Pebble Group ‘well-placed to return to growth’ after market ripples
Pebble Group, the Stretford-based corporate promotions specialist, saw a dip in profits and revenue that prompted a profit warning in November, but says trading in 2024 has “started in line with management’s expectations.”
The stock market listed business has posted revenues of £124.2m (FY 22: £134.0m), 7% behind last year.
Its two division saw mixed fortunes with Facilisgroup showing annual recurring revenue growth of 12% to US$21.2 million (FY 22: USD19.0m).
However, Brand Addition saw revenue decrease by 9% to £106.3m (FY 22: £117.4m) due to impact of reduced spend from the Technology and Consumer sectors.
Pre-tax profits for the group were down from £9.7m to £7.4m, in line with what Pebble warned the markets in November, sending the shares plummeting by more than 30% in response to the downgrade.
Chris Lee, chief executive of Pebble Group
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.”
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.
Looking ahead the growth at 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 strategy for Brand Addition, which sells promotional products to many of the world’s largest brands, is to increase its gross margins.
In the financial review the company admitted that the mix of business across Brand Addition was skewed more towards underperforming rather than overperforming sectors, particularly in the second half of the year.
“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.
“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,” the chief executive’s report said.
Following the profit warning in November, analysts backed the board to turn the situation around.
Fiona Orford-Williams, director, Edison, told TheBusinessDesk.com: “We’ve been seeing the repercussions from the lower levels of spending from the major tech companies on their own sales and marketing efforts right across the media space, so this is far from being Pebble-specific. The Facilisgroup offering is where the major growth opportunity lies and that is unchanged, but the pace of growth is inevitably influenced by the macro-economic backdrop. The stockmarket is marking down any company reducing expectations on the news, and it can take a while for underlying value to be recognised.”
Roddy Davidson, head of research, equity analyst, media and digital, Shore Capital recommended the shares were a BUY: “Based on our new numbers, the group’s stock is trading on FY24F P/E and EV/EBITDA ratios of 13.5x and 5.3x accompanied by a rising dividend yield – a valuation that we regard as modest relative to its financial characteristics, medium-term growth prospects and positive fundamentals”.
