Welcome to The Pebble Group full year 2021 results webinar. All attendees are in listen only mode, and at the end of the presentation, there will be the opportunity to ask questions. There's a PDF of the slides on the right-hand side, and this webinar is being recorded. I now hand over to Chris Lee, CEO, and Claire Thomson, CFO. Chris, over to you.
All right, thank you and hello everyone. Welcome to this presentation of our full year results for 2021, and giving you a little bit of direction of how 2022 has started as well. Thanks very much for your time. Our aim today is to skip through these slides using as a guide rather than sort of walk through in detail and then take any questions at the end. Hopefully we'll be through the slides in 20 minutes and give us lots of time to work to kind of really understand what's on your mind and give us some questions if you have them. My name is Chris. I've got Claire with me, the CFO.
We kind of calculated between us, we've got about 36 years in the business and we'll kind of work out how that splits. A lot of depth and kind of commitment from us, not only sort of from today, but also from the past as well. Kind of like to walk you through the business a little bit to start with and talk about, you know, Pebble Group, its space in the market. The Pebble Group is a provider of digital commerce, and product and related services into that global promotional products industry. If I take you onto the left-hand side, it's just really want to sort of focus on. It's a $50 billion market globally.
You know, it's kind of quite niche in that sort of marketing advertising space, but $50 billion is kind of, you know, size. I think, you know, a lot bigger than a lot of people think. Also a really fragmented market. We try to find some really specialist and differentiated spaces in that market. Half of it is half the market's in North America. In North America, it's around about 20,000 businesses looking to provide promotional products into businesses in North America. Our first business, Facilisg roup, provides digital commerce into those 20,000 businesses looking to help them bring efficiencies, professionalize and grow their organization. Facilisg roup provides that digital commerce and platform into those businesses to help them grow.
On the second side, Brand Addition, quite a different business, but in the same group and same sector and Brand Addition, again, very focused in a specialist area. It looks to provide product related services in some of the best known brands in the world. Brand Addition's customers, you will have heard of every one of them, based under contract and, providing product, distribution, e-commerce websites and services in a consistent manner, across the world. Pebble Group in a big space, the promotional marketing space with two distinct different businesses within there. I'll work from the bottom to the top here in terms of the highlights of 2021. I think it was a, you know, a very good year, in looking at Brand Addition, 41% revenue growth.
That sort of not only is a bounce back from the difficulties that COVID caused in terms of demand in 2020, but actually that 41% growth means that Brand Addition has made a full and complete recovery over 2019 levels, which we think is a great performance. Supply chain is kind of a big question in the world right now, but Brand Addition hasn't been the last three months it's been dealing with supply chain. It's been the last sort of 12-18 months. A mixture of a very good and experienced team, long-term supplier and customer relationships mean that our supply chain has been extremely well managed, a little bit of gross margin hit this year, but not an awful lot.
A great performance for Brand Addition over 2019 levels and a really well-managed supply chain in difficult circumstances. Taking us up to Facilis, a different business selling tech. You can see, I think there's three really great stats there. 40%. It's based in U.S. dollars, Facilis, so that's its kind of own currency. 40% growth I think is outstanding, but not only the actual growth, but looking at the EBITDA margins that are coming out there at 60%. I think that combination is a really powerful platform that we've produced there. Then underneath there, partners, our customers, the retention of those is extremely high at 98%.
If we can keep building our market share on a very stable customer base and bringing those kind of growth rates and EBITDA returns, you can see what a powerful business Facilis actually is. Those two take us to the group highlights. 40% growth is excellent, two really cash generative businesses as well. What we've navigated over the last two years has, you know, been quite difficult. We're actually sort of based in London today because it's been so lovely to do sort of meetings with institutions face to face. The first time we've done that since we floated in 2019. But what we've managed to do throughout since our flotation is manage our own cash.
We've kind of gone through COVID, we've gone through heavy investment into Facilis and investment back into Brand Addition into working capital to support its growth and all those under our own cash. 40% revenue growth, managing our own cash really well, I think a super performance from the Pebble Group and its team in 2021. What I'll do now, hand over to Claire, and she'll talk you through the group numbers.
Thank you. This slide is sharing our key metrics and the headline here is that they're all clearly moving in the right direction. Chris has talked about revenue growth, you can see that here. That's translated into growth in EBITDA. Again, that real strong performance on cash. You can see it's GBP 5 million up on where we were this time last year.
This is an interesting slide and it helps you understand the financial dynamics of the business. The chart on the left-hand side is showing the split of revenue between Brand Addition, Facilis, and we can see where Brand Addition is that products business, and that is the larger proportion of the group's revenue. When we've got those really super EBITDA returns in Facilisg roup, where on the SaaS—you know, on the SaaS subscriptions that we're charging, then that Facilisg roup is really catching up and is roughly about 50% of the group's EBITDA. Group P&L, it's here for the record. There are three lines highlighted in bold here, so revenue, adjusted EBITDA, and operating profit.
You can see that they've all, you know, moved forward across the period from FY 2019, and, you know, showing a really strong performance and also demonstrating that what Chris just said again, about our commitment into the product development in Facilisgroup and the investment that we've made there. You can see that coming through in an increased depreciation and amortization charge over that period. Cash flow. It is really strong, really strong performance and really straightforward. There are, you know, two points of interest on here. You can see that movement in working capital. So there's some investment in working capital in 2021, and that's all in support of Brand Addition's growth. So there's been a proportionate level of investment that reflects the incremental volume that we've seen in Brand Addition this year.
That investment in capital expenditure, which is, as I've just said, the investment into the products that we're developing in the Facilisgroup as we drive towards our strategic ambitions. Again, you know, balance sheet again, nice and straightforward. We can see the working capital on there, and that is all associated with Brand Addition. We've had some increased volume, and that translates into incremental receivables and payables, but that's with some of the largest brands in the world, so a real quality blue chip asset base. You know, I say every time that we have high quality debtors if we invoice correctly, then we collect out on that cash. We've got stock that's well managed and underwritten by our customers. It's a, you know, a really strong, really nice clean balance sheet that the business has got.
We're going to move now into a little bit more detail on each of the businesses, and if we just pause on Facilisgroup. We are focused in North America at the moment. That's that $25 billion industry. It's highly fragmented, and Facilisgroup is providing a digital commerce platform to the 20,000 businesses in that industry that are looking to professionalize and grow. This is the P&L for Facilisgroup. You know, there's that. You can see across the three years that we're sharing there, that period of uninterrupted growth.
I'm really focused in on the box at the bottom and the stats. You know, some really strong performance and some amazing statistics that come out of this business. We've had 40% growth in ARR over, you know, 2020. Amazing EBITDA return at 60%. You know, even with a significant level of investment into our technology products and our strategy, we're still generating operating profit returns of over 40%.
Thanks, Claire. Now we'll kind of go into the result from 2021, what goes behind there and what drives that is what we want to talk about now. Again, for the record, that's our revenues in sterling, but really this business is a U.S. dollar business, so we kind of put that on there. Since we acquired the business at the end of 2018, there's a sort of annual growth rate of 25%. You know, our ambitions is to actually kind of take that forward even further. You can see if we didn't know about COVID, we didn't know about some of the challenges that have been out there, you know, there is a consistent growth in the business, you know, over the long term.
If we look at these three charts, if these are moving in the right direction, we know that Facilis recurring revenue is moving in the right direction. Now, the fees that we charge, the subscriptions that we charge, and the fees that sort of come to us from our preferred suppliers are all driven by these metrics. Partner numbers going forward, the gross merchandise value going forward, and that is what the sales coming through our platform, by our customers or our partners. If you say 200 customers and $1 billion of revenue going through the gross merchandise value, that gives you what the average size of our customers are at the moment, which is around about $5 million revenue businesses.
Encouragement from ourselves to push the products of our Preferred Suppliers through to our partners. If that number goes up as well, that's really good for our partners, it's good for our suppliers, and it's good for us, too. Those three metrics moving forward, I know means that the recurring revenues of Facilis are moving forward, too. If I kind of sort of say we've got a great business that we've built and some super metrics. Now this business becomes really special if we can scale it. The chart that's in front of you there really is how we believe we can grow and expand the Facilisgroup platform to really escalate its revenues.
Right now, Facilis is a $17 million business and that's in that top left-hand side that we're providing right now that order workflow to those businesses between around $2 million and $20 million of sales. We think there's around about 2,000 in that pipeline for us, and we've got 200 partners. The top left-hand side of this chart, that's the business that the results have been placed on today. We'd like to grow the services that we offer to those businesses and actually extend the addressable market for us into the wider promotional products industry in North America. On the right-hand side, we have Syncore Lite that we're making those capital investments into. That opens up a lot more businesses in this very fragmented market under $2 million.
Syncore Lite is in, you know, heavy development stage right now, and we'll be looking to launch that mid-2023. Then below there, Commercio is an e-commerce platform. A lot of our partners right now use e-commerce. A lot of the North American promotional products use e-commerce to sell. There is a wide variety of platforms that are used, and we don't think there's any that really hit the nail on the head for our customers right now. They've been asking us for an e-commerce solution that links into Syncore that really helps us sell to their customers. We bought some software in 2021, which we further developed, and we're actually sort of doing some great beta testing.
We'll be entering beta testing very shortly and begin to start charging for that product with our partners. Over the next 12 months, we're looking to bring new releases of Commercio out that we believe each release will open up more potential partners to come and use us. What this chart is saying is, top left-hand side is a wonderful business that will continue to keep growing. We will expand our offering to those customers by adding the e-commerce platform. On the right-hand side, we'll increase our addressable market in North America by bringing Syncore Lite together. Together, we believe that the digital commerce revenues available from this market are around about $700 million. There's a big market for us to go for, and we set ourselves some targets that we've been tracking against.
Initial aspiration is to get to that GBP 50 million mark by doing Syncore Lite, those e-commerce platforms as well. That really extends the offering that we have and the market we're going to. We're tracking really sensibly against the milestones so far. Had a very good start to 2022, which means our GMV and our spend with preferred is already towards our end goal numbers for 2022. If we can kind of get those the GMV, the customer numbers and the preferred spend moving forward, you know, we're really excited about scaling this business.
Scaling this business, you know, makes it a very, very powerful and valuable organization. Just summarizing, I think we've got a wonderful opportunity for Facilis. We're really focused and have a great team that's focused on sort of those internal milestones for 2024, and that's kind of going to a successful launch of Commercio and setting great foundations for Syncore Lite in 2023. You know, really excited about what that business can bring. I'll hand over to Claire to talk us through Brand Addition.
Okay. Brand Addition, that's our products business that's working under contract with some of the largest brands in the world, providing them with exciting products in a way that helps them address their own agendas around sustainability and ESG, and do that efficiently through the use of e-commerce. Again, like with Facilis, we're sharing the segmental detail for Brand Addition on the P&L, and the you know, the message that I'm sharing here is there was a full recovery in that revenue line over the 2019 number. Yes, Brand Addition was affected by COVID, but what we've been able to demonstrate in 2021 is that we made a full recovery, managed our margins, managed our costs, and that incremental volume translated through to an increase in EBITDA.
This slide is sharing a little bit more detail on how we managed to deliver that V-shaped recovery. It was really around three things. You know, retain our customers. You know, our customers are working under contract with us. They're all still with us. We managed to win market share through converting new business through that period that we invoiced in 2021. Then also in shipment, we were able to grow our share of the wallet by our existing clients, and you can see that particularly in the consumer promotions line where we grew that successfully. That was GBP 46 million out of the Brand Addition revenues this year.
Looking at 2022, saying, you know, we've had a sensible start to the year, so we're up 11% year-on-year. You know, as we're in the middle of March, we've got 40% of our year-end expectation booked for Brand Addition. We've got new business opportunities that we converted in 2021 that we will start to invoice in FY 2022, and then we've also got room to grow in those underlying clients. This slide is just sharing with you the diversity of the Brand Addition revenue by both the sector and by geography. Again, we've got that good geographical spread and good diversification by sector.
Okay. Thanks for that. I'll kind of take us home on Brand Addition and then sort of finish off with some ESG bits as well. One slide. There we go. Supply chain's been a big issue. Again, kind of probably say the last three-six months, but I think actually something that as Brand Addition we've been doing over the last 12-18. When you're faced with any challenge, I think there's two things to be thinking about: the environment that we're operating in and secondly, the actions that you're taking. The environment we're operating in, it's not the same product we're buying from the same factory and selling to the same customer.
You know, we do have, you know, flexibility in terms of where we're buying from, sort of, and the price that we're selling at, and the products that we're actually using as well. You know, we don't think we're trying to hit a GBP 9.99 retail price for the same product that we're trying to do last year and bought from the same factory. We don't have that constraint at kind of either end of our supply chain. Secondly, it's sort of, you know, the actions that you're taking, and it's the people that are doing this. Our supply chain has been extremely well managed by our teams. That doesn't mean it's been easy. You know, that doesn't mean kind of, you know, there hasn't been a lot of challenges.
There has. The team have worked enormously hard. I think it's been a great team effort. Our account managers working with our clients to make sure our lead times are working, our teams are on the ground and actually in Europe kind of working with our suppliers, to make sure. I think our finance team's working around Brexit, our distribution team's working around Brexit, a real team effort and, you know, kind of if the wind's blowing in your face, you don't kind of necessarily have to take a step back. You can stand up and take action to change it. I think, you know, the words, you know, we've thought hard about, but we believe it's a well-controlled supply chain in very difficult circumstances from Brand Addition in 2021.
I'd say that theme continues again in 2022. There's some kind of more detail on there about how we've been affected and what we've done. I think the message from us into the market is a well-controlled supply chain and something we're, you know, dealing with under difficult circumstances, but we are dealing with it. That takes us to sort of the final message on Brand Addition. The top two of these will be a familiar theme in terms of how we're looking at Brand Addition. It's retention of really good accounts, working with really, you know, global brands over the long term and implementing the new business that we win.
Going back to the win, grow, retain, repeat mantra, it is very sort of, you know, that's kind of what we talk about at Brand Addition. Going out and on top of that good customer base that spends the regular amount of cash with us that then kind of, you know, builds with us over time. Adding to that is how Brand Addition grows. The specific, I think, over the last 18 months and the next sort of 6- 12 months, is very much making sure we continue to do what we have been doing and manage that supply chain and setting ourselves again sort of that goal moving towards, you know, moving our margins forward in the next 12 or 18 months, not moving them backwards.
Behind the two businesses, you know, there's some commonality in terms of our cultures, our ESG and our approach and to business generally. That comes through. ESG is something we've put a lot into over the last two years, but it's not sort of difficult for us to do that cause it's something we really believe in. I honestly think ESG is about, you know, being, you know, running a business well for its employees, its stakeholders, being investors, being its suppliers and being its clients and what's not to like about that. It's an easy thing for us to embrace. We've made some great senior appointments who are kind of driving this on a day-to-day basis.
It's very important to me that what we do is lived and breathed in the businesses. They're not tick boxes. They're not something to kind of say we do. That whatever we say, the claims that we make has evidence behind it, and it's lived and breathed in the businesses. That's coming through in the actions that we've taken. What we also have is, again, a published ESG report in 2021 in October. We'll do that now on an annual basis. We've set our targets. We're gonna measure ourselves against that. You know, I want us to do it because it makes our business better, and it's the right thing to do. It kind of, you know, I felt it comes naturally because why wouldn't it?
It's a good way to run your business. Just finally to sum up, work from the right to the left again. I believe 2021 was a great year for the business, and well done to kind of everybody in our group. A huge effort that kind of went into those results. You know, kind of a phrase of mine is results don't happen by accident. They certainly didn't. You know, it's kind of on the back of good people with a good strategy working really hard. Brand Addition started well. Order intake compared to the same point last year is 11% up. That's against the guidance that's out there around 8%. This time of the year, that feels like a nice balance.
Say it again, supply chain feels well controlled by a great group of people. Facilis partner numbers continue to grow. We're looking to expand that with the new products and but also our GMV, so in other words, the sales of our partners that run through the system is perhaps a little bit higher than we even thought ourselves, at 57% ahead. I think that's against a perhaps a soft comparison in Q1 last year, but still that's a really good performance, and we'll see how that works for the rest of the year.
To sum up what's the start for Pebble Group, I think it started well. Definitely met with expectations and you know kind of we're you know full of great enthusiasm. Think we've got a really good plan, and it's a matter of us executing that, and I think our business continues to move forward, you know, from a strategic and financial sense as well. I hope that was a nice trot through. How are we doing? 23 minutes.
Yeah, yeah.
I have to cut three minutes off that. But I hope that's, yeah, there's a lot of detail in there, and we're really happy to answer questions now, but really appreciate your time today. Yes-
Tremendous. Many thanks both of you. To ask your question, click on the question mark on the right-hand side or at the top, type your question and submit. We've got a question here. What gives you the confidence in achieving your targets for partner numbers at Facilisgroup?
I think you know we've done really well with GMV, and if we have you know if the targets are around GMV, spend with preferred, and partner numbers. The GMV and the spend with preferred is going very well, and we think that's in a really great place. In terms of the partner numbers, we've so far remember had that one component of our platform has been Syncore concentrating on those sort of businesses between $2 million and $20 million. But we're actually expanding you know dramatically our addressable market by having a Syncore Lite. The hockey stick in those numbers aren't like for like wins. They are saying Syncore Lite goes into a much bigger addressable market.
If we want 500 of those customers, there's 20,000 out there. You know, to put it in that context, I think it is how that needs to be looked at. It shouldn't be looked at as we've grown by 25 each year. We're dramatically expanding our addressable market, and I think that's why we believe those customer numbers can be achieved.
Tremendous. Thank you. Going on from there, do you think that your target market of sub-$2 million partners will have the same resilience in tough markets that your current partners have shown through the pandemic? Is there a chance of greater client attrition?
I think the answer to that is it's hard to get less client attrition when you know right now it's 98%. You know, our sort of retention almost can't be any higher. The default answer to that is probably yes, that they might be a little more transient, but also there's a lot more of them. I really think that we shouldn't underestimate the sort of businesses that those people have. They're a lifestyle business. They're doing $1 million a year from virtual distributors. Their overheads were pretty much nothing. You know, they'll be working from home most likely, and their overheads are up to paying themselves their own salaries. These businesses can, you know, they've got no cost to cut basically.
They can kind of, you know, if their sales slow right down, you know, they can actually kind of. They're not in premises. They're not employing many people. So I think those businesses can kind of open, you know, sort of retract and kind of grow quite quickly. I think that's proven now, you know. Now we've been through COVID, those people, those businesses will be coming back again. You know, they haven't sort of disappeared and gone and done something else.
Tremendous. Thank you. The questioner says, "Thanks for a very interesting presentation. How are the margins this year for Facilis? Previously, you said that you may trend towards 50% from the current 60%. Is that still the case, or will it happen more with Syncore or Lite?
Yeah, I think we're definitely flagging. We're looking to scale the business, right? 60% margins are probably a little higher than we expected this year because we had an excellent sort of last quarter. If you think, you know, 55% is the number we've probably averaged out at over the last two, three years, which is an amazing number in itself. What we're trying to say is, you know, let's put the percentage to one side for a moment. We're trying to say we'd like to spend $3 million or $4 million on ramping up and scaling Facilis and spend it on a sales and marketing piece. We think that's the return on that $3 million or $4 million can be absolutely amazing.
If we can get to that $50 million recurring revenue, then you know, kind of who knows where the return on sales can go on the EBITDA margin. Really think about, I think we are using our money really well to scale Facilis. That might mean I think we've got guidance out there. It's 50%, isn't it, into this year? So that money's been invested for growth. It's not a permanent movement in margin.
I think that's a really important piece because if we do get Facilis running in the way that we believe we can, and then it's not $50 million, there's no endpoint. You know, we'd like to take it much beyond there. I think spending. I think it'd be so wrong of us not to sort of, make very small bids and 50% margins is a pretty amazing number anyway. If we can spend a little bit of money in scaling Facilis, I think that is money tremendously well spent right now.
Thank you very much. The questioner goes on to ask if you can talk a little bit about broker forecasts. It's not easy to get access to Berenberg research. It looks like earnings per share estimate is for 4.61p for 2022, which is down from 2021's 5.14. Do you know if the 4.61p is right? Why is the earnings per share number coming down?
The 4.61 isn't a straight comparative to the 5.14. The right comparative would be 5.15. What we're saying is we think it's gonna be flat next year, and that's really around the investment that we're making into Facilisgroup. We've spent GBP 5 million over the last two years on those two products. We're forecasting to spend another GBP 8 million this year, and we're amortizing that over a really sensible period of three years. We will see an increase in the amortization charge that is affecting that forecast number. Our expectation through the broker is that that's gonna be flat.
Great. Thank you very much indeed. Another question now asks, "Why is the Pebble Group a better investment than Altitude?
Well, I don't think it's for us to, you know, that's for investors to make that analysis. You know, I think it's a big industry. Businesses can be successful, you know, within it, you know, in different sort of spaces. We're really keen to share our message as well, explain what we're doing and give investors so they can make informed decisions about us, and obviously they will look at kind of the other businesses and other sectors, same sector. You know, I think that's for other people to, you know, either comment on or decide upon. Yeah, I hope we've been able to explain our strategy really well. You know, a big thing, we wanna explain our strategy really well.
We, you know, learn every time we do something like this with the questions and the run through to investors. You know, our goal is to really, you know, drive our business forward as well as we can and, you know, let others make those decisions.
Many thanks, Chris. What are the main difference between the two?
Well, again, I kind of, you know, I think it's probably for others to sort of make those answers. You know, I think we set out our strategy, what we're looking to do, and there's always competition around. It's a very big industry. I'm sure there's, you know, room for lots of, you know, people to be successful and business to be successful in it. Really, you know, this, you know, we're setting our strategy and what we believe, and I think, you know, other businesses in our industry can be successful, you know, in parallel to us, but, you know, it's important that we explain our strategy right rather than trying to compare and contrast versus others.
Okay. Tremendous. Thank you very much. What's the split on people numbers between Facilisgroup and Brand Addition and the group?
We've got just over 500 people in the group, about 100 of those are in Facilis, and 50% of those are in tech development there. We've got eight at The Pebble Group, and then the balance is in Brand Addition.
Great. Thank you very much. Just a reminder to everyone, I've got one more question, but before I ask it, if you do have a question, click on the question mark, type your question, and submit. The final question at the moment is: What plans do you have for using the cash you're generating as the planned growth comes through?
You know, The Pebble Group is very cash generative through Facilis and Brand Addition. You know, that's been proven in the short time we've been on the market. We're definitely investing for growth right now. If we're successful in executing upon those strategies, then cash does, you know, come into the business very strongly. You know, I suppose we're looking forward to that position being a reality rather than a kind of a thought. There's no firm plans for that right now. I think, you know, our heads are sort of focused on getting our strategy right, executing well upon it, and, you know, we really look forward to managing that kind of challenge when it comes.
You know, I think we're in a good place, very cash generating model and, you know, let's hope we are able to execute on the plans and have that, you know, really great issue for us in a couple of years' time.
Tremendous. Thank you very much. That is the end of questions. Do you have any further closing remarks?
I think it's always really important to, when you get an opportunity to say something publicly, results don't get achieved by accident. There's an amazing group of people. It's close to 500. It's kind of crazy that there's 500 of us now. But you know, thank you to the team for again continuing pretty unusual circumstances. You know, it couldn't be done without a great team effort. Thanks to everybody and you know, we're always interested in just having questions, communicating our messages correctly. Any feedback we'd be really thrilled to receive it and grab questions from anyone. Yeah. Thank you all for your time.
Chris, that was marvelous. While we've got you, we do have one more question. Would you mind if I ask it?
Well, let's see what it is first. Yeah, of course.
Okay. Can you please talk through the contract terms for the Facilis customers in Syncore and Commercio length of contract and element of volume versus recurring?
You know, the contract length is, you know, three months. The notice period, that's all it is. You know, we want people to be using, you know, our digital platform because it brings them great services and, you know, we're not looking to tie them in over many years to something they wouldn't like. People use Facilis because they wanna be part of a great organization that kind of has great technology, super supplier relationships and great community. Those contracts aren't long in length. In terms of the recurring revenues, you know, 95% of the revenues in the business. Those recurring revenues split around about 65% comes from subscriptions and 35% comes from sort of marketing funds.
That's tremendous. I am going to let you go now. Many thanks indeed to you both, and thank you to everyone for joining. For those listening on the webinar, you'll now be taken to a webpage to give some feedback on The Pebble Group and today's presentation. If you're unable to complete it now, you'll receive a follow-up email in about an hour's time. We'd be really grateful if you could take a few minutes to complete. Many thanks for joining us. This is the end of the webinar.