The Pebble Group — Market headwinds in H2

The Pebble Group (LSE: PEBB)

Last close As at 20/06/2024

GBP0.58

0.50 (0.87%)

Market capitalisation

GBP97m

More on this equity

Research: TMT

The Pebble Group — Market headwinds in H2

The Pebble Group is experiencing tougher trading conditions in its second half year, particularly in its Brand Addition segment, which provides global brands with their promotional goods requirements. As has been the case more widely across the sector, spending from tech, and some consumer, clients has been under pressure, given the macroeconomic backdrop. We have aligned our FY23 forecasts with the revised guidance and adjusted FY24 from the lower base. The fundamental proposition of both business segments remains sound, with higher growth prospects in the digital commerce SaaS business, Facilisgroup. The group has a strong balance sheet, with end-FY23 net cash (excluding leases) set to be around £15.1m.

Fiona Orford-Williams

Written by

Fiona Orford-Williams

Director, TMT

Pebbles in wide calm Ocean

TMT

The Pebble Group

Market headwinds in H2

Trading update

Media

22 November 2023

Price

87.5p

Market cap

£147m

Net cash (£m) at end June 2023 (excluding leases)

4.2

Shares in issue

167.5m

Free float

93.2%

Code

PEBB

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(4.4)

0.0

1.7

Rel (local)

(6.3)

(2.9)

1.4

52-week high/low

119p

82p

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

FY23 results

March 2024

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 is experiencing tougher trading conditions in its second half year, particularly in its Brand Addition segment, which provides global brands with their promotional goods requirements. As has been the case more widely across the sector, spending from tech, and some consumer, clients has been under pressure, given the macroeconomic backdrop. We have aligned our FY23 forecasts with the revised guidance and adjusted FY24 from the lower base. The fundamental proposition of both business segments remains sound, with higher growth prospects in the digital commerce SaaS business, Facilisgroup. The group has a strong balance sheet, with end-FY23 net cash (excluding leases) set to be around £15.1m.

Year end

Revenue
(£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/21

115.1

10.9

5.1

0.0

17.2

N/A

12/22

134.0

12.4

5.8

0.6

15.1

0.7

12/23e

124.0

9.7

4.5

1.3

19.4

1.5

12/24e

128.5

10.1

4.6

1.4

19.0

1.6

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

Brand Addition’s customers restraining spending

We have reduced our FY23 group revenue projection from £143m to £124m, with the bulk of the shortfall at Brand Addition. Tech and consumer clients have not placed orders as expected in Q3 and Q4, although the update points out that those in engineering and transport have. Weakness in spending by tech clients has been widely cited across the sector. Both Meta and Alphabet have allocated less towards sales and marketing over recent quarters (Meta 8% versus 14% of revenue in Q323 versus Q322; Alphabet 9% from 10%) and this pattern is likely to have been replicated elsewhere. Confidence should return in FY24, with the main question one of timing. For now, we assume a second half weighting to the recovery. The impact of the lower revenue is partially mitigated by better gross margins, limiting the reduction in segmental EBITDA margin from 9.8% to around 9.0%.

Facilisgroup handling higher transaction values

Facilisgroup is not immune to wavering US commercial confidence but has been less affected. A net four partners have been added since September’s interims, taking the total to 242, and the gross merchandise value transacted through the company’s technology will be ahead of the prior year. The segmental EBITDA margin is guided to 50% (from 54%), with the group EBITDA margin at 12.9%, from 13.5%. Pebble has a strong balance sheet and we expect year-end net cash of £15.1m.

Valuation: Discount to blended peer set

Share price performances for both the advertising businesses used as peers for Brand Addition and the US SaaS stocks used for Facilisgroup have retrenched over the year to date – the former by 24%, the latter by 32%. Based on our new forecasts and averaging across FY23e and FY24e on EV/EBITDA, our blended multiple suggests a value of 80p at parity to peers.

Exhibit 1: Financial summary

£000s

2021

2022

2023e

2024e

31-December

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

115,101

134,025

124,000

128,500

Cost of Sales

(73,128)

(81,279)

(73,067)

(75,250)

Gross Profit

41,973

52,746

50,933

53,251

EBITDA

 

 

15,378

18,042

16,000

16,500

Operating profit (before amort. and excepts.)

 

 

11,475

12,896

10,100

10,350

Amortisation of acquired intangibles

(894)

(1,420)

(1,400)

(1,400)

Exceptionals

0

0

0

0

Share-based payments

(715)

(1,253)

(1,500)

(1,500)

Reported operating profit

9,866

10,223

7,200

7,450

Net Interest

(549)

(520)

(450)

(300)

Joint ventures & associates (post tax)

0

0

0

0

Exceptionals

0

0

0

0

Profit Before Tax (norm)

 

 

10,926

12,376

9,650

10,050

Profit Before Tax (reported)

 

 

9,317

9,703

6,750

7,150

Reported tax

(1,970)

(2,448)

(1,485)

(1,716)

Profit After Tax (norm)

8,599

9,675

7,527

7,638

Profit After Tax (reported)

7,347

7,255

5,265

5,434

Minority interests

0

0

0

0

Discontinued operations

0

0

0

0

Net income (normalised)

8,599

9,675

7,527

7,638

Net income (reported)

7,347

7,254

5,265

5,434

Average Number of Shares Outstanding (m)

167

167

167

167

EPS - basic normalised (p)

 

 

5.14

5.78

4.49

4.56

EPS - normalised fully diluted (p)

 

 

5.12

5.77

4.49

4.55

EPS - basic reported (p)

 

 

4.39

4.33

3.14

3.24

Dividend (p)

0.00

0.60

1.30

1.37

Revenue growth (%)

39.7

16.4

(7.5)

3.6

Gross Margin (%)

36.5

39.4

41.1

41.4

EBITDA Margin (%)

13.4

13.5

12.9

12.8

Normalised Operating Margin

10.0

9.6

8.1

8.1

BALANCE SHEET

Fixed Assets

 

 

63,901

69,786

73,908

79,395

Intangible Assets

55,674

60,002

61,587

64,437

Tangible Assets

7,927

9,492

12,029

14,666

Investments & other

300

292

292

292

Current Assets

 

 

51,566

65,198

62,512

64,711

Stocks

10,093

15,447

15,288

15,842

Debtors

29,422

34,693

32,098

33,263

Cash & cash equivalents

12,051

15,058

15,126

15,605

Other

0

0

0

0

Current Liabilities

 

 

31,469

39,045

34,962

35,927

Creditors

30,065

36,413

32,330

33,295

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

91,108

97,828

Minority interests

0

0

0

0

Shareholders' equity

 

 

74,575

85,589

91,108

97,828

CASH FLOW

Operating Cash Flow

15,378

18,061

16,000

16,500

Working capital

(2,861)

(3,362)

(1,329)

(754)

Exceptional & other

(13)

19

0

0

Tax

(521)

(1,712)

(1,485)

(1,716)

Net operating cash flow

 

 

11,983

13,006

13,186

14,030

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)

(2,213)

Other

(1,360)

(1,737)

(1,737)

(1,737)

Net Cash Flow

4,792

2,370

68

479

Opening net debt/(cash)

 

 

1,913

(4,279)

(5,999)

(6,068)

FX

193

655

0

0

Other non-cash movements

1,207

(1,305)

0

0

Closing net debt/(cash)

 

 

(4,279)

(5,999)

(6,068)

(6,547)

Closing net debt/(cash) excluding leases

 

 

(12,051)

(15,058)

(15,126)

(15,605)

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

More on The Pebble Group

View All

Latest from the TMT sector

View All TMT content

Research: Investment Companies

VinaCapital Vietnam Opportunity Fund — Continues to outperform its benchmark

VinaCapital Vietnam Opportunity Fund (VOF) posted a one-year NAV TR in US dollars to end-October 2023 of 13.1%, versus 2.8% for the VN Index, as a result of the rebound from last year’s market trough. VOF’s NAV TR since end-2022 of 9.1% was driven by financials and materials investments. Given the improving outlook for real estate and several of VOF’s portfolio companies in the sector, VOF reversed US$26.8m of the US$52.9m in write-downs recognised in the December 2022 interim report. VOF continues to pay out 1% of opening NAV in dividends, with the next payment due in December at US$0.07 per share, implying an annualised dividend yield of 2.4% based on the last closing share price.

Continue Reading

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free