Franchise Brands PLC - Acquisition and Trading Update
Acquisition of Willow Pumps - adding highly complementary services to Metro Rod
Group trading update for Q3
Change to total voting rights
The Initial Consideration has been paid as to
· Willow Pumps, founded in 1992, is a leading water pump supply, installation and servicing business, with a below-ground (foul water) and above-ground (fresh water) capability.
· Willow Pumps achieved revenue of
· The Board believes the Acquisition will be significantly earnings enhancing for the Group.
· The Acquisition has a strong strategic rationale:
· It is consistent with Metro Rod's Vision 2023 strategy of expanding its range of services to the commercial market.
· The longer-term aim of the Group is to provide a "water in, waste out" range of drainage, pumps and plumbing-related services to commercial customers nationally.
· Pumps are an engineered solution and the acquisition of this high quality, well-established business represents the optimum way to enter this specialist market.
· Willow Pumps will benefit from a significantly expanded delivery capability through Metro Rod's national network of over 400 engineers working out of 43 depots across the
· Metro Rod will benefit from potential demand from its national account customers who are progressively tendering for combined drainage and pump services and from the opportunity to supply its wide range of drainage services to Willow Pumps' customers.
· The above-ground pump capability of Willow Pumps also provides a new strategic opportunity to develop the Group's Metro Plumb and Kemac businesses.
· The deal structure provides both a significant incentive for Willow Pumps to help upskill the Metro Rod franchise community and then subcontract pump work to them, and for Willow Pumps' management to continue to grow the existing business.
· The principal vendor, Willow Pumps' founder and Managing Director
· Willow Pumps will continue to operate as a direct labour organisation ("DLO") within
Commenting on the Acquisition,
"The deal structure also provides a significant incentive for Willow Pump's management team to continue to grow its existing business by developing the many national accounts where Metro Rod only provides drainage services at present. As such, the Board of
"I am really looking forward to working with
"My team and I welcome the opportunity to work with Metro Rod franchisees all across the country and we look forward to working with Metro Rod to deliver first-class pump services and support to their national accounts."
Background to and rationale for the Acquisition
Willow Pumps is one of the
The business is highly complementary to the Group's Metro Rod and Metro Plumb businesses and provides a strategic opportunity to expand the range of services that Metro Rod and Metro Plumb can offer, consistent with our Vision 2023 strategy. The longer-term objective is to be able to offer an end-to-end range of drainage, pumps and plumbing-related services to commercial customers that will extend from "water in" to "waste out" on a national basis.
Pumps are engineered solutions and incorporate an electrical, as well as a mechanical, component. As such, they have certain specialisations over and above drainage services. The Metro Rod franchisees currently have little or no pump capability because of the specialist nature of this work. However, given the linkage between pumps and drainage, such work is frequently encountered. Currently, Metro Rod franchisees subcontract the pump work which stems from their drainage jobs, and, since 2013, a proportion of this has been subcontracted to Willow Pumps. In addition, there is increasing demand for a pump servicing capability from Metro Rod's national account customers who are progressively tendering combined drainage and pump services. As Metro Rod has historically been unable to self-deliver this service, it has not competed in this area of the market.
The organic development of a complete range of market-leading pump services within a franchise business would take a considerable amount of time to achieve and national coverage would be patchy, as the pace at which franchisees would embrace the opportunity would vary across the network. The Board therefore concluded that the acquisition of Willow Pumps, one of the leading pump companies in the
The above-ground capability of Willow Pumps, which includes cold water booster sets, storage tanks, and pressurisation units within its offering, also provides a new strategic opportunity to develop the Metro Plumb business. Currently, Metro Plumb is focused on lower-value insurance stabilisation work, but the expertise of Willow Pumps will provide the opportunity to enhance Metro Plumb's skill base and to undertake higher value work. Furthermore, an opportunity has been identified for Kemac, which carries out some high-end specialist plumbing work for water utilities, to work more closely with the above-ground team at Willow Pumps.
The Board of
Structure of the Acquisition and integration with the Group
The structure of the Acquisition provides a significant incentive for Willow Pumps to provide the necessary specialist training and support to the Metro Rod franchise community to enable them to undertake pump work to the required standard. All Metro Rod franchisees will be given the opportunity to upskill, identify and self-deliver pump work utilising Willow Pumps' expertise. Growth incentives, similar to the incentive scheme that has successfully encouraged significant investment by franchisees in a tankering capability, will also be offered to the Metro Rod franchise community to encourage them to invest in a pump servicing capability. Over time, Willow Pumps will benefit from a significantly expanded delivery capability through Metro Rod's national network of over 400 engineers working out of 43 depots across the
The deal structure also provides a significant incentive for Willow Pumps' management team to continue to grow its existing business. Willow Pumps will continue to operate as a DLO within
Willow Pumps has a strong management team led by the founder,
Details of Willow Pumps' business
Willow Pumps was founded by
Supply and installation work involves the design and installation of below ground pumping stations, typically in new-build developments. These range from central pump stations on new housing estates to new-build commercial premises. These installations take place over a number of months, in discrete phases. At the end of the project a customer may sign up to a maintenance contract prior to the installation being adopted by a water authority. The design aspect of directly won work is either undertaken in house or subcontracted to a specialist consultancy firm. This firm also wins contracts directly, particularly from housebuilders, and then refers the installation work to Willow Pumps, which invoices the customer directly.
Servicing and maintenance work comprises the routine servicing of pump systems and equipment and reactive call outs for pump failures or blockages. The routine servicing work can be scheduled in advance, resulting in high levels of labour efficiency. The reactive work often involves a significant drainage or tanker element which is expected to give rise to additional subcontract work for Metro Rod. Willow Pumps has built up a high-quality service and maintenance client base, with customers in the hospitality, retail and housebuilding sectors.
Above-ground pump applications, which handle fresh water, require a separate means of service delivery in order to mitigate against the potential risk of cross-contamination with foul water. Willow Pumps, therefore, has a specialist team operating from dedicated vehicles and premises engaged in this activity. The Board believes that there is significant potential in the above-ground market, in particular to develop a national capability, and this potential will be further enhanced by the development of opportunities in association with Kemac and Metro Plumb.
Willow Pumps employs 74 people, including 35 engineers, and has support centre teams in sales, contracts, national account management, finance, servicing, operations and health and safety. The majority of these employees work out of the main premises in
Financial information on Willow Pumps
On a group pro-forma unaudited basis, for the financial year ended
The net assets of Willow Pumps on a group pro-forma unaudited basis as at
Terms of the Acquisition
As a result of the issue of the Consideration Shares, the vendors of Willow Pumps (
The Deferred Consideration of up to
I. Up to
II. Up to
III. The Further Consideration and Additional Consideration will be payable in cash, subject to the Company having the right to settle 20 per cent. of the amount due in new Ordinary Shares at the then prevailing share price.
Group trading update
The second half of the financial year ending
Across our B2C brands, we continue to see an improvement in franchise recruitment. Year-to-date we have recruited 54 new franchisees (2018: 49) at
This good trading performance together with strong momentum across the Group means that the Board looks forward to the remainder of the year with confidence.
Issue of equity and change to Total Voting Rights
Application will be made to the
With the issue of the Consideration Shares, the total number of Ordinary Shares of 0.5p each in the Company in issue is now 79,339,544. There are 25,000 Ordinary Shares held in treasury and so the total number of voting rights in the Company is 79,314,544. This figure may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the Company under the
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This information is provided by RNS, the news service of the
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