Franchise Brands, the AIM-listed platform operator of B2B brands including Pirtek, Metro Rod, Willow Pumps and Filta, on Tuesday reported System sales growth of 8.4% for the three months to 30 September, up from 6.7% in the first half and 4.2% in the same quarter last year.
The trading update is described as reinforcing confidence in meeting full-year earnings expectations, pitched at £36.5m to £38m, with consensus at £37m.
Among the portfolio of brands, Filta International was the standout, with North American System sales up 20.8% in local currency in the third quarter, accelerating from 15.0% growth in the prior-year quarter, while used cooking oil sales rose 42.3% in local currency on a 9.6% rise in volume and a 29.9% increase in price.
The company said it expects the used cooking oil market to remain structurally supported around current levels into 2027.
Pirtek System sales rose 6.3% in sterling, led by a sharp improvement at Pirtek UK, the group's largest market, where growth reached 8.9% against 1.5% a year earlier, while Benelux System sales jumped 14.0% in local currency and Germany grew 5.0%.
Water & Waste Services System sales grew 2.4%, with Metro Rod performing well but divisional growth held back by previously announced project deferrals to the fourth quarter at Willow Pumps.
Filta's new FiltaClean Pro service "has started well and is opening up new sector opportunities", with the first national account onboarded for a leading Quick Service Restaurant group, the company noted.
Profit up 42% in first half
In the six months to 30 June, Franchise Brands reported pre-tax profit up 42% to £8.4m and adjusted EBITDA up 6.5% to £18.5m, with adjusted net debt down £9.2m to £52.9m and leverage reduced to 1.5 times adjusted EBITDA from 1.8 times a year earlier.
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The group's plan to simplify around its three core B2B franchised businesses, Pirtek, Filta and Metro Rod, is progressing in line with management's expectations, with any disposal proceeds to be used to accelerate debt repayment and support earnings-per-share growth in the continuing businesses.
Executive Chairman Stephen Hemsley said the quarter's performance "was broad-based across all three core B2B franchise brands, with Pirtek's key franchised businesses returning to more robust growth and a particularly strong performance from Filta as it expands its services with FiltaClean Pro."
The company said its full-year expectations assume no improvement in market conditions in the fourth quarter.
Shore Capital reiterates Buy on Franchise Brands at 185p
Shore Capital analyst Tom Fraine, in a note following Tuesday's update, said that the Q3 acceleration to 8.4% System sales has underlined the resilience and attractiveness of Franchise Brands' model.
In a note, the analyst repeated a Buy rating and 185p target, which compares to today's market price of 160.6p, whilst leaving his forecasts unchanged, for now, whilst saying consensus expectations are well underpinned.
The broker noted that there's scope for upgrades supported by sustained Filta International momentum and the group's cash-generative franchise model.