Franchise Brands shares drop on uncertain outlook

(Sharecast News) - Shares in AIM-listed Franchise Brands dropped sharply on Tuesday after the franchisor said that full-year profits are likely to come in at the lower end of market forecasts. The company, which builds B2B van-based businesses primarily via a franchise model, said that it has seen "resilient underlying demand" for its essential reactive and planned services during the second half so far, though non-essential work continued to see softer demand.

However, an anticipated recovery in project work has been pushed back to next year "due to continued macroeconomic uncertainty and challenging conditions in some markets".

As a result, adjusted EBITDA for 2024 is now expected to be at the lower end of the £35.7m-£37.0m consensus forecast range.

"Demand for our essential reactive services continues to drive a resilient performance despite softer demand for non-essential work. We expect this deferred work will be required, albeit the exact timing is uncertain and so we are cautiously assuming a recovery beyond the current year," said executive chair Stephen Hemsley.

"All our integration and de-gearing initiatives remain on track, which will enhance our operational gearing and EPS growth, respectively, in future years."

The stock was down nearly 9% at 166.40p by 0914 GMT.