Filta Group (Filta) announced FY’19 results pretty much in line with our numbers. Adjusted EBITDA was £3.2m, vs. our £3.3m estimate, and revenue was £24.9m, vs. our £25.1m expectation. These figures confirmed that the integration of Watbio was back on track and the business was trading well until COVID-19 struck. Most of Filta’s customers are currently closed, but the company is optimistic that they will bounce back one distancing restrictions are lifted. We have removed our 2020 forecasts.
Revenue was up 75%, at £25m, of which £8.6m came from Watbio. Costs, however, were up 91%, leaving reported EBIT down a third, at £1.2m, and statutory PBT nearly halved, to £0.9m. The company ended the year with net borrowings of £2.1m, having paid the deferred acquisition and integration costs of Watbio, and including future lease liabilities.
2020 had started well in all territories, with six new franchisees added. Margin improvements were coming through. A significant part of the company’s activities is focused on the hard-hit leisure sector and, until it reopens, the company is mostly marking time. It has developed a bacterial cleansing service, which it is offering to existing and new clients.
Along with our forecasts, we have suspended our valuation.
The clear risk for Filta is that it loses a substantial part of its business if customers are unable to reopen. In the UK-owned operations, the business is heavily weighted towards 20 large operations that are well positioned to survive, including some supermarket chains that have remained open.
Filta is an attractive business, in our view, combining the capital-light franchise model in North America and Europe with companyowned operations in the UK. As businesses begin to reopen, the focus on cleanliness, efficiency and environmental friendliness is unlikely to be abated.