The Directors believe that the key strengths described here will enable the Group to continue delivering profitable growth.
The Group operates in the growing promotional products market, a market that the Directors estimate to be worth over $50 billion globally on an annual basis and to account for approximately 10% of marketing expenditure worldwide. Promotional products are seen by the Directors as the most effective marketing tools and are an increasingly important part of a company’s marketing mix. They are also one of the most highly regarded forms of advertising, with survey evidence suggesting that North American consumers are 83% more likely to do business with the relevant brand once they have received a promotional product.
With its two businesses, Brand Addition and Facilisgroup, each focusing on specific areas of the promotional products industry, The Pebble Group has differentiated positions in multiple segments of the market. Brand Addition is one of the relatively few businesses to service and supply global brands across multiple geographies, whereas Facilisgroup supports SME promotional product distributors in North America, with annual revenues predominantly ranging from $2 million to $10 million, in a more fragmented segment of the market.
Brand Addition has established relationships with a diversified range of global brands, most of which are long-term clients. Through its creative service offering and ability to manage the complex needs of global clients, Brand Addition has continued to increase the number of brands with whom it contracts. Brand Addition’s relationships with its clients are built on its consistent ability to deliver high quality, ethically sourced products and related services in a timely manner.
Facilisgroup has developed deep-rooted, long-term relationships with its Partners through the provision of cost-effective SaaS-based business intelligence, buying power and community events, which enable Partners to grow their businesses and improve operational efficiency. Partners benefit from the @ease software, which rapidly becomes an integral part of their business, whilst the rebates received from suppliers typically more than cover the @ease subscription costs.
The blue-chip client base that underpins the strong repeat revenues of Brand Addition (98.6% of sales in the year ended 31 December 2018 came from brands who had been clients in earlier years) is augmented by the recurring revenues and strong visibility of earnings generated by the Group’s subscription-based offering, Facilisgroup.
The Pebble Group has delivered a consistent record of growth with a revenue CAGR of 16% from £74.1 million in the year ended 31 December 2016 to £99.8 million in the year ended 31 December 2018 based on the aggregated performance of The Pebble Group Holdings and Facilisgroup on a pro-forma basis in the year in which Facilisgroup was acquired. The Group has grown Adjusted EBITDA from £7.6 million in the year ended 31 December 2016 to £13.7 million in the year ended 31 December 2018, a CAGR of 34.3% on the same basis.
The Directors believe that the Group is well positioned to deliver a robust financial performance throughout the economic cycle for the following reasons:
- low overall investment and high returns, in terms of cost per impression, ensure that promotional products are particularly valuable brand engagement tools, even when budgets are constrained;
- the Group has two focused and differentiated propositions delivering diverse income streams through its products, services and technology across multiple regions, sectors and clients;
- Brand Addition has a diversified income, which dilutes the impact of any localised or sector reduction in spend. This, together with a blue-chip backed balance sheet and a management team with a proven track record of being able to navigate through the economic cycle, strongly positions the business in its chosen markets; and
- Facilisgroup’s subscription-based model provides income protection through the economic cycle. Facilisgroup’s proposition could also become even more attractive, during a downturn, due to the efficiencies gained through its @ease SaaS platform, coupled with the pricing and rebate benefits from the safe harbour of being part of a large organisation.
The Group has a high quality senior management team with substantial industry experience, led by Christopher Lee, the Group’s Chief Executive Officer, and Claire Thomson, Chief Financial Officer. Together, the management team has helped drive the growth of The Pebble Group since its inception and has a proven track record of delivering results.