City round-up: Pebble Group; Speedy Hire; Accrol; Bodycote

Pebble

Pebble Group, the Trafford Park-based corporate promotions specialist, said it expects its 2023 annual revenues and EBITDA to be lower than the previous year, although it anticipates a return to growth during 2024.

Shares in the group plummeted more than 30% in response to the downgrade.

Reviewing the year to December 31, 2023, it said, while it expects the Facilisgroup business to achieve revenue growth in the year, order intake at Brand Addition has been lower than anticipated and group revenues for 2023 are expected to be approximately £124m, against £134m the previous year.

As the group has continued to generate stronger gross margins in 2023 compared with the prior year, the impact of the revenue reduction is expected to be partially mitigated, and deliver group EBITDA of approximately £16m, compared with £18m the previous year, maintaining group EBITDA margins close to fiscal year 2022.

The cash position remains robust, and the group expects net cash as at December 31, 2023, to be no less than prior year net cash of £15.1m, after continued capital investment into Facilisgroup and the payment of a dividend of £1m in June 2023.

The group said it remains strong financially, and both of its businesses are strategically well placed within their respective markets.

Facilisgroup provides a digital commerce platform for promotional products businesses in North America. Despite the difficult market conditions, Facilisgroup 2023 revenues are expected to increase by approximately 10% compared with the prior year of $20.4m ($16.6m).

The group expects the Gross Merchandise Value (GMV) transacted through its technology by Partners (customers) to be approximately $1.4bn in 2023, slightly ahead of 2022. This reflects a more challenging economic environment in the second half of the year and consequently the proportion of income, based on in-year Partner activity, has impacted the overall rate of growth in 2023.

Facilisgroup EBITDA margins are expected to be approximately 50% (FY 22: 54.2%) as the group continues to invest in its technology, sales and marketing strategies.

Partner retention rates continue to be market leading and consistent with prior year rates of 96%. The total number of Partners at November 21, 2023 is 242 (December 31, 2022: 225), with an enlarged team supporting the new business pipeline.

It is anticipated that Facilisgroup, with its strong market position, growth opportunities and excellent profit margins, will become the majority contributor to group profits moving through 2024.

Brand Addition provides promotional products and related services under contract to many of the world’s most recognisable brands. The group expects Brand Addition revenues for 2023 to be approximately £106m (FY 22: £117.4m).

This reduction in revenues against 2022 has been driven principally from Technology and Consumer clients, while revenue from the Engineering and Transport sector clients has been more robust.

With gross margins increasing in 2023 compared with the 30.7% achieved in 2022, the impact of the revenue reduction is expected to be partially mitigated with the Brand Addition EBITDA margin expected to be approximately nine per cent (FY22: 9.8%).

Pebble said its clients are strong, global brands and retention rates continue to be high. At this point, it anticipates recovery in their spend during 2024.

Looking ahead, the group said: “Against the difficult economic backdrop, we are disappointed to report a reduction in our group’s expected FY 23 results, due to lower order intake at Brand Addition. Both of our businesses remain strong financially, are well differentiated within their respective markets and have a clear strategic plan. Our balance sheet is robust and we look forward to returning the group to growth in 2024.”

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A Speedy concession in B&Q Colchester

Newton-le-Willows-based tools and equipment hire group, Speedy, saw sales and profits decline in the six month period to September 30, 2023, although chief executive, Dan Evans said the results “demonstrates our ability to perform resiliently against challenging but manageable market conditions”.

However, he warned that full year results could be at the lower end of board expectations.

Revenues fell 2.9% to £208.5m, while pre-tax profits of £5.6m were a 57.6% fall from the same period last year. Net debt rose by 3.3% to £89.6m and free cash flow improved, from £700,000 last year to £106m. The interim dividend was kept at 0.80p per share.

The group said it is benefiting from its diverse customer mix, including strong national customer performance that mitigates some softening with regional customers.

It noted recent national key contract wins and extensions, as well as a strengthening pipeline, together with a strong performance in its Customer Solutions business

The Kazakhstan joint venture is performing behind the record performance in fiscal year 2023, and has also been impacted by dollar exchange rate movements.

Dan Evans said: “This set of results demonstrates our ability to perform resiliently against challenging but manageable market conditions, by maintaining price and cost discipline whilst investing in and executing on our Velocity Strategy.

“The recent acquisition of Green Power Hire Limited and the launch of Speedy Hydrogen Solutions Limited in joint venture with AFC Energy to deliver market leading clean energy power generation and storage solutions for our customers, further demonstrates our Velocity strategy in action.

“I am pleased to confirm the digital evolution of our partnership with B&Q, launching our online, home delivery tool hire proposition on diy.com and trade-point.co.uk. This will then be extended into over 310 B&Q stores nationally for digital hire in-store, in an overall lower cost to serve operating model.”

He added: “The group has a promising pipeline of opportunities to deliver revenue growth in the second half and beyond. As in prior years, the group expects a second half weighting to its revenues and profits, as the winter programmes commence and new contracts fully mobilise in the period, including those communicated at year end.
“We expect to see the benefits of our investments in our Velocity strategy including operational efficiency and supply chain optimisation, in the second half and beyond. Whilst the macroeconomic outlook is uncertain, we remain confident of delivering results, albeit towards the lower end of the board’s expectations.”

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Accrol, the Blackburn-based AIM-listed tissue and toilet roll maker, said it has performed strongly in the six months ended October 31, 2023.

In September the group announced annual figures that showed a £7.818m pre-tax loss, despite a jump in revenues from £159.450m in 2022 to £241.914m.

However, today’s update revealed that volume growth continued throughout the six month period, while margins returned to pre-pandemic levels, quicker than forecast, with the board now expecting Adjusted EBITDA for FY24 of at least £21m.

Adjusted net debt at October 31,2023, was £25.5m (H1 FY23 £30.5m), as a result of strong cash generation, driven by the operational efficiencies of the business. The board now anticipates that adjusted net debt will be close to 1x EBITDA by the full year end.

The group said it continues to demonstrate its strong market position, building on its strong customer base and market leading products, and is well positioned to deliver further growth.

Chief executive, Gareth Jenkins, said: “We are clearly very pleased with this performance. We continue to deliver by having great quality and value products which meet every consumer’s budget. Our strong relationship with the retailers and our robust supply model are ensuring we can continue to deliver a strong set of results in a changing market environment.”

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Loading a furnace at Bodycote

Bodycote, the Macclesfield-based provider of heat treatment and specialist thermal processing services, has seen revenue rates improve in the four month trading period to October 31, 2023.

In a trading update this morning it said it has delivered year-to-date revenue of £677m, representing growth of 10% versus the prior year, which is up six per cent, excluding energy-related surcharges and at constant currency. Operating margins have increased in line with expectations.

In the four month period, the group delivered revenue of £257m, up four per cent year-on-year at constant currency on both a pre- and post-surcharge basis.

ADE revenues were £116m, up 10% (eight per cent excluding surcharges). AGI revenues of £140m were down one per cent year-on-year, but up one per cent when the effect of declining surcharges are excluded.

The Specialist Technologies portion of the divisions achieved revenue growth of eight per cent both before and after the impact of surcharges. Growth continued to outperform Classical Heat Treatment, where revenues rose by two per cent pre- and post-surcharges.

Divisional revenues in Emerging Markets declined by seven per cent (down six per cent excluding surcharges), with lower activity in China and Eastern Europe.

Aerospace & Defence revenues increased by 13% (10% excluding surcharges), in line with the rate of growth delivered in the first half and led by ongoing growth in Civil Aerospace (up 11% excluding surcharges). This reflected market share gains in Classical Heat Treatment in North America, together with OEM (original equipment manufacturer) build rate increases and higher aftermarket demand. Defence growth was six per cent, excluding surcharges. Industry-wide Aerospace supply chain issues remain, but are progressively improving.

Automotive revenues were down two per cent, driven by reduced surcharges. Underlying growth was one per cent, excluding the impact of surcharges. The reduction in growth versus the first half of the year reflected the more modest increases in car and light truck production rates and the UAW strike. Bodycote’s penetration of the Electric Vehicle market continues to improve, it said.

General Industrial, including Energy, revenues were up two per cent (three per cent excluding the impact of falling surcharges). Bodycote achieved strong growth in both Oil & Gas and Medical subsectors, which constitute 18% of General Industrial revenues.

Within the Oil & Gas subsector, the group’s share of the Surface Technology markets in EMEA grew significantly. There were revenue declines in a number of subsectors, including Tooling, Industrial Machinery and Electronics. Geographically, Western European growth was ahead of that in North America.

Net debt, excluding lease liabilities at October 31, was £6.7m, an improvement of £19.9m from June 30, reflecting good cash flow conversion in the period.

The interim dividend of £12.6m was paid on November 10, 2023.

The acquisitions of Stack Metallurgical Group and Lake City Heat Treating have not yet completed and are progressing through regulatory clearance processes.

Looking ahead, the group said: “Reflecting the good progress achieved year-to-date, the board’s expectations for full year 2023 remain unchanged. Looking beyond this year, the board remains confident in the group’s prospects for continued profitable growth.”

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