Franchise Brands PLC Integration of UK DLOs & earn-out of Willow Pumps (6827M)
May 25 2022 - 2:01AM
UK Regulatory
TIDMFRAN
RNS Number : 6827M
Franchise Brands PLC
25 May 2022
25 May 2022
FRANCHISE BRANDS PLC
("Franchise Brands", the "Company" or the "Group")
Integration across UK direct labour organisations and
agreement to complete earn-out of Willow Pumps
The Board of Franchise Brands plc (AIM: FRAN), an international
multi-brand franchise business, is pleased to provide details of
its plans to integrate the Group's direct labour organisations
("DLOs") in the UK following the acquisition of Filta Group
Holdings plc ("Filta") in March 2022.
The acquisition of Filta allows the Group to offer a wider range
of drainage, pump, plumbing and fats, oils and grease management
services to commercial customers. In order to maximise the
opportunity to grow, the Board believes it is important to
streamline the way the Group's businesses operate and collaborate.
As such, the Board has identified advantages to harmonising some of
Filta UK's DLO business with Willow Pumps in order to unlock
further market opportunities in the B2B division.
There are considerable synergies and opportunities in the range
of core services of the two DLO businesses, as well as with the
Metro Rod franchise network, in particular pump servicing, drainage
and fats oils and grease management. These services are very
complementary in terms of the customer base, with significant
opportunities to cross-sell the now extended range of services to
all existing and new customers. These synergies will provide a
number of opportunities to enhance performance and customer service
and grow revenue and profits for the enlarged group.
In order to realise the efficiencies as quickly and efficiently
as possible, without constraints or impediments, the Board has
determined that the best course of action is to now buy out the
earn-out consideration for the acquisition of Willow Pumps that was
agreed in October 2019, rather than wait until the earn-out period
ends on 31 December 2024. The Board believes this will facilitate
an accelerated programme of integration and harmonisation across
the B2B division of the Group. This includes building on recent
initiatives between Willow Pumps and Metro Rod to deliver pump
services in an optimum way and accelerate the expansion of pump
expertise and resources in the Metro Rod network.
Franchise Brands acquired Willow Pumps in October 2019 from Ian
Lawrence, Managing Director of Willow Pumps, and his wife for an
initial consideration of GBP5.0 million (net of non-trading cash of
GBP700,000) and a performance-based potential deferred
consideration of up to GBP7.5 million ("Deferred Consideration")
payable over five years. The Deferred Consideration was structured
to be conditional on the achievement of targets for profits and
increases in pump work undertaken by Metro Rod franchisees for each
of the five financial years ending 31 December 2024. As previously
reported, Willow Pumps has been impacted by the disruption caused
by COVID-19 in the past two years, particularly in the
house-building sector, which has resulted in a total of GBP664,530
in Deferred Consideration paid to date for the first two years
ending 31 December 2021 out of a possible GBP3 million. Further
details of the Deferred Consideration were set out in the Company's
announcement on 7 October 2019.
The Board has r eached agreement with Ian Lawrence and his wife
whereby they will receive a cash payment of GBP1,335,470 for the
termination of the remainder of the earn-out element of the Willow
Pumps acquisition agreement . T his means that no further
consideration payments will be due and the total payment under the
Deferred Consideration will be GBP2 million (out of a possible
GBP7.5 million). This final payment to terminate the earn-out is
expected to result in an exceptional profit of GBP1.6 million for
Franchise Brands in the year ending 31 December 2022, against the
IFRS13 fair value of the contingent consideration provision in the
2021 accounts of GBP2.9 million.
Ian Lawrence will now become Non-Executive Chairman of Willow
Pumps and the Company has appointed Kevin Perry, previously Head of
Sales and Marketing at Willow Pumps, as Managing Director of Willow
Pumps. Kevin Perry will report to Peter Molloy who was recently
appointed Managing Director of the Group's B2B Division in the
UK.
This agreement with Ian Lawrence and his wife to vary the
deferred consideration for the Acquisition is a related party
transaction pursuant to rule 13 of the AIM Rules for Companies, due
to Mr Lawrence being a director of a Group company. The Directors
of the Company consider, having consulted with the Company's
Nominated Adviser, that the terms of the transaction are fair and
reasonable insofar as the Company's shareholders are concerned.
Enquiries:
Franchise Brands plc + 44 (0) 1625 813231
Stephen Hemsley, Executive Chairman
Brian Hogan, Chief Financial Officer
Julia Choudhury, Corporate Development
Director
Allenby Capital Limited (Nominated Adviser
and Joint Broker) +44 (0) 20 3328 5656
Jeremy Porter / Liz Kirchner (Corporate
Finance)
Amrit Nahal (Sales and Corporate Broking)
Dowgate Capital Limited (Joint Broker) +44 (0) 20 3903 7715
James Serjeant / Colin Climie / Nicholas
Chambers
MHP Communications (Financial PR) +44 (0) 20 3128 8100
Katie Hunt / Catherine Chapman +44 (0) 7884 494112
franchisebrands@mhpc.com
About Franchise Brands plc
Franchise Brands is focused on building market-leading
businesses in selected customer segments, primarily via a franchise
model. The Group currently has a combined network of over 600
franchisees across six principal franchise brands in the UK, North
America and Europe. Our focus is on established brands which can
benefit from our shared support services, specialist sector
expertise, management experience and group resources.
Our B2B brands are Metro Rod, Metro Plumb, Filta, Willow Pumps
and Azura, and our principle B2C brands are ChipsAway, Ovenclean
and Barking Mad. Each of our brands are leaders in their respective
markets. The combined trading history of all the Group's brands is
over 190 years. Franchise Brands employs over 430 people from 5
principal offices in the UK as well as Orlando, Florida and the
Netherlands.
For further information, visit www.franchisebrands.co.uk .
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