REG - Pebble Group (The) - Audited Full Year Results 2023
19/03/2024 07:00
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RNS Number : 3212H Pebble Group PLC (The) 19 March 2024
19 March 2024
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inside information as stipulated under the Market Abuse Regulations (EU)
No.596/2014 which is part of UK law by virtue of the European Union
(withdrawal) Act 2018. The information is disclosed in accordance with the
Company's obligations under Article 17 of the UK MAR. Upon the publication
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public domain.
THE PEBBLE GROUP PLC
("The Pebble Group", the "Group" or the "Company")
AUDITED FULL YEAR RESULTS 2023
Performance in line with revised expectations and well-placed for return to
growth
The Pebble Group, a leading provider of digital commerce, products and related
services to the global promotional products industry, announces its audited
results for the year ended 31 December 2023 ("FY 23").
The results are in line with revised expectations as set out in the trading
update on 22 November 2023 as a result of continued growth in Facilisgroup and
reduced revenue at Brand Addition stemming from a contraction in spend among
Technology and Consumer clients.
Commenting on the results, Chris Lee, Chief Executive Officer of Pebble Group
said: "Both Facilisgroup and Brand Addition retain attractive fundamental
strengths, are differentiated in their respective markets and have clear
strategic plans to grow in the very large global but fragmented promotional
products industry. With a robust balance sheet that has enabled investment in
new technology product initiatives and further development on its progressive
dividend policy, the Group remains well-placed to return to growth in 2024,
with exciting opportunities to scale further. Trading in 2024 has started in
line with management's expectations."
· Group revenue of £124.2m (FY 22: £134.0m), 7% behind the prior year.
· Facilisgroup: Annual Recurring Revenue grew by 12% to USD21.2 million (FY 22:
USD19.0m) with attractive Adjusted EBITDA margins of 50% (FY 22: 54%).
· Brand Addition: Revenue decreased by 9% to £106.3m (FY 22: £117.4m) due to
impact of reduced spend from the Technology and Consumer sectors.
· Gross profit margin increased 4.3 percentage points to 43.6% (FY 22: 39.3%) as
a result of increased value delivered by Brand Addition to its clients and the
growing proportion of Facilisgroup as a percentage of overall Group sales.
· Strong balance sheet with net cash of £15.9m at 31 December 2023, an
increase of £0.8m compared with 31 December 2022.
· Further development on progressive dividend policy, with the Board proposing
to increase dividend to 1.2 pence per share at FY 23 (FY 22: 0.6 pence per
share) and intending to implement in the near-term a share buy-back programme
in the Company's Ordinary Shares up to a maximum aggregate consideration of
£5.0m.
Financials
Statutory results FY 23 FY 22 Change
Revenue £124.2m £134.0m -7%
Gross profit margin 43.6% 39.3% +4.3ppt
Operating profit £8.0m £10.2m -22%
Profit before tax £7.4m £9.7m -24%
Basic earnings per share 3.46p 4.55p -24%
Other financial highlights FY 23 FY 22 Change
Adjusted EBITDA(1) £16.0m £18.0m -11%
Net cash(2) £15.9m £15.1m +5%
Adjusted basic earnings per share(3) 4.60p 5.78p -20%
Dividend 1.2p 0.6p +100%
(1) Adjusted EBITDA means operating profit before depreciation, amortisation and
share-based payments charge
(2) Net cash is calculated as cash and cash equivalents less borrowings (excluding
lease liabilities)
(3) Adjusted basic earnings per share ("EPS") represents Adjusted Earnings meaning
profit after tax before amortisation of acquired intangible assets,
share-based payments charge and exceptional items divided by a weighted
average number of shares
Online investor presentation
The management team is hosting an online investor presentation with Q&A at
3:00pm on Thursday, 21 March 2024. To participate, please register with PI
World at: https://bit.ly/PEBB_FY23_results_webinar
(https://bit.ly/PEBB_FY23_results_webinar)
Enquiries:
The Pebble Group Temple Bar Advisory (Financial PR)
Chris Lee, Chief Executive Officer Alex Child-Villiers
Claire Thomson, Chief Financial Officer Sam Livingstone
+44 (0) 750 012 4121 +44 (0) 207 183 1190
pebble@templebaradvisory.com (mailto:pebble@templebaradvisory.com)
Grant Thornton UK LLP (Nominated Adviser) Berenberg (Corporate Broker)
Samantha Harrison / Harrison Clarke / Ciara Donnelly Ben Wright / Mark Whitmore / Richard Andrews
+44 (0) 207 184 4384 +44 (0) 203 207 7800
About The Pebble Group
The Pebble Group is a provider of digital commerce, products and related
services to the global promotional products industry, comprising two
differentiated businesses, Facilisgroup and Brand Addition, focused on
specific areas of the promotional products market. For further information,
please visit www.thepebblegroup.com (http://www.thepebblegroup.com/) .
CHAIR'S REPORT
Overview
The Group continued to make good progress against its long-term strategy to be
a key influencer in the promotional products industry globally through the
provision of its digital commerce technology to independent promotional
products distributors and the sourcing and supply of high quality, sustainable
and innovative products to many of the world's leading brands.
The Group achieved revenue in the year of £124.2m (FY 22: £134.0m) and
adjusted EBITDA of £16.0m (FY 22: £18.0m) which was in line with the
guidance given in our trading update issued on 22 November 2023.
The Group balance sheet remains strong with Group net cash at 31 December 2023
of £15.9m, up from £15.1m a year earlier. The strong cash position enabled
the business to pay a maiden dividend of 0.6 pence per share for FY 22 and we
propose to increase this to 1.2 pence per share for FY 23.
The Group's divisions, Facilisgroup and Brand Addition, continue to invest in
new technology, with the objective of creating market leading differentiation
to win new clients and underpin the Group's long-term growth.
Our market and strategy
Facilisgroup and Brand Addition, together process transactions either directly
or indirectly which accounts for approximately 3% of all promotional products
sold globally and approximately 6% of promotional product transactions in our
strategically important North American market.
This gives the Group a good level of insight into the trends and development
of the promotional products market and enables us to plan our future strategy
accordingly.
Our market insight shows that:
· the global market for promotional products is very fragmented. The majority of
the market is being served by owner managed SMEs with a high concentration in
North America. As technology proliferates, SME distributors have a need for
digital commerce platform technology to support their efficiency and growth;
and
· high quality, sustainable promotional products continue to be a key strategic
component of the brand building, employee engagement and customer reward
strategies of the majority of large businesses and major brands around the
world.
The Group addresses these market needs through its Facilisgroup and Brand
Addition divisions, respectively.
Our businesses
Facilisgroup
Facilisgroup revenue grew by 9% over the year on a constant currency basis to
$22.2m (FY 22: $20.4m) which equated in Sterling terms to £17.9 (FY 22:
£16.6). EBITDA margin performance remained robust at circa 50%.
The strong profitability and cash generated by Facilisgroup is enabling the
business to invest into new technology aimed at enabling Facilisgroup to
become the leading provider of digital commerce software and services to the
large number of independent promotional products distributors across North
America. The vision of the Facilisgroup team is a clear and compelling one,
which represents a significant strategic opportunity for the Group.
Brand Addition
Brand Addition sells promotional products to many of the world's largest
brands with a focus on quality, sustainability and innovative design. Sales in
the year to 31 December 2023 were £106.3m down from £117.4m in the previous
year. The business retained all major clients during the year and, through its
positive differentiation, was able to increase its gross margins by 3.4
percentage points. However, the mix of business across Brand Addition was
skewed more towards underperforming rather than overperforming sectors,
particularly in the second half of the year. This resulted in a shortfall
against the revenue expectations at the start of the year.
Dividend
Last year the Group announced the payment of its first dividend since the IPO
and said it was the intention of the Board for this to be progressive, moving
in the medium-term to our stated position at IPO of making dividend payments
each year of circa 30% of profit after tax. In line with that policy, the
Group is proposing an increase in the final dividend to 1.2 pence per share
for the financial year ended 31 December 2023.
Environmental, Social and Governance
Investing in achieving our strategy with a sustainable impact is central to
the Group's values and our ESG priorities remain high on the Group Board's
agenda. We publish our third ESG report in March 2024 to provide a
comprehensive review of the meaningful action we are taking, which we believe,
is an opportunity to differentiate the Group by sharing the progress we have
made against our commitments.
In the ESG section of our 2023 Report and Accounts, we update on the continued
progress the Group is making in reducing its environmental impact and in
engaging with suppliers to encourage the reduction in their Greenhouse Gas
emissions. In October 2023, the Group was awarded The Race Equality Code
Quality Mark which recognises our efforts and future commitments to Diversity,
Equity and Inclusion (DEI) in the workplace.
From a governance perspective, the appointment of David Moss as our new
Non-executive Director to enhance the Group Board's technology experience and
skillset was a particular highlight. David was a co-founder and CTO of Blue
Prism which was an AIM listed company for 6 years before being bought by
SS&C Technologies Holdings, Inc. in 2022.
Team and Board
At The Pebble Group, the Group Board and the Executive Leadership Team believe
that the businesses' accomplishments are achieved because of its talented and
diverse teams. The Group is led by a Board with a wide diversity of skills and
experience, supported by highly engaged and motivated teams across the
businesses. We encourage diversity, actively engage with our teams on an
ongoing basis, and are focussed on investing in and developing our people.
Outlook
Trading in 2024 is progressing in line with management expectations. In light
of the Board's confidence in the return to growth and to enhance shareholder
returns, the Board intends in the near-term to implement a share buy-back
programme in the Company's Ordinary Shares up to a maximum aggregate
consideration of £5.0m. A further announcement will be made in due course.
We look forward to providing a further update on progress at our Annual
General Meeting on 30 April.
Richard Law
Chair
18 March 2024
CHIEF EXECUTIVE OFFICER'S REVIEW
Introduction
The Group's results for the year ended 31 December 2023 are in line with the
revised expectations as set out in our trading update of 22 November 2023.
Group revenue was £124.2m, a decrease of 7% on the prior year (FY 22:
£134.0m), being the net effect of the continued growth in Facilisgroup and
reduced sales with a particular cohort of clients at Brand Addition. We
describe the nuances of this in the Business Review below.
Group Adjusted EBITDA was £16.0m, a decrease of 11% (FY 22: £18.0m). Net
cash after a dividend payment of £1.0m in June 2023 remains strong, being
£15.9m at 31 December 2023 (31 December 2022: £15.1m).
Acknowledging the disappointment of reporting FY 23 results lower than FY 22,
it is important to reiterate that there has been no change to the underlying
opportunities for our businesses. In the Business Review, I set out why I
believe the intrinsic strength and growth prospects for both Facilisgroup and
Brand Addition remain compelling.
Business Review
Facilisgroup: providing a digital commerce platform for promotional products
businesses in North America
£'m FY 23 FY 22
ARR £17.0m £15.5m
Other revenue £0.9m £1.1m
Total revenue £17.9m £16.6m
Gross profit £17.9m £16.6m
Gross profit margin 100% 100%
Adjusted EBITDA £8.9m £9.0m
Operating profit £4.4m £5.0m
FY 23 revenue of £17.9m (FY 22: £16.6m) was 8% ahead of the prior year with
Annual Recurring Revenue (ARR) in USD (Facilisgroup home currency) of USD21.2m
(FY 22: USD19.0m), representing 12% growth over the prior year. The vast
majority of revenue is derived from our market leading Syncore technology
product. The activities that underpinned the FY 23 revenue and heavily
influence the future recurring revenue stream are:
- Partner numbers: 7.6% increase to 242 at 31 December 2023 (31 December 2022:
225);
- Gross Merchandise Value (GMV): FY 23 USD1.42bn (FY 22: USD1.40bn). This
breaks down as a 9% growth in H1 23 and a 5% decline in H2 23 as the trading
environment of our Partners toughened; and
- Spend with our Preferred Suppliers: FY 23 USD0.47bn (FY 22: USD0.46bn).
Moving in line with the dynamics of Partner GMV, it is the reduction of these
transactions in H2 23 that slowed the rate of revenue growth of Facilisgroup
in FY 23.
A major strength of Facilisgroup is its revenue to profit conversion. This
continued in 2023 with Adjusted EBITDA margins of 50% (FY 22: 54%) achieved
while investing in our team, including product sales and marketing, to support
Partner retention and bringing our new technology to market.
Operating profit was £4.4m (FY 22: £5.0m), reflecting the amortisation
charge on our investment in new technology as we expense a proportion of the
products that are yet to make a material impact on our revenues.
Facilisgroup has a highly attractive business model. Building on the financial
results described above, the business has consistently produced strong SaaS
metrics. To illustrate this, at the end of FY 23, there was:
- 17%, four-year Revenue Compound Annual Growth Rate;
- 50%, Adjusted EBITDA margin;
- 25%, Operating profit margin;
- 102%, Net Retention Rate on Syncore technology subscription to Partners; and
- 97%, Partner Retention Rate.
Approach to the market
Facilisgroup Partners are attracted to the business through its provision of a
combination of technology, supply chain network and community belonging. The
GMV being managed through our platform in 2023 was USD1.4bn representing circa
6% of the USD25bn North American Promotional Products industry, giving the
business great market insight.
Our strategy is to scale Facilisgroup revenues firstly, via the continued
development and responsible growth in market share of our established Syncore
product. Our expectation is that the ongoing capital investment relating to
Syncore will continue at its current amount of circa £2.5m per annum, being
approximately 15% of FY 23 revenue.
Secondly, we have chosen to allocate a further proportion of the business's
own cash generation into developing new technology products. These are aimed
at both widening the opportunity to provide existing Partners with other
services, plus expanding our addressable market. This capital investment was
approximately £3.0m in FY 23. Looking forward, the level of the investment
into these new products will be entirely based upon our assessment of the
market, customer feedback and the revenues these investments will generate.
Our current go to market strategy is through:
- Syncore: our established order workflow product focused on high quality,
growing SME distributors in North America with sales of greater than USD2m. We
estimate there is a total addressable market of circa 1,600 businesses against
the 242 contracted at 31 December 2023 (31 December 2022: 225);
- Commercio Stores: built specifically to support the needs of the promotional
products industry, Commercio Stores allows distributors of all sizes to create
ecommerce stores for their customers that can either stand alone or integrate
into our order workflow technology. At 31 December 2023 there were 56 paying
customers using this technology (31 December 2022: 130 non-paying); and
- Orders: our order workflow product for the many thousands of smaller
distributors with less than USD2m sales is in development. At 31 December 2023
there were 45 non-paying Beta customers using this technology (31 December
2022: Nil).
Trading in 2024 has started in line with management expectations. Partner
numbers at 18 March 2023 were 236 as a result of 5 Partners being acquired and
the exit of 3 Partners with a lower than average value of GMV. The key metrics
of GMV transactions and spend through Preferred Suppliers to date, are both
ahead of the same period in 2023.
Brand Addition: providing promotional products and related services under
contract to many of the world's most recognisable brands
£'m FY 23 FY 22
Revenue £106.3m £117.4m
Gross profit £36.3m £36.1m
Gross profit margin 34.1% 30.7%
Adjusted EBITDA £9.5m £11.5m
Operating profit £6.2m £8.0m
FY 23 revenue of £106.3m (FY 22: £117.4m) was 9% lower than the prior year.
The revenue decrease in the year was concentrated on our clients that operate
in the Technology and Consumer sectors. Importantly, client retention remains
strong. Technology sector client budgets were affected as they reduced their
employee numbers and Consumer sector clients spend has reduced in the last two
years following a peak in 2021. These clients all remain contracted with Brand
Addition, are amongst the best-known brands in the world, and continue to
deliver a repeatable revenue stream over the medium-term.
Reviewing the business beyond a single set of results, Brand Addition has
built close, long-term client and supplier relationships. As brand control,
product efficacy and international consistency becomes even more important to
large global brands, Brand Addition has provided additional services such as
multi-country service delivery, global distribution management and sustainable
product initiatives. The value placed by clients on these additional services
is demonstrated by the increase in its gross margins to 34.1% (FY 22: 30.7%).
We therefore revise up our gross margins long-term average to circa 33% from
the previously guided 30%.
Despite the recent contraction in demand in the Technology and Consumer client
sectors in the year, the underlying strengths and growth prospects of Brand
Addition remain highly attractive. To illustrate this, at the end of FY 23,
there was:
- a large total addressable market of circa $4 billion;
- circa 800 global opportunities on Brand Addition's target list;
- excellent client retention rates to well-known global brands;
- highly repeatable revenues over the medium-term; and
- a 3.4%, increase in margins reflecting the widening of services delivered to
clients.
Approach to the market
There is a large addressable market for the specialist services offered by
Brand Addition. International corporates use promotional products to engage
with their employees, customers, and wider stakeholders. This includes
Consumer Promotions to support businesses in driving their own sales volumes
and Corporate Programmes to support employee engagement and brand building
activities.
These categories of marketing spend are outsourced under contract because
brands wish to have control over:
- thoughtful and creative bespoke products to carry their brand and engage their
stakeholders;
- product quality and supply chain assurances to protect their brand integrity;
and
- a consistent international strategy.
Trading in 2024 has started in line with management expectations with the
sector specific sales challenges experienced in H2 23 currently following
anticipated order intake trends.
People and Environmental, Social and Governance
Our Group comprises of approximately 560 people based across multiple
geographies. Our team's talent and dedication in developing long-term
relationships with our Partners, clients and suppliers is the foundation of
our businesses' success. Our people are a consistent strength and my thanks go
to everyone at Facilisgroup, Brand Addition and The Pebble Group.
The Group Board also sends its appreciation to Ashley McCune who left
Facilisgroup in October 2023 after 16 years with the business, culminating as
Facilisgroup President from 2020 until her departure. This change led to me
taking a larger role in the day-to-day activities within Facilisgroup. I have
enjoyed deepening my operational involvement there and building close
relationships with Partners, Preferred Suppliers and the team. As a result, I
am even more drawn to the opportunities ahead for Facilisgroup and have plans
to further strengthen the team in 2024.
We remain firmly committed to being a leader in the way we manage our
businesses for the long-term and continue to embed our ESG strategy across our
Group. In 2023, we have made good progress against a wide number of topics.
Our Chair focusses on some of those highlights in his report and we will
publish our third ESG report in March 2024.
Outlook
Trading in 2024 has started in line with management expectations at both of
our businesses. We are concentrating on progressing our stated strategies.
Chris Lee
Chief Executive Officer
18 March 2024
CHIEF FINANCIAL OFFICER'S REVIEW
Overview
FY 23 was a year for the Group where progress in Facilisgroup was overshadowed
by a contraction in demand in the Technology and Consumer client sectors of
Brand Addition. Group revenue of £124.2m (FY 22: £134.0m) was 7% below FY 22
and Adjusted EBITDA of £16.0m (FY 22: £18.0m) was 11% below. Operating
profit was £8.0m (FY 22: £10.2m). The Group Board is pleased to announce the
continuation of the dividend policy implemented in FY 22 and is proposing a
final dividend of 1.2 pence per share for FY 23 (FY 22: 0.6 pence per
share), payable in May 2024.
The Group's balance sheet remains strong and its liquidity position continues
to be robust with cash balances of £10.0m at 18 March 2024 and no amounts
drawn down on the Company's £10m committed revolving credit facility.
£'m FY 23 FY 22
Revenue 124.2 134.0
Gross profit 54.2 52.7
Gross profit margin 43.6% 39.3%
Adjusted EBITDA 16.0 18.0
Depreciation and amortisation (7.5) (6.5)
Share-based payment charge (0.5) (1.3)
Operating profit 8.0 10.2
Net finance costs (0.6) (0.5)
Profit before tax 7.4 9.7
Tax (1.6) (2.1)
Profit for the year 5.8 7.6
Weighted average number of shares 167,412,949 167,450,893
Adjusted Basic EPS 4.60p 5.78p
Basic EPS 3.46p 4.55p
Revenue
Group revenue for FY 23 was £124.2m (FY 22: £134.0m). Facilisgroup revenue
was £17.9m (FY 22: £16.6m). This represents an increase of 8% in GBP and 9%
in Facilisgroup's home currency of USD. ARR from Partner and customer
subscriptions for our technology accounted for this increase, through a
combination of additional fees from existing and new Partners. Revenue in
Brand Addition was £106.3m (FY 22: £117.4m). The reduction in revenue was
concentrated in our Technology and Consumer clients which combined were
£16.9m behind FY 22, offset in part by £3.6m of revenue growth delivered by
new client contracts won in FY 22 and FY 23 and the robust performance of the
more traditional sectors of Transport and Engineering which grew by £2.2m.
Gross profit
Gross profit as a percentage of revenue increased during the year by 4.3 p.p.t
to 43.6%. Of the total increase, 2.9 p.p.t relates to the improvement in gross
margins at Brand Addition as the business raised prices to cover the
investment it has made to deliver increasingly complex services to its
clients. We expect this to be a permanent change moving the businesses
long-term gross margins to circa 33%. The balance of improvement reflects the
increasing proportion of Facilisgroup as part of overall Group sales. This
improvement is expected to continue as Facilisgroup scales.
Adjusted EBITDA
Adjusted EBITDA for FY 23 was £16.0m (FY 22: £18.0m). The reduction was made
up as follows:
- Facilisgroup; £0.1m reduction as incremental revenues were invested in sales
and marketing to continue to drive sales growth. The business has excellent
EBITDA returns of circa 50% demonstrating its ability to retain strong margins
whilst growing revenue;
- Brand Addition; £2.0m reduction as the volume reductions and investment in
business services discussed above translated to EBITDA; and
- Central costs; £0.1m reduction in costs in the year as incremental advisors'
fees were offset by a reduction in payroll costs as no bonuses were payable in
respect of FY 23.
Depreciation and amortisation
The total charge in the year was £7.5m (FY 22: £6.5m), of which £5.2m (FY
22: £4.2m) related to the amortisation of intangible assets. In accordance
with IAS 38, the Group capitalises the costs incurred in the development of
its software and the increase in the year is primarily a result of the Group's
stated decision to increase capital expenditure in its proprietary technology
at Facilisgroup.
Share based payments
The total charge for the year under IFRS 2 "Share-based payments" was £0.5m
(FY 22: £1.3m). This charge related to the 2020, 2021, 2022 and 2023 awards
made under the 2019 Long Term Incentive Plan and Save As You Earn scheme. The
reduction against FY 22 relates to the 2021 award for which the performance
period ended on 31 December 2023. As Group trading in the year was below
expectation, forecast performance conditions for the EPS element of this award
were not met giving rise to a reduction in the charge associated with this
award.
Operating profit
Operating profit for the year was £8.0m (FY 22: £10.2m) after the impact of
the reduction in sales volumes and investment in new technology products and
services noted above and charging incremental depreciation and amortisation of
£1.0m
Finance costs
Net costs of £0.6m in the year (FY 22: £0.5m) include £0.4m interest costs
on leases capitalised in accordance with IFRS 16 (FY 22: £0.4m), £0.1m
interest in relation to the Group's £10.0m committed RCF facility (FY 22:
£0.1m) and £0.1m costs of refinancing this facility.
Taxation
The total taxation charge was £1.6m (FY 22: £2.1m) giving rise to an
effective rate of tax of 21.6% (FY 22: 21.6%). The effective rate of tax was
lower than the UK standard rate of taxation due to the proportion of profit
earned by the Group in overseas jurisdictions where the applicable rate of
corporation tax was lower than that in the UK. The Group is subject to taxes
in the UK, Ireland, Germany, Turkey, US, Canada, China and Hong Kong.
Earnings per share
The earnings per share analysis in note 6 covers both adjusted earnings per
share (profit attributable to equity shareholders before amortisation of
acquired intangibles, share-based payments charge and exceptional items
divided by the weighted average number of shares in issue during the year),
and basic earnings per share (profit attributable to equity holders divided by
the weighted average number of shares in issue during the year). Adjusted
earnings was £7.7m (FY 22: £9.7m), meaning adjusted basic earnings per share
was 4.60 pence per share (FY 22: 5.78 pence per share), a decrease of 1.18
pence per share. Basic earnings per share was 3.46 pence per share (FY 22:
4.55 pence per share), a decrease of 1.09 pence per share.
Dividends
In FY 23, the Group Board began the implementation of a progressive dividend
policy where it announced its intention in the medium-term to move towards its
stated position at IPO of making dividend payments of c.30% of profit after
tax. For FY 23, the Board is proposing the payment of a final dividend of 1.2
pence per share (FY 22: 0.6 pence per share), a distribution totalling £2.0m,
or 34% of profit after tax. This will be paid on 7 May 2024, subject to
shareholder approval, to those shareholders on the register of members on 5
April 2024. The shares will trade ex-dividend on 4 April 2024.
Cash flow
The Group had a cash balance of £15.9m at 31 December 2023 (FY 22: £15.1m).
Cash flow for the year is set out below.
£'m FY 23 FY 22
Adjusted EBITDA 16.0 18.0
Movement in working capital 0.7 (3.4)
Capital expenditure (8.6) (7.4)
Deferred consideration - (1.0)
Leases (1.6) (1.7)
Operating cash flow 6.5 4.5
Tax paid (2.5) (1.7)
Net finance cash flows (0.6) (0.5)
Dividend paid (1.0) -
EBT purchase of own shares (0.4) -
Exchange (loss)/gain (1.2) 0.7
Net cash flow 0.8 3.0
Operating cash flow
Operating cash flow before tax payments and net finance costs increased by
£2.0m in the year to £6.5m. This increase is due to the unwinding of working
capital as sales volumes in Brand Addition reduced. This remains an important
metric for the Group and is monitored to ensure underlying cash flow remains
sufficiently strong to underpin the short-term additional investment required
to deliver the Group's ambitious plans for growth.
Balance sheet and shareholders' funds
Net assets increased in the year by £2.9m, the balance sheet is summarised
below:
£'m FY 23 FY 22
Non-current assets 69.9 69.8
Working capital 13.0 13.7
Cash 15.9 15.1
Lease liabilities (7.6) (9.1)
Other net liabilities (2.7) (3.9)
Net assets 88.5 85.6
Non-current assets
Non-current assets are the most significant balance sheet category and
comprise the following:
£'m FY 23 FY 22
Goodwill 36.0 36.1
Customer relationships 8.0 9.0
Software development costs 17.3 14.9
Property, plant & equipment 8.3 9.5
Deferred tax assets 0.3 0.3
Non-current assets 69.9 69.8
Amounts classified as goodwill and customer relationships relate to historic
acquisitions made by the Group. Software development costs, which include
£5.7m (FY 22: £5.1m) investment in the year into Facilisgroup technology
products, arise from ongoing investment into Group proprietary software and,
in particular, investment into the Facilisgroup digital commerce platform to
ensure that existing technology remains market leading and differentiated from
our competitors, alongside the development of new products that will support
our medium-term growth plans. The costs are capitalised in accordance with IAS
38 and amortised over the period which the Group expects to generate benefit
from the development. As we have previously indicated, FY 23 was the intended
peak point of our investment into the Facilisgroup platform and moving
forward, we expect the level of investment to reduce. Property, Plant and
Equipment primarily comprises the costs of Right-of-Use assets capitalised in
accordance with IFRS 16 "Leases".
Working capital
Working capital of £13.0m is £0.7m lower than FY 22. This relates
principally to the reduction in sales in Brand Addition.
Lease liabilities
Lease liabilities of £7.6m (FY 22: £9.1m) relate to Group properties
capitalised in accordance with IFRS 16. The reduction in the year reflects
payments made under the lease agreements.
Other net liabilities
Other net liabilities of £2.7m (FY 22: £3.9m) are net tax liabilities of
which £2.4m (FY 22: £2.9m) is deferred tax in respect of the intangible
assets of Facilisgroup. £1.5m of the deferred tax liability (FY 22: £1.7m)
relates to acquired customer relationships. These liabilities will reverse
over the period that the assets are amortised.
Alternative Performance Measures (APMs)
Throughout the Annual Report and related statements, the Group has used a
number of APMs as key performance indicators in addition to those reported
under IFRS. These are used to provide additional clarity to the Group's
underlying financial performance and are used internally by management to
monitor business performance, in its budgeting and forecasting and also for
determination of Directors' and senior management remuneration. These APMs are
not defined under IFRS and, therefore, may not be directly comparable with
adjusted measures presented by other companies. The non-GAAP measures are not
intended to be a substitute for, or superior to, any IFRS measures of
performance. However, they are considered by management to be important
measures used in the business for assessing performance. They have been
consistently applied in all years presented.
The following are key non-GAAP measures identified by the Group and used in
the Business Review and Financial Statements.
Adjusted EBITDA which means operating profit before depreciation,
amortisation, share-based payments charge and exceptional items. Refer to note
7 for reconciliation.
Adjusted operating profit which means operating profit before amortisation of
acquired intangible assets, share- based payments charge and exceptional
items. Refer to note 7 for reconciliation.
Adjusted operating profit less finance costs which means adjusted operating
profit before tax, amortisation of acquired intangible assets, share-based
payments charge and exceptional items. Refer to note 7 for reconciliation.
Adjusted earnings which means profit attributable to equity shareholders
before amortisation of acquired intangible assets, share-based payments charge
and exceptional items. Refer to note 7 for reconciliation.
Adjusted earnings per share which means Adjusted earnings divided by a
weighted average number of shares in issue. Refer to note 6 for
reconciliation.
Claire Thomson
Chief Financial Officer
18 March 2024
Consolidated income statement
For the year ended 31 December 2023
Note 2023 2022
£'000 £'000
Revenue 4 124,171 134,025
Cost of goods sold (69,988) (81,279)
Gross profit 54,183 52,746
Operating expenses (46,185) (42,523)
Operating profit 7,998 10,223
Analysed as:
Adjusted EBITDA(1) 15,978 18,042
Depreciation 10 (2,248) (2,384)
Amortisation 9 (5,184) (4,182)
Share-based payment charge 12 (548) (1,253)
Total operating profit 7,998 10,223
Finance expense (589) (520)
Profit before taxation 7,409 9,703
Income tax expense 5 (1,614) (2,090)
Profit for the year 5,795 7,613
Basic earnings per share 6 3.46p 4.55p
Diluted earnings per share 6 3.45p 4.54p
Note 1: Adjusted EBITDA, which is defined as operating profit before
depreciation, amortisation, exceptional items and share-based payment charge,
is a non-GAAP metric used by management and is not an IFRS disclosure.
All results derive from continuing operations.
Consolidated statement of other comprehensive income
For the year ended 31 December 2023
2023 2022
£'000 £'000
Items that may be subsequently reclassified to profit and loss
Foreign operations - foreign currency translation differences (2,068) 2,190
Other comprehensive (expense)/income for the year (2,068) 2,190
Profit for the year 5,795 7,613
Total comprehensive income for the year 3,727 9,803
Consolidated statement of financial position
As at 31 December 2023
2023 2022
Note
£'000 £'000
ASSETS
Non-current assets
Intangible assets 9 61,307 60,002
Property, plant and equipment 10 8,306 9,492
Deferred tax asset 282 292
Total non-current assets 69,895 69,786
Current assets
Inventories 11,852 15,447
Trade and other receivables 30,158 34,693
Cash and cash equivalents 15,898 15,058
Total current assets 57,908 65,198
TOTAL ASSETS 127,803 134,984
LIABILITIES
Non-current liabilities
Lease liability 11 6,130 7,490
Deferred tax liability 2,365 2,860
Total non-current liabilities 8,495 10,350
Current liabilities
Lease liability 11 1,494 1,569
Trade and other payables 28,965 36,413
Current tax liability 381 1,063
Total current liabilities 30,840 39,045
TOTAL LIABILITIES 39,335 49,395
NET ASSETS 88,468 85,589
EQUITY AND RESERVES
Share capital 1,675 1,675
Share premium 78,451 78,451
Own share reserve (227) -
Capital reserve 125 125
Merger reserve (103,581) (103,581)
Translation reserve (1,205) 863
Share-based payment reserve 2,005 1,892
Retained earnings 111,225 106,164
TOTAL EQUITY AND RESERVES 88,468 85,589
Consolidated statement of changes in equity
For the year ended 31 December 2023
Share capital Share premium Own share reserve Share-based payment reserve Retained earnings Total equity
Capital reserve Merger reserve Translation reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2022 1,675 78,451 - 125 (103,581) (1,327) 681 98,551 74,575
Profit for the year - - - - - - - 7,613 7,613
Other comprehensive income for the year - - - - - 2,190 - - 2,190
Total comprehensive income - - - - - 2,190 - 7,613 9,803
Employee share schemes - value of employee services (note 12) - - - - - - 1,196 - 1,196
Deferred tax on employee share schemes - - - - - - 15 - 15
Total transactions with owners recognised in equity - - - - - - 1,211 - 1,211
At 31 December 2022 1,675 78,451 - 125 (103,581) 863 1,892 106,164 85,589
Profit for the year - - - - - - - 5,795 5,795
Other comprehensive expense for the year - - - - - (2,068) - - (2,068)
Total comprehensive (expense)/income - - - - - (2,068) - 5,795 3,727
Dividend paid (note 8) - - - - - - - (1,005) (1,005)
Purchase of own shares by EBT - - (395) - - - - - (395)
Employee share schemes - value of employee services (note 12) - - 168 - - - 136 271 575
Deferred tax on employee share schemes - - - - - - (23) - (23)
Total transactions with owners recognised in equity - (227) - - - 113 (734) (848)
At 31 December 2023 1,675 78,451 (227) 125 (103,581) (1,205) 2,005 111,225 88,468
The Group set up an Employee Benefit Trust (EBT) in the year to administer
share plans and acquire shares, using funds gifted by the Group, to meet
commitments to employee share schemes. At 31 December 2023, the EBT held
412,637 shares (2022: nil).
Consolidated cash flow statement
For the year ended 31 December 2023
Note 2023 2022
£'000 £'000
Profit before taxation 7,409 9,703
Adjustments for:
Depreciation 10 2,248 2,384
Amortisation 9 5,184 4,182
Share-based payment charge 12 548 1,253
(Profit)/loss on disposal of fixed assets (18) 19
Finance expense 589 520
Cash flows from operating activities before changes in working capital 15,960 18,061
Change in inventories 3,595 (5,354)
Change in trade and other receivables 4,535 (5,271)
Change in trade and other payables (7,422) 7,263
Cash flows from operating activities 16,668 14,699
Income taxes paid (2,517) (1,712)
Net cash flows from operating activities 14,151 12,987
Cash flows from investing activities
Purchase of property, plant and equipment 10 (882) (945)
Purchase of intangible assets 9 (7,648) (7,434)
Net cash flows used in investing activities (8,530) (8,379)
Cash flows from financing activities
Lease payments (1,600) (1,737)
Interest paid (589) (520)
Dividends paid 8 (1,005) -
Purchase of own shares by EBT (395) -
Net cash flows used in financing activities (3,589) (2,257)
NET CASH FLOWS 2,032 2,351
Cash and cash equivalents at beginning of year 15,058 12,051
Effect of exchange rate fluctuations on cash held (1,192) 656
Cash and cash equivalents at end of year 15,898 15,058
Notes to the Group financial statements
1. GENERAL INFORMATION
The principal activity of The Pebble Group plc (the "Company") is that of a
holding company and the principal activity of the Company and its subsidiaries
(the "Group") is the sale of digital commerce, products and related services
to the promotional merchandise industry. The Group has two segments: Brand
Addition; and Facilisgroup. For Brand Addition this is the sale of promotional
products internationally, to many of the world's best-known brands, and for
Facilisgroup the provision of digital commerce, consolidated buying power, and
community learning and networking events to SME promotional product
distributors in North America, its Partners, through subscription-based
services.
The Company was incorporated on 27 September 2019 in the United Kingdom and is
a public company limited by shares registered in England and Wales. The
registered office of the Company is Broadway House, Trafford Wharf Road,
Trafford Park, Manchester, England M17 1DD. The Company registration number is
12231361.
2. ACCOUNTING POLICIES
(a) Basis of preparation
The Group financial statements have been prepared in accordance with
UK-adopted International Accounting Standards and with the requirements of the
Companies Act 2006 as applicable to companies reporting under those standards.
The Company financial statements have been prepared under FRS 102. Both
financial statements have been prepared on the historical cost basis with the
exception of certain items which are measured at fair value as disclosed in
the principal accounting policies set out below. These policies have been
consistently applied to all years presented unless otherwise stated.
The financial information is presented in Sterling and has been rounded to the
nearest thousand (£'000).
(b) Going concern
The Group meets its day-to-day working capital requirements through its own
cash balances and committed banking facilities. The Group refinanced its £10m
RCF in January 2023 for a three-year period to January 2026, with the option
to extend for an additional year to January 2027. In assessing the
appropriateness of adopting the going concern basis in the preparation of
these financial statements, the Directors have prepared cash flow forecasts
and projections for the two years ending 31 December 2025.
The forecasts and projections, which the Directors consider to be prudent,
have been further sensitised by applying reductions to revenue growth and
margin, to consider a severe but plausible downside. Under both the base and
sensitised case the Group is expected to have headroom against covenants,
which are based on interest cover and net leverage, and a sufficient level of
financial resources available through existing facilities when the future
funding requirements of the Group are compared with the level of committed
available facilities. Based on this, the Directors are satisfied that the
Group has adequate resources to continue in operational existence for at least
12 months from the date of signing the financial statements. For this reason,
they continue to adopt the going concern basis in preparing the Group and
Company financial statements.
(c) Forward-looking statements
Certain statements in this report are forward looking with respect to the
operations, strategy, performance, financial condition, and growth
opportunities of the Group. The terms "expect", "anticipate", "should be",
"will be", "is likely to", and similar expressions, identify forward-looking
statements. Although the Board believes that the expectations reflected in
these forward-looking statements are reasonable, by their nature these
statements are based on assumptions and are subject to a number of risks and
uncertainties. Actual events could differ materially from those expressed or
implied by these forward-looking statements. Factors which may cause future
outcomes to differ from those foreseen in forward-looking statements include,
without limitation: general economic conditions and business conditions in the
Group's markets, customers' expectations and behaviours, supply chain
developments, technology changes, the actions of competitors, exchange rate
fluctuations, and legislative, fiscal and regulatory developments. Information
contained in these financial statements relating to the Group should not be
relied upon as a guide to future performance.
(d) New standards, amendments and interpretations
New and amended standards adopted by the Group
The Group has applied the following standards and amendments for the first
time for its annual reporting period commencing 1 January 2023:
· IFRS 17 Insurance Contracts;
· Amendment to IAS 12 Deferred tax: deferred tax related to assets
and liabilities arising from a single transaction;
· Amendment to IAS 12 International tax reform - pillar two model
rules; and
· Narrow-scope amendments to IAS 1, Practice statement 2 and IAS 8.
The amendments listed above do not have any impact on the amounts recognised
in prior periods and are not expected to significantly affect current or
future periods.
New standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that
are not mandatory for 31 December 2023 reporting periods and have not been
early adopted by the Group. These standards are not expected to have a
material impact on the Group in the current or future reporting periods and on
foreseeable future transactions.
Judgements made by the Directors in the application of these accounting
policies that have a significant effect on these financial statements together
with estimates with a significant risk of material adjustment in the next year
are discussed in note 3.
(e) Basis of consolidation
Subsidiaries are all entities over which the Group has control. The Group
controls an entity when the Group is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to affect
those returns through its power over the entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the Group and
are deconsolidated from the date control ceases.
Inter-company transactions, balances and unrealised gains and losses on
transactions between Group companies are eliminated. Accounting policies of
subsidiaries have been changed where necessary to ensure consistency with the
policies adopted by the Group.
Employee Benefit Trust (EBT)
The Group established an EBT (The Pebble Group Employee Benefit Trust) on 2
May 2023 to enable shares to be bought in the market to satisfy the demand
from share awards under the Group's employee share schemes. The EBT is a
separately administered trust and is funded by contributions from Group
companies in the form of a loan or a gift. The assets of the trust comprise
shares in The Pebble Group plc and cash balances. The Group recognises the
assets and liabilities of the trust in the consolidated financial statements
and shares held by the trust are recorded in the own share reserve as a
deduction from shareholders' equity. As at 31 December 2023, the EBT held
412,637 shares in the Company.
(f) Revenue
Revenue arises from the provision of services through digital commerce and a
global infrastructure that enables the efficient sale and distribution of
products to support corporate marketing activity and consumer promotions of
businesses in Europe, North America and Asia.
To determine whether to recognise revenue, the Group follows the 5-step
process as set out within IFRS 15:
1. Identifying the contract with a customer
2. Identifying the performance obligations
3. Determining the transaction price
4. Allocating the transaction price to the performance obligations
5. Recognising revenue when/as performance obligation(s) are satisfied
Revenue is measured at transaction price, stated net of VAT, rebates and other
sales related taxes.
Revenue is recognised either at a point in time, or over-time as the Group
satisfies performance obligations by transferring the promised goods and
services to its customers as described below. Variable consideration, in the
form of rebates, is recognised at a point in time.
Facilisgroup provision of digital commerce, consolidated buying power and
community learning through subscription-based services
Services are provided through signed annual Partner agreements. There is one
distinct performance obligation, being the provision of access to the
Facilisgroup network. The transaction price is set on 1 January each year by
reference to the previous year sales volumes and is fixed for the financial
year. For new Partners, the transaction price is calculated by reference to
forecasted sales for the year the Partner joins. Revenue is recognised over
time on a monthly basis as the Partners receive the benefits of being part of
the network. Payments are received on a monthly basis as the performance
obligations are satisfied over time.
Revenue earned from Preferred Suppliers is recognised over time on a monthly
basis in line with orders placed by Partners with these suppliers. Payments
are received bi-annually.
Brand Addition sale of promotional product
Contracts with customers take the form of customer orders under a framework
agreement. There is one distinct performance obligation, being the design,
sourcing and distribution of products to the customer, for which the
transaction price is clearly identified. Revenue is recognised at a point in
time when the Group satisfies performance obligations by transferring the
promised goods to its customers, i.e. when control has passed from the Group
to the customer. This tends to be on receipt of the product by the customer.
Customer invoices tend to be raised when the goods are delivered and the
performance obligation is satisfied. These invoices are shown within trade
receivables and payment is usually made within 60 days (being the common
payment terms). In cases where the goods have been delivered and an invoice
cannot be raised at that time, the income is accrued and presented within
trade receivables in the statement of financial position. A small number of
customers are invoiced in advance and these amounts are deferred and presented
within contract liabilities.
(g) Alternative performance measures
Throughout the report, we refer to a number of alternative performance
measures (APMs). APMs are used internally by management to assess the
operating performance of the Group. These are non-GAAP measures and so other
entities may not calculate these measures in the same way and hence are not
directly comparable. The APMs that are not recognised under UK-adopted
international accounting standards are:
· Adjusted earnings;
· Adjusted EBTIDA;
· Adjusted operating profit; and
· Adjusted operating profit less finance costs.
See note 7 for the reconciliation of the APMs.
The Board considers that the above APMs provide useful information for
stakeholders on the underlying trends and performance of the Group and
facilitate meaningful year on year comparisons.
(h) Taxation
Current tax is provided at amounts expected to be paid (or recovered) using
the tax rates and laws that have been enacted or substantively enacted by the
balance sheet date.
Deferred tax is recognised in respect of all timing differences that have
originated but not reversed at the balance sheet date where events or
transactions that result in an obligation to pay more tax in the future, or a
right to pay less tax in future, have occurred at the balance sheet date.
Timing differences are differences between the Group's taxable profits and its
results as stated in the financial statements that arise from the inclusion of
gains and losses in tax assessments in periods different from those in which
they are recognised in the financial statements. Deferred income tax assets
and liabilities are offset when there is a legally enforceable right to offset
current tax assets against current tax liabilities and when the deferred
income taxes relate to the same fiscal authority.
A net deferred tax asset is regarded as recoverable, and therefore recognised
only to the extent that, on the basis of all available evidence, it can be
regarded as more likely than not that there will be suitable taxable profits
from which the future reversal of the underlying timing differences can be
deducted.
Deferred tax is measured at the average tax rates that are expected to apply
in the periods in which the timing differences are expected to reverse based
on tax rates and laws that have been enacted or substantively enacted by the
balance sheet date. Deferred tax is measured on a non-discounted basis.
Current and deferred tax is recognised in profit or loss, except to the extent
that it relates to items recognised in other comprehensive income or directly
in equity. In this case, the tax is also recognised in other comprehensive
income or directly in equity, respectively.
(i) Intangible assets
All business combinations are accounted for by applying the purchase method.
Goodwill represents the difference between the cost of the acquisition and the
fair value of the net identifiable assets acquired. Identifiable intangibles
are those which can be sold separately, or which arise from legal or
contractual rights regardless of whether those rights are separable and are
initially recognised at fair value. In cases where the vendors of an acquired
business are required to remain employed by the Group post-acquisition, the
deferred payments are treated as post-acquisition remuneration and charged to
profit and loss.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is
allocated to cash-generating units and is not amortised but is tested annually
for impairment. Other intangibles are stated at cost less accumulated
amortisation and accumulated impairment losses.
All intangible assets are denominated in the functional currency of the
relevant subsidiary company and retranslated into Sterling at each period end
date. Exchange differences are dealt with through the consolidated statement
of other comprehensive income. Intangible assets are presented in note 9.
Customer relationships
Customer relationships acquired in a business combination are recognised at
fair value at the date of acquisition. Customer relationships have a finite
life and are subsequently carried at cost less accumulated amortisation.
Amortisation is calculated using the straight-line method to allocate the cost
of these assets over their estimated useful lives of 20 years.
Development costs
Research costs are charged to the income statement in the year in which they
are incurred and are presented within operating expenses. Internal development
costs that are incurred during the development of significant and separately
identifiable new technology are capitalised when the following criteria are
met:
· it is technically feasible to complete the technological
development so that it will be available for use;
· management intends to complete the technological development and
use or sell it;
· it can be demonstrated how the technological development will
develop probable future economic benefits;
· adequate technical, financial and other resources to complete the
development and to use or sell the product are available; and
· expenditure attributable to the technological product during its
development can be reliably measured.
Capitalised development costs include costs of materials and direct labour
costs. Internal costs that are capitalised are limited to incremental costs
specific to the project.
Other development expenditures that do not meet these criteria are recognised
as an expense as incurred and presented within operating expenses, together
with any amortisation which is charged to the income statement on a
straight-line basis over the estimated useful lives of development intangible
assets.
Assets classified as "work in progress" are not amortised as such assets are
not currently available for (or in) use. Once available for use, assets will
be recategorised and amortised at the rate appropriate to their
classification.
Computer software
Computer software purchased separately, that does not form an integral part of
related hardware, is capitalised at cost.
Amortisation is charged to profit or loss on a straight-line basis over the
estimated useful lives of intangible assets unless such lives are indefinite
and is presented within operating expenses. All intangible assets are
amortised from the date they are available for use. The estimated useful lives
are as follows:
· Customer relationships - 20 years; and
· Software and development costs - 3-5 years.
(j) Impairment losses
The carrying amounts of the Group's assets are tested for impairment. Assets
with an indefinite useful life are not depreciated or amortised but are tested
for impairment at each reporting date. Assets subject to
amortisation/depreciation and impairment losses are tested for impairment
every time events or circumstances indicate that they may be impaired.
Impairment losses are recognised in the income statement based on the
difference between the carrying amount and the recoverable amount.
An impairment loss is recognised for the amount by which the asset's carrying
amount exceeds its recoverable amount, which is the higher of fair value less
costs of disposal and value in use. To determine the value in use, management
estimates expected future cash flows and determines a suitable discount rate
in order to calculate the present value of those cash flows. The data used for
impairment testing procedures are directly linked to the Group's latest
approved budget, adjusted as necessary to exclude the effects of future
reorganisations and asset enhancements. Discount factors are determined
individually for each asset and reflect current market assessments of the time
value of money and asset-specific risk.
The Group makes use of a simplified approach in accounting for trade and other
receivables and records the loss allowance as lifetime expected credit losses.
These are the expected shortfalls in contractual cash flows, considering the
potential for default at any point during the life of the financial
instrument. In calculating, the Group uses its historical experience, external
indicators and forward-looking information to calculate the expected credit
losses.
The Group assesses impairment of trade receivables on a collective basis as
they possess shared credit risk characteristics; they have been grouped based
on the days past due.
(k) Foreign currencies
Items included in the financial statements are measured using the currency of
the primary economic environment in which the Group operates (the "functional
currency"). The functional and presentational currency is Sterling.
The functional currency of a subsidiary is determined based on specific
primary and secondary factors including the principal currency of the cash
flows and the primary economic environment in which the subsidiary operates.
Once determined, the functional currency is used and translated for
consolidation purposes.
Foreign currency items are translated using the transaction date exchange
rate. Monetary assets and liabilities denominated in foreign currencies are
translated at the closing rate. Foreign currency differences are taken to the
income statement. Non-monetary assets and liabilities that are measured based
on historical cost in a foreign currency are translated at the transaction
date exchange rate.
The assets and liabilities of foreign operations, including goodwill and fair
value adjustments arising on consolidation, are translated at closing rates.
The income and expenses of foreign operations are translated at the average
exchange rate of the year which approximates to the transaction date exchange
rates. Exchange differences arising on consolidation are presented within
other comprehensive income.
(l) Tangible assets and depreciation
Tangible fixed assets are stated at historical purchase cost less accumulated
depreciation. Cost includes the original purchase price of the asset and the
costs attributable to bringing the asset to its working condition for its
intended use.
Gains and losses on disposals are determined by comparing proceeds with
carrying amount. These are included in profit or loss.
Depreciation is calculated using straight-line method so as to write off the
cost of an asset, less its estimated residual value, over the useful economic
life of that asset as follows:
· Fixtures and fittings - 3 - 15 years; and
· Computer hardware - 5 years.
(m) Leases
The Group applies IFRS 16 to account for leases. At inception of a contract,
the Group assesses whether a contract is, or contains, a lease. A contract is,
or contains, a lease if the contract conveys the right to control the use of
an identified asset for a period of time in exchange for consideration.
The Group recognises a right-of-use asset and a lease liability at the lease
commencement date. The right-of-use asset is initially measured at cost, which
comprises the initial amount of the lease liability adjusted for any lease
payments made at or before the commencement date, plus any initial direct
costs incurred, and an estimate of costs to restore the underlying asset, less
any lease incentives received. Extension and termination options are included
in a number of property and equipment leases across the Group and so lease
payments to be made under reasonably certain extension options are also
included in the measurement of the liability.
The right-of-use asset is subsequently depreciated using the straight-line
method from the commencement date to the earlier of the end of the useful life
of the right-of-use asset or the end of the lease term. In addition, the
right-of-use asset is periodically reduced by impairment losses, if any, and
adjusted for certain remeasurements of the lease liabilities.
The lease liability is initially measured at the present value of lease
payments that were not paid at the commencement date, discounted using the
Group's incremental borrowing rate, which is based on the Group's financing
facilities, and adjusted where necessary for the specific terms of the lease.
The lease liability is measured at amortised cost using the effective interest
method. If there is a remeasurement of the lease liability, a corresponding
adjustment is made to the carrying amount of the right-of-use asset, or is
recorded directly in profit or loss if the carrying amount of the right-of-use
asset is zero.
The Group presents right-of-use assets within property, plant and equipment in
note 10.
Short-term leases and low value assets
The Group has elected not to recognise right-of-use assets and lease
liabilities for short-term leases that have a lease term of 12 months or less,
or leases of low value assets. These lease payments are expensed on a
straight-line basis over the lease term.
(n) Segmental reporting
The Group reports its business activities in two areas being:
· Brand Addition - sale of promotional product through services
provided under framework contracts on an international basis; and
· Facilisgroup - provision of digital commerce, consolidated buying
power and community learning and networking events to SME promotional product
distributors in North America through subscription-based services.
This is reported in a manner consistent with the internal reporting to the
Executive Directors, who have been identified as the Chief Operating Decision
Maker.
(o) Employee benefits
The Group provides a range of benefits to employees, including annual bonus
arrangements, paid holiday arrangements and defined contribution pension
plans.
Short-term benefits
Short-term benefits, including holiday pay and other similar non-monetary
benefits, are recognised as an expense in the period in which the service is
received.
Defined contribution pension plans
The Group operates a number of country-specific defined contribution plans for
its employees. A defined contribution plan is a pension plan under which the
Group pays fixed contributions into a separate entity. Once the contributions
have been paid, the Group has no further payment obligations. The
contributions are recognised as an expense when they are due. Amounts not paid
are included in other payables within trade and other payables in the
statement of financial position. The assets of the plans are held separately
from the Group in independently administered funds.
Share-based payments
Equity-settled awards are valued at the grant date, and the fair value is
charged as an expense in the income statement spread over the vesting period.
Fair value of the awards are measured using an adjusted form of the
Black-Scholes model which includes a Monte Carlo simulation model. The fair
value of the options, appraised at the grant date, includes the impact of
market-based vesting conditions if applicable.
Share-based remuneration is recognised as an expense in profit or loss with
the credit side of the entry being recorded in equity.
Non-market vesting conditions are included in assumptions about the number of
options that are expected to become exercisable. Estimates are subsequently
revised if there is any indication that the number of share options expected
to vest differs from previous estimates. Any adjustment to cumulative
share-based compensation resulting from a revision is recognised in the
current period. The number of vested options ultimately exercised by holders
does not impact the expense recorded in any period.
(p) Equity, reserves and dividend payments
Share capital
Share capital represents the nominal (par) value of shares that have been
issued.
Share premium
Share premium represents the difference between the nominal value of shares
issued and the fair value of consideration received. Any transaction costs
associated with the issuing of shares are deducted from share premium, net of
any related income tax benefits.
Own share reserve
Own share reserve represents Ordinary Shares in the Company held by the
Employee Benefit Trust set up in 2023 to administer share plans and acquire
shares, using funds contributed by the Group, to meet commitments to employee
share schemes.
Capital reserve
The capital reserve was created in 2021 as a result of the purchase by the
Company of all deferred shares in issue.
Merger reserve
The merger reserve was created as a result of the share for share exchange
under which The Pebble Group plc became the parent undertaking prior to the
Initial Public Offering (IPO). Under merger accounting principles, the assets
and liabilities of the subsidiaries were consolidated at book value in the
Group financial statements and the consolidated reserves of the Group were
adjusted to reflect the statutory share capital, share premium and other
reserves of the Company as if it had always existed, with the difference
presented as the merger reserve.
Translation reserve
The translation reserve includes foreign currency translation differences
arising from the translation of financial statements of the Group's foreign
entities.
Retained earnings
Retained earnings includes all current and prior period retained profits and
losses.
All transactions with owners of the parent are recorded separately within
equity.
Dividends
Dividends are recognised when approved by the Group's shareholders or, in the
case of interim dividends, when the dividend has been paid. No interim
dividend has been paid in the year (2022: £nil). The Directors recommend the
payment of a final dividend for 2023 of 1.2 pence per share (2022: 0.6 pence
per share).
3. JUDGEMENTS IN APPLYING ACCOUNTING POLICIES AND KEY SOURCES OF
ESTIMATION UNCERTAINTY
In the preparation of the Group financial statements, the Directors, in
applying the accounting policies of the Group, make some judgements and
estimates that affect the reported amounts in the financial statements. The
following are the areas requiring the use of judgement and estimates that may
significantly impact the financial statements:
(a) Accounting estimates
Information about estimates and assumptions that may have the most significant
effect on recognition and measurement of assets, liabilities, income and
expenses is provided below. Actual results may be substantially different.
Goodwill impairment
The Group tests goodwill for impairment every year in accordance with the
relevant accounting policies. The recoverable amounts of cash-generating units
are determined by calculating value in use. These calculations require the use
of estimates. As part of these calculations, we have considered various
sensitivities, explained in note 9. A 1% increase in the Weighted Average Cost
of Capital (WACC) would reduce the total value in use by £21.5m (2022:
£25.7m).
Goodwill relates to the various acquisitions made and amounts to £35,964,000
as at 31 December 2023 (2022: £36,139,000). The estimates used in the
impairment calculation are set out in note 9. There is no significant risk of
material adjustment to the carrying amount of the goodwill within the next 12
months. The sensitivities applied are explained in note 9.
Useful economic lives of intangible assets
The Directors have estimated the useful economic lives of the acquired
customer intangible assets to be 20 years based upon attrition rates and the
Directors' judgement. These lives are reviewed and updated annually. There is
no significant risk of material adjustment to the carrying amount of the
intangible assets within the next 12 months. No reasonable sensitivity
performed in relation to the useful economic lives assumption would result in
a material change in the carrying value of intangible assets.
Useful economic lives of property, plant and equipment
Property, plant and equipment is depreciated over the useful lives of the
assets. Useful lives are based on the management's estimates of the period
that the assets will generate revenue, which are reviewed annually for
continued appropriateness. The carrying values are tested for impairment when
there is an indication that the value of the assets might be impaired. When
carrying out impairment tests these would be based upon future cash flow
forecasts and these forecasts would be based upon management judgement. Future
events could cause the assumptions to change, therefore, this could have an
adverse effect on the future results of the Group. There is no significant
risk of material adjustment to the carrying amount of the property, plant and
equipment within the next 12 months.
The useful economic lives applied are set out in the accounting policies and
are reviewed annually. No reasonable sensitivity performed in relation to the
useful economic lives assumption would result in a material change in the
carrying value of property, plant and equipment.
Share-based payment charge
Fair values used in calculating the amount to be expensed as a share-based
payment is subject to a level of uncertainty. These fair values are calculated
by applying a valuation model, which is in itself judgmental, and takes into
account certain inherently uncertain assumptions. The basic assumptions that
are used in the calculations are explained further in note 12. No reasonable
sensitivity performed in relation to the share-based payment assumptions would
result in a material change to the expense in the consolidated income
statement.
(b) Accounting judgements
The following are the areas requiring the use of judgement that may
significantly impact the Group financial statements:
Capitalisation of internal development costs
Distinguishing the research and development phases of a new customised project
and determining whether the recognition requirements for the capitalisation of
development costs are met requires judgement. There is also some judgement
required in relation to the proportion of time capitalised for employees
working on the development of internally generated intangible assets. After
capitalisation, management monitors whether the recognition requirements
continue to be met and at what point amortisation should commence, in addition
to whether there are any indicators that capitalised costs may be impaired.
Capitalised development expenditure is analysed further in note 9.
4. SEGMENTAL ANALYSIS
The Chief Operating Decision Maker (CODM) has been identified as the Executive
Directors. The Directors have determined that the operating segments, based on
these financial statements, are:
· Brand Addition - sale of promotional product through complex
services provided under framework contracts on an international basis;
· Facilisgroup - provision of digital commerce, consolidated buying
power and community learning and networking events to SME promotional product
distributors in North America through subscription-based services; and
· Central operations - certain central activities and costs that
are not directly related to the activities of the operating segments.
Segment information about the above businesses is presented on the following
pages.
The Executive Directors assess the performance of the operating segments based
on Adjusted EBITDA and operating profit. Other information provided to the
Directors is measured in a manner consistent with that in the financial
statements. Inter-segment transactions are entered into under the normal
commercial terms and conditions that would also be available to unrelated
third parties. Segment assets exclude centrally held cash at bank and in hand.
Major customers
In 2023, there was one major customer that individually accounted for at least
10% of total revenues (2022: none). In 2023, the revenue relating to this
customer was £12,511,000 and related to the Brand Addition segment.
Analysis of revenue by geographical destination
2023 2022
£'000 £'000
United Kingdom 21,710 22,570
Continental Europe 41,896 47,236
US 39,924 43,189
Rest of World 20,641 21,030
Total revenue 124,171 134,025
The geographical revenue information above is based on the location of the
customer.
Included within Rest of World is £14,378,000 of revenue from China (2022:
£14,247,000).
All the above revenues are generated from contracts with customers and are
recognised at a point in time or over time as follows:
2023 2022
£'000 £'000
At a point in time 107,128 118,507
Over time 17,043 15,518
Total revenue 124,171 134,025
All non-current assets of the Group reside in the UK, with the exception of
non-current assets with a net book value of £31,525,000 (2022: £31,250,000)
which were located in North America and £2,006,000 (2022: £2,451,000)
located in other foreign countries.
Income statement for the year ended 31 December 2023
Brand Addition Facilisgroup Central operations 2023
£'000 £'000 £'000 £'000
Revenue 106,276 17,895 - 124,171
Cost of goods sold (69,988) - - (69,988)
Gross profit 36,288 17,895 - 54,183
Operating expenses (30,084) (13,514) (2,587) (46,185)
Operating profit/(loss) 6,204 4,381 (2,587) 7,998
Analysed as:
Adjusted EBITDA 9,491 8,851 (2,364) 15,978
Depreciation (1,640) (571) (37) (2,248)
Amortisation (1,335) (3,849) - (5,184)
Share-based payment charge (312) (50) (186) (548)
Total operating profit/(loss) 6,204 4,381 (2,587) 7,998
Finance expense (345) (67) (177) (589)
Profit/(loss) before taxation 5,859 4,314 (2,764) 7,409
Income tax expense (891) (700) (23) (1,614)
Profit/(loss) for the year 4,968 3,614 (2,787) 5,795
Statement of financial position as at 31 December 2023
Brand Addition Facilisgroup Central operations 2023
£'000 £'000 £'000 £'000
ASSETS
Non-current assets
Intangible assets 38,472 22,835 - 61,307
Property, plant and equipment 5,269 2,803 234 8,306
Deferred tax asset 158 - 124 282
Total non-current assets 43,899 25,638 358 69,895
Current assets
Inventories 11,852 - - 11,852
Trade and other receivables 24,956 4,921 281 30,158
Cash and cash equivalents 12,906 1,607 1,385 15,898
Total current assets 49,714 6,528 1,666 57,908
TOTAL ASSETS 93,613 32,166 2,024 127,803
LIABILITIES
Non-current liabilities
Lease liability 4,161 1,969 - 6,130
Deferred tax liability - 2,365 - 2,365
Total non-current liabilities 4,161 4,334 - 8,495
Current liabilities
Lease liability 1,195 299 - 1,494
Trade and other payables 26,519 2,006 440 28,965
Current tax liability/(asset) (202) 583 - 381
Total current liabilities 27,512 2,888 440 30,840
TOTAL LIABILITIES 31,673 7,222 440 39,335
NET ASSETS 61,940 24,944 1,584 88,468
Income statement for the year ended 31 December 2022
Brand Addition Facilisgroup Central operations 2022
£'000 £'000 £'000 £'000
Revenue 117,391 16,634 - 134,025
Cost of goods sold (81,279) - - (81,279)
Gross profit 36,112 16,634 - 52,746
Operating expenses (28,155) (11,624) (2,744) (42,523)
Operating profit/(loss) 7,957 5,010 (2,744) 10,223
Analysed as:
Adjusted EBITDA 11,467 9,011 (2,436) 18,042
Depreciation (1,719) (626) (39) (2,384)
Amortisation (1,232) (2,950) - (4,182)
Share-based payment charge (559) (425) (269) (1,253)
Total operating profit/(loss) 7,957 5,010 (2,744) 10,223
Finance expense (388) (13) (119) (520)
Profit/(loss) before taxation 7,569 4,997 (2,863) 9,703
Income tax (expense)/income (1,495) (689) 94 (2,090)
Profit/(loss) for the year 6,074 4,308 (2,769) 7,613
Statement of financial position as at 31 December 2022
Brand Addition Facilisgroup Central operations 2022
£'000 £'000 £'000 £'000
ASSETS
Non-current assets
Intangible assets 37,863 22,139 - 60,002
Property, plant and equipment 6,449 3,004 39 9,492
Deferred tax asset 137 - 155 292
Total non-current assets 44,449 25,143 194 69,786
Current assets
Inventories 15,447 - - 15,447
Trade and other receivables 29,989 4,648 56 34,693
Cash and cash equivalents 12,655 2,265 138 15,058
Total current assets 58,091 6,913 194 65,198
TOTAL ASSETS 102,540 32,056 388 134,984
LIABILITIES
Non-current liabilities
Lease liability 5,148 2,315 27 7,490
Deferred tax liability - 2,860 - 2,860
Total non-current liabilities 5,148 5,175 27 10,350
Current liabilities
Lease liability 1,221 303 45 1,569
Trade and other payables 33,543 2,075 795 36,413
Current tax liability 258 805 - 1,063
Total current liabilities 35,022 3,183 840 39,045
TOTAL LIABILITIES 40,170 8,358 867 49,395
NET ASSETS/(LIABILITIES) 62,370 23,698 (479) 85,589
5. INCOME TAX EXPENSE
2023 2022
£'000 £'000
Current income tax
- UK corporation tax charge for the year 575 901
- Adjustments in respect of prior years (337) (159)
- Foreign tax 1,652 1,822
Total current income tax 1,890 2,564
Deferred tax
- Deferred tax (413) (426)
- Adjustments in respect of prior years 137 (48)
Total deferred tax (276) (474)
Total income tax expense 1,614 2,090
The expected corporation tax charge for the year is calculated at the UK
corporation tax rate of 23.5% (2022: 19%) on the profit before taxation for
the year. Taxation for other jurisdictions is calculated at the rates
prevailing in the respective jurisdictions in which the Group operates.
The charge for the year can be reconciled to the profit in the consolidated
income statement as follows:
2023 2022
Analysis of charge in year
£'000 £'000
Reconciliation of total tax charge:
Profit before taxation 7,409 9,703
Profit before taxation multiplied by the rate of corporation tax in the UK of 1,741 1,844
23.5% (2022: 19%)
Effects of:
Adjustments in respect of prior years (200) (207)
Impact of difference in current and deferred tax rates in the UK - 13
Non-deductible (income)/expenses (27) 32
Differences in tax rates in overseas jurisdictions 100 286
Unrecognised for deferred tax - 122
Total income tax expense 1,614 2,090
Factors that may affect future tax charges
An increase in the UK corporation tax rate from 19% to 25% from 1 April 2023.
This change was substantively enacted on 24 May 2021. The impact of this rate
change has been considered when recognising the deferred tax in relation to
the UK companies in the Group. Where the asset or liability is expected to
unwind after 1 April 2023, the deferred tax has been recognised at 25%.
Amounts recognised directly in equity
Aggregate deferred tax arising in the reporting period and not recognised in
net profit or loss or other comprehensive income but directly
(charged)/credited to equity:
2023 2022
£'000 £'000
Deferred tax: (charge)/credit relating to employee share schemes - value of
employee services
(23) 15
6. EARNINGS PER SHARE
Basic earnings per share are calculated by dividing the earnings attributable
to equity shareholders by the weighted average number of Ordinary Shares in
issue during the year.
For diluted earnings per share, the weighted average number of Ordinary Shares
in issue is adjusted to assume conversion of all potentially dilutive Ordinary
Shares. The Company has potentially dilutive Ordinary Shares arising from
share options granted to employees. Options are dilutive under the Group
Sharesave Plan (SAYE) where the exercise price together with the future IFRS 2
charge of the option is less than the average market price of the Company's
Ordinary Shares during the year. Options under The Pebble Group plc Long Term
Incentive Plan (LTIP), as defined by IFRS 2, are contingently issuable shares
and are therefore only included within the calculation of diluted EPS if the
performance conditions, as set out in note 12, are satisfied at the end of the
reporting period, irrespective of whether this is the end of the vesting
period or not.
The impact of the potentially dilutive share options issued under the LTIP on
21 December 2020, 8 June 2021, 29 March 2022, and 28 March 2023 and the SAYE
on 6 October 2021 and 25 April 2023, as detailed in note 12, is 0.01p for the
year ended 31 December 2023 (2022: 0.01p).
The calculation of basic earnings per share is based on the following data:
Statutory EPS
2023 2022
Earnings (£'000)
Earnings for the purposes of basic and diluted earnings per share being 5,795 7,613
profit for the year attributable to equity shareholders
Number of shares
Weighted average number of shares for the purposes of basic earnings per share 167,412,949 167,450,893
Weighted average dilutive effects of conditional share awards 445,904 185,624
Weighted average number of shares for the purposes of diluted earnings per 167,858,853 167,636,517
share
Earnings per Ordinary Share (pence)
Basic earnings per Ordinary Share (pence) 3.46 4.55
Diluted earnings per Ordinary Share (pence) 3.45 4.54
Adjusted EPS
The calculation of adjusted earnings per share is based on the after-tax
adjusted profit after adding back certain costs as detailed in the table in
note 7. Adjusted earnings per share figures are given to exclude the effects
of amortisation of acquired intangible assets, share-based payment charge and
exceptional items, all net of taxation, and are considered to show the
underlying performance of the Group.
2023 2022
Earnings (£'000)
Earnings for the purposes of basic and diluted earnings per share being 7,708 9,675
adjusted earnings
Number of shares
Weighted average number of shares for the purposes of adjusted earnings per 167,412,949 167,450,893
share
Weighted average dilutive effects of conditional share awards 445,904 185,624
Weighted average number of shares for the purposes of diluted earnings per 167,858,853 167,636,517
share
Adjusted earnings per Ordinary Share (pence)
Basic adjusted earnings per Ordinary Share (pence) 4.60 5.78
Diluted adjusted earnings per Ordinary Share (pence) 4.59 5.77
See note 7 for the reconciliation of adjusted earnings.
7. ALTERNATIVE PERFORMANCE MEASURES (APMs)
Throughout the consolidated financial statements, we refer to a number of
APMs. A reconciliation of the APMs used are shown below.
Adjusted earnings:
2023 2022
£'000 £'000
Profit for the year attributable to equity shareholders 5,795 7,613
Add back/(deduct):
Amortisation charge on acquired intangible assets 1,901 1,420
Share-based payment charge 548 1,253
Tax effect of the above (536) (611)
Adjusted earnings 7,708 9,675
Adjusted EBITDA:
2023 2022
£'000 £'000
Operating profit 7,998 10,223
Add back:
Depreciation 2,248 2,384
Amortisation 5,184 4,182
Share-based payment charge 548 1,253
Adjusted EBITDA 15,978 18,042
Adjusted operating profit:
2023 2022
£'000 £'000
Operating profit 7,998 10,223
Add back:
Amortisation charge on acquired intangible assets 1,901 1,420
Share-based payment charge 548 1,253
Adjusted operating profit 10,447 12,896
Adjusted operating profit less finance costs:
2023 2022
£'000 £'000
Adjusted operating profit 10,447 12,896
Deduct:
Finance expense (589) (520)
Adjusted operating profit less finance costs 9,858 12,376
8. DIVIDENDS PAID AND PROPOSED
2023 2022
£'000 £'000
Declared and paid during the year
Final dividend for 2022 paid in June 2023: 0.6p per share 1,005 -
Proposed for approval at AGM (not recognised as a liability at 31 December)
Final dividend for 2023: 1.2p per share (2022: 0.6p per share) 2,004 1,005
As per the Trust Deed, the EBT shall waive its entitlement to a
dividend on the shares held of 412,637 shares.
9. INTANGIBLE ASSETS
Goodwill Customer relationships Software and development costs Work in progress Total
£'000 £'000 £'000 £'000 £'000
Cost
Balance at 1 January 2022 35,805 10,241 21,321 423 67,790
Foreign exchange translation 334 1,081 1,643 39 3,097
Additions - - 2,347 4,115 6,462
Disposals - - (926) - (926)
Reclassifications - - 492 (492) -
Balance at 31 December 2022 36,139 11,322 24,877 4,085 76,423
Foreign exchange translation (175) (554) (672) (195) (1,596)
Additions - - 661 6,987 7,648
Disposals - - (186) - (186)
Reclassifications - - 4,200 (4,200) -
Balance at 31 December 2023 35,964 10,768 28,880 6,677 82,289
Accumulated amortisation
Balance at 1 January 2022 - 1,647 10,469 - 12,116
Foreign exchange translation - 171 878 - 1,049
Charge for the year - 554 3,628 - 4,182
Disposals - - (926) - (926)
Balance at 31 December 2022 - 2,372 14,049 - 16,421
Foreign exchange translation - (123) (345) - (468)
Charge for the year - 550 4,634 - 5,184
Disposals - - (155) - (155)
Balance at 31 December 2023 - 2,799 18,183 - 20,982
Net book value
Balance at 31 December 2021 35,805 8,594 10,852 423 55,674
Balance at 31 December 2022 36,139 8,950 10,828 4,085 60,002
Balance at 31 December 2023 35,964 7,969 10,697 6,677 61,307
Staff costs of £6,626,000 (2022: £5,797,000) have been capitalised as
intangible assets. The net book value of internally generated assets is
£13,785,000 (2022: £9,941,000).
The remaining amortisation periods for customer relationships are between 13
and 15 years (2022: 14 and 16 years) and for software and development costs
are between 1 and 5 years (2022: 1 and 5 years).
Goodwill has been tested for impairment. The method, key assumptions and
results of the impairment review are detailed below.
Goodwill is attributed to the respective cash-generating units (CGUs) within
the Group (Brand Addition and Facilisgroup). Goodwill has been tested for
impairment by assessing the value in use of each CGU. The value in use
calculations were based on projected cash flows in perpetuity. For both CGUs,
budgeted cash flows for 2024 to 2028 were used. For Brand Addition, these were
based on a forecast for 2024 with growth rates of 6% applied to EBITDA each
year. For Facilis, these were based on forecasts for 2024 to 2025, with growth
rates of 20% applied to revenue each year and an EBITDA return of 50% for 2026
and 55% for 2027 and 2028. Subsequent years were based on a reduced rate of
growth of 2.0% (2022: 2.0%) into perpetuity. Appropriate adjustments were also
made for changes in working capital and other cash flows to both CGUs.
These growth rates are based on past experience and market conditions and
discount rates are consistent with external information. The growth rates
shown are the average applied to the cash flows of the individual CGUs and do
not form a basis for estimating the consolidated profits of the Group in the
future.
The Directors used an estimated pre-tax market weighted average cost of
capital (WACC) of 12.6% for Brand Addition and 13.9% for Facilisgroup (2022:
12.4% for Brand Addition and 13.6% for Facilisgroup) to discount the cash
flows used for the CGUs. Sensitivities to revenue and margin, consistent with
those used in the going concern analysis, were applied to each CGU.
Additionally, the impact on headroom arising from a 2% increase in the WACC
was also considered. The value in use calculations described above, together
with sensitivity analysis using reasonably possible changes in the key
assumptions as set out above, indicate the Group has adequate headroom and
therefore do not give rise to impairment concerns.
Having completed the impairment reviews at the date of transition and at each
subsequent balance sheet date, no impairments were identified.
Goodwill is attributable to the following segments:
2023 2022
£'000 £'000
Brand Addition 33,057 33,057
Facilisgroup 2,907 3,082
35,964 36,139
The value in use, calculated as described on the previous page and
attributable to each CGU, is as follows:
2023 2022
£'000 £'000
Brand Addition 102,824 102,824
Facilisgroup 98,560 123,798
201,384 226,622
The revenue and margin sensitivities described above, result in a reduction in
the total value in use to £105,013,000. The WACC sensitivity described above,
results in a reduction in the total value in use to £162,373,000. Under both
sensitivities, there is headroom for both CGUs.
Management considers that no reasonably possible changes would reduce either
CGUs headroom to £nil. The reduction from prior year is driven by revenue
growth phasing for Facilis new products, in addition to the increase in WACC.
10. PROPERTY, PLANT AND EQUIPMENT
Fixtures and fittings Computer hardware Right-of-use assets Total
£'000 £'000 £'000 £'000
Cost
Balance at 1 January 2022 3,892 3,226 12,784 19,902
Foreign exchange translation 216 146 783 1,145
Additions 327 618 2,471 3,416
Disposals (880) (1,319) (2,240) (4,439)
Balance at 31 December 2022 3,555 2,671 13,798 20,024
Foreign exchange translation (118) (74) (394) (586)
Additions 245 626 516 1,387
Disposals - (350) (477) (827)
Balance at 31 December 2023 3,682 2,873 13,443 19,998
Accumulated depreciation
Balance at 1 January 2022 3,133 2,323 6,519 11,975
Foreign exchange translation 154 98 339 591
Charge for the year 233 451 1,700 2,384
Disposals (880) (1,300) (2,238) (4,418)
Balance at 31 December 2022 2,640 1,572 6,320 10,532
Foreign exchange translation (81) (48) (143) (272)
Charge for the year 278 465 1,505 2,248
Disposals - (345) (471) (816)
Balance at 31 December 2023 2,837 1,644 7,211 11,692
Net book value
Balance at 31 December 2021 759 903 6,265 7,927
Balance at 31 December 2022 915 1,099 7,478 9,492
Balance at 31 December 2023 845 1,229 6,232 8,306
Right-of-use assets - net book value
2023 2022
£'000 £'000
Leasehold property 5,943 7,362
Fixtures and fittings 100 87
Computer hardware 189 29
Total right-of-use assets - net book value 6,232 7,478
11. LEASES
Amounts recognised in the statement of financial position
The statement of financial position shows the following amounts relating to
leases:
Right-of-use assets £'000
Balance at 1 January 2022 6,265
Foreign exchange translation 444
New leases recognised in the year 2,471
Disposals (2)
Depreciation charge for the year (1,700)
Balance at 31 December 2022 7,478
Foreign exchange translation (251)
New leases recognised in the year 516
Disposals (6)
Depreciation charge for the year (1,505)
Balance at 31 December 2023 6,232
These are included within property, plant and equipment in the statement of
financial position.
Lease liability 2023 2022
£'000 £'000
Maturity analysis - contractual undiscounted cash flows:
Less than one year 1,807 1,897
More than one year, less than two years 1,729 1,726
More than two years, less than three years 1,722 1,627
More than three years, less than four years 1,165 1,624
More than four years, less than five years 1,004 1,091
More than five years 1,106 2,207
Total undiscounted lease liability at year end 8,533 10,172
Finance costs (909) (1,113)
Total discounted lease liability at year end 7,624 9,059
Current 1,494 1,569
Non-current 6,130 7,490
7,624 9,059
Amounts recognised in the income statement
The income statement shows the following amounts relating to
leases:
2023 2022
£'000 £'000
Depreciation charge - fixtures and fittings 1,451 1,655
Depreciation charge - computer hardware 54 45
1,505 1,700
Interest expense (within finance expense) 399 374
The above leases relate to office space, computer equipment and motor
vehicles. The net book value by category is set out in note 10.
Any expense for short-term and low value leases is not material
and has not been presented.
12. SHARE-BASED PAYMENTS
In the year ended 31 December 2023, the Group operated equity-settled
share-based payment plans as described below.
The Group recognised total expenses of £548,000 (2022: £1,253,000) in
respect of equity-settled share-based payment transactions in the year ended
31 December 2023.
The weighted average remaining contractual life of options outstanding at the
end of the year is 1.33 years (2022: 1.40 years).
The Pebble Group plc Long Term Incentive Plan (LTIP)
Certain employees of the Company, along with other Group employees, have been
granted share options on 21 December 2020, 8 June 2021, 29 March 2022 and 28
March 2023 under the LTIP.
The vesting of most of these awards is subject to the Group achieving certain
performance targets under the LTIP, measured over a three-year period, as set
out in the Directors' Remuneration report. The options are split into two
parts with the amount of Part 1 options that will vest depending on
achievement of the Group's Basic Adjusted EPS (AEPS) whilst Part 2 depends on
absolute total shareholder return (TSR) that will vest depending on
performance of the Company's Absolute TSR:
Proportion of award
Part 1 options - Basic AEPS 70%
Part 2 options - TSR 30%
Details of the maximum total number of Ordinary Shares which may be issued in
future periods in respect of LTIP awards outstanding at 31 December 2023 are
shown below.
Number of shares
At 1 January 2022 2,074,246
Granted in the year 1,719,986
Lapsed in the year (436,702)
At 31 December 2022 3,357,530
Granted in the year 1,655,496
Exercised in the year (303,558)
Lapsed in the year (1,494,515)
Outstanding at 31 December 2023 3,214,953
Exercisable at 31 December 2023 412,637
The weighted average exercise price in the year is 52.1p (2022: nil).
The fair value at grant date is independently determined using an adjusted
form of the Black-Scholes model which includes a Monte Carlo simulation model
that takes into account the exercise price, the term of the option, the share
price at grant date, the expected price volatility of the underlying share
based on the AIM Price Index over the past 3 years and the risk-free interest
rate for the term of the option as shown below.
2022 award 2022 award 2023 award 2023 award
TSR condition AEPS condition TSR condition AEPS condition
Share price at start of performance period 132.5p 132.5p 88.5p 88.5p
Share price at grant date 101.5p 101.5p 117.0p 117.0p
Exercise price £nil £nil £nil £nil
Expected volatility 17.9% - 14.3% -
Expected life 3 years 3 years 3 years 3 years
Expected dividend yield 0% - 0% -
Risk-free interest rate 0.53% - 3.05% -
Fair value per option 29.6p 101.5p 21.1p 117.0p
The Pebble Group plc Group Sharesave Plan (SAYE)
Certain eligible employees of the Company, along with other Group employees,
have been granted share options on 6 October 2021 and 25 April 2023 under its
Sharesave Plan and its sub-plan, the International Sharesave Plan.
The SAYE provides for an exercise price equal to the quoted mid-market price
of the Company shares on the business day immediately preceding the date of
grant, less a discount of 20 per cent. The vesting period under the scheme is
three years with no performance conditions, other than remaining a Group
employee, attached to the options.
In 2023 under the SAYE, the Group made awards of 417,932 (2022: nil)
conditional shares to certain Directors and employees.
Details of the maximum total number of Ordinary Shares which may be issued in
future periods in respect of SAYE awards outstanding at 31 December 2023 are
shown below.
Number of shares Weight average exercise price (p)
At 1 January 2022 923,710 122.0
Lapsed in the year (181,645) 122.0
At 31 December 2022 742,065 122.0
Granted in the year 417,932 94.0
Lapsed in the year (481,650) 117.4
Outstanding at 31 December 2023 678,347 108.0
The fair value at grant date is independently determined using an adjusted
form of the Black-Scholes model that takes into account the exercise price,
the term of the option, the share price at grant date, the expected price
volatility of the underlying share based on the AIM Price Index over the past
3 years and the risk-free interest rate for the term of the option as shown
below.
2023 award
Share price at grant date 117.0p
Exercise price 94.0p
Expected volatility 13.4%
Expected life 3 years
Expected dividend yield 0%
Risk-free interest rate 3.05%
Fair value per option 16.0p
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. END FR GPUWCWUPCPURRecent news on Pebble
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