’000
762
2,359
2,747
(2,593)
(776)
222
2,721
*Restated
2022
£’000
873
1,848
2,721
2022
£’000
—
—
—
—
—
The loans are comprised of a £50m term loan, which at 31 December 2023 carries a 7.94%
interest rate, comprising 5.19% SONIA rate and 2.75% margin (subsequently reduced to 2.5%
in February 2024), and is repayable in instalments until 2027; and a £60m RCF (2022: £5m),
of which £36.9m (2022: £nil) is utilised, which is fixed until 2027 and is not renewed annually,
and carries the same 7.94% interest rate. The Group debt facilities are secured by way of an
English debenture, with cross-guarantees to cover, at all times, the aggregate of the EBITDA,
turnover and gross assets and net assets of the guarantor Group companies (being all material
companies contributing in excess of 5% of gross assets, net assets or turnover) and these
should contribute at any time 85% or more of the consolidated EBITDA, consolidated turnover
and consolidated gross assets respectively of the Group at that time. The Group has only two
bank covenants: net debt divided by EBITDA and EBITDA divided by interest payable. The
Group had comfortable headroom on both these bank covenants at 31 December 2023. This
position has continued in 2024. On 8 April 2024, the Group extended the Group banking
facilities by 12 months from a termination date of 3 April 2027 to 3 April 2028. The Group
expects to have repaid these facilities before this extended date.
The Company’s present and future assets are subject to a fixed and floating charge in favour of
HSBC UK Bank plc, National Westminster Bank plc, Citibank N.A., and Bank of Ireland in respect
of certain borrowings of fellow Group companies Franchise Brands plc, Metro Rod Limited,
Willow Pumps Limited, The Filta Group Limited, ChipsAway International Ltd, The Filta Group Inc,
WPL Group Holdings Limited and Filta Group Holdings Limited. At 31 December 2023, the net
borrowings encompassed by the charges amounted to £86,159,000 (2022: £nil).
The Group has set up an asset financing scheme with HSBC plc for the use of Metro Rod
franchisees, primarily for the purchase of vans and tankers. The Group participates in this
scheme, on a step-in basis, up to a total value of £1m. In the event of a default of a franchisee,
the Group would step in and have the rights of the financed asset, and the obligation of the
liability. At the year end, £1.0m (2022: £0.4m) had been lent through this scheme. There are no
expected credit losses to recognise in respect of the asset financing scheme.
Based on contractual undertakings, Metro Rod Limited franchisees can request for payment for
local account sales that have been invoiced, but not yet collected from the customer, and not
yet paid on the typical standard monthly payment run to franchisees. The value of this open
commitment at 31 December 2023 is £2.1m (2022: £1.8m).
Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Governance Financial Statements
23 Discontinuing operations
In 2022, following a strategic review the Company instructed Cavendish Corporate Finance
to assist in finding a buyer for the B2C business. Having only received an offer for part of the
business, which would leave a sub-scale operation in the remaining B2C businesses, the
Directors declined this offer and subsequently decided to no longer actively market the division
for sale. There was no indication of impairment based upon the offer received. Trade and other
receivables held for sale in the prior period have been restated due to a review on the timing of
the recognition of franchise sales, see Note 1a for further information.
Assets held for sale
Intangible assets
PPE
Right-of-use assets
Inventories
Trade and other receivables
Deferred tax asset
Total assets held for sale
Liabilities held for sale
Trade and other payables
Deferred income
Obligations under leases
Current tax liability
Total liabilities held for sale
*
See Note 1 for further information.
2023
£’000
*Restated 2022
£’000
—
—
—
—
—
—
—
—
—
—
—
—
2,094
95
277
763
2,180
46
5,455
1,097
776
298
390
2,561
Following this change of intention the Consolidated Statement of Cash Flows has been re-
presented to include the B2C business as a continuing operation.
24 Contingent consideration
On 25 May 2022, the Group announced the early settlement of the contingent consideration
relating to the 2019 acquisition of Willow Pumps Limited. Under the terms of the original
acquisition agreement, further consideration of up to £7.5m was payable in respect of the five
years to 31 December 2024, linked to sales and profits growth over the period.
167
Franchise Brands plc
Annual Report and Accounts 2023
During 2022 £345,000 was paid in respect of the performance conditions met in 2021. A further
£1.34m was paid as a result of a Deed of Variation during the year to fully settle this liability.
The net gain of £1.2m was taken to the income statement within non-recurring expenses within
administrative expenses. There is no deferred consideration in 2023.
25 Lease liabilities
Group
Current
Non-current (between one and five years)
Non-current (greater than five years)
Total lease liabilities
At 1 January 2022
Additions on acquisition
Additions
Interest expense
Lease payments
Disposals
Transfer to liabilities held for resale
Foreign exchange movements
At 31 December 2022
Additions on acquisition
Additions
Interest expense
Lease payments
Disposals
Transfer to liabilities held for resale
Foreign exchange movements
At 31 December 2023
The Company has no lease liabilities.
2023
£’000
2,617
5,371
416
8,404
Plant and
equipment
£’000
310
3
7
7
(50)
—
(1)
—
276
155
52
14
(89)
—
1
1
410
2022
£’000
831
1,626
—
2,457
Total
£’000
2,534
697
565
119
(1,156)
(11)
(298)
7
2,457
6,127
1,926
325
(2,687)
(95)
298
53
8,404
Land &
buildings
£’000
1,273
126
261
38
(463)
—
(54)
—
1,181
3,726
1,092
176
(1,169)
(77)
54
34
5,017
Motor
vehicles
£’000
951
568
297
74
(643)
(11)
(243)
7
1,000
2,246
782
135
(1,429)
(18)
243
18
2,977
Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section
Strategic Report Governance Financial Statements
Governance Financial Statements
26 Deferred tax liability
Deferred tax is calculated in full on temporary differences under the liability method using the latest substantively enacted tax rates in the relevant countries, including 25% for the UK,
approximately 28% for the US and rates of between 25% - 27.3% for intangibles depending on the geography of the underlying assets.
Group
At 1 January 2022
Acquired in the year
Recognised through the statement of changes in equity
Foreign exchange movements
Transfer to assets held for resale
Credit/(charge) in the year
At 31 December 2022
Acquired in the year
Recognised through the statement of changes in equity
Foreign exchange movements
Transfer from assets held for resale
Credit/(charge) in the year
At 31 December 2023
*Restated
Intangibles
£’000
(2,474)
(4,237)
—
—
—
457
(6,254)
(31,478)
—
—
—
2,051
(35,681)
Losses
£’000
—
1,163
—
—
—
(31)
1,132
300
—
—
—
(551)
881
Accelerated
allowances
£’000
Provisions
£’000
Share-based
payment
£’000
ROU assets
£’000
Lease liabilities
£’000
(314)
(312)
—
(2)
36
162
(430)
(27)
—
—
(36)
213
(280)
3
497
—
55
—
(95)
460
16
—
(17)
—
(8)
451
646
—
334
—
(82)
60
958
—
(496)
—
82
139
683
—
—
—
—
—
—
—
(1,532)
—
—
—
258
(1,274)
—
—
—
—
—
—
—
1,532
—
—
—
(237)
1,295
*
The prior period restatement relates to the deferred tax liability and charge on intangibles acquired, see Note 1 for further information.
27 Subsidiaries and audit exemption
The investment in Group companies held by the Company are as follows:
Cost
At 1 January 2022
Additions in year
Assets held for sale
At 31 December 2022
Additions in year
Assets held for sale
At 31 December 2023
*
The prior period restatement relates directly attributable costs in the acquisition of Filta Group Holdings, see Note 1 for further information.
168
Franchise Brands plc
Annual Report and Accounts 2023
*Restated
Total
£’000
(2,139)
(2,888)
334
53
(46)
553
(4,134)
(31,189)
(496)
(17)
46
1,865
(33,925)
*Restated
£’000
42,823
52,255
(2,564)
92,514
112,752
2,564
207,830
Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Governance Financial Statements
27 Subsidiaries and audit exemption continued
The subsidiaries of the Company included in the consolidated financial statements are as set out below.
Name of undertaking
Country of incorporation and
operation
Share class owned
% of share class
held by the Group Principal activity
Registered office address
Azura Business Solutions Limited2
England & Wales
£1.00 Ordinary shares
100
Dormant
Azura Design Studio Limited2
England & Wales
£1.00 Ordinary shares
100
Dormant
Azura Group Limited1,2
England & Wales
£1.00 Ordinary shares
100
Trading
Barking Mad Limited1,2
England & Wales
£1.00 Ordinary shares
100
Trading
ChipsAway International Limited1,2
England & Wales
£0.10 Ordinary shares
100
Trading
CSK Hydraulics Limited2
England & Wales
£1.00 Ordinary shares
100
Trading
CSS Hydraulics Limited2
England & Wales
£1.00 Ordinary shares
100
Trading
CST Hydraulics Limited2
England & Wales
£1.00 Ordinary shares
100
Dormant
Ashwood Court, Springwood Close, Tytherington Business Park,
Macclesfield, SK10 2XF, United Kingdom
Ashwood Court, Springwood Close, Tytherington Business Park,
Macclesfield, SK10 2XF, United Kingdom
Ashwood Court, Springwood Close, Tytherington Business Park,
Macclesfield, SK10 2XF, United Kingdom
Ashwood Court, Springwood Close, Tytherington Business Park,
Macclesfield, SK10 2XF, United Kingdom
Ashwood Court, Springwood Close, Tytherington Business Park,
Macclesfield, SK10 2XF, United Kingdom
Ashwood Court, Springwood Close, Tytherington Business Park,
Macclesfield, SK10 2XF, United Kingdom
Ashwood Court, Springwood Close, Tytherington Business Park,
Macclesfield, SK10 2XF, United Kingdom
Ashwood Court, Springwood Close, Tytherington Business Park,
Macclesfield, SK10 2XF, United Kingdom
CSY Hydraulics Limited2
England & Wales
£1.00 Ordinary shares
100
Non-trading Ashwood Court, Springwood Close, Tytherington Business Park,
Macclesfield, SK10 2XF, United Kingdom
DentsAway Limited2
England & Wales
£1.00 Ordinary shares
100
Non-trading Ashwood Court, Springwood Close, Tytherington Business Park,
Edwin Investments Limited2
England & Wales
£0.25 Ordinary shares
100
Dormant
Environmental Biotech Limited2
FB Holdings Limited1,2
England & Wales
England & Wales
£1.00 Ordinary shares
£0.01 Ordinary shares
Filta Environmental Canada Limited
Filta Group Europe BV
Filta Group Holdings Limited1,2
Filta Refrigeration Limited2
Canada
(British Columbia)
Netherlands
England & Wales
England & Wales
Common Stock
(no par value)
€1.00 Ordinary shares
£0.10 Ordinary shares
£1.00 Ordinary A shares
100
100
100
100
100
100
Non-trading
Dormant
Non-trading
Trading
Holding
Non-trading
Macclesfield, SK10 2XF, United Kingdom
Ashwood Court, Springwood Close, Tytherington Business Park,
Macclesfield, SK10 2XF, United Kingdom
The Locks, Hillmorton, Rugby, Warwickshire, CV21 4PP, United Kingdom
Ashwood Court, Springwood Close, Tytherington Business Park,
Macclesfield, SK10 2XF, United Kingdom
27th Floor – PO Box 49123 595 Burrard Street Vancouver,
British Columbia, Canada, V7X 1J2
Maasstraat 1A, 7071 VR, Ulft, Netherlands
The Locks, Hillmorton, Rugby, Warwickshire, CV21 4PP, United Kingdom
The Locks, Hillmorton, Rugby, Warwickshire, CV21 4PP, United Kingdom
169
Franchise Brands plc
Annual Report and Accounts 2023
Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Governance Financial Statements
27 Subsidiaries and audit exemption continued
Name of undertaking
Country of incorporation and
operation
Share class owned
% of share class
held by the Group Principal activity
Registered office address
FiltaFry Deutschland GmbH
Germany
FiltaFry Limited2
Grease Management Limited2
Hydraulic Authority I Limited1,2
England & Wales
England & Wales
England & Wales
€25,500 Ordinary 1
share and €24,500
Ordinary 2 share
£1.00 Ordinary shares
£1.00 Ordinary A shares
£0.10 Ordinary shares
100
100
100
100
Hydraulic Authority II Limited2
England & Wales
£1.00 Ordinary shares
100
Hydraulic Authority III Limited2
England & Wales
£1.00 Ordinary shares
100
Kemac Services Limited2
England & Wales
£1.00 Ordinary shares
100
Trading
Pliniusstrasse 8, 48488, Emsbüren, Germany
Non-trading
Non-trading
Holding
company
Holding
company
Holding
company
Non-trading Ashwood Court, Springwood Close, Tytherington Business Park,
The Locks, Hillmorton, Rugby, Warwickshire, CV21 4PP, United Kingdom
The Locks, Hillmorton, Rugby, Warwickshire, CV21 4PP, United Kingdom
Ashwood Court, Springwood Close, Tytherington Business Park,
Macclesfield, SK10 2XF, United Kingdom
Ashwood Court, Springwood Close, Tytherington Business Park,
Macclesfield, SK10 2XF, United Kingdom
Ashwood Court, Springwood Close, Tytherington Business Park,
Macclesfield, SK10 2XF, United Kingdom
M&M Asset Maintenance Limited2
Metro Plumb Limited2
England & Wales
England & Wales
£1.00 Ordinary shares
£1.00 Ordinary shares
100
100
Non-trading
Dormant
Metro Rod Limited1,2
England & Wales
£1.00 Ordinary shares
100
Trading
Macclesfield, SK10 2XF, United Kingdom
The Locks, Hillmorton, Rugby, Warwickshire, CV21 4PP, United Kingdom
Ashwood Court, Springwood Close, Tytherington Business Park,
Macclesfield, SK10 2XF, United Kingdom
Ashwood Court, Springwood Close, Tytherington Business Park,
Macclesfield, SK10 2XF, United Kingdom
MRB Drainage Limited2
England & Wales
£1.00 Ordinary shares
100
Non-trading Ashwood Court, Springwood Close, Tytherington Business Park,
MRE Drainage Limited2
England & Wales
£1.00 Ordinary shares
100
Trading
Macclesfield, SK10 2XF, United Kingdom
Ashwood Court, Springwood Close, Tytherington Business Park,
Macclesfield, SK10 2XF, United Kingdom
Oven Clean (Ontario) Limited2
England & Wales
£1.00 Ordinary shares
100
Non-trading Ashwood Court, Springwood Close, Tytherington Business Park,
Oven Clean Domestic Limited1,2
England & Wales
£1.00 Ordinary shares
100
Trading
Pirtek (UK) Limited2
England & Wales
£1.00 Ordinary shares
100
Trading
Pirtek 24/7 HydraulikService GmbH
Pirtek Austria GmbH
Pirtek Brussel BV
Pirtek BV
Austria
Austria
Belgium
Netherlands
51
€1.00 Ordinary shares
€35.00 Ordinary shares
100
€100.00 Ordinary shares 100
100
€1.00 Ordinary shares
Trading
Trading
Trading
Trading
Macclesfield, SK10 2XF, United Kingdom
Ashwood Court, Springwood Close, Tytherington Business Park,
Macclesfield, SK10 2XF, United Kingdom
Ashwood Court, Springwood Close, Tytherington Business Park,
Macclesfield, SK10 2XF, United Kingdom
Brückenkopfgasse 1/6 , 8020, Graz, Austria
Gonzagagasse 4, 1010, Wien, Austria
Avenue Newton 7, 1300, Wavre, Belgium
Hongkongstraat 29, 3047BR, Rotterdam, Netherlands
170
Franchise Brands plc
Annual Report and Accounts 2023
Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Governance Financial Statements
27 Subsidiaries and audit exemption continued
Name of undertaking
Pirtek (Deutschland) GmbH
Pirtek Europe Limited2
Pirtek Europoort BV
Pirtek France Holding SAS
Pirtek Hydraulique Service SAS
Pirtek Liége BV
Pirtek Lummen BV
Pirtek Rotterdam Noord BV
Pirtek Sweden AB
The Filta Group Limited2
The Filta Group, Inc
The Handyman Van Limited1,2
Watbio Holdings Limited2
Watbio Limited2
Watling Hope (Installations) Limited2
Willow Drainage Limited2
Netherlands
France
France
Belgium
Belgium
Netherlands
Sweden
England & Wales
USA (Delaware)
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
Country of incorporation and
operation
Share class owned
% of share class
held by the Group Principal activity
Registered office address
Germany
England & Wales
€100.00 Ordinary shares 100
100
£1.00 Ordinary shares
100
€1.00 Ordinary shares
100
€1.00 Ordinary shares
100
€21.95 shares
100
€100.00 shares
€100.00 Ordinary shares 100
100
€1.00 Ordinary shares
100
SEK100 Ordinary shares
100
£1.00 Ordinary shares
100
Common Stock (no par)
100
£1.00 Ordinary shares
£1.00 A Ordinary shares
£1.00 Ordinary shares
£1.00 B Ordinary shares
£1.00 Ordinary shares
and £1.00 Ordinary A
shares
£1.00 Ordinary shares
100
100
100
100
100
Trading
Holding
company
Trading
Holding
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Maarweg 165, D-50825, Köln, Germany
Ashwood Court, Springwood Close, Tytherington Business Park,
Macclesfield, SK10 2XF, United Kingdom
Moezelweg 104, 3198 LS, Europoort, Netherlands
3 rue des Lancés, 94310, Orly, France
3 rue des Lancés, 94310, Orly, France
Rue de l’Informatique 10/3, 4460 Grâce-Hollogne, Belgium
Klaverbladstraat 16, 3560, Lummen, Belgium
Schuttevaerweg 88, 3044BB, Rotterdam, Netherlands
Vendevägen 85B 6tr, 182 91, Danderyd, Sweden
The Locks, Hillmorton, Rugby, Warwickshire, CV21 4PP, United Kingdom
7075 Kingspointe Parkway, Suite 1, Orlando, Florida, 32819, United States
Ashwood Court, Springwood Close, Tytherington Business Park,
Macclesfield, SK10 2XF, United Kingdom
The Locks, Hillmorton, Rugby, Warwickshire, CV21 4PP, United Kingdom
The Locks, Hillmorton, Rugby, Warwickshire, CV21 4PP, United Kingdom
The Locks, Hillmorton, Rugby, Warwickshire, CV21 4PP, United Kingdom
Non-trading
Non-trading
Non-trading
Non-trading Ashwood Court, Springwood Close, Tytherington Business Park,
Macclesfield, SK10 2XF, United Kingdom
Trading
Holding
company
Ashwood Court, Springwood Close, Tytherington Business Park,
Macclesfield, SK10 2XF, United Kingdom
Ashwood Court, Springwood Close, Tytherington Business Park,
Macclesfield, SK10 2XF, United Kingdom
Willow Pumps Limited2
England & Wales
WPL Group Holdings Limited1,2
England & Wales
£1.00 Ordinary shares
100
1. Entities directly owned by Franchise Brands plc
2. For the purposes of section 479A to 479C, Companies Act 2006 (the ‘Act’) the Company confirms that the UK subsidiaries of the Company, all of which are included in these consolidated accounts, are exempt from the requirements of the Act relating to the
audit of individual accounts by virtue of s479A of the Act. The outstanding liabilities at 31 December 2023 of the UK subsidiaries have been (or will be) guaranteed by the Company pursuant to s479A to s479C of the Act. In the opinion of the Directors, the
possibility of the guarantee being called upon is remote.
171
Franchise Brands plc
Annual Report and Accounts 2023
Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Governance Financial Statements
28 Share capital and other reserves
Allotted, called up and fully paid
At 1 January 2023
Placing
Acquisition of Filta Group plc
Acquisition of Hydraulic Authority I
Limited
Exercise of share options
At 31 December 2023
2023
£’000
652
268
—
49
—
969
2022
£’000
480
2023
No. of shares
2022
No. of shares
— 53,700,180
130,311,112 95,865,609
—
— 33,788,008
169
—
3
9,772,788
—
652 193,784,080
—
657,495
130,311,112
Share capital comprises the nominal value of the Company’s ordinary shares of 0.5 pence each.
During the year the Group completed the placing of 63,472,968 ordinary shares at a price of
180p raising £110.7m (net of expenses), and issued 9,772,788 ordinary shares as consideration for
the acquisition of Hydraulic Authority I Limited.
Share premium: The share premium reserve is the premium paid on the Company’s 0.5
pence ordinary shares. During the year costs of £2.6m were charged against share premium
representing directly attributable costs of issuing shares for the acquisition of Hydraulic Authority
I Limited.
Share‑based payment reserve: The share-based payment reserve represents the movement in
cost of equity-settled transactions in relation to the long-term incentive plan.
Merger reserve: The merger reserve represents the premium above the nominal value of the
equity issued as part of the consideration in relation to acquisitions.
EBT reserve: This represents the amount that the Company paid for its own shares held in
the EBT. During the year, the EBT purchased 18,420 ordinary shares (2022: 1,852,870 ordinary
shares) at an average price of 200 pence per share (2022: 143 pence per share). 226,418
ordinary shares (2022: 301,427 ordinary shares) have been used to satisfy the exercise of
options. Accordingly, at the year end the EBT held 1,562,685 ordinary shares (2022: 1,770,683
ordinary shares) which represents 0.81% (2022: 1.36%) of the Company’s current issued
share capital.
29 Related party transactions
Remuneration of Directors and other transactions
During the year the Group employed family members of two of the Directors. The total
remuneration paid was the same as other employees at an equivalent level in the organisation.
During the year £151,398 (2022: £173,373) was paid to Roxanna Inc, a company which Jason
Sayers is a Director of under a consultancy arrangement with Filta US in relation to Jason
Sayers. This is included within the Director’s remuneration. During the year £12,300 (2022:
£nil) was paid to Robin Bellhouse, who at the time was a Non-executive Director, for corporate
secretarial and governance services, prior to his permanent appointment as Company Secretary
on 2 October 2023.
We operate a number of businesses which provide consumer-facing services. From time-to-
time, Directors of the Parent Company and other Group companies may use some of these
to provide services to them or their immediate family members in a personal capacity. These
transactions are conducted at arm’s length and no discounts or special terms are offered by
virtue of the Director’s position. The value of these transactions, individually and collectively,
are not material for either the individual or the Group company involved. There are no other
transactions with Directors.
Notes payable to related party
On 31 January 2018, FiltaFry Deutschland GmbH entered into notes totalling £48,201, bearing
interest at 2.5%, with companies which held the master licences acquired in the acquisition.
The Managing Director of FiltaFry Deutschland GmbH is the sole Director of one of these
companies. The notes matured on 31 January 2023 and were fully repaid; at year end the total
amount outstanding under these notes was £nil (2022: £25,004). Interest accrued on the notes
amounted to £nil at 31 December 2023 (2022: £609).
30 Dividends
Final 2022 dividend of 1.1p per ordinary share paid and declared
(2022: Final 2021 dividend of 0.9p)
Interim dividend of 1.0p per ordinary share paid and declared
(2022: 0.9p)
2023
£’000
1,433
1,938
3,371
2022
£’000
1,169
1,170
2,339
Movements on these reserves are set out in the consolidated statement of changes in equity.
A final dividend of 1.2 pence per ordinary share is proposed.
172
Franchise Brands plc
Annual Report and Accounts 2023
Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section Strategic Report Governance Financial Statements
Governance Financial Statements
31 Employee benefits
Country
Valuation date
Fiscal year
Currency
Plan
Actuarial methodology
Key assumptions
Discount rate
Measurement date
Salary increase rate
Mortality table
Movement in defined benefit obligation
At 1 January 2023
Additions in year
Current service cost
Interest expense on defined benefit obligation
Actuarial gain – financial assumption charges
Actuarial gain – demographic changes
Foreign exchange movements
At 31 December 2023
Funded status
Defined benefit obligation at end of year
Funded status liability
Net pension liability
173
Franchise Brands plc
Annual Report and Accounts 2023
Net liability reconciliation
Balance sheet reconciliation
At 1 January 2023
Additions in year
Expense recognised in consolidated statement of comprehensive income
Remeasurement amounts recognised in other comprehensive income
Foreign exchange movements
At 31 December 2023
Expense
Current service costs
Interest costs
Total expenses recognised
2023
£’000
—
514
62
(63)
(6)
507
2023
£’000
50
12
62
The Group assumed defined benefit retirement schemes for all qualifying employees in France
as part of the acquisition of Pirtek Europe. The scheme is an unfunded plan, therefore there are
no separately identifiable assets associated with the scheme. The Group recorded expenses of
£62k (2022: £nil) in the consolidated income statement for the year. That expense represents
contributions payable to the trust fund for this scheme by the Group at rates specified in
the rules of the scheme. The unfunded benefit obligation for this scheme reflected on the
consolidated statement of financial position as at 31 December 2023 is £507k (2022: £nil).
Pirtek France operates a post-employment bonus scheme which is as required by French law.
Under this national scheme, employees accrue a bonus based on years of service and a bonus
is paid out at retirement. The scheme is an unfunded plan, therefore there are no separately
identifiable assets associated with the scheme. The following sensitivities have been modelled
by the Group actuaries: 1% increase/ decrease in the discount rate has a potential impact of
£56k, a 1.5% increase / decrease in salary inflation £59k and a 2% change in social contribution
£11k.
France
31 December 2023
31 December 2023
Euro (€)
Pension
OCI
3.17%
31 December 2023
2.50%
Insee 2022
2023
£’000
—
514
50
12
(6)
(57)
(6)
507
2023
£’000
507
—
507
Notes forming part of the Financial Statements continuedFor the year ended 31 December 2023Contents Generation – PageContents Generation – Sub PageContents Generation – Section Five Year Financial Summary (Unaudited)
2023
£’000
350,053
121,265
30,101
(4,417)
(5,953)
19,731
(5,153)
14,578
(7,718)
—
(838)
(6,159)
3,174
3,037
1.75p
8.42p
2.20p
2022
Restated
£’000
186,353
69,839
15,257
(2,281)
(235)
12,741
(2,560)
10,181
(1,693)
1,232
(535)
(1,707)
648
8,126
6.65p
8.34p
2.00p
2021
Restated
£’000
93,571
34,133
8,474
(1,716)
(292)
6,465
(1,154)
5,311
(393)
223
(334)
(187)
(387)
4,233
4.42p
5.55p
1.50p
2020
Restated
£’000
75,849
30,454
6,640
(1,357)
(446)
4,836
(899)
3,937
(393)
151
(205)
(707)
9
2,793
3.09p
4.35p
1.10p
2019
Restated
£’000
76,652
24,822
5,182
(755)
(357)
4,069
(687)
3,382
(260)
(26)
(238)
(270)
121
2,710
3.48p
4.34p
0.95p
Definition
Customer Relationship Management
Direct Labour Organisation
Fats, Oil and Grease
Grease Recovery Unit
Mobile Filtration Unit
Mobile Service Unit
Mobile Service Technician
Total Hose Management
Strategic Report
Governance Financial Statements
Five Year Financial Summary (Unaudited)
For the year ended 31 December 2023
Five year financial summary
System sales
Statutory revenue
Adjusted EBITDA
Depreciation & amortisation of software
Finance expense
Adjusted profit before tax
Tax expense
Adjusted profit after tax
Amortisation of acquired intangibles
Other gains & losses
Share-based payment
Non-recurring items
Tax on adjusting items
Statutory profit
Basic EPS
Adjusted basic EPS
Dividend
Glossary of key terms
Term
CRM
DLO
FOG
GRU
MFU
MSU
MST
THM
174
Franchise Brands plc
Annual Report and Accounts 2023
Contents Generation – Sub PageContents Generation – Section Company Information
Strategic Report
Governance Financial Statements
Company Information
Directors and Company Secretary
Stephen Hemsley
Mark Fryer
Peter Kear
Andy Brattesani
Nigel Wray
Executive Chairman
Chief Financial Officer
Senior Independent Non-executive Director
Independent Non-executive Director
Non-executive Director
Rob Bellhouse
Company Secretary
Management Board
Stephen Hemsley
Mark Fryer
Robin Auld
Rob Bellhouse
Julia Choudhury
Tim Harris
Andrew Mallows
Peter Molloy
Colin Rees
Jason Sayers
Chris Stuckey
Executive Chairman
Chief Financial Officer
Group Marketing Director
Company Secretary
Corporate Development Director
Managing Director, B2C Division
Group Commercial Director
CEO, Water & Waste Services
Chief Information Officer
CEO, Filta International
CEO, Pirtek Europe
Registered office and principal place of business
Ashwood Court
Springwood Close
Tytherington Business Park
Macclesfield
SK10 2XF
Auditor
BDO LLP
3 Hardman Street
Manchester
M3 3AT
175
Franchise Brands plc
Annual Report and Accounts 2023
Nominated adviser and joint broker
Allenby Capital Limited
5 St. Helen’s Place
London
EC3A 6AB
Financial public relations advisers
MHP Group
4th Floor, 60 Great Portland Street
London
W1W 7RT
Joint brokers
Stifel Nicolaus Europe Limited
150 Cheapside
London
EC2V 6ET
Dowgate Capital Limited
15 Fetter Lane
London
EC4A 1BW
Legal advisor
Gateley Plc
One Eleven Edmund Street
Birmingham
B3 2HJ
Registrars
Neville Registrars
Neville House
Steelpark Road
Halesowen
B62 8HD
Principal bankers
HSBC Bank
8 Canada Square
London
E14 5HQ
Other syndicate banks
National Westminster Bank
(Syndicate bank agent)
250 Bishopsgate
London
EC2M 4AA
Citibank
Citigroup Centre
33 Canada Square
Canary Wharf
London
E14 5LB
Bank of Ireland
26 Cross Street
Manchester
M2 7AF
Contents Generation – Sub PageContents Generation – Section Notes
Strategic Report
Governance Financial Statements
Notes
Warning to shareholders – investment fraud
We are aware that shareholders in UK companies sometimes receive unsolicited telephone calls or correspondence
offering to buy or sell their shares on very favourable terms. The callers can be extremely persistent and very persuasive
and often have professional-looking websites and telephone numbers to support their activities. These callers will
sometimes imply a connection to the company and provide incorrect or misleading information. This type of call should
be treated as an investment scam – the safest thing to do is hang up and ignore any written communications.
You should always check that any firm calling you about potential investment opportunities is properly authorised and
regulated by the FCA. If you deal with an unauthorised firm, you will not be eligible for compensation under the Financial
Services Compensation Scheme. You can find out more about protecting yourself from investment scams by visiting the
FCA’s website www.fca.org.uk/consumers, or by calling the FCA’s helpline on 0800 111 6768.
If you have already paid money to share fraudsters contact Action Fraud immediately on 0300 123 2040 or through their
website, www.actionfraud.police.uk.
Cautionary note regarding forward-looking statements
Certain statements contained in this document relate to the future and constitute ‘forward-looking statements’. These forward-
looking statements include all matters that are not historical facts. In some case, these forward-looking statements can be
identified by the use of forward-looking terminology, including the terms “believes”, “estimates”, “anticipates”, “expects”,
“intends”, “plans”, “may”, “will”, “could”, “shall”, “risk”, “aims”, “predicts”, “continues”, “assumes”, “positioned” or “should” or, in
each case, their negative or other variations or comparable terminology. They appear in a number of places throughout this
document and include statements regarding the intentions, beliefs or current expectations of the directors, Franchise Brands or
the Group concerning, amongst other things, the results of operations, financial condition, liquidity, prospects, growth, strategies
and dividend policy of Franchise Brands and the industry sectors in which it operates.
By their nature, forward-looking statements are not guarantees or predictions of future performance and involve known and
unknown risks, uncertainties, assumptions and other factors, many of which are beyond the Group’s control, and which may
cause the Group’s actual results of operations, financial condition, liquidity, dividend policy and the development of the industry
and business sectors in which the Group operates to differ materially from those suggested by the forward-looking statements
contained in this document. In addition, even if the Group’s actual results of operations, financial condition and the development
of the business sectors in which it operates are consistent with the forward-looking statements contained in this document,
those results or developments may not be indicative of results or developments in subsequent periods. Past performance
cannot be relied upon as a guide to future performance and should not be taken as a representation or assurance that trends or
activities underlying past performance will continue in the future. Accordingly, readers of this documents are cautioned not to
place undue reliance on these forward-looking statements.
Other than as required by English law, none of the Company, its Directors, officers, advisers or any other person gives any
representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking
statements in this document will actually occur, in part or in whole. Additionally, statements of the intentions of the Board and/
or Directors reflect the present intentions of the Board and/or Directors, respectively, as at the date of this document, and may
be subject to change as the composition of the Company’s Board of Directors alters, or as circumstances require. The forward-
looking statements contained in this document speak only as at the date of this document.
Except as required by the Market Abuse Regulation or other applicable law, the AIM Rules for Companies or other requirements
of the London Stock Exchange, Franchise Brands expressly disclaims any obligation or undertaking to release publicly any
updates or revisions to any forward-looking statements contained in this document to reflect any change in the Group’s
expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
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Franchise Brands plc
Annual Report and Accounts 2023
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Franchise Brands plc
Ashwood Court
Springwood Close,
Tytherington Business Park
Macclesfield
Cheshire
SK10 2XF