We view Franchise Brands as a long-term growth business, with exposure to essential reactive services in the UK, Europe and North America. The franchise/royalty model affords the Group the ability to grow organically without being too consumptive of either capex or working capital, and the cash generated and more efficient group structure should enable the financial profile to be enhanced further in future through acquisitions. We expect the Group EPS will begin to reaccelerate, providing a catalyst in 2026E, before much deferred customer project work returns, leaving the current juncture a timely point to invest, in our view. The market cap of the Group is notably less than the combined £280m the Group paid for: Filta (£51m), Pirtek (£200m) and Metro Rod (£29m). All of these have substantially progressed since acquisition, are not at their potential under the Maximum Potential Model and are worth more today (see later). We start coverage with a Buy/200p TP, based on the value we expect to be created.
