City round-up: Franchise Brands; Northcoders; Pets at Home

Metro Rod, a Franchise Brands business

Franchise Brands, the Macclesfield-based multi-brand franchise business, said its annual adjusted EBITDA level could be “very marginally below” the current range of market expectations for the year to December 31, 2024, in a trading update this morning.

It said its last financial year saw resilient underlying demand for the group’s essential reactive and planned services, resulting in record system sales in all key divisions, despite the challenging macroeconomic conditions in several key markets that we the group has previously referred to.

However, slightly moderated system sales growth, combined with the relatively fixed nature of the cost base of the group’s key franchise businesses, leads the board to expect that its adjusted EBITDA figures could fail to hit market expectations of between £35.5m-£36m, subject to audit.

Following the appointment of Peter Molloy as Group CEO, a new group-wide strategic initiative, ‘One Franchise Brands’, was launched to focus on integrating the group into one business with the objective of enhancing sales, creating an efficient overhead structure and driving operational gearing.

Progress is being made on integrating all the group’s businesses and the opportunities remain significant, the group said.

In the UK and Continental Europe, Pirtek grew system sales to record levels, with a like-for-like increase of two per cent in the UK & Ireland and four per cent in the Continental European markets in local currency.

In the Water & Waste Services division, good demand for essential reactive services resulted in system sales growing to record levels at Metro Rod and Metro Plumb, with growth of six per cent and 16%, respectively.

In North America, Filta International’s business performed strongly. System sales increased by 17% excluding used cooking oil sales (14% increase in sterling). In local currency, used oil volumes increased by 14%, however, the average price fell by 23% year-on-year, resulting in a revenue reduction of 11%. Overall, system sales increased by 12% in local currency (nine per cent increase in sterling).

The B2C Division continued to trade creditably despite a subdued franchisee recruitment and retention environment.

The group’s adjusted net debt on December 31, 2024, was £65.1m (December 31, 2023: £74.7m), comprised of gross debt of £78m and cash of £12.9m.

Looking ahead, the group said at this early stage of the year, the board is mindful of the macroeconomic uncertainty in many of the markets in which it operates, with higher levels of confidence in the US where robust growth is expected to continue.

It anticipates continued resilient demand for essential reactive and planned services, but the board retains a more cautious view on the timing of the recovery in project and other discretionary work.

Executive chairman, Stephen Hemsley, said: “The group’s key divisions achieved record system sales in 2024, despite a challenging macroeconomic background.

“This is a testament to the resilience of our underlying business, experienced management teams, entrepreneurial franchisees and dedicated Support Centre teams.

“Our clear focus in 2025 is to accelerate the pace of the integration of all the group’s businesses following a period of rapid expansion.”

He added: “Reducing leverage remains a strategic priority. Together with the tailwind we anticipate from continuing reductions in interest rates, this should allow us to drive earnings per share at a faster pace than over the last couple of years. I, therefore, look forward to 2025 with cautious optimism.”

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Northcoders, the Manchester-based coding specialist with bases in Birmingham, Newcastle and Leeds, said it is on target to deliver forecast results for the year to December 31, 2024, and that the new 2025 financial year has started promisingly.

Underlying 2024 trading was in line with market expectations. The unaudited revenue for the period increased by 24% to £8.8m, driven by increasing demand for digital training.

As anticipated, efficiencies provided by the group’s NCore technology platform and product maturity have enabled a large year-on-year profitability increase in line with expectations.

The group said it maintains a robust financial position with £1.2m of cash as at year end, compared with £1.6m a year ago, and net cash of £0.75m (December 31, 2023: £0.8m).

Despite the wider macro-economic uncertainty, the group’s Training Bootcamp division has delivered a resilient performance with enrolments up by 15% to 1,339 (FY-2023: 1,167).

Registrations grew by 24% to 10,575 (FY-2023: 8,535) and the hiring partner network increased to 510 companies (FY-2023: 465 companies).

Training for students outside the core delivery in England continues to be a priority, with Northcoders receiving 474 registrations from outside England (FY-2023: 320 registrations).

There has been further momentum in Counter, the group’s consultancy brand, with the initial pilot contracts progressing well, and discussions regarding the commercial terms of renewals now under way. Furthermore, Counter has secured a full contract with a large airport group, which has commenced, and the pipeline for future sales opportunities is growing.

Northcoders said the new financial year has started promisingly across the business, further supported by the successful office move in Manchester that provides lower costs and more flexibility to the business.

The group revealed that it took actions to streamline the business in the fourth quarter of 2024 and quarter one of the current financial year to absorb costs of £0.15m from the Government’s hike in Employers’ National Insurance.

Founder and CEO, Chris Hill, said: “We are pleased to report another year of significant progress for Northcoders, with our strategic investment into our products and infrastructure leading to a material increase in profitability in the period.

“Whilst conscious of the hiring challenges felt in the wider UK recruitment market, there continues to be a fundamental gap in digital skills which acts as a barrier to economic growth and, as such, we remain confident in the underlying demand for our services.”

He added: “We believe the steps taken to diversify our revenue streams, through the launch of the Counter consultancy business, combined with the ongoing expansion of the Northcoders brand in the UK, position us strongly as we start the new financial year.”

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Pets at Home – Pet Care Centre

Strong growth in the veterinary services business at Pets at Home has offset a soft retail performance.

In a trading update this morning the Cheshire-headquartered group said it is on course to hit its profit targets, but has warned that a “subdued consumer backdrop”.

In November the company lowered its year-to-March-2025 pre-tax profit guidance from £144 million to modest growth on last year’s £132 million.

The shares dropped from 279p to 230p on that news and haven’t recovered, despite a purchase of £100,000 worth by chief executive Lyssa McGowan.

In today’s statement total revenue revenue for the third quarter to January 2025 was down slightly (0.2%) to £361.6m. 

Vet Group revenues grew at 21.3% with like for like growth of 19.9%, which included a growth in subscriptions, visits, and average transaction values.

Retail revenue (2.4%) in Q3 with a (2.8%) LFL. As widely reported across the consumer sector, Q3 saw a more challenging UK consumer backdrop with particularly weak footfall from October. 

However, digital performance improved, building momentum through the quarter, with continued strong growth in subscriptions.

The company has returned £85m to shareholders via ordinary dividends and buybacks over the last year.

Russ Mould, investment director at Manchester investment platform, AJ Bell, said: “Britons love their pets but that doesn’t mean they aren’t prepared to economise on behalf of their furry and feathered friends. It’s clear Pets at Home is finding it tricky to get customers through the doors.

“Non-specialist retailers, including the supermarkets, will often be able to outcompete Pets at Home on price and people are also less likely at the moment to splash out on anything other than the essentials for their animal companions.

“The veterinary side of the business is coming to the rescue to some extent – with an increase in subscriptions providing the company with a steady stream of income.”

He added: “However, Pets at Home and others are nervously awaiting the outcome of a probe by the competition authorities into practices in the vet industry.

“This investigation could drag on until November, meaning Pets at Home may not get much credit for how the best performing part of its business is doing until after that deadline.”

Broker Panmure has maintained a “Buy” notice on their shares, as they think the dynamics from the one-digital platform can drive significant growth. “But between tax hikes and the poor consumer sentiment it is hard to see earnings momentum change in the near-term,” a note said this morning.

Shares in Pets at Home opened this morning at 213.40p and rose to 221p in early trading, before falling back to 219.80p by 10am.

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