26 Franchise Brands plc Annual Report and Accounts 2018 Earnings Depreciation and amortisation costs have increased to £0.4m, due to a full year’s amortisation of the intangible assets arising from the acquisition of Metro Rod; the acquisition of new equipment at our Exeter corporate franchise; and new software at the Metro Rod support centre. The share based payment charge has increased by 138% to £0.1m as we see the full year effect of new options granted at the end of 2017. The finance charge of £0.3m is up 12%, as the benefit of lower average debt was more than offset by the full year effect of the debt facilities that were taken out in April 2017 to finance the acquisition of Metro Rod, and an increase in the base rate in August 2018. Adjusted profit before tax was £2.9m which is a 36% increase when compared to the adjusted profit before tax in 2017 of £2.1m. In 2018, the Group had no items which we considered to be ‘non-recurring’, whereas in the prior year there were a number of these items, primarily in relation to the acquisition of Metro Rod. The tax charge for the period at 18.7% (2017: adjusted tax charge 18.4%) was lower than the statutory rate of 19% owing to a small adjustment in respect of previous years. As a result, the Group made a statutory profit after tax in the period of £2.3m compared to a loss of £0.1m in 2017. Although the number of shares in issue during the period was 77,732,033, the Group has undertaken a programme to purchase shares into Treasury in order to mitigate the dilutive effect of the share options we have issued to our team. In 2018, we repurchased 200,000 shares (2017: nil) for a consideration of £151,000 (2017: £nil), which, tied to the full year effect of the shares issued in relation to the Metro Rod purchase, resulted in a weighted average number of shares of 77,687,101 (2017: 69,553,746). Therefore, this 12% increase in the weighted average number of shares means that, whilst adjusted earnings increased 36%, adjusted earnings per share increased by 21% or 0.53p to 3.00p per share (2017: 2.47p). As there have been no non-recurring items in 2018, statutory EPS was the same at 3.00p (2017: loss of 0.18p). Financing and cash flow The Group generated cash from operating activities of £2.9m (2017: £0.7m). During the period we repaid £1.6m of debt, reducing the gross level of debt from £9.5m to £7.9m. Of the £1.6m repayment, £0.6m was scheduled and £1.0m was a reduction in the drawing on the revolving credit facility (“RCF”). At 31 December 2018, we had utilised £2.5m of our £5.0m RCF (2017: £3.5m) and had cash-in-hand of £2.9m (2017: £3.2m), meaning that we had available cash and facilities of £5.4m (2017: £4.7m). Shareholders’ funds at 31 December were £24.4m (2017: £22.5m) against net debt of £5.0m (31 December 2017: £6.3m), giving modest gearing of 20% (31 December 2017: 28%). Dividend The Board is pleased to propose a final dividend of 0.46 pence per share (2017: 0.33 pence per share), taking the total dividends for the year to 0.67 pence per share (2017: 0.50 pence per share). The cost of the proposed final dividend is £358,000. The total dividend for the year is 4.4 times covered by adjusted profit after tax. Subject to shareholder approval at the AGM on 23 April 2019, the final dividend will be paid on 20 May 2019 to shareholders on the register at the close of business on 3 May 2019. The Strategic Report (which includes all of the content from pages 1 to 31 inclusive) was approved by the Board on 12 March 2019 and signed on its behalf by: Chris Dent Chief Financial Officer 12 March 2019 FINANCIAL REVIEW continued