The Pebble Group — H123 trading ahead of prior year

The Pebble Group (LSE: PEBB)

Last close As at 16/07/2024

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Research: TMT

The Pebble Group — H123 trading ahead of prior year

The Pebble Group’s AGM statement outlines first-half trading likely to be up on the same period in FY22, with both of the group’s constituent businesses performing well. Facilisgroup, serving the US promotional product distribution market, is extending its offering and building market share in the substantial North American market. Brand Addition, which provides promotional products and associated services to major global brands, benefits from strong relationships built on trust, and is reported to have ‘robust’ order intake year-to-date. Our forecasts are unchanged for now and the valuation remains below peers.

Fiona Orford-Williams

Written by

Fiona Orford-Williams

Director, TMT

TMT

The Pebble Group

H123 trading ahead of prior year

AGM statement

Media

23 May 2023

Price

100.5p

Market cap

£168m

Net cash (£m) at end December 2022 (excluding leases)

15.1

Shares in issue

167.5m

Free float

93.2%

Code

PEBB

Primary exchange

AIM

Secondary exchange

OTCQX

Share price performance

%

1m

3m

12m

Abs

(9.5)

(3.8)

(10.7)

Rel (local)

(8.1)

(1.8)

(13.8)

52-week high/low

119p

78p

Business description

The Pebble Group provides digital commerce, products and related services to the global promotional products industry through two focused, complementary and differentiated businesses: Facilisgroup and Brand Addition.

Next events

Interim figures

5 September 2023

Analysts

Fiona Orford-Williams

+44 (0)20 3077 5739

Milo Bussell

+44 (0)20 3077 5700

The Pebble Group is a research client of Edison Investment Research Limited

The Pebble Group’s AGM statement outlines first-half trading likely to be up on the same period in FY22, with both of the group’s constituent businesses performing well. Facilisgroup, serving the US promotional product distribution market, is extending its offering and building market share in the substantial North American market. Brand Addition, which provides promotional products and associated services to major global brands, benefits from strong relationships built on trust, and is reported to have ‘robust’ order intake year-to-date. Our forecasts are unchanged for now and the valuation remains below peers.

Year

end

Revenue
(£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/21

115.1

10.9

5.1

0.0

19.6

N/A

12/22

134.0

12.4

5.8

0.6

17.4

0.6

12/23e

143.0

12.9

5.8

1.3

17.4

1.3

12/24e

148.0

14.0

6.3

1.9

16.1

1.9

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Progress on both fronts

Facilisgroup has been building on the success of its initial proposition, Syncore, where gross merchandise value and preferred supplier purchases have made progress so far in H123. Commercio, launched just under a year ago, enables distributors to set up ‘no-fuss’ e-commerce, while further new offerings in the pipeline are extending the company’s reach across distributors across the scale range. These aspects were discussed in our recent ETV interview with Facilisgroup president, Ashley McCune. With Brand Addition, the focus is on building spend with existing clients as well as winning new accounts. The increasing complexity of client requirements, in terms of logistics and in ensuring brand safety, should stand it in good stead. The AGM statement refers to the robust order intake and also to an improvement in gross margin over the prior period.

Capex requirements likely to peak in FY23

The comments on current trading are all compatible with our existing modelling and we make no changes to earnings forecasts at this juncture. We do note, however, that management is indicating that the requirement for capital spend is likely to decrease from FY24e, suggesting that perhaps some of the Facilisgroup development programmes have come to fruition ahead of schedule. We will review our modelling on this aspect with the half-year results in early September.

Valuation: Discount to blended peer set valuation

Based on a sum-of-the-parts using peer group FY1 and FY2 EV/EBITDA multiples of US SaaS companies for Facilisgroup and of UK marketing services companies for Brand Addition, we derive an implied value of 113p/share. This is below the 125p cited in our March update, reflecting weak share price performance in both peer sets.

Exhibit 1: Financial summary

£000s

2021

2022

2023e

2024e

31-December

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

115,101

134,025

143,000

148,000

Cost of Sales

(73,128)

(81,279)

(85,910)

(88,199)

Gross Profit

41,973

52,746

57,090

59,801

EBITDA

 

 

15,378

18,042

19,250

20,400

Operating profit (before amort. and excepts.)

 

 

11,475

12,896

13,350

14,250

Amortisation of acquired intangibles

(894)

(1,420)

(1,400)

(106)

Exceptionals

0

0

0

0

Share-based payments

(715)

(1,253)

(1,500)

(1,500)

Reported operating profit

9,866

10,223

10,450

12,644

Net Interest

(549)

(520)

(450)

(300)

Exceptionals

0

0

0

0

Profit Before Tax (norm)

 

 

10,926

12,376

12,900

13,950

Profit Before Tax (reported)

 

 

9,317

9,703

10,000

12,344

Reported tax

(1,970)

(2,448)

(2,150)

(3,059)

Profit After Tax (norm)

8,599

9,675

9,675

10,462

Profit After Tax (reported)

7,347

7,255

7,850

9,284

Net income (normalised)

8,599

9,675

9,675

10,462

Net income (reported)

7,347

7,254

7,850

9,284

Average Number of Shares Outstanding (m)

167

167

167

167

EPS - basic normalised (p)

 

 

5.14

5.78

5.78

6.25

EPS - normalised fully diluted (p)

 

 

5.12

5.77

5.77

6.23

EPS - basic reported (p)

 

 

4.39

4.33

4.69

5.54

Dividend (p)

0.00

0.60

1.30

1.87

Revenue growth (%)

39.7

16.4

6.7

3.5

Gross Margin (%)

36.5

39.4

39.9

40.4

EBITDA Margin (%)

13.4

13.5

13.5

13.8

Normalised Operating Margin

10.0

9.6

9.3

9.6

BALANCE SHEET

Fixed Assets

 

 

63,901

69,786

73,908

80,689

Intangible Assets

55,674

60,002

61,587

65,731

Tangible Assets

7,927

9,492

12,029

14,666

Investments & other

300

292

292

292

Current Assets

 

 

51,566

65,198

69,855

74,283

Stocks

10,093

15,447

16,481

17,058

Debtors

29,422

34,693

37,016

38,310

Cash & cash equivalents

12,051

15,058

16,358

18,915

Other

0

0

0

0

Current Liabilities

 

 

31,469

39,045

41,120

42,145

Creditors

30,065

36,413

38,488

39,513

Tax and social security

20

1,063

1,063

1,063

Short term borrowings / leases

1,384

1,569

1,569

1,569

Other

0

0

0

0

Long Term Liabilities

 

 

9,423

10,350

10,350

10,350

Long term borrowings / leases

6,388

7,490

7,490

7,490

Other long term liabilities

3,035

2,860

2,860

2,860

Net Assets

 

 

74,575

85,589

92,294

102,477

Minority interests

0

0

0

0

Shareholders' equity

 

 

74,575

85,589

92,294

102,477

CASH FLOW

Operating Cash Flow

15,378

18,061

19,250

20,400

Working capital

(2,861)

(3,362)

(1,283)

(845)

Exceptional & other

(13)

19

0

0

Tax

(521)

(1,712)

(2,150)

(3,059)

Net operating cash flow

 

 

11,983

13,006

15,817

16,495

Capex

(5,282)

(8,379)

(9,200)

(9,300)

Acquisitions/disposals

0

0

0

0

Net interest

(549)

(520)

(450)

(300)

Equity financing

0

0

0

0

Dividends

0

0

(1,730)

(2,495)

Other

(1,360)

(1,737)

(1,737)

(1,737)

Net Cash Flow

4,792

2,370

2,700

2,663

Opening net debt/(cash)

 

 

1,913

(4,279)

(5,999)

(8,699)

FX

193

655

0

0

Other non-cash movements

1,207

(1,305)

0

0

Closing net debt/(cash)

 

 

(4,279)

(5,999)

(8,699)

(11,362)

Closing net debt/(cash) excluding leases

 

 

(12,051)

(15,058)

(16,358)

(18,915)

Source: Company accounts, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by The Pebble Group and prepared and issued by Edison, in consideration of a fee payable by The Pebble Group. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by The Pebble Group and prepared and issued by Edison, in consideration of a fee payable by The Pebble Group. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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