Hi, everybody. We'll kick off. We're just one minute past eight, so in respect of everybody's time, we will get going. Thanks for joining us this morning. We have Full Year Results for 2024 of Pebble Group, and we'll kind of run you through the presentation from here. I think we'll probably be around about 20 minutes, 25 minutes walking through the actual presentation itself, and then obviously take any questions. If we keep cameras off for now and on mute, and then as we get to the end, can raise hands, and we'll sort of bring you on camera and unmute you for questions at the end. For those of you who joined us before, we'll do a familiar format. I'll do a little bit of the industry, the positioning, some highlights. Claire will take you through the financials.
I'll dive into Facilis, Claire into Brand Addition. We'll do some ESG and wrap up towards the end as well. Yeah, CEO, CFO, both kind of in here, [creaky] a long time. Definitely emotionally, financially invested in the group, and really sort of happy to take you through who we are. Promotional products, big industry, all companies, all sizes are using promotional products. I'm going to do a tiny bit of show and tell here. If you think of promotional products, I've got my Pebble Group pen, kind of pad, my water bottle, kind of very proudly in. That's, I think, what you'll traditionally think of promotional products about, and 4Imprint, a great business who does that sort of thing as well. Slightly different, 4Imprint, one of our businesses, Brand Addition, does some slightly different things as well.
Working with brands like La Prairie, and this is sort of a gift with purchase that you'll get if you buy some really sort of quite expensive skincare products. I actually don't know what this does, but it kind of rubs on your face and kind of helps you do that. I think this is Burberry, so they're sort of high-value clients. That's a Christmas bauble that they give to them when they attend their stores as a gift and a thank you. Here we have some sort of Nespresso product as well. This makes Espresso Martinis, and we do this thing again as a gift with purchase. You buy more coffee pods, you kind of buy more from Nespresso, you actually get a gift with purchase as well.
Things that are actually sort of a great worth, sort of supporting the marketing spend of really large corporate, Brand Addition does that kind of product too. Very much we're selling mugs, pens, hats, sort of apparel, but also selling some really kind of nice high-end items to help sort of push the sales of our customers' core business as well. Our lens into that industry, which is $50 billion on a global basis, half of that is in North America, and our lens into that industry is about $1.6 billion. That is the group, and we have two businesses in that group, Facilisgroup and Brand Addition. It is Facilis' technology business, and we see $1.5 billion worth of the North American industry's promotional product sales going through our technology.
If you think that is $1.5 billion, but that's a million orders, probably 3 million order lines, probably 5-6 million actual sort of quotes and proposals that are going through our system at Facilis. We have this amazing amount of data that we see and understand about the industry, so knowing which product from which supplier is going to which customer. That gives us a really sort of interesting lens that people want to work with us, and particularly the supply network, because we have around about 6% of what gets spent in North America comes through Facilisgroup. One of the reasons I prefer suppliers which to work with us there is because we can give them information where they're doing well, where they're missing out, etc. Our second business is Brand Addition.
Brand Addition is our product business that does these things, but only working with the really large corporates under contract. Those businesses are people like Nespresso, Unilever, Michelin, Scania, Google, Intel. Those really large corporates outsource their need for promotional merchandise, and Brand Addition sells product to those guys and does that with a contract on a long-term basis. Our lens, $1.6 billion out of the $50 billion in total, and really market-leading businesses in Facilisgroup and Brand Addition. Why do we think we're a great business and what we've got to do? Sort of starting from left to right, really, we really concentrate on once we have a customer and we have a client building a long-term relationship and helping that business grow, they trust us with their brand, they trust us to help them grow their business.
Looking after our existing partners and clients is our first point of growth, making sure we have long-term relationships with those businesses and really look after them when they do join us. Both businesses have been around for a long time, so we have heritage, and they have really important and very good niche market-leading positions in what they do. Facilis on the technology side of supporting small distributors and medium-sized distributors in North America, and Brand Addition is only focused on looking after those large corporates on a global basis. Both businesses have been part of the industry for a long time and both are market-leading in their own way. It is a large industry, so both have very good opportunities in which to grow. As we grow, we are also still making a lot of cash. Both businesses generate cash.
We have cash on our balance sheet, and actually our cash is increasing, so it gives us options of what to do, definitely one of which is invest in ourselves, but also sort of make returns to shareholders as well. Established businesses with market-leading positions in this industry and long-term client relationships is really sort of, I think, stands this group apart from others. Looking at some highlights, Claire, I've talked you through the 2024 numbers, but if I work from right to left, Brand Addition, our products business, again, very high retention levels. If we go through, we promise that still [inaudible] under here, but these long-term relationships are built. 90% of the top 20 customers that were with us in 2019, which do a lot of our revenue, are still with us today. That is six years later since we listed.
Our growth starts with high retention. We've grown the margin in that business from 30 percentage points since listing now through to 35, and that shows you the value that our customers and those large corporates place upon the services that we're delivering to them. Really pleasingly, in the back end of 2024 and early 2025, to those businesses that we've been that are long-term relationships with us, we've added some more. New wins in 2024 and 2025 should support our 2025 revenues. Facilis, I've spent a long time there in 2024 and really got to understand what was on the mind of our customers, our suppliers, investors, and our team. By spending that time there, we've really evolved some of the things we've been doing and really worked hard at operationally improving our business. Two new key hires have been included in that.
While we've been doing that, the GMV has still moved forward, and the spend with our preferred suppliers has moved forward in an industry that's been really quite flat. We're moving from a position of high CapEx spend to slightly sort of lower ongoing spend in Facilisgroup, which is actually going to increase the cash conversion, not only facilisg roup, but of the overall business. Claire will talk you through that a little bit more as we go through. We want to invest in our business and choosing to invest our own cash in our business.
That means we'll be further cash generative, but wanting to invest more in that business as well, particularly in facilisg roup, because if we can make that business grow, then our group has a much higher value than it's been placed upon it today. Claire will talk you through some numbers, and then I'll come back and talk through Facilis in a few minutes.
Thank you. Sharing the financial highlights of the group for 2024, the message from us today is that all our key metrics are moving in the right direction. Our revenue for 2024 was much more predictable than what we experienced in 2023, but also we focused on controlling what we can control. Moving our margins forward and controlling our costs translated through to improved EBITDA. Importantly, as Chris has touched on, and I'm sure we'll both say quite a lot more as we move through this presentation, improving our cash conversion, reducing our CapEx spend, and you can see there that our net cash moved forward, and that was after making incremental distributions. Let's go. I used to have two donuts, I think, on this slide.
What we're trying to do here is help you understand how the two P&Ls or the two business models within the group come together. We're moving from left to right on this slide, and you can see the kind of dark gray black chart is a revenue of both Facilisgroup and Brand Addition. Brand Addition, that products business, is a lion's share of the group revenue. Facilisgroup, that SaaS revenue that we earn through technology subscriptions, is a much smaller proportion of what the overall group's revenue is. As we're moving across, you can see that all of the cost of sales in the group are Brand Addition. That's the cost of the products that we sell. Facilis is 100% margin, so there's no cost for Facilis in that line. Both businesses are obviously our costs below margin are just people.
Facilis, we've got that highly efficient translation of SaaS revenue into EBITDA, but obviously the cost of running the business and the people in that business are sitting below that, and the same with Brand Addition. As we get to the right-hand side, you can see that from the kind of disproportionate kind of 90/10 split in revenue Facilis to Brand Addition, we get to a 50/50 split of EBITDA for the group. Income statement, I touched on this on the highlights page, but our revenue was slightly ahead of where we were in FY2023, but importantly, much more predictable than what we'd experienced back in the second half of 2023. We moved our gross profit margins forward, and that was largely through Brand Addition.
We'd implemented some pricing increases in Brand Addition in 2023, and those held and moved forward a little bit further in 2024. As I said, as I touched on, we focused on controlling what we can control while the larger macro environments are a little bit more uncertain. That kind of good discipline around cost management means that the revenues are translated through to high levels of EBITDA. There's debate whether I include the balance sheet. It's pretty, in my messages, are pretty straightforward. It's kind of very clean and high-quality balance sheet. Sitting on there is really all the working capital and working capital belongs just to Brand Addition. It's kind of blue-chip-backed assets that translate quickly into cash. The message that we're saying there is it's a well-invested balance sheet.
We talked about our cash conversion increasing, and that gives us options in terms of how we'd like to spend that cash. Again, this comes through in the cash flow. Our operating cash conversion in the year was 68%. That compares to 63% in the previous year. You can see as you move down the cash flow, that's coming through from a reduction in our capital spend. We've had some investment into working capital, which is Brand Addition, and that will move with the volumes in Brand Addition and is needed to support that business as it grows. I touched on earlier how we've moved forward in terms of the dividends that we've paid. That increased to GBP 2 million in the year. Also, we've got our ongoing share buyback program. What are we going to do with all that cash?
What we're trying to share with you here is that we knew we've got really good choices ahead of us. We've got our ongoing uses of cash. We've always wanted to have a strong balance sheet, which is what we've got. We will always want some cash to invest in working capital to support Brand Addition as it grows. We'll always have a level of ongoing capital expenditure, but we've got no debt. That gives us some nice options. What do we do with the remaining cash? First and foremost, we've decided that we're going to spend some of that cash in the business that we know and really focus now on accelerating our organic growth plan in Facilis. Chris will touch on that in more detail as we move through the presentation.
We've announced today that our dividend is moving to GBP 0.0185 per share from GBP 0.012 last year. We're kind of returning value to shareholders through dividends, and the share buyback is ongoing. What else do we do with that cash? I could say we're focusing on one. We're doing two and three, and then we'll think about other options as a mainly.
Thanks, Claire. We'll kind of dive into Facilis, and then Claire will come back and talk a little bit about Brand Addition. Giving you a little overview of Facilis, it is technology, an end-to-end order processing system, and system is both technology and best practice processes. We do not just sell a piece of technology and walk away. We help those customers, those distributors and partners, to actually get the best out of their technology by working through best practices. That makes their businesses more efficient, allows them more time to sell, helps their cash flows, and helps their margins as well. The technology with best practice is kind of what makes us market-leading. We add on to that a market network.
Remember that $1.5 billion worth of GMV of spend that's going through, there's probably, excuse me, a million dollars worth of purchases with suppliers that go through from the distributor. We try and point those purchases into the preferred purchases that we suppliers that we have a contract with. That gets the distributor or our partner great pricing, a lot of attention. That real sort of, if we can help the distributor buy well from the preferred supplier, the preferred supplier gets more share of the market than it otherwise would, and we get a rebate back from that supplier as well. A real win-win-win in terms of that market network that we get the opportunity to do because of our technology.
We do bring our partners and our suppliers together at events, at learning and networking experiences, so they can, again, learn from each other, understand what's going on in the industry, what's happening with tariffs, what's happening with working from home, what's happening with salespeople's commissions, and make their businesses better from it. It is definitely technology plus a number of other services that get added to that. We talk about the power to process in terms of our technology. The process is to scale, meaning our best practice, and then the network to grow your business through pulling together the best distributors and the best preferred suppliers in the industry. In terms of the market that we're actually looking at, $25 billion is North America. Facilisgroup is exclusively North America at the moment.
We move that $25 billion into three segments and working through each of those in turn. Our core market has been in that $2 million-$20 million growing business from an entrepreneur to an enterprise where the owner-manager of the business has been a good salesperson. They've outgrown just selling themselves into creating a business. They want visibility, control of their organization. That's been Facilis' heritage in that market. We think there's 1,600 distributors. We've got around 240 of them. Looking after those existing customers and growing more of them in that sector is certainly sort of what we wish to do. Coming round the circle, a number of those distributors grow. A number of those are plus $20 million right now, and we want to make sure we grow together.
Investing in our technology, particularly through integrations and bringing other technology to talk to Syncore, the name of our technology system, is really important. We can help those $2 million-$20 million go on the journey to be in that top 100, the elite businesses within the whole industry. We want to go on the journey together with them. Actually, if we can do that, that really kind of helps us sort of break into that market as well and win some of those that are already there. What we want to do, thirdly, is make sure we're getting the next generation in our core market and capture them. That sort of $1 million-$2 million bracket is what we want to do as well. We've invested in technology to help win those businesses, which is now sort of coming to market.
Investing to look after our core customers and help them grow, win more of them, making sure those growing and ambitious businesses, we can go on the journey together in terms of them becoming part of the elite, but then backfilling the pipeline with the next generation of winners. Therefore, we are the business of choice for end-to-end order processing systems in North America and promotional products industry. That is who we want to be. There is a lot of market to go at, and I think we are building the team and the technology to take advantage of that. Again, I am not going to read through all this, but that talks about why people choose to use Facilisgroup and both suppliers and distributors. There are some quotes and statistics, but I think just pulling out that top row, what do distributors want?
They want to have good visibility of their businesses, growing margin, control of their cash flow, and efficient processes. We have definitely given that through the technology, but also the processes in which we help go through with use that technology. That leads to a very large kind of $1.5 billion of spend in the industry, which gives us a lot of power in terms of the network. Those things coming together, I think, stand Facilisgroup apart. There are some quotes there from partners and suppliers. That leads to, just pick out that stat in the middle, that when a partner, a distributor, chooses to work with us, Facilisgroup, through our technology, Syncore, and this is on average over the last six years, they have grown by 14% in their revenues in the first two years that they have been with us.
It's a really powerful statistic in an industry that's been growing by 3-5% and even less over the last year or so. That is why partners choose and suppliers choose to work with Facilisgroup. There are some really nice metrics on here. Revenues have been growing, but actually a bit less so in the last couple of years. We will come and address that. On the right-hand side there, you will see retention is good. EBITDA margins have been excellent. The KPIs that really sort of influence revenue in EBITDA are the ones below it: number of partners, the GMV that we have in the group, and the spend with preferred suppliers. Really nice set of statistics. What we want to do is balance a little bit more out.
We have sort of great conversion into cash, which comes from strong EBITDA margins, and we've been spending quite a lot in CapEx at the moment, but then the growth has slowed slightly. We just want to put those things in a bit of a rebalance and spend the last sort of six to nine months going, what are the best ways of putting revenue growth, EBITDA margins, and CapEx, and balancing those out in a slightly different manner? That kind of takes us to this. On the left-hand side, I'll just go down the numbers, and then I'll kind of go across into the chart. From 2022 to 2024, we spent quite a lot on expansionary CapEx.
There's always going to be something that we should be spending on, on capital expenditure into our ongoing product to keep it evolving and developing and ahead of the market. That's always going to happen. Over and above there, we spent around, on average, in 2022, 2023, and 2024, about 10% of our revenues extra has been spent in supporting new product development. That's now coming down. What we want to do is, rather than sort of just let all that flow through to extra sort of cash conversion, we'd like to spend a bit of that in OpEx to take advantage of strong position in the market. There's a large market to go after. Again, rebalancing, we'd like a little bit more sales growth. Cash conversion is going to be higher because of the CapEx spend.
We will sort of take a slightly reduced margin at the cost of growing the sort of benefit of growing our sales line. Trying to translate that into numbers, you can see that's around, if we talk about percentage of revenue, the 27%-20% is the percent is around about $4.6 million-$4.7 million, something like that, on a slightly growing revenue number. That's what we expect to spend on an ongoing basis, that top line, around about 20% of revenue into capital expenditure to evolve our product. We've been doing some new product development, and you can see 2022 to 2024, average about 10%. That's coming out now. We're kind of moving up into that 20% piece. From 30% of our revenue going into CapEx over the last three years, it's going to be 20% in 2025.
Rather than let that all flow through into cash, what we'd like to do is spend a bit of that and try and really kind of reinvigorate the sales line. Because if we can kind of move forward 5%-10% growth on a 45% EBITDA margin, it's a much more powerful basis than growing much slower on a 50% EBITDA margin. Cash flow and cash conversion is moving forward, and it has done from 2023 to 2024. We expect it to do so from 2024 to 2025, but we want to reinvest some of our own cash and back in ourselves to grow the top line. That's probably the new news that we'll be sharing with you today. In terms of priorities, really important, we always kind of respect and look after the development and progress of our existing business and our existing customers.
That's the sort of basis of our long-term growth. Making sure we're kind of growing our technology. We will be spending less on CapEx, but we actually are still evolving our technology. We have market-leading position in the industry. I want to make that a financially leading position as well and, as I say, sort of rebalance revenue growth with EBITDA returns and cash conversion. Brand Addition.
Okay. Brand Addition, products business, and this diagram in the middle there is showing you where Brand Addition sits. Brand Addition is a very large distributor in the industry sitting between the suppliers and the brands and supplying those brands with really cool products to engage their stakeholders. It is working internationally under contract and, again, has a number of long-term relationships. This is helping you understand Brand Addition's addressable market. In that $50 billion global market, we think Brand Addition's addressable market is around about $4 billion. Large corporates who want to work internationally with cool products, but also want somebody to look after their brand, and they're the companies that are attracted to Brand Addition.
We think that there are around about 800 companies that we would like to work with, and at the minute, we've got about 70 of those. What do they and again, I'm not going to go through all the detail on this slide—what do those companies want from us, and why do they choose Brand Addition? They want really, really cool products that can engage their stakeholders and that people want to keep and reuse. That's the power of a good promotional product. They want somebody who can work with them internationally and has the infrastructure to support their global reach. They also want somebody who they can trust with their brand. That means right materials, right factories made in the right hands. By choosing Brand Addition, they're never going to be embarrassed.
The stats below there, I think I'm just going to pick out the two bar charts. That shows you the one in the middle, the revenue by region shows you that Brand Addition really does have the infrastructure to support these brands globally. If you looked at any one of our competitors, then they would be very strong in maybe one or possibly two regions, but Brand Addition has a presence across all of them. That is really important to the clients that we want to work with. Again, going back to the theme of long-term relationships, you can see in the chart on the right-hand side that our customers, they stay with us.
You can see there that we've got a number of plus 15 years, but also we've kind of got a lot of long-term relationships with those new businesses that we're bringing in. The mantra at Brand Addition is win, grow, retain, repeat, and the stats that we've got there really support that. It's a really nice stat. I've touched on it a couple of times already, but revenue in a sensible place in 2024 versus 2023, really moving those margins forward, guiding at 33%, but we were obviously beyond that, and that's where we'd like to keep it, but we'd like to keep the guidance at 33%. That translates to some really nice EBITDA margins. Brand Addition is a, you should think of Brand Addition as a 5% growth, 10% EBITDA margin, and really spend a couple of million a year on CapEx.
Kind of really high cash-generative business as well. What's our focus for 2025? It's really doing that, what I've said. Let's hold on to those relationships that we've got. Again, kind of growth starts with retention. Let's continue with attracting some new clients. We saw some momentum start to build at the end of last year, and that's continued into the early part of 2025. Kind of hopefully that will continue. Doing that on a really disciplined financial model. Again, that gets you back to the high cash generation, 10% EBITDA return business.
Okay. Thanks for that. We will sort of some ESG things. I think it's really important to us how we run our business and the results that we get from our business, and those two things come together. ESG seems to sort of oscillate between very popular and not so popular and all those things. That's kind of almost irrelevant to us. We want to make sure that we're running our business in a way that we think is right. Sort of looking at the environment, employees, caring about kind of long-term relationships, which a lot comes under the banner of ESG, how we want to run our business, no matter sort of how fashionable or unfashionable ESG is.
We do put a lot into this because we want to run our business properly for the long term, have a great team that looks after it, both at the Pebble Group level and within our businesses. We are not going to be blown by the trends. We are going to stick to what we think is right and run our business right, understanding what is important to our stakeholders, including our teams and as investors, customers, and then keeping on that path rather than sort of moving around from place to place. There will be an ESG report coming out alongside our report accounts, which I think could be our fourth one in the next few weeks. There is a thorough document. If you would please kind of review, give us some feedback on those things as well.
It is important to us how we run our business and the results that we get from it. Those two things come together. That is sort of taking us over to the outlook. I think, I suppose, if I split this into three, firstly, important to know cash conversion is increasing, and we are in a good place on our cash returning money to shareholders through an extended dividend and the share buyback. That is still leaving a position to have other options as well. In terms of the start of trading, Facilisgroup got the GMV partners slightly ahead and the spend through our preferred supplier slightly behind.
Just trying to get our arms around what that means because we've got a lot, bizarrely, coming from importing right now and a lot sort oftrying to think, is that trying to get sort of before tariffs and do all those kind of things? Really trying to get our arms around those GMV and spend with preferreds normally move together as a slight sort of imbalance in there, and that's a little unusual for us. Trying to understand that. In terms of Brand Addition, sales order intake has been pretty sensible. If you put that on top of the new product wins, we kind of go Brand Addition, I think, is in quite a good place. In terms of class, 5% growth, steady margins around 33, 10% EBITDA return on a steady CapEx number. I think that business is in quite a good place.
When we look forward, we're bound to be asked about things like tariffs and how does that affect us. Don't forget, as Brand Addition, three quarters of our business is non-U.S., right? That side of it is kind of not been affected by tariffs at all. Facilisgroup is in the U.S., and some of our preferred suppliers will be working really hard. Tariffs to one side, what's most important to our success and sort of the economic background that we need is a stable, kind of strong economy. Tariffs in itself, I think we can, like inflation, like freight rates, we can move around. What we do want is that sort of decent economy. Does tariffs knock onto an economic kind of challenge? That's what we're thinking about. Either way, I know we'll kind of work through it.
We've got market-leading businesses, long-term relations with our customers who stay with us through the good and the difficult times, and we generate cash. We are definitely monitoring it carefully and thinking through what might happen. I know we'll get through all those things and come out as strong, if not stronger, with good relationships, more cash being generated. We are definitely not panicking about everything, but being aware of what is happening in the wider markets. I think the message is clear.
We're investing back into our business, making the choice to do that with our own cash because that's surely the best use of our cash is to back ourselves and try and get some more growth, particularly in Facilisgroup, and keeping our eye on the wider economy, but knowing that we can manage our way through that no matter how sort of choppy the waters might get in the short term. That's everything. I think I'll kind of take us onto the full screen. If you do have any questions, if you stick your hands up and raise a hand, we'll be pleased to unmute you. If you wish to be seen and go from there. I don't want to go. There we go. Thank you. Thank you for presenting. I think that's right. Yeah.
Roddy, we will go with you first if I try and unmute you.
Just do it now.
Say again.
It's gone.
There you go. Thank you. Roddy, over to you. Yeah, that's right. I think if you unmute yourself, Roddy, I think we should be able to hear you. I can't hear you. Disable might have disabled it. One second. Roddy, can you come in or are you struggling to do that? Right. I might try Fiona. Fiona, see if we have any more success with you. Can you unmute?
Oh, yeah. Does that work?
Yeah. We've got you, Fiona. Very good.
Can't do the camera, but you know what I look like. First of all, on Facilisgroup, have you now got all the team that you need in place? I know you've made a lot of changes. Have you changed your approach to the market significantly? That's the first one. The second one on Facilisgroup is what shifts have been in the competitive landscape? Obviously, notice what the ASI have got on their landing page now. The third question is about Brand Addition. You said you've been getting a little bit more interest with new business coming in in the back end of last year into this year. Have you still got a good pipeline? Are these significant wins?
Okay. Thank you, Fiona. We'll sort of obviously start with the beginning. I do feel it's got a great team around Facilis. I've spent a lot of time there over the last 15 months, taking it apart, in fact. I've sort of put a lot into getting really involved in the day-to-day of that business. The main function of that business are sort of, yeah, we'll go finance. We've got a great person who has already existed in the business. Supplier relations, we brought someone through who was already there to manage that important piece. On our partner relationships, again, someone who was already in the business. Those three functions were looked after. The two new functions we brought in is someone to both internally and externally lead technology and product.
A guy called Matthew Cromar has a history of being at Ariba, very much Bay Area, whole career, whole life. He is leading technology internally and externally. In the sort of nine months, ten months now he's been with us, it's made a great difference. I really feel as though that's been a good hire. As we've organized ourselves operationally, we've got our technology strategy together. We've brought in a CRO as well to do what Matthew Cromar has done in technology to do in net new acquisition. A gentleman called JC Capote, again, kind of a career in NetSuite, Cleverbridge, businesses that are SaaS enterprise selling and been in that all his life. I think some very clear responsibilities have been given to three internal people and then two new external coming along.
I think that team of five can definitely sort of take this business to the next level. I am really pleased with that. It is definitely an evolving picture as, again, time tells us we have invested in technology on e-commerce, on the small side of supporting the really long tail of the business. Our e-commerce platform exists, but it is a really crowded market. There are lots going on there. Everybody wants something quite different, quite bespoke. Perhaps is that part of our business what I thought it was originally? I do not think it will be going forward, but a really nice, important piece to round our offering out. What we have been investing for the long tail, we are bringing that all together under the brand of Syncore. Keep a clear marketing message, really. Facilisgroup is our company. Syncore is our technology.
No matter where you are in there, you'll get a slightly different piece of technology and service from us. That is our evolving message, I think. On Brand Addition, do you want to kind of talk about the new sort of wins and what the pipeline is like?
Yeah. Yeah. Yeah. I think the question was, we've had some momentum, and have we still got a strong pipeline? I think, Fiona, the quick answer to that is yes. It's always really that we have a team that's their job and to kind of keep them all topped up. I think the guys in that team are excited about what's on that list. It's always really hard to say if it's going to be a major piece of work. What we've seen over the last three or four years is that new business is round about 10% of the Brand Addition sales. That's dipped slightly in 2024, but it's kind of building back. I guess a really long way of saying is people need an indication of what the spend is going to be.
It usually takes us 12-18 months to get a really clear view on how that's going. The customers are the global brands that want to work with us on an international basis. They've got the same look and feel as a typical Brand Addition customer, and time will tell where they end up. There are some really nice names that we're excited to be working with.
Good. Thank you.
Thanks, Fiona. Joe, I will do my best to allow your mic. Hopefully, if you unmute, we should be able to hear you.
Hi. Good morning.
Hi.
Good morning.
Three questions, if I may. Would you like them one at a time or all at once?
Come on. Throw us out, Joe.
Excellent. Okay. Firstly, I was going to ask about the key story of the day, which is increased OpEx at Facilisgroup and to understand the trajectory of that OpEx. Is it kind of a step change, or is it increased gradually? Secondly, Facilisgroup, you talk about the opportunity to go up the size scale and the opportunity to go down the size scale. In your mind, which is more exciting of those two? Thirdly, again, at Facilisgroup, I'm afraid you say the year started with the preferred suppliers slightly down. It might be a bit unfair because you may not have got your arms around it, but interested in your initial thoughts as to why that might have happened.
Yeah. Okay. I think I'll slightly extend your first question. I think the story of the day is increasing cash conversion. As our CapEx comes down, we're choosing to reinvest a proportion of that to invigorate more growth in Facilisgroup. I think it's important to have that first bit on there because a headline is EBITDA reduces, but stand back from there, and actually cash conversion is increasing. I think this is about, as I said before, keeping that how do we want the balance between revenue growth, EBITDA margins, and CapEx, which basically turns into cash. How do we want that to evolve? We think the biggest cash return comes from trying to grow that revenue line a bit more excitingly than we did in the last two years.
That involves a choice to invest our cash that we're generating back into Facilisgroup. We have said from a margin of 50% EBITDA margin in 2023, 2024, we're guiding you to, in the year, a margin of 45%. That will kind of sort of drip through across the year. That is where we think in the year finishes out. Take that further down. How does that convert into cash? Not at a lower level, but a higher level. I think in a public company, there's that headline that says EBITDA is reducing, but then take that a little bit further and stand back and say our operating cash conversion is increasing, and we're spending that to grow the top line.
I think it is a very sensible thing to do, albeit it does create a headline that a singular headline, which is less attractive than the bigger picture.
Apologies. I was just using a bit of shorthand there, but understood. Yeah.
All right. Very good. Thank you. In terms of what was the all right, yeah, going up or down? Both, can I say? I think the narrative two or three years ago on facilis w as, "Oh, there's a really long tail. Let's run over there." It is about saying, "We've got 20 people on this call or something like that now." I've got 240 Facilisgroup partners, 100 Facilisgroup suppliers. I probably have more competitors, partners, and suppliers who will read our information than investors. I think they read all those things and thought, "What about me?" You are kind of running after something new to try and please an audience and forgetting about your core customer. What I really understood in the last 15 months is our growth starts with our existing businesses.
Making sure we're looking after the core customer and we're supporting their needs, which supports more of attracting more of the same, I think that's where we start with growth. I do think I ordered them one, two, and three on that Facilisgroup market slide. I think that is our order. Our order is making sure we have those amazing retention levels and grow more of the same. Those businesses, we can grow together and support them becoming part of the elite 100, top 100. We do have probably 10-15 businesses already in that plus $20 million. I want to make sure they choose to stay with us in the medium term.
What we must do is kind of have an offering to the next generation of winners to make sure that we top up the less than two because they'll be growing into the 2-20. I labeled them one, two, and three. I think that's how you should think of that priority. The preferred supply piece, it is really early. We've got two and a half months' worth of information. What we're finding is around about 50% of those purchases generally went through those preferred suppliers. There's a little bit more going through direct import at the moment, which aren't our preferred. People are buying direct out of principally China. That is a little bit different than we've experienced before. Is that about people trying to bring things in pre-tariffs?
We just want to get our arms around that with a couple more months more data. We can update you early June at the latest, won't it?
That's the AGM.
Is when we have the AGM. Early days in looking at all that. Yeah, the one piece on tariffs is we're trying to understand what that means to the preferred supply spend. That's important. As important, what do tariffs mean to the wider economy? That obviously has an effect on the end budgets of the marketeers that buy promotional products. We'll be keeping a close eye on that too.
Thanks, Chris.
Yeah, Roddy, I don't know if we want to come back to you. There we are. Yeah. Yeah. Final now. Hopefully, Roddy, if you unmute yourself, we should be okay.
Okay. Can you hear me now, guys?
Yeah. Yeah. Yeah.
Excellent. Sorry about that earlier on. Thanks for the presentation. I had to drop off and drop back on again. Apologies if I ask a question that has been asked already. I just wondered, in terms of, I mean, you've talked about new product development during the presentation. In terms of the cost associated, that's going to be lower. I'm sure, as you've touched on already, there's a lot of innovation going on within the business. I wonder if you could just sort of talk about which areas you're looking to drive forward in that regard. Also maybe touch on AI, what role that has to play in your business, and if you expect it to have any particular impact across the industry as a whole. Just sort of two kind of board-level questions.
I wonder if you could talk about your thoughts in general at the moment with regard to capital allocation between dividends and buybacks, albeit obviously you're investing more in the growth of the business. I just also wanted to ask, Chris, you were kind of shouldering the burden of chair, exec, etc., for quite a while, but you've now got a new chair in place. Just wondering what your new chair has brought to the business, whether there's any sort of change of emphasis in terms of this sort of overall thinking. Thanks.
Okay. Thanks, Roddy. I think new product development. I think it's really important to say we spent a lot over 2022, 2023, 2024 in continuing to evolve our existing products, but in a couple of new things as well. E-commece platform and what we call the older products, looking at the long tail. The e-commerce platform is now in a state of low overall evolvement or maintenance. The older products, we're really consuming within the wider Syncore product in order just to really have a clearer go-to-market strategy. In their initial evolvement, there's a high level of CapEx. That was getting up to a total of 30% of our revenues, which is a high number we appreciate. We are absolutely investing in continuing to evolve our products and our product strategy, our product mix.
That is under Matthew Cromar. He has done a great job of that. We are guiding to say we believe the right number to continue to evolve, not to stand still, and continue to evolve is around 20% of revenue. Of course, what we want to do is increase the dollars that that sort of 20% is multiplied by, putting more dollars in on an increase in top line. Product development continues, but definitely guiding you towards a 20% of revenue on a go-forward basis. In terms of AI, I talked to you earlier about that data that is right at the beginning. There is an incredible amount of data. I do not think we are using that to its full degree right now. We are working with third-party business who are, they kind of were sort of data specialists. Now they call themselves AI specialists.
To help unravel some of that, what trends can we pick up? How can we help our partners and our preferred suppliers get the best out of each other and understand industry trends? The biggest, I think, part of AI right now is definitely in unraveling that data. We're doing a little bit with our engineers and trying to understand how coding can be a little more efficient and things like that. There are different pockets of it knocking around. I don't think it changes our end market in terms of people having engaging products to bring an engagement with our brand's audience. I don't think that changes. Trying to be a little more efficient in some of the administrative duties we can definitely do. The real ongoing thing right now for us is around our data.
How can we get more out of that and support the growth of our partners and our suppliers and their success by using our data very well? I think that's where we come from. Do you want to touch on capital allocation?
Yeah. I think it was the choice between dividend and buyback. I think we've always said that we would like a progressive dividend policy. That's what we're doing. We're evolving that slightly. I think historically, we said 30% of profit after tax. We're slightly ahead of that, but just making sure that we've got the right level of EPS cover on there. We've got cash. We want to return value to shareholders. The dividend gives us one option to do that. The buyback we announced last year, that was GBP 5 million. That was a little bit of a slow start. Feels like we've gained momentum there. We're about two-thirds of the way through that GBP 5 million.
We will continue to do that while it's still good value to shareholders, which we believe it is at this share price. Roddy, when we get through the $5 million, we will look again and see whether we go again on that.
Yeah. That final point, Roddy, about sort of chair Pebble Group and Facilisgroup. From the chair change perspective, there was a three or four-month gap. I can't quite remember what it was. That didn't particularly divert my time at all. Great support with Claire and our Legal and General Counsel, Lucy Penfold, so with those guys around me, I can say that that chair, having to sit in that seat for a short period of time, actually didn't distract me at all. There was nothing going on that I felt was taking me away from the business. Anne de Kerckhove has come in in September. Bringing a slightly different perspective. It's great to have a new set of eyes on our business. She spent time over at Facilisgroup.
She spent time with a team at Brand Addition. Six months in, she's definitely still getting her arms around things and her arms around the business. I have been with the business for 25 years. I think it's my sixth chair. Every one of them brings something new. I have definitely learned from them all. I am looking forward to working with them. I have taken the president role at Facilisgroup for last year because I wanted to really get into the detail and get my arms around that business on a day-to-day basis, lead the team, the customer, and the supplier. I feel as though I have done half a job. I feel as though we have got a great team in place. We have organized one or two things operationally. We have got our tech strategy together. I want to see that through to growth.
I feel as though I've done half a job right now. It's going to take a lot to sort of crowbar me out of that at the moment because I do want to see that business through to growth. Equally, if the board say there is sort of getting someone else to do that job will make that business better, then I'll give that but a second. I definitely just want the success for Facilisgroup. I think doing the role I'm doing is the right thing for that. Equally, I'm not precious about it. I'm precious about Facilisgroup's success, not my point.
Thanks for that, it's very helpful.
Okay. I think Andrew, if we'll unmute you. Thank you, Roddy. Andrew will unmute you. Yeah, go for it.
Thank you very much. Just a quick question. I think Joe's covered off most of the stuff I was interested in. Your balance sheet is very robust and healthy. It seems the only exposure to risk you've got there is through the Brand Addition customer base, which could just dent your inventory and your debtors if one of them goes belly up. What's the largest customer exposure you've got in Brand Addition? Have you got a track record of any of those customers failing?
Yeah. Brand Addition is, I think the largest customer will be around 10% of revenues. That is, I think it will be Nespresso. If you think, that's under Nestlé. Our top five customers will be Nespresso, under Nestlé, Unilever, Michelin, Scania, Intel, Google. I've gone a little bit further down. Those are our businesses. I've been doing this for 25 years. I'm touching plenty of wood. I don't know if we've ever written off thousands of inventory or thousands of debts, not in tens of thousands or hundreds.
Yeah. Yeah. Andrew, from a kind of balance sheet perspective, the stock that we hold on behalf of our clients is underwritten in our contracts. If there's a brand change or a change of contract, then they pay us for that stock. We have protected that. Like we said, we're working with some of the largest brands in the world. In terms of their kind of robustness and their ability to pay, that's never been a challenge in the best part of 20 years that I've been here.
What would be the revenue exposure to your largest customer?
Yeah. Our largest will be 10% of revenue, so around about GBP 10 million. That sort of fluctuates slightly, but that's been the case, I think, for a while. It might have got a little bit bigger in 2022. Yeah, but around about 10% of revenues would be our largest customer. Not kind of wishing to throw the risk out there, so I do not worry about the balance sheet risk there. Of course, with having a large customer, I worry about the retention risk of that customer as opposed to the balance sheet risk of that customer. That's how I would think of that for not wanting to give a risk out there. Yeah, that's where we come from.
Great stuff. Thank you.
Okay. Will, we'll come to you.
Yeah. Thanks, guys. Can you hear me?
Yeah.
Yeah. Perfect.
Great. Thanks for the presentation. Just a couple from me, actually relating to Brand Addition. Obviously, we're slightly below the 2022 peak in revenues. I guess, can you help sort of contextualize where we are on that sort of recovery journey? Which sectors are still sort of below where they were in 2022? Is it still the technology? We've talked about consumer in the past. Just secondly, on gross margins in Brand Addition, obviously sort of guiding towards 33%. I guess, firstly, is 35% a peak level? Is 33% conservative? Why should margins necessarily go backwards in 2025? Thanks.
Yeah. Okay. Just on that recovery versus 2022. I think in 2022, we had the kind of post-COVID bubble in both consumer and technology. We had our consumer businesses, like we said, are Unilever, Nespresso, and both of those were really benefiting from kind of the products that we were supplying to them being in stores when other stores were closed. We had the working from home and the coffee-at-home Nespresso bounce. I think really fiscal year 2022 was our peak in terms of the contribution from those high-volume consumer customers. What we saw through 2023 was that coming down. In 2024, we said we expected that to stabilize against 2023. That is what it did. The story with tech was slightly different. Those businesses were recruiting heavily through 2021 and 2022.
A lot of what we supply to them is used with their employees. When they made their changes to the number of employees that they were taking on through the end, through 2023, we saw that come down. We did see that stabilize and start to come back a little bit in 2024. We expect that to kind of continue again in 2025. We are not kind of budgeting internally for that to get back to the 2022 peaks. We will kind of see how that progresses. I think we are along that. I think we are a consumer. We are where we expected to be. We are not kind of putting anything too much more in there. Technology, we think, will come back a little bit further.
On the guidance, I think 35% is what obviously where we got to in 2024. We think that is a sensible number for where we will be. Again, kind of give myself a little bit of wriggle room with you guys and point you to 33%. We think 35% is where we are planning and intending to stay from an internal perspective. I would put you to 2033 to just give myself a little bit of headroom.
Okay. Thanks.
Roddy, you've got your hand up again. I don't know if that's from last time or there's anything else. I'm going to say that's a no, Roddy, if you haven't brought yourself up.
Hi. Can you got me now?
Yeah. Perfect.
Sorry, guys. Yeah, just one further question for me, please. You highlighted, obviously, during the presentation that Brand Addition is much more than just a US business. Just wondering in terms of international growth at Brand Addition on the existing footprint, how much of an imperative is that? How much of an opportunity do you think there is there?
On that chart, I think it's a really important one. I saw we had a couple of the keys missing that kind of keep sort of disappearing on it. We'll put those in because it was a fairly even spread between UK, Europe, US, and rest of the world. That's a really, get any of our competitors and have their revenue split by those four brackets, and there'll be a really dominant line, either Europe or US. What Brand Addition has is this office of substance and true office of substance around the globe. That's one thing where we definitely stand out. We do have an overall new business approach and sales teams within each of those regions. I don't mind where the growth comes from. You'd say we're actually underweight in the US, in North America.
If that's half of the industry, but only 25% of the Brand Addition business, it says that for those U.S. businesses that want a European and Asia presence, we should be very well placed for those large corporates that come there. I would expect new business wins to come out of similar sectors to the ones we have already. The more international and global the opportunity, the more Brand Addition stands out. I don't really mind. If I think of a lot of the businesses in the top 5, top 10, we do sort of look after those in more than one geography. That's where Brand Addition stands out, as Claire said. Great product, delivered from the right source, and we can audit where that comes from, but then delivered consistency across the globe.
That's where Brand Addition stands out when those three things are in play.
That's great. Thanks again.
Okay. I think we have no more hands. I am under instruction to make some closing remarks. What they are is, thank you for attending first. I think one of the major messages to come out of this is operating cash conversion is increasing. We are choosing to put a little bit of that back into invigorating the growth in Facilisgroup, but we are remaining in a very strong cash position. There is lots of, kind of, the world, sort of, there is always something, isn't there? Since we listed, crikey, I cannot imagine. It has been COVID. It has been inflation. It has been freight rates, interest rates, and now dealing with tariffs.
I think I hope over time and kind of look at the business results and the way that cash has been managed, customers stay with us over the long term, I think we're a great business, cash-generative, a lot to kind of a lot of growth to move into. No matter what the short-term environment, we definitely come out the other side and remain sort of a major player in the industry. Hopefully, we get credit for that at some point. We wish to keep moving forward in the business, and the rest will look after itself. I just appreciate your support, your questions, and we're easy to find if there's any follow-up required. With that, I'll say thank you ever so much and have a great day. Thank you. Bye-bye.