The kitchen services provider serves an industry harder hit than most by the ensuing lockdowns and most of its largest customers have yet to reopen, leaving plenty of bounce-back potential for the company.
Revenue in 2020 was down by 34% at GBP16.4mln from GBP24.9mln in 2019 but a 28% reduction in operating costs to GBP17.0mln (2019: GBP23.7mln) limited the loss before tax to GBP866,231 versus a profit the previous year of GBP936,284.
Adjusted underlying earnings (EBITDA) declined to GBP1.1mln from GBP3.2mln the year before.
Gross margins rose to 42.2% from 40.7% the previous year.
Cash at the end of the year stood at GBP4.2mln, up from GBP2.9mln a year earlier, resulting in net debt of GBP1.6mln (2019: GBP2.1mln).
The board is not recommending the payment of a dividend but said provided the progress made in the first quarter of the year continues, it expects to be able to resume payments in respect of 2021.
Although many of its big customers, such as stadia, universities and corporate dining, have not yet re-opened, the upward trend in business levels Filta saw in the second half of 2020 has continued into the current year, with the numbers of new customers in both of its markets being “particularly encouraging”.
“We have already sold three franchises in the US this year and have a strong pipeline of potential franchisees seeking to join the network, a trend which we expect to continue as the economy gradually recovers,” said company chairman, Tim Worlledge.
With the lockdown restrictions expected to be lifted further over the next two to three months and with the vaccination programmes progressing well in the UK and US, the board is confident that the progress seen in the first quarter will continue through the year.
“As lockdown restrictions continue to ease and vaccine programmes are rolled out successfully, particularly in the US and the UK, current business levels have moved past 70% of that pre-COVID-19, with the majority of our largest US and UK customers still to reopen, indicating that demand for Filta’s services is poised to increase further,” said Jason Sayers, the chief executive officer of Filta.
“In accordance with this, we have moved our focus back onto the group’s core service offerings, following the success of the FiltaShield service, which we launched in April 2020 to help customers open as safely, as normally and as quickly as possible.
“With COVID-19 still causing levels of uncertainty, we are continuing to carefully monitor developments in our markets and will manage our activities accordingly. Where possible we have sought ways to aid our customers in their efforts to reopen, and this has, in turn, improved relations with existing customers. The strength of our brand and the relations with customers has proven invaluable during this time, providing us with further confidence in the resilience of the group.
“Our long-term focus remains on growing the business both organically and through acquisitions of high margin, repeat revenue businesses in the grease management market. With the group now much more efficient and with a strong pipeline of sales in place, I believe the outlook is very promising as we exit these challenging times,” Sayers said.
Research house Hardman said it is clear the business performed robustly during the pandemic.
“With business levels back to 70% of pre-COVID-19 levels and with its largest clients yet to reopen, Filta is emerging from this fog stronger than ever. Assuming there is no reversion to widescale lockdowns, our forecasts should prove conservative,” Hardman said.
Hardman values the shares at 169p on a discounted cash flow basis, which equates to an enterprise value – essentially the market capitalisation of the company adjusted for debt and cash – multiple of 10 times annual underlying earnings.
Filta shares currently trade at 144p.
“Filta is an attractive business, in our view, focusing on the capital-light franchise model developed in North America, and now widespread in the UK and growing in Europe,” hardman said.
“As businesses continue to reopen, the focus on cleanliness, efficiency and environmental friendliness is unlikely to be abated. This is a business that did not sit idly by while its customers were shut; it has improved efficiency across the operations, which will drive profitability this year and next. The company is currently hiring 100 staff to cope with the resurgent demand, and, with its FiltaFOG Cyclone product being specified for exclusive use in some of the world’s largest restaurant chains, we believe it is here to thrive for the foreseeable future,” it added.
— adds research house comment —