PEBB The Pebble Group Plc

Consolidated cash flow statement

For the year ended 31 December 2023

	Note		2023	2022
			£'000	£'000
Profit before taxation			7,409	9,703
Adjustments for:
Depreciation	10		2,248	2,384
Amortisation	9		5,184	4,182
Share-based payment charge	12		548	1,253
(Profit)/loss on disposal of fixed assets			(18)	19
Finance expense			589	520
Cash flows from operating activities before changes in working capital			15,960	18,061
Change in inventories			3,595	(5,354)
Change in trade and other receivables			4,535	(5,271)
Change in trade and other payables			(7,422)	7,263
Cash flows from operating activities			16,668	14,699
Income taxes paid			(2,517)	(1,712)
Net cash flows from operating activities			14,151	12,987
Cash flows from investing activities
Purchase of property, plant and equipment	10		(882)	(945)
Purchase of intangible assets	9		(7,648)	(7,434)
Net cash flows used in investing activities			(8,530)	(8,379)
Cash flows from financing activities
Lease payments			(1,600)	(1,737)
Interest paid			(589)	(520)
Dividends paid	8		(1,005)	-
Purchase of own shares by EBT			(395)	-
Net cash flows used in financing activities			(3,589)	(2,257)
NET CASH FLOWS			2,032	2,351
Cash and cash equivalents at beginning of year			15,058	12,051
Effect of exchange rate fluctuations on cash held			(1,192)	656
Cash and cash equivalents at end of year			15,898	15,058

Notes to the Group financial statements

1.     GENERAL INFORMATION

The principal activity of The Pebble Group plc (the "Company") is that of a holding company and the principal activity of the Company and its subsidiaries (the "Group") is the sale of digital commerce, products and related services to the promotional merchandise industry. The Group has two segments: Brand Addition; and Facilisgroup. For Brand Addition this is the sale of promotional products internationally, to many of the world's best-known brands, and for Facilisgroup the provision of digital commerce, consolidated buying power, and community learning and networking events to SME promotional product distributors in North America, its Partners, through subscription-based services.

The Company was incorporated on 27 September 2019 in the United Kingdom and is a public company limited by shares registered in England and Wales. The registered office of the Company is Broadway House, Trafford Wharf Road, Trafford Park, Manchester, England M17 1DD. The Company registration number is 12231361.

2.     ACCOUNTING POLICIES

(a)   Basis of preparation

The Group financial statements have been prepared in accordance with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards. The Company financial statements have been prepared under FRS 102. Both financial statements have been prepared on the historical cost basis with the exception of certain items which are measured at fair value as disclosed in the principal accounting policies set out below. These policies have been consistently applied to all years presented unless otherwise stated.

The financial information is presented in Sterling and has been rounded to the nearest thousand (£'000).

(b)   Going concern

The Group meets its day-to-day working capital requirements through its own cash balances and committed banking facilities. The Group refinanced its £10m RCF in January 2023 for a three-year period to January 2026, with the option to extend for an additional year to January 2027. In assessing the appropriateness of adopting the going concern basis in the preparation of these financial statements, the Directors have prepared cash flow forecasts and projections for the two years ending 31 December 2025.

The forecasts and projections, which the Directors consider to be prudent, have been further sensitised by applying reductions to revenue growth and margin, to consider a severe but plausible downside. Under both the base and sensitised case the Group is expected to have headroom against covenants, which are based on interest cover and net leverage, and a sufficient level of financial resources available through existing facilities when the future funding requirements of the Group are compared with the level of committed available facilities. Based on this, the Directors are satisfied that the Group has adequate resources to continue in operational existence for at least 12 months from the date of signing the financial statements. For this reason, they continue to adopt the going concern basis in preparing the Group and Company financial statements.

(c)    Forward-looking statements

Certain statements in this report are forward looking with respect to the operations, strategy, performance, financial condition, and growth opportunities of the Group. The terms "expect", "anticipate", "should be", "will be", "is likely to", and similar expressions, identify forward-looking statements. Although the Board believes that the expectations reflected in these forward-looking statements are reasonable, by their nature these statements are based on assumptions and are subject to a number of risks and uncertainties. Actual events could differ materially from those expressed or implied by these forward-looking statements. Factors which may cause future outcomes to differ from those foreseen in forward-looking statements include, without limitation: general economic conditions and business conditions in the Group's markets, customers' expectations and behaviours, supply chain developments, technology changes, the actions of competitors, exchange rate fluctuations, and legislative, fiscal and regulatory developments. Information contained in these financial statements relating to the Group should not be relied upon as a guide to future performance.

(d)   New standards, amendments and interpretations

New and amended standards adopted by the Group

The Group has applied the following standards and amendments for the first time for its annual reporting period commencing 1 January 2023:

·      IFRS 17 Insurance Contracts;

·      Amendment to IAS 12 Deferred tax: deferred tax related to assets and liabilities arising from a single transaction;

·      Amendment to IAS 12 International tax reform - pillar two model rules; and

·      Narrow-scope amendments to IAS 1, Practice statement 2 and IAS 8.

The amendments listed above do not have any impact on the amounts recognised in prior periods and are not expected to significantly affect current or future periods.

New standards and interpretations not yet adopted

Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2023 reporting periods and have not been early adopted by the Group. These standards are not expected to have a material impact on the Group in the current or future reporting periods and on foreseeable future transactions.

Judgements made by the Directors in the application of these accounting policies that have a significant effect on these financial statements together with estimates with a significant risk of material adjustment in the next year are discussed in note 3.

(e)   Basis of consolidation

Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group and are deconsolidated from the date control ceases.

Inter-company transactions, balances and unrealised gains and losses on transactions between Group companies are eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Employee Benefit Trust (EBT)

The Group established an EBT (The Pebble Group Employee Benefit Trust) on 2 May 2023 to enable shares to be bought in the market to satisfy the demand from share awards under the Group's employee share schemes. The EBT is a separately administered trust and is funded by contributions from Group companies in the form of a loan or a gift. The assets of the trust comprise shares in The Pebble Group plc and cash balances. The Group recognises the assets and liabilities of the trust in the consolidated financial statements and shares held by the trust are recorded in the own share reserve as a deduction from shareholders' equity. As at 31 December 2023, the EBT held 412,637 shares in the Company.

(f)    Revenue

Revenue arises from the provision of services through digital commerce and a global infrastructure that enables the efficient sale and distribution of products to support corporate marketing activity and consumer promotions of businesses in Europe, North America and Asia.

To determine whether to recognise revenue, the Group follows the 5-step process as set out within IFRS 15:

1.     Identifying the contract with a customer

2.     Identifying the performance obligations

3.     Determining the transaction price

4.     Allocating the transaction price to the performance obligations

5.     Recognising revenue when/as performance obligation(s) are satisfied

 

Revenue is measured at transaction price, stated net of VAT, rebates and other sales related taxes.

Revenue is recognised either at a point in time, or over-time as the Group satisfies performance obligations by transferring the promised goods and services to its customers as described below. Variable consideration, in the form of rebates, is recognised at a point in time.

Facilisgroup provision of digital commerce, consolidated buying power and community learning through subscription-based services

Services are provided through signed annual Partner agreements. There is one distinct performance obligation, being the provision of access to the Facilisgroup network. The transaction price is set on 1 January each year by reference to the previous year sales volumes and is fixed for the financial year. For new Partners, the transaction price is calculated by reference to forecasted sales for the year the Partner joins. Revenue is recognised over time on a monthly basis as the Partners receive the benefits of being part of the network. Payments are received on a monthly basis as the performance obligations are satisfied over time.

Revenue earned from Preferred Suppliers is recognised over time on a monthly basis in line with orders placed by Partners with these suppliers. Payments are received bi-annually.

Brand Addition sale of promotional product

Contracts with customers take the form of customer orders under a framework agreement. There is one distinct performance obligation, being the design, sourcing and distribution of products to the customer, for which the transaction price is clearly identified. Revenue is recognised at a point in time when the Group satisfies performance obligations by transferring the promised goods to its customers, i.e. when control has passed from the Group to the customer. This tends to be on receipt of the product by the customer.

Customer invoices tend to be raised when the goods are delivered and the performance obligation is satisfied. These invoices are shown within trade receivables and payment is usually made within 60 days (being the common payment terms). In cases where the goods have been delivered and an invoice cannot be raised at that time, the income is accrued and presented within trade receivables in the statement of financial position. A small number of customers are invoiced in advance and these amounts are deferred and presented within contract liabilities.

(g)   Alternative performance measures

Throughout the report, we refer to a number of alternative performance measures (APMs). APMs are used internally by management to assess the operating performance of the Group. These are non-GAAP measures and so other entities may not calculate these measures in the same way and hence are not directly comparable. The APMs that are not recognised under UK-adopted international accounting standards are:

·      Adjusted earnings;

·      Adjusted EBTIDA;

·      Adjusted operating profit; and

·      Adjusted operating profit less finance costs.

See note 7 for the reconciliation of the APMs.

The Board considers that the above APMs provide useful information for stakeholders on the underlying trends and performance of the Group and facilitate meaningful year on year comparisons.

(h)   Taxation

Current tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where events or transactions that result in an obligation to pay more tax in the future, or a right to pay less tax in future, have occurred at the balance sheet date. Timing differences are differences between the Group's taxable profits and its results as stated in the financial statements that arise from the inclusion of gains and losses in tax assessments in periods different from those in which they are recognised in the financial statements. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority.

A net deferred tax asset is regarded as recoverable, and therefore recognised only to the extent that, on the basis of all available evidence, it can be regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted.

Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the timing differences are expected to reverse based on tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax is measured on a non-discounted basis.

Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

(i)    Intangible assets

All business combinations are accounted for by applying the purchase method. Goodwill represents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired. Identifiable intangibles are those which can be sold separately, or which arise from legal or contractual rights regardless of whether those rights are separable and are initially recognised at fair value. In cases where the vendors of an acquired business are required to remain employed by the Group post-acquisition, the deferred payments are treated as post-acquisition remuneration and charged to profit and loss.

Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is not amortised but is tested annually for impairment. Other intangibles are stated at cost less accumulated amortisation and accumulated impairment losses.

All intangible assets are denominated in the functional currency of the relevant subsidiary company and retranslated into Sterling at each period end date. Exchange differences are dealt with through the consolidated statement of other comprehensive income. Intangible assets are presented in note 9.

Customer relationships

Customer relationships acquired in a business combination are recognised at fair value at the date of acquisition. Customer relationships have a finite life and are subsequently carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of these assets over their estimated useful lives of 20 years.

Development costs

Research costs are charged to the income statement in the year in which they are incurred and are presented within operating expenses. Internal development costs that are incurred during the development of significant and separately identifiable new technology are capitalised when the following criteria are met:

·      it is technically feasible to complete the technological development so that it will be available for use;

·      management intends to complete the technological development and use or sell it;

·      it can be demonstrated how the technological development will develop probable future economic benefits;

·      adequate technical, financial and other resources to complete the development and to use or sell the product are available; and

·      expenditure attributable to the technological product during its development can be reliably measured.

Capitalised development costs include costs of materials and direct labour costs. Internal costs that are capitalised are limited to incremental costs specific to the project.

Other development expenditures that do not meet these criteria are recognised as an expense as incurred and presented within operating expenses, together with any amortisation which is charged to the income statement on a straight-line basis over the estimated useful lives of development intangible assets.

Assets classified as "work in progress" are not amortised as such assets are not currently available for (or in) use. Once available for use, assets will be recategorised and amortised at the rate appropriate to their classification.

Computer software

Computer software purchased separately, that does not form an integral part of related hardware, is capitalised at cost.

Amortisation is charged to profit or loss on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite and is presented within operating expenses. All intangible assets are amortised from the date they are available for use. The estimated useful lives are as follows:

·      Customer relationships - 20 years; and

·      Software and development costs - 3-5 years.

 

(j)    Impairment losses

The carrying amounts of the Group's assets are tested for impairment. Assets with an indefinite useful life are not depreciated or amortised but are tested for impairment at each reporting date. Assets subject to amortisation/depreciation and impairment losses are tested for impairment every time events or circumstances indicate that they may be impaired.

Impairment losses are recognised in the income statement based on the difference between the carrying amount and the recoverable amount.

An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount, which is the higher of fair value less costs of disposal and value in use. To determine the value in use, management estimates expected future cash flows and determines a suitable discount rate in order to calculate the present value of those cash flows. The data used for impairment testing procedures are directly linked to the Group's latest approved budget, adjusted as necessary to exclude the effects of future reorganisations and asset enhancements. Discount factors are determined individually for each asset and reflect current market assessments of the time value of money and asset-specific risk.

The Group makes use of a simplified approach in accounting for trade and other receivables and records the loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash flows, considering the potential for default at any point during the life of the financial instrument. In calculating, the Group uses its historical experience, external indicators and forward-looking information to calculate the expected credit losses.

The Group assesses impairment of trade receivables on a collective basis as they possess shared credit risk characteristics; they have been grouped based on the days past due.

(k)   Foreign currencies

Items included in the financial statements are measured using the currency of the primary economic environment in which the Group operates (the "functional currency"). The functional and presentational currency is Sterling.

The functional currency of a subsidiary is determined based on specific primary and secondary factors including the principal currency of the cash flows and the primary economic environment in which the subsidiary operates. Once determined, the functional currency is used and translated for consolidation purposes.

Foreign currency items are translated using the transaction date exchange rate. Monetary assets and liabilities denominated in foreign currencies are translated at the closing rate. Foreign currency differences are taken to the income statement. Non-monetary assets and liabilities that are measured based on historical cost in a foreign currency are translated at the transaction date exchange rate.

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated at closing rates. The income and expenses of foreign operations are translated at the average exchange rate of the year which approximates to the transaction date exchange rates. Exchange differences arising on consolidation are presented within other comprehensive income.

(l)    Tangible assets and depreciation

Tangible fixed assets are stated at historical purchase cost less accumulated depreciation. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use.

Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss.

Depreciation is calculated using straight-line method so as to write off the cost of an asset, less its estimated residual value, over the useful economic life of that asset as follows:

·      Fixtures and fittings - 3 - 15 years; and

·      Computer hardware - 5 years.

 

(m)  Leases

The Group applies IFRS 16 to account for leases. At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred, and an estimate of costs to restore the underlying asset, less any lease incentives received. Extension and termination options are included in a number of property and equipment leases across the Group and so lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liabilities.

The lease liability is initially measured at the present value of lease payments that were not paid at the commencement date, discounted using the Group's incremental borrowing rate, which is based on the Group's financing facilities, and adjusted where necessary for the specific terms of the lease.

The lease liability is measured at amortised cost using the effective interest method. If there is a remeasurement of the lease liability, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded directly in profit or loss if the carrying amount of the right-of-use asset is zero.

The Group presents right-of-use assets within property, plant and equipment in note 10.

Short-term leases and low value assets

The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less, or leases of low value assets. These lease payments are expensed on a straight-line basis over the lease term.

(n)   Segmental reporting

The Group reports its business activities in two areas being:

·      Brand Addition - sale of promotional product through services provided under framework contracts on an international basis; and

·      Facilisgroup - provision of digital commerce, consolidated buying power and community learning and networking events to SME promotional product distributors in North America through subscription-based services.

 

This is reported in a manner consistent with the internal reporting to the Executive Directors, who have been identified as the Chief Operating Decision Maker.

(o)   Employee benefits

The Group provides a range of benefits to employees, including annual bonus arrangements, paid holiday arrangements and defined contribution pension plans.

Short-term benefits

Short-term benefits, including holiday pay and other similar non-monetary benefits, are recognised as an expense in the period in which the service is received.

Defined contribution pension plans

The Group operates a number of country-specific defined contribution plans for its employees. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. Once the contributions have been paid, the Group has no further payment obligations. The contributions are recognised as an expense when they are due. Amounts not paid are included in other payables within trade and other payables in the statement of financial position. The assets of the plans are held separately from the Group in independently administered funds.

Share-based payments

Equity-settled awards are valued at the grant date, and the fair value is charged as an expense in the income statement spread over the vesting period. Fair value of the awards are measured using an adjusted form of the Black-Scholes model which includes a Monte Carlo simulation model. The fair value of the options, appraised at the grant date, includes the impact of market-based vesting conditions if applicable.

Share-based remuneration is recognised as an expense in profit or loss with the credit side of the entry being recorded in equity.

Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any adjustment to cumulative share-based compensation resulting from a revision is recognised in the current period. The number of vested options ultimately exercised by holders does not impact the expense recorded in any period.

(p)   Equity, reserves and dividend payments

Share capital

Share capital represents the nominal (par) value of shares that have been issued.

Share premium

Share premium represents the difference between the nominal value of shares issued and the fair value of consideration received. Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits.

Own share reserve

Own share reserve represents Ordinary Shares in the Company held by the Employee Benefit Trust set up in 2023 to administer share plans and acquire shares, using funds contributed by the Group, to meet commitments to employee share schemes.

Capital reserve

The capital reserve was created in 2021 as a result of the purchase by the Company of all deferred shares in issue.

Merger reserve

The merger reserve was created as a result of the share for share exchange under which The Pebble Group plc became the parent undertaking prior to the Initial Public Offering (IPO). Under merger accounting principles, the assets and liabilities of the subsidiaries were consolidated at book value in the Group financial statements and the consolidated reserves of the Group were adjusted to reflect the statutory share capital, share premium and other reserves of the Company as if it had always existed, with the difference presented as the merger reserve.

Translation reserve

The translation reserve includes foreign currency translation differences arising from the translation of financial statements of the Group's foreign entities.

Retained earnings

Retained earnings includes all current and prior period retained profits and losses.

All transactions with owners of the parent are recorded separately within equity.

Dividends

Dividends are recognised when approved by the Group's shareholders or, in the case of interim dividends, when the dividend has been paid. No interim dividend has been paid in the year (2022: £nil). The Directors recommend the payment of a final dividend for 2023 of 1.2 pence per share (2022: 0.6 pence per share).

3.     JUDGEMENTS IN APPLYING ACCOUNTING POLICIES AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the preparation of the Group financial statements, the Directors, in applying the accounting policies of the Group, make some judgements and estimates that affect the reported amounts in the financial statements. The following are the areas requiring the use of judgement and estimates that may significantly impact the financial statements:

(a)   Accounting estimates

Information about estimates and assumptions that may have the most significant effect on recognition and measurement of assets, liabilities, income and expenses is provided below. Actual results may be substantially different.

Goodwill impairment

The Group tests goodwill for impairment every year in accordance with the relevant accounting policies. The recoverable amounts of cash-generating units are determined by calculating value in use. These calculations require the use of estimates. As part of these calculations, we have considered various sensitivities, explained in note 9. A 1% increase in the Weighted Average Cost of Capital (WACC) would reduce the total value in use by £21.5m (2022: £25.7m).

Goodwill relates to the various acquisitions made and amounts to £35,964,000 as at 31 December 2023 (2022: £36,139,000). The estimates used in the impairment calculation are set out in note 9. There is no significant risk of material adjustment to the carrying amount of the goodwill within the next 12 months. The sensitivities applied are explained in note 9.

Useful economic lives of intangible assets

The Directors have estimated the useful economic lives of the acquired customer intangible assets to be 20 years based upon attrition rates and the Directors' judgement. These lives are reviewed and updated annually. There is no significant risk of material adjustment to the carrying amount of the intangible assets within the next 12 months. No reasonable sensitivity performed in relation to the useful economic lives assumption would result in a material change in the carrying value of intangible assets.

Useful economic lives of property, plant and equipment

Property, plant and equipment is depreciated over the useful lives of the assets. Useful lives are based on the management's estimates of the period that the assets will generate revenue, which are reviewed annually for continued appropriateness. The carrying values are tested for impairment when there is an indication that the value of the assets might be impaired. When carrying out impairment tests these would be based upon future cash flow forecasts and these forecasts would be based upon management judgement. Future events could cause the assumptions to change, therefore, this could have an adverse effect on the future results of the Group. There is no significant risk of material adjustment to the carrying amount of the property, plant and equipment within the next 12 months.

The useful economic lives applied are set out in the accounting policies and are reviewed annually. No reasonable sensitivity performed in relation to the useful economic lives assumption would result in a material change in the carrying value of property, plant and equipment.

Share-based payment charge

Fair values used in calculating the amount to be expensed as a share-based payment is subject to a level of uncertainty. These fair values are calculated by applying a valuation model, which is in itself judgmental, and takes into account certain inherently uncertain assumptions. The basic assumptions that are used in the calculations are explained further in note 12. No reasonable sensitivity performed in relation to the share-based payment assumptions would result in a material change to the expense in the consolidated income statement.

(b)   Accounting judgements

The following are the areas requiring the use of judgement that may significantly impact the Group financial statements:

Capitalisation of internal development costs

Distinguishing the research and development phases of a new customised project and determining whether the recognition requirements for the capitalisation of development costs are met requires judgement. There is also some judgement required in relation to the proportion of time capitalised for employees working on the development of internally generated intangible assets. After capitalisation, management monitors whether the recognition requirements continue to be met and at what point amortisation should commence, in addition to whether there are any indicators that capitalised costs may be impaired.

Capitalised development expenditure is analysed further in note 9.

 

4.     SEGMENTAL ANALYSIS

The Chief Operating Decision Maker (CODM) has been identified as the Executive Directors. The Directors have determined that the operating segments, based on these financial statements, are:

·      Brand Addition - sale of promotional product through complex services provided under framework contracts on an international basis;

·      Facilisgroup - provision of digital commerce, consolidated buying power and community learning and networking events to SME promotional product distributors in North America through subscription-based services; and

·      Central operations - certain central activities and costs that are not directly related to the activities of the operating segments.

 

Segment information about the above businesses is presented on the following pages.

The Executive Directors assess the performance of the operating segments based on Adjusted EBITDA and operating profit. Other information provided to the Directors is measured in a manner consistent with that in the financial statements. Inter-segment transactions are entered into under the normal commercial terms and conditions that would also be available to unrelated third parties. Segment assets exclude centrally held cash at bank and in hand.

Major customers

In 2023, there was one major customer that individually accounted for at least 10% of total revenues (2022: none). In 2023, the revenue relating to this customer was £12,511,000 and related to the Brand Addition segment.

Analysis of revenue by geographical destination

	2023	2022
	£'000	£'000
United Kingdom	21,710	22,570
Continental Europe	41,896	47,236
US	39,924	43,189
Rest of World	20,641	21,030
Total revenue	124,171	134,025

 

The geographical revenue information above is based on the location of the customer.

Included within Rest of World is £14,378,000 of revenue from China (2022: £14,247,000).

All the above revenues are generated from contracts with customers and are recognised at a point in time or over time as follows:

	2023	2022
	£'000	£'000
At a point in time	107,128	118,507
Over time	17,043	15,518
Total revenue	124,171	134,025

 

All non-current assets of the Group reside in the UK, with the exception of non-current assets with a net book value of £31,525,000 (2022: £31,250,000) which were located in North America and £2,006,000 (2022: £2,451,000) located in other foreign countries.

 

 

Income statement for the year ended 31 December 2023

	Brand Addition	Facilisgroup	Central operations	2023
	£'000	£'000	£'000	£'000
Revenue	106,276	17,895	-	124,171
Cost of goods sold	(69,988)	-	-	(69,988)
Gross profit	36,288	17,895	-	54,183
Operating expenses	(30,084)	(13,514)	(2,587)	(46,185)
Operating profit/(loss)	6,204	4,381	(2,587)	7,998
Analysed as:
Adjusted EBITDA	9,491	8,851	(2,364)	15,978
Depreciation	(1,640)	(571)	(37)	(2,248)
Amortisation	(1,335)	(3,849)	-	(5,184)
Share-based payment charge	(312)	(50)	(186)	(548)
Total operating profit/(loss)	6,204	4,381	(2,587)	7,998
Finance expense	(345)	(67)	(177)	(589)
Profit/(loss) before taxation	5,859	4,314	(2,764)	7,409
Income tax expense	(891)	(700)	(23)	(1,614)
Profit/(loss) for the year	4,968	3,614	(2,787)	5,795

 

 

Statement of financial position as at 31 December 2023

	Brand Addition	Facilisgroup	Central operations	2023
	£'000	£'000	£'000	£'000
ASSETS
Non-current assets
Intangible assets	38,472	22,835	-	61,307
Property, plant and equipment	5,269	2,803	234	8,306
Deferred tax asset	158	-	124	282
Total non-current assets	43,899	25,638	358	69,895
Current assets
Inventories	11,852	-	-	11,852
Trade and other receivables	24,956	4,921	281	30,158
Cash and cash equivalents	12,906	1,607	1,385	15,898
Total current assets	49,714	6,528	1,666	57,908
TOTAL ASSETS	93,613	32,166	2,024	127,803
LIABILITIES
Non-current liabilities
Lease liability	4,161	1,969	-	6,130
Deferred tax liability	-	2,365	-	2,365
Total non-current liabilities	4,161	4,334	-	8,495
Current liabilities
Lease liability	1,195	299	-	1,494
Trade and other payables	26,519	2,006	440	28,965
Current tax liability/(asset)	(202)	583	-	381
Total current liabilities	27,512	2,888	440	30,840
TOTAL LIABILITIES	31,673	7,222	440	39,335
NET ASSETS	61,940	24,944	1,584	88,468

Income statement for the year ended 31 December 2022

	Brand Addition	Facilisgroup	Central operations	2022
	£'000	£'000	£'000	£'000
Revenue	117,391	16,634	-	134,025
Cost of goods sold	(81,279)	-	-	(81,279)
Gross profit	36,112	16,634	-	52,746
Operating expenses	(28,155)	(11,624)	(2,744)	(42,523)
Operating profit/(loss)	7,957	5,010	(2,744)	10,223
Analysed as:
Adjusted EBITDA	11,467	9,011	(2,436)	18,042
Depreciation	(1,719)	(626)	(39)	(2,384)
Amortisation	(1,232)	(2,950)	-	(4,182)
Share-based payment charge	(559)	(425)	(269)	(1,253)
Total operating profit/(loss)	7,957	5,010	(2,744)	10,223
Finance expense	(388)	(13)	(119)	(520)
Profit/(loss) before taxation	7,569	4,997	(2,863)	9,703
Income tax (expense)/income	(1,495)	(689)	94	(2,090)
Profit/(loss) for the year	6,074	4,308	(2,769)	7,613

 

 

Statement of financial position as at 31 December 2022

	Brand Addition	Facilisgroup	Central operations	2022
	£'000	£'000	£'000	£'000
ASSETS
Non-current assets
Intangible assets	37,863	22,139	-	60,002
Property, plant and equipment	6,449	3,004	39	9,492
Deferred tax asset	137	-	155	292
Total non-current assets	44,449	25,143	194	69,786
Current assets
Inventories	15,447	-	-	15,447
Trade and other receivables	29,989	4,648	56	34,693
Cash and cash equivalents	12,655	2,265	138	15,058
Total current assets	58,091	6,913	194	65,198
TOTAL ASSETS	102,540	32,056	388	134,984
LIABILITIES
Non-current liabilities
Lease liability	5,148	2,315	27	7,490
Deferred tax liability	-	2,860	-	2,860
Total non-current liabilities	5,148	5,175	27	10,350
Current liabilities
Lease liability	1,221	303	45	1,569
Trade and other payables	33,543	2,075	795	36,413
Current tax liability	258	805	-	1,063
Total current liabilities	35,022	3,183	840	39,045
TOTAL LIABILITIES	40,170	8,358	867	49,395
NET ASSETS/(LIABILITIES)	62,370	23,698	(479)	85,589

 

5.     INCOME TAX EXPENSE

	2023	2022
	£'000	£'000
Current income tax
-      UK corporation tax charge for the year	575	901
-      Adjustments in respect of prior years	(337)	(159)
-      Foreign tax	1,652	1,822
Total current income tax	1,890	2,564
Deferred tax
-      Deferred tax	(413)	(426)
-      Adjustments in respect of prior years	137	(48)
Total deferred tax	(276)	(474)
Total income tax expense	1,614	2,090

 

The expected corporation tax charge for the year is calculated at the UK corporation tax rate of 23.5% (2022: 19%) on the profit before taxation for the year. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions in which the Group operates. 

 

The charge for the year can be reconciled to the profit in the consolidated income statement as follows:

Analysis of charge in year	2023	2022
	£'000	£'000
Reconciliation of total tax charge:
Profit before taxation	7,409	9,703
Profit before taxation multiplied by the rate of corporation tax in the UK of 23.5% (2022: 19%)	1,741	1,844
Effects of:
Adjustments in respect of prior years	(200)	(207)
Impact of difference in current and deferred tax rates in the UK	-	13
Non-deductible (income)/expenses	(27)	32
Differences in tax rates in overseas jurisdictions	100	286
Unrecognised for deferred tax	-	122
Total income tax expense	1,614	2,090

 

Factors that may affect future tax charges

An increase in the UK corporation tax rate from 19% to 25% from 1 April 2023. This change was substantively enacted on 24 May 2021. The impact of this rate change has been considered when recognising the deferred tax in relation to the UK companies in the Group. Where the asset or liability is expected to unwind after 1 April 2023, the deferred tax has been recognised at 25%.

Amounts recognised directly in equity

Aggregate deferred tax arising in the reporting period and not recognised in net profit or loss or other comprehensive income but directly (charged)/credited to equity:

	2023	2022
	£'000	£'000
Deferred tax: (charge)/credit relating to employee share schemes - value of employee services	(23)	15

 

 

6.     EARNINGS PER SHARE

Basic earnings per share are calculated by dividing the earnings attributable to equity shareholders by the weighted average number of Ordinary Shares in issue during the year.

For diluted earnings per share, the weighted average number of Ordinary Shares in issue is adjusted to assume conversion of all potentially dilutive Ordinary Shares. The Company has potentially dilutive Ordinary Shares arising from share options granted to employees. Options are dilutive under the Group Sharesave Plan (SAYE) where the exercise price together with the future IFRS 2 charge of the option is less than the average market price of the Company's Ordinary Shares during the year. Options under The Pebble Group plc Long Term Incentive Plan (LTIP), as defined by IFRS 2, are contingently issuable shares and are therefore only included within the calculation of diluted EPS if the performance conditions, as set out in note 12, are satisfied at the end of the reporting period, irrespective of whether this is the end of the vesting period or not.

The impact of the potentially dilutive share options issued under the LTIP on 21 December 2020, 8 June 2021, 29 March 2022, and 28 March 2023 and the SAYE on 6 October 2021 and 25 April 2023, as detailed in note 12, is 0.01p for the year ended 31 December 2023 (2022: 0.01p).

The calculation of basic earnings per share is based on the following data:

Statutory EPS

	2023	2022
Earnings (£'000)
Earnings for the purposes of basic and diluted earnings per share being profit for the year attributable to equity shareholders	5,795	7,613
Number of shares
Weighted average number of shares for the purposes of basic earnings per share	167,412,949	167,450,893
Weighted average dilutive effects of conditional share awards	445,904	185,624
Weighted average number of shares for the purposes of diluted earnings per share	167,858,853	167,636,517
Earnings per Ordinary Share (pence)
Basic earnings per Ordinary Share (pence)	3.46	4.55
Diluted earnings per Ordinary Share (pence)	3.45	4.54

 

Adjusted EPS

The calculation of adjusted earnings per share is based on the after-tax adjusted profit after adding back certain costs as detailed in the table in note 7. Adjusted earnings per share figures are given to exclude the effects of amortisation of acquired intangible assets, share-based payment charge and exceptional items, all net of taxation, and are considered to show the underlying performance of the Group.

	2023		2022
Earnings (£'000)
Earnings for the purposes of basic and diluted earnings per share being adjusted earnings	7,708		9,675
Number of shares
Weighted average number of shares for the purposes of adjusted earnings per share	167,412,949		167,450,893
Weighted average dilutive effects of conditional share awards	445,904		185,624
Weighted average number of shares for the purposes of diluted earnings per share	167,858,853		167,636,517
Adjusted earnings per Ordinary Share (pence)
Basic adjusted earnings per Ordinary Share (pence)	4.60		5.78
Diluted adjusted earnings per Ordinary Share (pence)	4.59		5.77

 

See note 7 for the reconciliation of adjusted earnings.

 

7.     ALTERNATIVE PERFORMANCE MEASURES (APMs)

Throughout the consolidated financial statements, we refer to a number of APMs. A reconciliation of the APMs used are shown below.

Adjusted earnings:

	2023	2022
	£'000	£'000
Profit for the year attributable to equity shareholders	5,795	7,613
Add back/(deduct):
Amortisation charge on acquired intangible assets	1,901	1,420
Share-based payment charge	548	1,253
Tax effect of the above	(536)	(611)
Adjusted earnings	7,708	9,675

 

Adjusted EBITDA:

		2023	2022
	£'000		£'000
Operating profit	7,998		10,223
Add back:
Depreciation	2,248		2,384
Amortisation	5,184		4,182
Share-based payment charge	548		1,253
Adjusted EBITDA	15,978		18,042

 

Adjusted operating profit:

	2023	2022
	£'000	£'000
Operating profit	7,998	10,223
Add back:
Amortisation charge on acquired intangible assets	1,901	1,420
Share-based payment charge	548	1,253
Adjusted operating profit	10,447	12,896

 

 

Adjusted operating profit less finance costs:

	2023	2022
	£'000	£'000
Adjusted operating profit	10,447	12,896
Deduct:
Finance expense	(589)	(520)
Adjusted operating profit less finance costs	9,858	12,376

 

8.     DIVIDENDS PAID AND PROPOSED

	2023	2022
	£'000	£'000
Declared and paid during the year
Final dividend for 2022 paid in June 2023: 0.6p per share	1,005	-
Proposed for approval at AGM (not recognised as a liability at 31 December)
Final dividend for 2023: 1.2p per share (2022: 0.6p per share)	2,004	1,005

 

        As per the Trust Deed, the EBT shall waive its entitlement to a dividend on the shares held of 412,637 shares.

 

 

 

9.     INTANGIBLE ASSETS

		Goodwill	Customer relationships	Software and development costs	Work in progress	Total
		£'000	£'000	£'000	£'000	£'000
	Cost
	Balance at 1 January 2022	35,805	10,241	21,321	423	67,790
	Foreign exchange translation	334	1,081	1,643	39	3,097
	Additions	-	-	2,347	4,115	6,462
	Disposals	-	-	(926)	-	(926)
	Reclassifications	-	-	492	(492)	-
	Balance at 31 December 2022	36,139	11,322	24,877	4,085	76,423
	Foreign exchange translation	(175)	(554)	(672)	(195)	(1,596)
	Additions	-	-	661	6,987	7,648
	Disposals	-	-	(186)	-	(186)
	Reclassifications	-	-	4,200	(4,200)	-
	Balance at 31 December 2023	35,964	10,768	28,880	6,677	82,289
	Accumulated amortisation
	Balance at 1 January 2022	-	1,647	10,469	-	12,116
	Foreign exchange translation	-	171	878	-	1,049
	Charge for the year	-	554	3,628	-	4,182
	Disposals	-	-	(926)	-	(926)
	Balance at 31 December 2022	-	2,372	14,049	-	16,421
	Foreign exchange translation	-	(123)	(345)	-	(468)
	Charge for the year	-	550	4,634	-	5,184
	Disposals	-	-	(155)	-	(155)
	Balance at 31 December 2023	-	2,799	18,183	-	20,982
	Net book value
	Balance at 31 December 2021	35,805	8,594	10,852	423	55,674
	Balance at 31 December 2022	36,139	8,950	10,828	4,085	60,002
	Balance at 31 December 2023	35,964	7,969	10,697	6,677	61,307

 

Staff costs of £6,626,000 (2022: £5,797,000) have been capitalised as intangible assets. The net book value of internally generated assets is £13,785,000 (2022: £9,941,000).

The remaining amortisation periods for customer relationships are between 13 and 15 years (2022: 14 and 16 years) and for software and development costs are between 1 and 5 years (2022: 1 and 5 years).

Goodwill has been tested for impairment. The method, key assumptions and results of the impairment review are detailed below.

Goodwill is attributed to the respective cash-generating units (CGUs) within the Group (Brand Addition and Facilisgroup). Goodwill has been tested for impairment by assessing the value in use of each CGU. The value in use calculations were based on projected cash flows in perpetuity. For both CGUs, budgeted cash flows for 2024 to 2028 were used. For Brand Addition, these were based on a forecast for 2024 with growth rates of 6% applied to EBITDA each year. For Facilis, these were based on forecasts for 2024 to 2025, with growth rates of 20% applied to revenue each year and an EBITDA return of 50% for 2026 and 55% for 2027 and 2028. Subsequent years were based on a reduced rate of growth of 2.0% (2022: 2.0%) into perpetuity. Appropriate adjustments were also made for changes in working capital and other cash flows to both CGUs.

These growth rates are based on past experience and market conditions and discount rates are consistent with external information. The growth rates shown are the average applied to the cash flows of the individual CGUs and do not form a basis for estimating the consolidated profits of the Group in the future.

The Directors used an estimated pre-tax market weighted average cost of capital (WACC) of 12.6% for Brand Addition and 13.9% for Facilisgroup (2022: 12.4% for Brand Addition and 13.6% for Facilisgroup) to discount the cash flows used for the CGUs. Sensitivities to revenue and margin, consistent with those used in the going concern analysis, were applied to each CGU. Additionally, the impact on headroom arising from a 2% increase in the WACC was also considered. The value in use calculations described above, together with sensitivity analysis using reasonably possible changes in the key assumptions as set out above, indicate the Group has adequate headroom and therefore do not give rise to impairment concerns.

Having completed the impairment reviews at the date of transition and at each subsequent balance sheet date, no impairments were identified.

Goodwill is attributable to the following segments:

	2023	2022
	£'000	£'000
Brand Addition	33,057	33,057
Facilisgroup	2,907	3,082
	35,964	36,139

 

The value in use, calculated as described on the previous page and attributable to each CGU, is as follows:

	2023	2022
	£'000	£'000
Brand Addition	102,824	102,824
Facilisgroup	98,560	123,798
	201,384	226,622

 

The revenue and margin sensitivities described above, result in a reduction in the total value in use to £105,013,000. The WACC sensitivity described above, results in a reduction in the total value in use to £162,373,000. Under both sensitivities, there is headroom for both CGUs.

Management considers that no reasonably possible changes would reduce either CGUs headroom to £nil. The reduction from prior year is driven by revenue growth phasing for Facilis new products, in addition to the increase in WACC.

 

10.  PROPERTY, PLANT AND EQUIPMENT

	Fixtures and fittings	Computer hardware		Right-of-use assets		Total
	£'000	£'000		£'000		£'000
Cost
Balance at 1 January 2022	3,892	3,226		12,784		19,902
Foreign exchange translation	216	146		783		1,145
Additions	327	618		2,471		3,416
Disposals	(880)	(1,319)		(2,240)		(4,439)
Balance at 31 December 2022	3,555	2,671		13,798		20,024
Foreign exchange translation	(118)	(74)		(394)		(586)
Additions	245	626		516		1,387
Disposals	-	(350)		(477)		(827)
Balance at 31 December 2023	3,682	2,873		13,443		19,998
Accumulated depreciation
Balance at 1 January 2022	3,133	2,323		6,519		11,975
Foreign exchange translation	154	98		339		591
Charge for the year	233	451		1,700		2,384
Disposals	(880)	(1,300)		(2,238)		(4,418)
Balance at 31 December 2022	2,640	1,572		6,320		10,532
Foreign exchange translation	(81)	(48)		(143)		(272)
Charge for the year	278	465		1,505		2,248
Disposals	-	(345)		(471)		(816)
Balance at 31 December 2023	2,837	1,644		7,211		11,692
Net book value
Balance at 31 December 2021	759	903		6,265		7,927
Balance at 31 December 2022	915	1,099		7,478		9,492
Balance at 31 December 2023	845	1,229		6,232		8,306
Right-of-use assets - net book value
					2023	2022
					£'000	£'000
Leasehold property					5,943	7,362
Fixtures and fittings					100	87
Computer hardware					189	29
Total right-of-use assets - net book value					6,232	7,478