Pebble Group PLC (LSE:PEBB) (Q4 2024) Earnings Call Highlights: Strong Cash Conversion and ...

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Wed, Mar 19, 2025, 1:00 AM 4 min read

Revenue: Slightly ahead of FY23, with improved predictability compared to the second half of 2023.
Gross Profit Margin: Increased, largely due to pricing strategies implemented in Brand Addition.
Operating Cash Conversion: Improved to 68% from 63% in the previous year.
Net Cash: Increased after making incremental distributions.
CapEx Spend: Reduced, leading to higher cash conversion.
Dividend: Increased to 1.85p per share from 1.2p last year.
EBITDA Margin: Facilities Group maintains strong EBITDA margins, with a focus on balancing revenue growth and CapEx.
Brand Addition Revenue Growth: 5% growth with a 10% EBITDA margin.
Cash Flow: High cash generation, with ongoing share buyback and increased dividends.
GMV (Gross Merchandise Value): Slightly ahead for Facilities Group, with a focus on understanding supply chain dynamics.

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Release Date: March 18, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Pebble Group PLC (LSE:PEBB) reported increased cash conversion, indicating improved financial efficiency.
The company has a strong balance sheet with no debt, providing flexibility for future investments.
Brand Addition, one of the company's divisions, maintains high customer retention with 90% of top 20 customers from 2019 still engaged.
The company is investing in technology and operational improvements, particularly in the Facilis Group, to drive future growth.
Pebble Group PLC (LSE:PEBB) announced an increase in dividends, reflecting confidence in its financial stability and commitment to returning value to shareholders.

Negative Points

Revenue growth in recent years has been slower, particularly in the Facilis Group, prompting a strategic shift to reinvigorate sales.
The company faces challenges in the competitive landscape, particularly with shifts in the promotional products industry.
There is a slight imbalance in the spend through preferred suppliers, which the company is still trying to understand.
The company is cautious about the impact of tariffs and economic conditions on its operations and customer budgets.
Brand Addition's revenue is slightly below its 2022 peak, with certain sectors like technology and consumer products still recovering.

Q & A Highlights

Q: Have you now got all the team that you need in place for Facilis Group, and have you changed your approach to the market significantly? A: Yes, we have a great team in place now. We've made some internal promotions and brought in two new hires to lead technology and product, and net new acquisition. Our approach is evolving, focusing on a clear marketing message and integrating our offerings under the Syncore brand.

Q: What shifts have been in the competitive landscape for Facilis Group, and what are your thoughts on the ASI's recent moves? A: The competitive landscape is evolving, particularly in e-commerce. Our focus is on integrating our offerings and maintaining a clear marketing message. We are aware of ASI's activities but remain focused on our strategy.

Q: Regarding Brand Addition, have you still got a good pipeline of new business, and are these significant wins? A: Yes, we have a strong pipeline, and our team is excited about the prospects. New business typically accounts for about 10% of Brand Addition's sales, and while it dipped slightly in 2024, it's building back up.

Q: Can you explain the increased OpEx for Facilis Group and its trajectory? A: The increased OpEx is part of our strategy to invigorate growth. While EBITDA margins are guided to 45%, cash conversion is increasing, and we're reinvesting to drive revenue growth.

Q: Which is more exciting for Facilis Group: going up the size scale or down? A: Both are important, but our priority is maintaining and growing our core customer base. We aim to support existing customers and attract new ones, focusing on the next generation of winners.

Q: Why has the spend with preferred suppliers started slightly down this year? A: It's early in the year, and we're seeing more direct imports, possibly due to pre-tariff buying. We're monitoring this closely and will update as we gather more data.

Q: What are your thoughts on capital allocation between dividends and buybacks? A: We aim for a progressive dividend policy and are currently executing a $5 million buyback. We'll reassess once the buyback is complete to ensure we're providing value to shareholders.

Q: How is AI impacting your business, and what role does it play? A: AI is primarily used to analyze our extensive data to identify trends and improve efficiencies. We're also exploring AI in coding and administrative tasks to enhance productivity.

Q: What is the largest customer exposure in Brand Addition, and have you had any issues with customer failures? A: Our largest customer accounts for about 10% of revenue, and we work with major brands like Nespresso and Unilever. We have not experienced significant issues with customer failures.

Q: Can you discuss the international growth opportunities for Brand Addition? A: Brand Addition has a strong international presence, and we see opportunities across all regions. We're particularly well-positioned to serve US businesses seeking a global reach.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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