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Building brands.
Growing relationships.
Strengthening businesses.
The Pebble Group plc
Annual Report 2019
Building brands.
Growing relationships.
Strengthening businesses.
Our vision is to become the partner of choice for both
global brands that use promotional products as a key
stakeholder engagement tool, and SME distributors that
seek to professionalise and grow their promotional
products businesses in North America.
Stay up to date at
thepebblegroup.com
2012
2014
2016
Management buy-out of Brand
Addition, supported by H.I.G
Europe Capital Partners LP and by
Beechbrook Capital LLP.
Expanded operations into Shanghai,
established a full-service office
enabling further development of
overseas capabilities.
Acquisition of US-based Gateway
CDI (now Brand Addition US),
increasing market share and
providing greater access to the
largest single regional market for
promotional products.
STRATEGIC REPORT
Highlights
Financial highlights
Operational highlights
REVENUE
GROSS MARGIN
£107.2m
+15.3%
37.4%
+7.2ppt
m
2
.
7
0
1
£
m
0
.
3
9
£
%
4
.
7
3
%
2
.
0
3
Brand Addition:
• Organic growth in revenue of 6.1%, primarily driven by
increased sales to existing customers in Consumer Promotions
• Continued track record of successfully retaining major
client contracts
• Engaged in new business tender processes that resulted in
major new business wins in early 2020, are expected to begin
invoicing in H220
Facilisgroup:
• Successfully integrated with investment in technology and
people, including the appointment of new leadership and
management team and setting a clear growth strategy
• Customer (“Partner”) numbers increased to 149 (2018: 127) –
2018
2019
2018
2019
an increase of 17.3%
ADJUSTED EBITDA*
ADJUSTED EPS**
£15.2m
+50.5%
2.81p
+205.4%
m
2
.
5
1
£
m
1
.
0
1
£
p
1
8
.
2
p
2
9
.
0
2018
2019
2018
2019
• Total Partner sales processed through proprietary @ease SaaS
platform at US$801m (2018: US$701m) – an increase of 14.3%
Group:
• Major acquisition successfully integrated and delivering growth
• Successful IPO and Admission to AIM, raising a total of £135m
and repaying all existing debt
• Experienced Board formed at IPO: Richard Law, Chairman;
Yvonne Monaghan, Senior Independent Non-executive Director;
and Stuart Warriner, Non-executive Director
*
**
Adjusted EBITDA is defined as operating profit adjusted to add back depreciation of
property, plant and equipment, amortisation, and exceptional items in note 7.
Adjusted EPS represents adjusted earnings divided by a weighted average number of
shares in issue post Admission on 5 December 2019; this has been applied
retrospectively to the number of shares in issue at 31 December 2018 and is disclosed
to indicate the underlying profitability of the Group.
Strategic report
01 Highlights
02 At a glance
04 Our businesses
06 Chairman’s statement
08 Chief Executive’s statement
12 Our markets
13 Our business model
14 Our strategy
15 Our stakeholders
16 Sustainability
18 Key performance indicators
20 Chief Financial Officer's review
26 Risk management
Corporate governance
30 Chairman’s introduction to governance
31 Board structure and composition
31 Board Committees
32 Corporate governance statement
36 Board of Directors
38 Audit Committee report
40 Remuneration report
45 Directors’ report
47 Statement of Directors’ responsibilities
Financial statements
Independent auditors' report
48
53 Consolidated income statement
54 Consolidated statement
of comprehensive income
55 Consolidated balance sheet
56 Consolidated statement of changes
in equity
57 Consolidated cash flow statement
58 Notes to the consolidated
financial statements
95 Company balance sheet
96 Company statement of changes in equity
97 Notes to the Company financial statements
103 Company information
2017
2018
2019
Secondary management buy-out
supported by Elysian Capital and
Beechbrook Capital LLP. Formation
of The Pebble Group as parent
company to Brand Addition.
Acquisition of Facilisgroup in North
America saw the establishment of
the Pebble Group brand and
enabled it to diversify and
strengthen its service offering.
Admission to AIM.
The Pebble Group plc Annual Report 2019
01
STRATEGIC REPORT
At a glance
We provide products, services
and technology to the global
promotional products industry.
Our Group provides products,
services and technology to the
global promotional products
industry through two focused
and differentiated businesses:
Brand Addition is a leading provider of
promotional products to global brands.
Brand Addition utilises its global network
to source and deliver complex and
creative promotional product solutions.
Facilisgroup provides
subscription-based services to SME
promotional product distributors in
the United States and Canada.
Read more on page 4
Read more on page 5
Investment case
Attractive market
opportunity
The Group operates in the
growing promotional products
market, a market that the
Directors estimate to be worth
over $50bn globally on an
annual basis and to account for
approximately 10% of marketing
expenditure worldwide.
Markets on page 12
Differentiated positioning
within the promotional
products space
We have 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.
Business model on page 13
Brand Addition’s strong
relationships with a
diversified blue-chip
client base
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.
Facilisgroup’s long-term,
deep-rooted relationships
with its Partners
Facilisgroup has developed
deep-rooted, long-term
relationships with its Partners
through the provision of
cost-effective “Software as a
Service” ("SaaS") -based
business intelligence, buying
power and community events,
which enable Partners to grow
their businesses and improve
operational efficiency.
02
The Pebble Group plc Annual Report 2019
Where we operate
The Pebble Group is
headquartered in the UK
in a facility that also
houses the headquarters
of Brand Addition.
The Group has offices
in the UK, the Republic
of Ireland, Germany,
China, Canada and the
United States.
Europe
Manchester
Dublin
London
Hagen
North America
Ottawa
St. Louis
China
Guangzhou
Hong Kong
Shanghai
REVENUE BY GEOGRAPHY (%)
EBITDA BY GEOGRAPHY (%)
58+
– Europe (58%)
– North America (30%)
– China (7%)
– RoW (5%)
46+
– Europe (46%)
– North America (48%)
– China (5%)
– RoW (1%)
Strong track record
of historical
financial growth
The Pebble Group has
delivered a consistent
record of growth.
Financial Review from page 20
Combination of loyal
client base and recurring
revenues drives high
quality earnings
The blue-chip client base that
underpins the strong repeat
revenues of Brand Addition is
augmented by the recurring
revenues and strong visibility
of earnings generated by the
Group’s subscription-based
offering, Facilisgroup.
The Group model is well
positioned through the
economic cycle
The Group is well positioned
to deliver robust financial
performance:
• low overall investment and
high returns; and
• differentiated propositions
delivering diverse income
streams.
Proven, experienced,
high calibre
management team
The Group has a high quality
senior management team
with substantial industry
experience. 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.
Board of Directors on page 36
The Pebble Group plc Annual Report 2019
03
48
+
5
+
1
+
C
30
+
7
+
5
+
C
Our businesses
Our Group comprises two
differentiated businesses,
focused on specific areas.
Brand Addition is a leading provider of
promotional products to global brands. Brand
Addition utilises its global network to source and
deliver complex and creative promotional product
solutions to support the marketing efforts of
multi-national clients who operate in sectors
which include health and beauty, fast moving
consumer goods, transport, technology, banking
and finance and charity. Brand Addition’s clients
primarily comprise major global brands.
Since 2010, Brand Addition has grown to become a market
leader in delivering complex services to support the
corporate marketing and consumer promotions of global
corporate clients. Headquartered in Manchester, Brand
Addition attracts and retains global brands through its design,
ethical sourcing and international distribution of promotional
products from its locations in Europe, the US and Asia.
Brand Addition provides promotional products to its clients
across its two main offerings: Corporate Programmes and
Consumer Promotions.
Target market: Large global brands.
Revenue model: Margin on products for services.
Supporting clients: Globally through offices in Europe,
the US and Asia.
Number of customers >£1m: 22
Excellent track record of attracting and retaining many of
the world’s leading brands through design, ethical sourcing
and international distribution.
Learn more at brandaddition.com
PERCENTAGE OF GROUP REVENUE (%)
91+
C 91%
PERCENTAGE OF ADJUSTED EBITDA (%)
66+
C 66%
04
The Pebble Group plc Annual Report 2019
STRATEGIC REPORT9
+
34
+
Facilisgroup provides subscription-based
services to SME promotional product distributors
in the United States and Canada. Facilisgroup’s
suite of services includes business intelligence
software, buying power and community events.
Established in 2004 and acquired by The Pebble Group in
December 2018, Facilisgroup provides a SaaS-based platform
to support the operations of SME promotional product
distributors based in the United States and Canada.
Facilisgroup has built a community of nearly 150 SME
promotional product distributors and over 100 preferred
suppliers in North America and in the year ended
31 December 2019 processed over $800m of sales (2018:
$700m) in the promotional products sector. A typical
Facilisgroup Partner generates between $1m and $10m of
annual sales.
Facilisgroup attracts and retains Partners through its
proprietary @ease software, consolidating the buying power
of its Partners and developing its community of Partners and
suppliers through learning and networking events.
Facilisgroup generates revenue through three main pillars:
subscription revenue from providing technology to its
Partners; income from its suppliers for co-ordinating the
consolidation of spend; and fees from suppliers for hosting
community events with Partners and suppliers.
Target market: SME promotional product distributors.
Revenue model: Subscriptions for technology, fees for
supply chain management.
Manages: c.$800m sales in the promotional products
sector from c.150 Partners in the US and Canada.
Attracts and retains “Facilis Partners” through a
combination of highly regarded technology, consolidation
of buying power and community learning and
networking events.
Learn more at facilisgroup.com
PERCENTAGE OF GROUP REVENUE (%)
91+
C 9%
PERCENTAGE OF ADJUSTED EBITDA (%)
66+
C 34%
The Pebble Group plc Annual Report 2019
05
9
+
34
+
Chairman’s statement
A notable year
for the Group.
COVID-19
The Group entered 2020 in good shape and, until the
COVID-19 pandemic impacted, The Pebble Group was on
track to continue delivering growth in 2020. As previously
announced on 19 March 2020 (RNS number 8138G), the virus
has, to date, caused major disruption to one part of the
Brand Addition business, Corporate Programmes, which has
seen a dramatic reduction in the number of orders
despatched in the last three weeks as a result of the
unprecedented lockdown restrictions. The other two areas
of the Group, Brand Addition’s Consumer Promotions and
Facilisgroup, are currently experiencing only minor disruption.
In response to the major impact on Brand Addition’s
Corporate Programmes activity, the management team has
rapidly implemented a mitigation strategy, which includes a
range of cost reduction measures, principally comprising
temporary weighted salary reductions and the use of the
UK Government’s furlough scheme. Details of tiered
temporary salary reductions are set out in the Financial
Review. The Board is also taking a temporary 40% reduction
in salary. These measures will reduce costs by c.£0.5m per
month in those parts of the business most affected by the
COVID-19 lockdown.
In addition, the Board took swift action to strengthen the
Group’s liquidity position by drawing down £7.7m from its
committed £10m revolving credit facility on 26 March 2020.
As at 7 April 2020, the Group held cash balances of £9.9m.
The scale and nature of the pandemic is changing daily and
there is no visibility, as yet, on the likely duration of the
lockdown restrictions. As such, it is not possible to estimate
the full impact of the pandemic on the Group’s trading. The
Board is, therefore, withdrawing its financial performance
guidance for FY20 and FY21.
The Group’s COVID-19 mitigation strategy, which has the
wellbeing of our people at its heart and is structured to
protect the capabilities of business and its ability to recover
rapidly from this unprecedented situation, is outlined in the
Chief Executive’s Review.
I am pleased to have been appointed as
the new Chairman of The Pebble Group
and to present the Group’s first set of
results as a quoted company, which
show the substantial progress made by
the business during 2019.
The year under review was a notable one for the business and
The Pebble Group team. Having operated independently as
Brand Addition for over seven years, the decision was taken
to build upon this success and expand the business by
acquiring Facilisgroup, a provider of subscription-based
services to SME promotional products distributors in North
America in December 2018.
Over the course of the year to 31 December 2019, Facilisgroup
was rapidly and effectively integrated into the Group, a
process which transformed the enlarged business in terms of
scale, diversity and financial performance. Group revenue in
the year increased by 15.3% to £107.2m (2018: £93.0m) and
Adjusted EBITDA increased by 50.5% to £15.2m (2018: £10.1m).
This transformational year concluded with the successful IPO
and Admission to AIM in December 2019, when the Group
raised £135m.
06
The Pebble Group plc Annual Report 2019
STRATEGIC REPORT “The Group’s COVID-19 mitigation strategy has
the wellbeing of our people at its heart and is
structured to protect the capabilities of the
business and its ability to recover rapidly from
this unprecedented situation.”
Long-term vision and strategy
Our vision is to become the partner of choice for:
• global brands, which use promotional products as a key
stakeholder engagement tool; and
• SME distributors of promotional products, seeking to
professionalise and grow their businesses in North America
through the use of Facilisgroup’s SaaS @ease platform.
The Group has a track record for delivering strong organic
growth, as well as growth through acquisition. Our talented
people have delivered on all key areas of this strategy during
the year under review and we have strategic objectives for the
future. The unprecedented events of recent weeks have
impacted our business, like many others. Our long-term
strategy, however, to continue growing organically and by
acquisition remains unchanged.
Whilst managing the short-term market disturbance, our team
is also continuing to plan for organic growth and prepare for the
opportunities, which will arise as normality returns. These plans
focus primarily on using the Group’s strong position in the
market to grow by winning new clients and generating increased
spend on existing contracts at Brand Addition and by attracting
new Partners and increasing the range and value of services that
we sell to Partners through Facilisgroup’s SaaS @ease service.
The markets in which we operate are large and fragmented. We
will also continue, at the right time, to consider value-enhancing
acquisitions, as part of our wider strategy, particularly those
which are complementary to Facilisgroup.
People
On Admission to AIM, the Group welcomed Yvonne Monaghan,
as Independent Non-executive Director and Senior Independent
Director, and Stuart Warriner, as Independent Non-executive
Director. I also joined the Board at this time. The Board has
extensive experience in dealing with a broad range of market
conditions and rapid strategic growth. I am very pleased to have
such diverse knowledge and expertise around the Board table.
The Pebble Group’s team globally comprises 450 people
operating across six countries. Our firm belief is that our team
is central to all that the Group does and achieves. We value
our people highly and are committed to building a culture of
positive engagement throughout the business, encouraging the
development of our people and recognising their contribution
to the business. As well as raising the profile of the Group and
its brands, the IPO provided a new capital structure to grow
the business and incentivise our people.
Environmental, Social and Governance (“ESG”)
A primary function of any board is governance. As part of the
process of becoming a listed company, new structures and
processes have been put in place or extended by the Board,
the details of which will be set out in our Annual Report 2019.
We are committed to continuing to evolve and develop these
in line with corporate governance best practice and guidance
moving forward.
The Pebble Group takes its responsibility to sustainable business
practices very seriously and is committed to sourcing, designing
and offering products which support social responsibility and
environmental sustainability. Through collaboration with key
stakeholders, including clients and suppliers, and strong supply
chain audit processes, we protect the integrity and reputation
of the global brands with whom we work.
As a Board, we understand the increasing importance of ESG to
investors, employees and clients. Our intention, therefore, is to
move towards reporting this in a structured manner going forward.
Summary
In summary, 2019 was a very significant year for the Group,
demonstrating its ability to grow organically and deliver
transformational growth in revenue and profitability through
selective acquisition.
The arrival of COVID-19 has interrupted the progress of the
Group. Our talented people and managers, however, are highly
capable of both dealing with the current challenges and, as
restrictions are withdrawn, of achieving The Pebble Group’s
ambitions. For now, we shall continue to protect our team, by
observing social distancing and working from home
restrictions, and seek to reduce costs, where appropriate and
without impacting the future capabilities of the business.
We have a strong liquidity position and robust balance sheet.
The Board believes that the Group is well placed to manage
the disruption and benefit as normal business activity
resumes and, as such, remains confident in the long-term
prospects of the Group.
Richard Law
Non-executive Chairman
8 April 2020
The Pebble Group plc Annual Report 2019
07
Chief Executive Officer’s review
A step change in focus,
scale and profitability.
These results include the first full year contribution from
Facilisgroup, following its acquisition in December 2018, and
represent a step change in focus, scale and profitability
within the Group, with revenue 15.3% ahead of the prior
year at £107.2m (2018: £93.0m). Adjusted EBITDA increased
by 50.5% to £15.2m (2018: £10.1m). This material change
demonstrates the excellent returns generated by
Facilisgroup under its subscription-based income model.
Since its acquisition, Facilisgroup has progressed well and
has been successfully integrated into The Pebble Group.
This SaaS business evolves our reach within the promotional
products market, enabling us to offer technology and other
services to entrepreneurial promotional product businesses
in North America, which in turn further professionalise and
grow their own organisations.
Added to this, Brand Addition again delivered revenue and
profit growth through its disciplined strategy to support
large corporates and global brands, who outsource their
promotional merchandise requirements, through complex
design, sourcing and delivery services under contract.
Our stock market listing at the end of 2019 was a key
milestone for The Pebble Group. The IPO raised £135m, of
which £79m was primarily used to repay the Company’s
existing debt facilities in full, as well as settling an
outstanding consideration arising from the acquisition of
Facilisgroup. The Group’s new capital structure enhances
our profile and will provide incentivisation to our people.
The management team remains invested in the success of
the business, having retained approximately 9% of the
Company’s total issued share capital at IPO.
The progress the Group made in the year under review,
including the successful IPO, was a direct result of the
combined efforts of our team of highly talented and
dedicated people across our businesses in Asia, Europe and
North America. The COVID-19 pandemic is presenting us
with new challenges in 2020, as outlined below. I have
confidence in the resilience of our client base, Partners and
suppliers to rebound from the effects of this virus and am
very grateful to our people for their exceptional efforts and
dedication during these uncertain times.
Following our Admission to AIM in
December 2019, we are pleased to report
the Group’s full year results for the year
ended 31 December 2019.
08
The Pebble Group plc Annual Report 2019
STRATEGIC REPORT
Promotional products market
As one of the most cost-effective forms of marketing, the
global promotional products market is large and growing
with the North American and European markets totalling
over US$50bn. Businesses of all sizes, sectors and
geographies use promotional products to convey their
brand values and identity to stakeholders. The returns these
products deliver, in respect of brand awareness and
engagement relative to cost, makes them a highly efficient
marketing tool.
The Group has two differentiated offerings, delivered
through Brand Addition and Facilisgroup.
Our business model and operational performance
Brand
Addition Facilisgroup
Central
operations
Group
Revenue
Gross profit
Gross profit %
Adjusted EBITDA
£97.9m
£30.8m
31.4%
£10.7m
£9.3m
£9.3m
100%
-
-
-
£107.2m
£40.1m
37.4%
£5.1m £(0.6m)
£15.2m
Brand Addition
Our strategy is to focus on the provision of product and
complex services to support the promotional product
requirements of large corporates via long-term
relationships under contract. Working in close collaboration
with its clients Brand Addition designs products and
product ranges, hosts client-branded global web stores and
provides international sourcing and distribution solutions.
Through purchasing our products and services our clients
are seeking to create excitement, brand loyalty and brand
recognition across their stakeholder base, as well as protect
their brand equity by ensuring their promotional products
and services are procured through a channel which reflects
their own values towards corporate and social responsibility.
Brand Addition allows them to achieve this in an efficient
manner across global geographies.
In the year under review, revenue increased by 6.1% to
£97.9m (2018: £92.3m). This organic growth was achieved
during a transformational year for the Group, during which
we successfully integrated a major acquisition, Facilisgroup,
and undertook an intensive three-month IPO process.
Brand Addition delivers Corporate Programmes to support
our clients’ general marketing activities and Consumer
Promotions to support clients’ sales. The majority of growth
achieved in FY19 was derived from increased sales to
existing customers in Consumer Promotions.
Our disciplined strategy to focus on large corporates
continued into the new financial year and, in the early
months of FY20, Corporate Programmes successfully
retained some major existing Corporate Programmes clients
and attracted new ones. The COVID-19 pandemic, however,
has had a major impact on the activity of our clients who
operate Corporate Programmes with us. Lockdown
situations have taken hold in March 2020. The value of
orders received in the last two weeks of March and first
week of April equated to 28.4% of the comparable period
of 2019. We do not expect any material recovery in order
levels until the governmental restrictions on working from
home, travel and holding events are lightened.
To date, there has been minor disruption to our Consumer
Promotions business with more than 70% of orders
expected in the year already received.
I believe that our success in winning new Corporate
Programmes clients, prior to the impact of COVID-19,
demonstrates the attractiveness of our offering. Brand
Addition’s blue-chip corporate client list, together with its
geographical and sector diversity, ensure that the business
is well placed to manage in the short term and benefit as
normal business activity resumes.
The Pebble Group plc Annual Report 2019
09
Chief Executive Officer’s review
(continued)
Facilisgroup
Facilisgroup provides technology that supports promotional
product distributors in North America to efficiently manage
and grow their businesses. Added to this, we provide
related benefits of supply chain consolidation together with
networking and learning events.
Revenue of £9.3m was achieved in this first full year of
contribution to the Group and Partner numbers grew to 149
by the year end, an increase of 22 or 17.3% in the year.
The sales activity of our Partners resulted in US$801m of
sales being processed through our subscription-based
technology platform, @ease. This represents a significant
spend in the fragmented, c.US$25bn, North American
market.
The Pebble Group has invested heavily into the Facilisgroup
team since its acquisition in late 2018. This includes
increasing the skillsets to drive the continual development
of our bespoke technology, adding services for existing
Partners and ensuring the resources are in place to support
Partner growth.
In early 2020, we formalised the new leadership and
management team and set a clear path for the successful
development of the next stage of growth for Facilisgroup.
There are three points of focus:
• responsibly increase our Partner numbers ensuring our
Partner quality remains high, and the community
relationships we create with our Partners and suppliers
remain strong;
• develop additional income streams that augment the
benefits available to our existing Partners and suppliers; and
• develop our technology and strong industry relationships
to offer an adaptation of our existing services to
industry entrepreneurs in the early stage of their
business development.
10
The Pebble Group plc Annual Report 2019
This combination creates an exciting platform for growth for
Facilisgroup in 2020 and beyond.
Partner numbers have, so far, continued to grow in line with
our expectations in 2020, with a further nine Partners being
implemented in Q1, of which three joined in March. A
further five are contracted, awaiting implementation. Early
indications show a spike in overall sales processed by our
Partners using our technology in the last two weeks. The
total value of sales processed by our Partners is 57% ahead
of the prior year at 3 April 2020, including this spike. Being
highly entrepreneurial, after the initial shock of COVID-19, a
number of our Partners swiftly refocused marketing into
new product categories, such as PPE and cleaning products,
attracting increased sales from new and existing customers.
We expect this unusual high level of sales to fall, as Partner
sales regulate at lower levels until normal working patterns
resume. A significant proportion of this unusual uplift has
been sourced through non-preferred suppliers. The
revenue from our subscription-based SaaS @ease platform
(c.68% of divisional revenue in FY19) is continuing to grow in
line with management expectations to date.
Overall, we continue to be pleased with the progress of
Facilisgroup and remain confident about realising the
multiple growth opportunities ahead.
STRATEGIC REPORT Outlook
The Group made substantial progress in FY19 and the
foundations for growth were firmly put in place with the
successful IPO in December. Whilst the new financial year
started well in all areas of the business, COVID-19 is
undoubtedly having a major impact our financial
performance which will continue in the weeks ahead until
the effects of the disruption start to dissipate. We have
taken rapid action to support our people and to mitigate
the effects of the COVID-19 on our business operations. The
Group’s balance sheet is strong and our proven growth
strategy is unchanged.
We remain confident in the long-term prospects for the
Group and are well placed to benefit as normal business
activity resumes.
Christopher (Chris) Lee
Chief Executive Officer
8 April 2020
COVID-19 strategy
As referenced above, COVID-19 has had a major impact on
the order demand of our Brand Addition Corporate
Programmes clients.
These clients are global businesses that will re-emerge from
the initial shock of COVID-19 and we expect more normal
order demand patterns to return as restrictions on working
from home, travel and holding events are lightened. Added
to this, we expect the new client wins, secured early in
FY20, will begin to impact in H2 and contribute to the speed
of demand recovery.
In response to these demand challenges, the Group has
reacted quickly and has been supported by the Brand
Addition team, utilising government initiatives, where
appropriate, and reducing costs, where activity levels are
lower. The Pebble Group Board has aligned itself with this
cost reduction programme, which has been implemented
and is expected to be temporary. We believe these actions,
together with the strong balance sheet of the Group and
the less affected business streams in Facilisgroup and Brand
Addition Consumer Promotions, leave the Group well
placed both to navigate the short-term issues and return to
the expected growth pattern pre-COVID-19.
Throughout the uncertainties created by this global
pandemic our team has reacted with great care for their
colleagues, clients, suppliers and the Group. I thank them all
for their continued dedication through these most
difficult circumstances.
The Pebble Group plc Annual Report 2019
11
Our markets
The promotional products
market is large and growing.
TOTAL MARKET VALUE
NORTH AMERICAN MARKET
EUROPEAN MARKET
$50bn
$24.7bn
$22.6bn
The Group’s management estimated this market to be worth over
$50bn in 2019 (which would represent approximately 10% of
global marketing expenditure), with North America and Europe
representing $24.7bn and $22.6bn respectively.
Promotional products comprise an increasingly important
part of a company’s marketing mix, conveying a company’s
brand values and identity to its stakeholders. The return
that promotional products deliver, in respect of brand
awareness relative to the level of investment, makes them a
valuable marketing and engagement tool for all businesses,
particularly at times where budgets are constrained. The
Directors consider the promotional products industry to be
highly fragmented, typified by the large number of
promotional product distributors.
Through Brand Addition, The Pebble Group looks to
differentiate itself from its competition by utilising its depth
of expertise and international infrastructure to provide a
comprehensive and integrated service of account
management, design, quality control and web stores, which
meets the complex needs of global brands.
Through Facilisgroup, the Group is able to access a
different segment of the market. Its subscription-based
proprietary software and services support the growth and
operations of North American owner-managed, sales-led
SME promotional product distributors in this region.
Facilisgroup’s industry-focused technology platform enables
Partners to improve the efficiency of their operations and
understanding of the activities of their businesses.
12
The Pebble Group plc Annual Report 2019
STRATEGIC REPORT Our business model
Providing product, services
and technology into the global
promotional products industry.
The Group comprises two differentiated businesses, focused on specific
areas of the promotional products market: Brand Addition’s activities
comprise the design, sourcing and delivery of creative promotional
merchandise and branded products for global brands, and Facilisgroup
provides subscription-based SaaS technology and services to SME
distributors in the promotional products market in North America.
The industry
c.$50bn promotional products market
Our Group
Providing products, services and technology into the global promotional products industry
Building brands, growing relationships, strengthening businesses.
Our focused
businesses
Brand Addition
Products and services
Facilisgroup
Technology and services
Target market
Large global brands
SME promotional product distributors
Services
Design of corporate ranges and bespoke products
Source from ethical suppliers
Deliver across the globe
SaaS technology to power efficiency and growth
Supply chain consolidation for buying dynamism
Community events and training
Revenue model
Margin on products for services
Subscriptions for technology
Fees for supply chain management
Geographic hubs
Europe Asia US
US Canada
The Pebble Group plc Annual Report 2019
13
Our strategy
Becoming a
partner of choice.
The Group’s vision is to become the partner of choice for both
global brands that use promotional products as a key stakeholder
engagement tool and SME distributors that seek to professionalise
and grow their promotional products business in North America.
The Pebble Group has a proven track record of delivering
strong organic growth, as well as growth through acquisition.
The Group’s strategy is to continue its profitable growth in
the following ways:
Organic growth opportunities
Attract additional clients – Brand Addition has steadily
increased the number of clients to whom it provides services,
by attracting new clients and through the acquisition of
Gateway CDI in 2016. The Directors believe that there is
significant scope to continue this principally organic growth.
Increase spend from existing clients – Brand Addition has
grown the level of spend from its existing client base. By
building the trust of clients through the successful fulfilment
of expectations, Brand Addition is able to create new
business opportunities by extending those relationships into
new geographies, as well as by increasing its market share
of existing client business in Europe, the US and Asia.
Attract additional Partners – Facilisgroup has consistently
grown the number of Partners that use its proprietary
software, through a combination of technology, supply chain
power and community events, and the Directors believe that
they can continue to deliver such Partner growth.
Increase the number of services offered to Partners –
In addition to the current services offered to Partners,
Facilisgroup is considering additional service offerings in the
form of other consolidated spend areas and value-added
services. Facilisgroup is considering a number of other
opportunities with a view to taking advantage of its strong
industry position and the highly fragmented global market.
Selective consideration of acquisitions by the Group
In addition to delivering organic growth, the Group’s
management has a track record of successfully identifying
and executing acquisitions which have added significant
value to The Pebble Group. The Directors believe that, as a
result of their depth of knowledge of the promotional
products market, they may identify further opportunities to
grow the business through acquisitions which complement
the Group’s offering in the US and in Europe.
14
The Pebble Group plc Annual Report 2019
STRATEGIC REPORT Our stakeholders – Section 172 statement
Listening to
our stakeholders.
The Board is aware of and understands its duties under Section 172 of the
Companies Act 2006 and that engaging with our diverse stakeholder base
is key to successfully managing The Pebble Group.
As well as addressing any feedback as it arises, the Board also allocates time within its fixed
agenda to consider each stakeholder group, the level and quality of engagement through the
year and any outcomes required from these interactions, including any impact on the Group’s
principal decisions arising from the feedback.
Below we share the groups identified as our key stakeholders and how we engage with each.
Our teams
Our teams of highly talented
and dedicated people
across the Group in Asia,
Europe and North America
create a positive culture
under which the business
has successfully grown.
The Pebble Group takes
pride in providing all the
members of our teams with
the opportunity to develop
and grow, reaching their full
potential within the business.
How we engage with
our team
• Employee feedback
surveys
• Investors in People
programme (UK)
• Annual sales and
management conferences
• Management development
programme
• Employee forums and
panels
Clients and Partners
Our objective at The Pebble
Group is to attract and retain
a quality client and Partner
base from which we grow
long-term relationships for
the benefit of all parties.
Continual investment into
our technology, services
and capabilities to enhance
these relationships is
designed to ensure
long-term value is created.
How we engage with
our clients and
partners
• Regular face-to-face
feedback and business
reviews
• Net promoter scores
• Client surveys and
feedback questionnaires
• Annual feedback surveys
• Customer community
events providing
opportunities for shared
learning experiences
Strategic suppliers
The quality of the product and
services we deliver to our
clients and Partners is heavily
influenced by the careful
management of our important
supplier relationships.
Alongside seeking new supply
routes to enhance our business
offering we collaborate with a
key group of suppliers in Asia,
Europe and North America.
Developing these long-term
relationships builds trust and
support within a partnership
environment.
How we engage with
our strategic suppliers
• Formal written contracts
negotiated transparently
and openly
• Face-to-face meetings to
discuss performance and
feedback
• Ongoing two-way evaluation
processes to facilitate
business improvement and
address ultimate customer
demands
• Supplier networking events
providing opportunity to
develop and grow
Shareholders and the
wider investment
community
As a newly listed company
we are beginning our journey
in the public markets.
We will advocate
transparency and best
practice seeking to ensure
the investor community has
the information it requires to
make informed judgements
about the Group.
How we engage with
our shareholders and
the wider investment
community
• Face-to-face meetings
prior to listing on AIM
• Face-to-face meetings or
calls as requested by
existing and potential
shareholders
• Face-to-face meetings
at the full year and
interim results
• Broker, investor and
analyst feedback
The Pebble Group plc Annual Report 2019
15
Sustainability
Environmental,
Social and Governance.
Environmental, social and governance (“ESG”) is at
the core of our business and we conduct our
operations with integrity, fairness and transparency.
The Group is committed to sourcing, designing and offering
products and services which support social responsibility
and environmental sustainability. The Group collaborates
with all stakeholders including its clients, Partners and
suppliers to ensure the integrity and reputation of the
brands with which it works.
Environmental
Reduction of single use plastics
Throughout 2019 our Brand Addition business has taken
steps to reduce further our impact on the environment
through a continued initiative to reduce its single use
plastic, working with the supply chain to minimise packaging
material used to transit goods. Across its warehouses,
plastics have been replaced with paper-based alternatives,
from packing tape to infill materials used to protect
products in transit. In offices, we have installed water
dispensers and provided employees with reusable bottles,
replacing single use plastic cups.
Reduction of energy use
In Europe, we reduced our site energy consumption in 2019
by a further 1.4%, compared to the prior year, through
careful monitoring of our usage and internal initiatives
focusing employee attention on energy reduction. Plus, we
have reduced the volume of product delivered into Europe
from China by airfreight by 10% in the year. Our aim is to
achieve year-on-year savings in both these areas.
Product sustainability
Product sustainability remains a key focus area for our
business and our stakeholders as we look to provide cost
effective solutions which allow us to offer reusable
products and sustainable materials. In 2019, we worked
closely with our suppliers to identify alternative materials
from sustainable sources for the production of goods, such
as recycled polyethylene terephthalate, organic cottons and
water and plant-based inks, so that we can help to support
the circular economy.
Accreditation
We continue to recognise the part we have to play in
protecting our environment and minimising our impact on
climate change. To assist this in the UK, our integrated
management system is certified to ISO 9001, ISO 14001 for
environmental management and ISO 50001 for energy
management. We also take part in an annual supplier
sustainability evaluation by Eco Vadis, in which we retained
our gold rating in 2019 and increased our percentile rank to
the top 1% of companies assessed in our sector.
Social
Promoting human rights
Our Brand Addition business procures product and
throughout this supply chain we are committed to ensuring
that our suppliers uphold the same level of compliance,
transparency and commitment to ESG as we do. Our
commitment is supported by detailed internal processes
and procedures based upon the Ethical Trading Initiative
(“ETI”) base code, SA8000 and the ten principles outlined in
the UN Global compact.
Adherence to these principles and processes is verified
through periodic internal assessment and on-site visits to
our suppliers. In 2019, we conducted a total of 311 vendor
assessments through our internal team of six trained
auditors, enabling us to monitor performance and ensure
that our existing suppliers and potential new suppliers meet
our strict ESG requirements. During these assessments, our
audit teams visit suppliers to review and validate their
factories, processes and workforce to ensure that their
commitments are being upheld.
People at the heart of our business
We have been accredited against Investors in People in the
UK for over a decade. Our people are at the heart of
everything we do and we recognise the value and
contribution they make to our business. We want our
people to enjoy spending time at work and, in return, we
support and encourage them to develop to their full
potential. We all have a part to play in this, working to the
best of our ability, doing the right thing, evolving our roles or
seeking that next promotion. We want to help our teams
increase their knowledge of our business and gain greater
job satisfaction throughout their careers with the business.
16
The Pebble Group plc Annual Report 2019
STRATEGIC REPORT Supporting employee growth and development
Over the last 12 months, we have invested substantially in
our internal programmes and developed a global Brand
Addition Management Development Programme for the
management teams and mid-level managers across our
business. It is in our DNA to lead by example, treating others
how we expect to be treated ourselves. This development
programme sets the culture and tone for the wider teams.
Supporting local communities
We actively encourage employees, through their personal
development plans, to develop and harness skills which are
of value to the many voluntary and community organisations
which rely on volunteers to achieve their objectives. Our
belief is that everyone has something to offer their local
community. Volunteering is a matter of personal choice and
we believe it helps personal growth.
Charity
Our Faciliscares programme started in 2019. This initiative
encourages charitable activities in our business and with our
Partner (customer) community. At our Facilisgroup events
we choose to support a locally based charity and work with
our Partners raising money and offering practical support.
This is a programme we are committed to through 2020
and promote participation throughout the year.
In the UK we have always supported Children in Need,
which helps to change the lives of disadvantaged children
and young people in the UK. We make donations every year
from employees who raise money through the “fun and
games” held across the business.
We operate a nominated Charity of the Year policy;
employees nominate and vote for a charity that is close to
their hearts. Our chosen charity for 2020 is the mental
health charity Mind and all funds raised throughout the year
from various activities will be donated to support this
important charity.
Recognition for charity work
In the UK we have been awarded with a Payroll Giving
Quality Mark Silver Award for commitment to good causes in
the local community, which reflects our efforts to foster a
culture of giving in the workplace by actively promoting our
Payroll Giving Scheme.
Governance
QCA Code
We are committed to effective corporate governance as
the basis for delivering long-term value growth and for
meeting our shareholder expectations for proper leadership
and oversight.
In adhering to these principles, the Company has chosen to
adopt the Corporate Governance Code for Small and
Mid-Size Quoted Companies 2018 published by the Quoted
Companies Alliance (the “QCA Code”), led by the Chairman,
to ensure that the Company and its subsidiary undertakings
are managed in a way that nurtures and protects the
medium to long-term benefit of all shareholders, supported
by effective and efficient decision making. Applying the QCA
Code forms an important part of this process, which serves
to mitigate and minimise risk and add value to our business.
For details on how we adhere to the ten principles of the
QCA Code see pages 32-35.
Risk management
We have a risk management framework in place through
which the risk of any adverse effects in the implementation
of the strategy is monitored. Details of our key risks can be
found on pages 26-29 of this report.
Ethical behaviour
We promote an ethical corporate culture through our
documented Code of Ethics, which is followed in every
territory in which we operate, with a zero-tolerance
approach towards any form of discrimination or unethical
behaviour relating to bribery, corruption or business
conduct. Non-compliance is reported to the Board.
At Board level, there are terms of reference for each of its
committees, requiring regular disclosure of Directors’ other
interests, and following a share dealing code, all of which
require high standards of behaviour.
The Company’s employment policies, such as those applying
to whistleblowing and anti-bribery, also assist in embedding
a culture of ethical behaviour for all employees and the
Company’s commitment to upholding human rights of all
individuals is clearly documented in its Modern Slavery Act
2015 Statement.
The Pebble Group plc Annual Report 2019
17
Key performance indicators
Measuring our
performance.
Financial (Group)
REVENUE GROWTH
ADJUSTED EBITDA*
RETURN ON SALES
EARNINGS PER SHARE
ADJUSTED
OPERATING CASH FLOW
CONVERSION
15.3%
£15.2m
+50.5%
14.2%
+3.3%
2.81p
+205.4%
93.4%
+19.1%
m
2
.
7
0
1
£
m
0
.
3
9
£
m
2
.
5
1
£
m
1
.
0
1
£
%
2
.
4
1
%
9
.
0
1
p
1
8
.
2
p
2
9
.
0
%
4
.
3
9
%
3
.
4
7
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
Why we measure it
Year-on-year growth in
revenue indicates
progress against both
short-term plans and
long-term strategy.
Comment
The growth in 2019
reflects the impact of
the Group’s successful
acquisition of
Facilisgroup in December
2018, its speedy
integration and continued
organic growth through
new client and Partner
acquisition.
Why we measure it
Year-on-year growth in
Adjusted EBITDA
indicates progress
against both short-term
plans and long-term
strategy. Management
believes this adjusted
measure is more
appropriate in
understanding the
underlying trading
performance of the
business.
Comment
The growth in 2019
reflects the growth
in revenue.
Why we measure it
Return on sales
calculated as Adjusted
EBITDA as a percentage
of revenue is an
important measure for
the Group illustrating its
ability to grow revenue
profitably whilst
maintaining control over
its margins and costs.
Comment
The Group increase of
3.3% in the year reflects
the positive impact of the
Facilisgroup acquisition
which generates Adjusted
EBITDA returns in excess
of 50%.
* See the CFO Report on page 25.
18
The Pebble Group plc Annual Report 2019
Why we measure it
This is used by the Group
to monitor the ability to
turn profit into cash.
Comment
2019 was a strong year
for the Group reflecting
good working capital
management practices
and the relatively low
capital investment
requirements of
the business.
Why we measure it
This measure illustrates the
profitability of the Group in
relation to the number of
shares in issue and is
therefore an important
metric in demonstrating
the delivery of value for
our shareholders.
Comment
Adjusted earnings per
share is operating profit
before amortisation of
acquired intangibles and
exceptional items less net
finance costs and taxation
divided by the weighted
average number of shares
in issue post Admission on
5 December 2019.
Basic earnings per share
were (12.56)p against
0.34p in 2018. The figure
for 2019 includes the
£13.4m (2018: £0.5m)
deferred consideration
payable on the acquisition
of Facilisgroup, which will
not occur again.
STRATEGIC REPORT Financial and non-financial (Group companies)
Brand Addition
ACCOUNTS >£1M
REVENUE FROM
EXISTING CUSTOMERS
Facilisgroup
PARTNER NUMBERS
SALES THROUGH @EASE
SPEND WITH
PREFERRED SUPPLIERS
22
+22.2%
£46.1m
+16.5%
149
+17.3%
$801m
+14.3%
$253m
+11.9%
2
2
8
1
m
1
.
6
4
£
m
5
.
9
3
£
9
4
1
7
2
1
m
1
0
8
$
m
1
0
7
$
m
3
5
2
$
m
6
2
2
$
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
Why we measure it
Brand Addition has
excellent levels of client
retention which provide
the business with good
visibility of revenues and
inform the view of
future performance.
Comment
The contribution in the
year from existing
customers at 98.7% is
consistent with 2018 and
is a positive indicator
for 2020.
Why we measure it
Responsibly increasing
Partner numbers whilst
maintaining Partner quality
is key to delivery of the
Facilisgroup strategy. The
number of Partners who
are part of our group are
tracked monthly to
demonstrate progress
against this target.
Comment
Facilisgroup increased
Partners by a net 22 in
the year.
Why we measure it
Tracking the volume of
sales processed through
our proprietary @ease
software allows the
Group to monitor both
the growth in like-for-like
Partner sales and also
overall growth in total
distributor sales.
Comment
Total sales through
@ease for 2019 were
$801m, a further positive
step in the direction of
our $1bn short-term
target in 2021.
Why we measure it
Consolidating Partner
spend through a
high-quality supply base
that provides excellent
service, favourable pricing
and rebates for our
Partners also generates
revenue for Facilisgroup.
The level of spend with
our preferred Partners is
tracked monthly to
demonstrate progress
against this target.
Comment
2019 was a further year
of growth with preferred
suppliers as our existing
Partners grew their
purchases through
our preferred supplier
network alongside
the introduction
of new Partners to
our community.
Why we measure it
Brand Addition focuses
upon developing long-
term relationships
with large corporates
which outsource their
requirements for
promotional products
and related services.
Increasing the number of
clients with annual spend
greater than £1m is one
way of demonstrating
the business’ success
in retaining and
attracting clients against
this objective.
Comment
The increase from 18 in
2018 to 22 in 2019 shows
the continued success of
the business in delivering
on its goal of increasing
spend with existing
customers and targeted
conversion of new
business opportunities
that become key,
long-term accounts.
The Pebble Group plc Annual Report 2019
19
Chief Financial Officer’s review
Significant growth.
Overview
The Group generated significant growth in revenue and
Adjusted EBITDA in 2019, increasing by 15.3% and 50.5%
respectively. Facilisgroup, acquired in December 2018, was a
key driver of this growth with 2019 being the first full year of
trading under The Pebble Group ownership. This acquisition
materially changed the Group’s offering and we now provide
products, services and technology across a diverse range of
customers in the promotional products sector. The Group
also delivered organic revenue growth in 2019. Facilisgroup
implemented a record number of new Partners (22) and
Brand Addition generated growth from both existing
customers and new customer acquisition, resulting in a 6.1%
increase in revenue.
Upon Admission to AIM, the Group became debt free, having
repaid all outstanding loans from the previous private equity
ownership financing structure and satisfying the deferred
consideration outstanding from the acquisition of
Facilisgroup. At the year end, it had a net cash balance of
£2.5m, compared to net debt of £62.2m at 31 December
2018 restated.
The Group’s balance sheet is strong and its liquidity position
is robust with cash balances of £9.9m at 7 April 2020. This
includes an amount of £7.7m drawn down on the Company’s
£10m committed revolving credit facility on 26 March 2020.
The delivery of our successful IPO in December 2019 has been
reflected in these numbers using merger accounting. This
results in the transaction being reflected as though the Group
and its new holding company had always been in existence.
Review of the business
The Group chooses to use adjusted measures as key
performance indicators in addition to those reported under
IFRS, as they better reflect the underlying performance of
the business. These adjusted measures exclude certain
non-operational and exceptional items, which have been
consistently applied in both periods presented. The
information presented below should also be considered in
conjunction with the segmental analysis in the Chief
Executive’s Review and note 4, which provide further detail on
the performance of the separate businesses within the Group.
2019
2018
Growth
Revenue
Adjusted EBITDA
£107.2m
£15.2m
Adjusted operating cash flow
£14.2m
£93.0m
£10.1m
£7.5m
15.3%
50.5%
89.3%
Net cash/(debt) position
£2.5m £(62.2)m
Adjusted earnings per share
2.81p
0.92p
205.4%
20
The Pebble Group plc Annual Report 2019
STRATEGIC REPORT £’000
Revenue
Gross profit
Gross profit margin
Adjusted EBITDA
Adjusted EBITDA margin
Depreciation and
amortisation
Exceptional items
Operating (loss)/profit
Net finance costs
(Loss)/profit before tax
Tax
(Loss)/profit for the year
Adjusted weighted
average number of
shares
Adjusted EPS
Weighted average
number of shares
Basic EPS
2019
2018
(Restated)
£107.2m
£93.0m
£40.1m
37.4%
£15.2m
14.2%
£(2.7)m
£(17.3)m
£(4.9)m
£(5.4)m
£(10.3)m
£(2.0)m
£(12.3)m
£28.1m
30.2%
£10.1m
10.9%
£(1.6)m
£(1.3)m
£7.2m
£(5.8)m
£1.3m
£(1.0m)
£0.3m
Variance
£14.2m
£12.0m
-
£5.1m
-
£(1.1)m
£(16.0)m
£(12.1)m
£0.4m
£(11.6)m
£(1.0)m
£(12.6)m
167,450,893 167,450,893
0.92p
2.81p
-
1.89p
97,390,317
92,016,939
5,373,378
(12.56)p
0.34p
(12.90)p
Revenue
Revenue for FY19 was £107.2m (2018: £93.0m), representing
growth of 15.3%. Of this increase, £8.6m comprised a full 12
months’ revenue from Facilisgroup, which contributed only
one month in 2018. In the year, Facilisgroup delivered 7%
organic growth (£0.9m) in revenue on a like-for-like basis
from existing customers and a further £0.7m from 22 new
Partner implementations. Revenue in the Brand Addition
business increased by £5.6m in FY19, of which £1.2m came
from new customers and £4.4m from existing customers.
Gross profit
Gross profit as a percentage of turnover increased during
the year by 7.2ppt from 30.2% to 37.4%, largely reflecting
the impact of the Facilisgroup acquisition, which delivers
100% gross profit margins. This overall increase also
includes a 1.7ppt uplift in the gross profit margin of the
Brand Addition business, which moved to 31.4% in the year
(2018: 29.7%), as we achieved our objective of maintaining
gross margins whilst growing revenue.
Adjusted EBITDA
Adjusted EBITDA increased by £5.1m (50.5%) in the year,
reflecting the £4.6m full year impact of the Facilisgroup
acquisition and growth in the Brand Addition business of
£1.1m less central costs of £0.6m. The Adjusted EBITDA
margin increased by 3.3ppt from 10.9% to 14.2%.
Operating (loss)/profit
The £4.9m operating loss for the year (2018 restated: £7.2m
operating profit) includes £17.3m of exceptional items (2018
restated: £1.3m). £13.4m of this arises on the settlement of
deferred consideration payments for the acquisition of
Facilisgroup with a further £3.9m of IPO related costs,
further details for which are provided below.
Depreciation and amortisation
The total charge in the year was £2.7m, of which £1.5m
(2018 restated: £0.6m) related to the amortisation of
intangible assets. In accordance with IAS 38, the Group
capitalises the costs incurred in the development of its
software and the increase in the year represents the full
year impact of the ownership of Facilisgroup. Given the
Group’s intention to accelerate the growth of Facilisgroup
via increased investment into its technology, it is expected
that this charge will increase in the next financial year.
The Pebble Group plc Annual Report 2019
21
Chief Financial Officer’s review
Exceptional items
Exceptional items
Reorganisation and
restructuring
Transaction and IPO
related costs
Deferred consideration
payments to
Facilisgroup vendors
Total
2019
2018
Variance
-
£0.2m
£(0.2)m
£3.9m
£0.7m
£3.2m
£13.4m
£17.3m
£0.4m
£1.3m
£13.0m
£16.0m
Exceptional costs of £17.3m (2018 restated: £1.3m) comprise
£3.9m, relating to the Group’s Admission to AIM in
December 2019, which include £1.3m accelerated interest
costs, due to the previous providers of mezzanine debt
finance that crystallised at listing, and £0.75m in respect of
a one-off conditional IPO bonus accrual agreed by the
former board payable in the event of listing. Both these
items were identified as debt-like items and were funded by
cash left behind in the business on IPO. A further £1.3m
related to the write-off of unamortised debt fees, arising
under the previous private equity ownership, and one-off
deal related items arising on IPO of £0.55m.
£13.4m (2018 restated: £0.5m) arose on settlement of
deferred consideration payments to the vendors of
Facilisgroup. As the sale and purchase agreement for the
acquisition of Facilisgroup specified deferred payments would
only be payable in the event the vendors remained as
employees of the Group, IFRS 3 requires these payments are
treated as remuneration for post-acquisition services. As
such, the costs are charged to the profit and loss account over
the deferral period rather than being held on the balance
sheet as an intangible asset. This has resulted in a restatement
of the 2018 income statement to reflect the application of this
principle for one month, following the acquisition, in 2018. As
all remaining amounts outstanding were settled on Admission
to AIM, the balance of amounts due has been included as an
exceptional item in 2019. As these payments were funded by
amounts raised at IPO, this treatment has no impact on the
Group’s underlying cash position. Further detail has been
provided in note 7.
Finance costs
Net costs of £5.4m in the year (2018 restated: £5.8m)
include the costs relating to Group’s capital structure prior
to Admission to AIM. As the debt associated with this capital
structure was repaid at Admission, there will be a significant
reduction in net finance costs moving forward.
Taxation
The total taxation charge was £2.0m giving rise to an
effective rate of tax of -19.7% (2018 restated: 76.8%). The
effective rate of tax in 2018 was higher than the UK
standard rate of taxation as a result of the impact of
corporate interest rate deductions disallowed for taxation
purposes. The same principle applies in the current year,
but the impact of this is offset by the tax treatment of the
exceptional item relating to Facilisgroup deferred
consideration for which no tax deduction is available. Both
these items relate to the Group’s debt structure prior to
IPO; in future years we would expect the Group’s effective
rate of tax to move closer to the UK corporation tax rate,
although this will be impacted by the amount of profit the
Group earns in overseas jurisdictions where rates are higher
than the UK.
22
The Pebble Group plc Annual Report 2019
STRATEGIC REPORT Earnings per share
The earnings per share analysis in note 11 covers three
metrics, adjusted earnings per share (profit before
amortisation of acquired intangibles and exceptional items
less net finance costs and taxation divided by the number of
shares in issue post Admission on 5 December 2019),
pro-forma earnings per share (profit attributable to equity
holders divided by the number of shares in issue post
Admission on 5 December 2019) and statutory earnings per
share (profit attributable to equity holders divided by the
weighted average number of shares in issue during the
year). Adjusted earnings (profit before amortisation of
acquired intangibles and exceptional items less net finance
costs and taxation divided by the weighted average number
of shares in issue post Admission on 5 December 2019) was
£4.7m (2018 restated: £1.5m) resulting in a 205% increase in
adjusted basic earnings per share from 0.92p per share to
2.81p per share. Pro-forma basic earnings per share (profit
attributable to equity holders divided by the weighted
average number of shares in issue post Admission on
5 December 2019) was a loss of 7.36p per share (2018: gain
of 0.18p per share). This is the impact of the treatment of
deferred payments on the Facilisgroup acquisition as
discussed above.
Dividends
In line with the Group’s dividend policy set out at IPO, the
Directors do not intend to declare a dividend in respect
of 2019. At IPO, the Group stated its intention to pay
dividends to shareholders in respect of the full year ending
31 December 2020 in an aggregate annual amount
equivalent to approximately 30% of net profits, retaining the
balance of earnings from operations to finance the future
expansion of the Group. The Board will review the decision
to pay a dividend in FY20, as the full impact of COVID-19 on
the Group’s operations becomes clearer, and will provide an
update in the Company’s half yearly results, scheduled for
announcement in September 2020.
Cash flow
The Group had a cash balance of £8.9m at 31 December 2019
(2018: £8.2m). Of this cash, £2.8m related to proceeds received
from the IPO that were left behind by the selling shareholders.
Cash flow for the year is set out below.
Adjusted EBITDA
Movement in working capital
Capital expenditure
Adjusted operating cash flow
Tax paid
Net finance cash flows
Acquisitions and financing
Exceptional items
Exchange loss
Net cash flow
2019
2018
Variance
£15.2m
£1.1m
£(2.1)m
£14.2m
£(2.5)m
£7.8m
£(1.3)m
£(17.3)m
£(0.2)m
£10.1m
£(1.4)m
£(1.2)m
£7.5m
£(1.0)m
£7.4m
£(10.2)m
£(1.3)m
£(0.5)m
£5.1m
£2.5m
£(0.9)m
£6.7m
£(1.5)m
£0.4m
£8.9m
£(16.0)m
£0.3m
£0.7m
£1.9m
£(1.2)m
The Pebble Group plc Annual Report 2019
23
Chief Financial Officer’s review
Adjusted operating cash flow
Operating cash flow before tax payments, net finance costs,
payments in respect of acquisitions and exceptional items
increased by £6.7m in the year to £14.2m, representing
Adjusted EBITDA to operating cash flow conversion of 92.8%
(2018: 74.3%). This includes £1.1m IPO related accruals;
adjusting for this the underlying operating cash flow
conversion was 86.2% (2018: 74.3%). This is an important
metric for the Group that is monitored consistently to
ensure it remains strong whilst retaining an appropriate level
of investment in capital expenditure to support future
growth. Group investing and exceptional cash outflows
relate principally to the settlement of third-party debt and
financing facilities outstanding at the time of IPO.
Balance sheet and shareholders’ funds
Net assets increased in the year by £66.3m. The principal
reason for this was the Group’s IPO, which resulted in all
debt being repaid to previous stakeholders. The balance
sheet is summarised below.
2019
2018
Variance
£54.6m
£5.9m
£8.9m
£53.6m
£5.7m
£8.2m
£1.0m
£0.2m
£0.7m
£(6.3)m
£(70.3)m
£64.0m
Non-current assets
Working capital
Cash
Borrowings
Other net assets/
(liabilities)
Net assets/(liabilities)
£62.9m
£(0.2)m
£(0.6)m
£(3.4)m
£0.4m
£66.3m
Non-current assets
Non-current assets are the most significant balance sheet
category, of which £35.9m (2018 restated: £36.0m) is
goodwill arising on previous acquisitions. Non-current assets
also include £9.8m (2018: £10.6m) of customer relationship
intangible assets, £4.5m (2018 restated: £4.0m) of software
development costs and £6.1m (2018: £4.8m) of PPE.
Software development costs arise from ongoing investment
in Group software to ensure the technology services
24
The Pebble Group plc Annual Report 2019
supplied to its customers remain market leading and
differentiated from its competitors. The costs are
capitalised in accordance with IAS 38 and amortised over
the period which the Group expects to generate benefit
from the development. As the Group pursues its strategic
objectives to accelerate the growth of Facilisgroup, we
expect this investment to increase in the short term.
Working capital
Working capital has reduced in the year as current liabilities
include £2.8m of fees and debt-like items arising on IPO
that will be settled during 2020.
Cash
Cash balances at 31 December 2019 were £8.9m, an increase
of £0.7m on 2018. This includes £2.8m of cash left in the
business to settle debt-like items and fees arising at IPO.
Borrowings
Borrowings reduced significantly in the year, as all debt
was settled at IPO. The balance of £6.3m outstanding at
31 December 2019 represents amounts due in respect of
leases utilised by the Group brought onto the balance sheet
on adoption of IFRS 16.
Post-year-end activity
Actions to mitigate the impact of COVID-19
As a result of the impact of the COVID-19 pandemic on the
Corporate Programmes business, a number of cost-saving
measures have been implemented to support the business
as it navigates through this unprecedented challenge.
Wherever possible, advantage has been taken of
government support offered in the territories within which
we operate and employees have been furloughed, in areas
of the business where activity levels mean this course of
action is necessary. In addition, costs have been reduced
further through temporary salary reductions for Brand
Addition staff earning over specified salary levels who
remain in work. This includes The Pebble Group Board. The
percentage of salary reduction is weighted by salary
banding and seniority with the lower paid taking no salary
reduction and the Board taking the greatest reduction.
STRATEGIC REPORT Adjusted profit before tax
Adjusted profit before tax means profit before tax
before amortisation of acquired intangible assets and
exceptional items.
Adjusted earnings per share
Adjusted EPS represents adjusted earnings divided by a
weighted average number of shares in issue post Admission
on 5 December 2019; this has been applied retrospectively to
the number of shares in issue at 31 December 2018 and is
disclosed to indicate the underlying profitability of the Group.
Adjusted operating cash flow
Adjusted operating cash flow is calculated as
Adjusted EBITDA less movements in working capital
and capital expenditure.
Claire Thomson
Chief Financial Officer
8 April 2020
All non-essential revenue expenditure has been cancelled,
along with non-committed capital expenditure.
Management has taken this action to ensure the business is
able to emerge positively as the effects of the pandemic
start to subside. The cost reduction measures amount to a
saving of c.£0.5m per month, effective from the beginning of
April 2020. The level of mitigation required will be kept under
close review and, if necessary, further actions will be taken.
Cash
The Group has cash balances of £9.9m at 7 April 2020,
which includes an amount of £7.7m drawn down on
26 March 2020, leaving a further £1.3m available in addition
to amounts remaining to cover ancillaries of the Company’s
£10m committed revolving credit facility.
Use of non-GAAP measures in the Group financial
statements
The Group has used certain measures that it believes assist
a reader of the Report and Accounts in understanding the
business. The measures are not defined under IFRS and
therefore may not be directly comparable with adjusted
measures presented by other companies. The non-GAAP
measures are not intended to be a substitute for or
superior to any IFRS measures of performance; however,
they are considered by management to be important
measures used in the business for assessing performance.
The following are key non-GAAP measures identified by the
Group and used in the Strategic Review and financial
statements:
Adjusted EBITDA
Adjusted EBITDA means operating profit before
depreciation, amortisation and exceptional items.
Adjusted operating profit
Adjusted operating profit means operating profit before
amortisation of acquired intangible assets and
exceptional items.
The Pebble Group plc Annual Report 2019
25
Risk management
Managing our key
risks and uncertainties.
As part of the process for Admission to AIM, the
Group reviewed and updated its assessment of
principal risks and uncertainties and mitigating
actions in place in respect of these risks. These
were then considered again by the Board in
preparing this Annual Report. The items
referred to below are regarded as the key risks
for the Group. These are not the only risks that
could affect Group performance but in the
opinion of the Board are those which are
currently the most significant and specific to the
Group’s business.
Risk management framework
Board
Responsible for risk management
Audit
Committee
Remuneration
Committee
Non-executive Directors
Market risks
Risk and potential impacts
COVID-19
Whilst it is impossible to estimate the full impact of the
pandemic on the Group’s performance at this stage, it
poses a risk to demand for Group’s products and services
which could impact the Group’s ability to meet its revenue
and EBITDA targets.
How COVID-19 is currently impacting the Group’s trading:
Revenue source
Contribution to
Adjusted EBITDA in
FY19
Status
Facilisgroup
Facilisgroup operates primarily on
a SaaS recurring revenue model
(c.68% of divisional revenue)
34%
Minor disruption
Customer (Partner) numbers continue to grow in line with
management’s expectations and, although the sales
processed per Partner are expected to decline in the year as
a result of the virus, the business remains on track for FY20.
26
The Pebble Group plc Annual Report 2019
STRATEGIC REPORT Risk and potential impacts
Revenue source
Contribution to
Adjusted EBITDA in
FY19
Status
Brand Addition
66%
Consumer Promotions
(c.30% of divisional revenue)
Consumer Promotions supports
the sales of clients
Corporate Programmes
(c.70% of divisional revenue)
Corporate Programmes supports
clients’ general marketing activities
Mitigating activities
A COVID-19 mitigation strategy is being implemented
(detailed below) and the Board’s current view is that the
Company is well placed to manage the disruption and is
confident in the long-term prospects for the business. The
strength and robustness of the Facilisgroup business model
is being demonstrated in this uncertain trading environment
and new business activity in Brand Addition in Q120
demonstrates the attractiveness of its offering and the
constitution of its client base, together with its geographical
and sector diversity.
• Business operations are fully functioning, despite the
disruption, and work patterns, which maintain the team
dynamic and effectiveness whilst minimising risk, have
been put in place.
Minor disruption
Trading remains in line with management expectations.
Orders are placed early in the year for clients’ H2 20
promotions. Order values amounting to c.70% of our full
year expectations have already been received, which is
slightly ahead of the prior year.
Major disruption
A substantial reduction has been experienced, as clients
take understandable measures to protect their people
through home office working and the cancelation of
travel, conferences and events.
We cannot predict the longevity of this situation but there
will be a financial impact resulting from COVID-19 in FY20.
New business activity in Corporate Programmes in the
year to date has been strong. The Group currently
expects to benefit from this new business in H220.
• The Pebble Group has strong cash balances, no debt, a
committed revolving credit facility of £10m, of which £7.7m
has been drawn down, and an efficient working capital
model. New measures aimed specifically at managing cash
during the outbreak are currently being implemented,
including a hold on non-committed capital expenditure.
• Product supplies from China and elsewhere have been
successfully maintained to date and this is expected
to continue.
The Pebble Group plc Annual Report 2019
27
Risk management
Market risks
Risk and potential impacts
Mitigating activities
Macroeconomic environment
If there were to be a general economic downturn either
globally or locally in an area in which the Group operates it
may have an impact on demand for the Group’s products
and services which could impact the Group’s ability to meet
its revenue and EBITDA targets.
We expect the technology-based subscription model of the
Facilis business to be more resilient in this scenario from
any initial shock and revenues in the year of impact would
be unaffected. The diversification of Brand Addition
revenues across geographies and sectors provides some
protection against the impact of a reduction in demand and
the flexibility of the operating model below gross margin
gives the business the ability to protect profits. Both
businesses are highly cash generative with the quality of the
client base in Brand Addition supporting cash flow through
debtor collections and the sale of stock.
Strategic
Risk and potential impacts
Mitigating activities
Concentrated client base
Brand Addition has a relatively small number of key clients
and in 2019 generated 64% of Group revenue from the top
20 clients. A loss or significant reduction in activity from one
of our major clients could materially affect the Group’s
ability to meet its revenue and EBITDA targets.
The acquisition of Facilisgroup in December 2018, which has a
diversified customer base and represents 34% of Group
EBITDA, means that the impact of the loss of a key Brand
Addition client on Group EBITDA is much reduced. In addition,
delivering on the strategic objective of the Brand Addition
business to grow through new client acquisition means the
Group EBITDA impact of any one client is further diluted.
Acquisition risk
The Group has a track record of achieving growth through
acquisition. Any future acquisition could give rise to
unforeseen risks for the Group, such as loss of key
customers or key personnel, complex and extended
integration processes absorbing significant amounts of
senior management time or unforeseen liabilities. A poorly
implemented acquisition could have a damaging impact on
the Group’s financial position and reputation.
The Group takes great care in identifying potential
acquisition targets and they are typically businesses with
whom senior management have an existing relationship.
All proposed acquisition targets are subject to robust
due diligence using internal teams with extensive industry
experience supported by external advisers where the
Group does not have the specialist in-house skills.
Financial
Risk and potential impacts
Mitigating activities
Currency and foreign exchange
A proportion of the Group's revenue is denominated in
foreign currency, principally US Dollars and Euros, while the
Group’s reporting currency is Pounds Sterling. The Group is,
therefore, exposed to the risk that adverse exchange rate
movements could cause its costs to increase (relative to its
reporting currency) and could result in reduced profitability.
Where it is considered appropriate the Group uses
hedges to reduce exposure to currency risk; however,
these may not always be effective and there may be
some residual currency risk.
28
The Pebble Group plc Annual Report 2019
STRATEGIC REPORT Operational
Risk and potential impacts
Mitigating activities
Retaining and attracting key personnel
Attracting and retaining experienced and appropriately skilled
personnel is critical to the future success of the Group. Not
having the right people and skills within the business could
impact on the Group’s ability to service its customers and
grow the business.
Reliance on IT systems
The Group’s activities are reliant on the effective operation
of its IT platforms and infrastructure. In the event of an
incident, the Group would initiate its business continuity and
disaster recovery procedures. However, prolonged disruption
could impact the Group’s ability to hit revenue and
EBITDA targets.
Breach of IT security
A breach of IT security could result in a loss of business for
the Group, give rise to a potential liability through litigation
and damage the Group’s reputation with customers giving
rise to a loss of goodwill.
We value our people highly, invest across our Group in their
development and support them in achieving their potential.
We offer competitive compensation packages that are
reviewed regularly and regularly survey our employees to
monitor employee engagement levels and identify
opportunities for further improvement. Attrition rates
across sites and geographies are monitored monthly to
enable mitigating actions to be taken quickly if necessary.
The Group has an experienced and dedicated IT team
with support from external consultants where necessary.
Disaster recovery and business continuity procedures are
monitored and updated regularly by both the IT and
operations teams.
The Group implements a robust testing process on
systems and software that includes external penetration
testing by software consultants. Disaster recovery plans
have been developed to respond to such incidents to
ensure the business is able to recover with limited
interruption should an incident arise.
The Strategic Report, which includes the Chairman’s Statement, the Chief Executive Officer’s Review, the business model
and strategy, the Group Financial Review and the principal risks and uncertainties, was approved by the Board and signed
on its behalf by:
Christopher Lee
Chief Executive Officer
8 April 2020
The Pebble Group plc Annual Report 2019
29
Chairman’s introduction to governance
Committed to effective
corporate governance.
The Board is committed to effective corporate
governance as the basis for delivering long-term
value growth and for meeting shareholder
expectations for proper leadership and oversight.
In adhering to these principles, the Company has chosen to
adopt the Corporate Governance Code for Small and
Mid-Size Quoted Companies 2018 published by the Quoted
Companies Alliance (the “QCA Code). It is the role of the
Board, led by the Chairman, to ensure that the Company
and its subsidiary undertakings (the “Group”) are managed
in a way that nurtures and protects the medium to long-
term benefit of all shareholders, supported by effective and
efficient decision making. Applying the QCA Code forms an
important part of this process, which serves to mitigate and
minimise risk and add value to our business.
The Company and its current Board and Board Committees
were constituted in December 2019 as part of the
preparation for Admission to AIM on 5 December and
therefore this report relates to the days post IPO to the
end of 2019.
Richard Law
Chairman
8 April 2020
30
The Pebble Group plc Annual Report 2019
CORPORATE GOVERNANCE Board structure and composition
The Board comprises five Directors, two Executive Directors
and three independent Non-executive Directors, the
combination of which the Board believes represents a blend
of different experiences and backgrounds, further details of
which can be found in the Board biographies on pages 36-37.
The Board believes that its composition brings a desirable
range of skills and experience in light of the Company’s
challenges and opportunities following Admission, while at
the same time ensuring that no individual (or small group of
individuals) can dominate the Board’s decision making.
Board Committees
The Audit Committee
The Audit Committee chaired by Yvonne Monaghan has
primary responsibility for monitoring the quality of internal
controls to ensure that the financial performance of the
Group is properly measured and reported on. It will receive
and review reports from the Group’s management and
external auditors relating to the interim and annual accounts
and the accounting and internal control environment in
operation throughout the Group and recommend external
auditors for reappointment. The Audit Committee reports
to the Board on all these matters and will meet at least
twice in each financial year. Richard Law and Stuart
Warriner are the other members of the Audit Committee.
Further information can be found in the Audit Committee
Report on pages 38-39.
The Remuneration Committee
The Remuneration Committee chaired by Stuart Warriner has
responsibility to review the performance of the Executive
Directors, Chairman of the Board and other senior
management of the Group and make recommendations to
the Board on matters relating to their remuneration and
terms and conditions of service. This includes making
recommendations on proposals for the granting of share
options and other long-term equity incentives.
The Remuneration Committee will meet as and when
necessary, but at least twice each year. In exercising this role,
the members of the Remuneration Committee will have
regard to the recommendations put forward in the QCA
Code and, where appropriate, the QCA Remuneration
Committee Guide and associated guidance. The
remuneration of Non-executive Directors (other than the
Chairman of the Board) will be a matter for the Chairman and
the executive members of the Board. Richard Law and
Yvonne Monaghan are the other members of the
Remuneration Committee. Further information can be found
in the Remuneration Committee Report on pages 40-44.
The Nomination Committee
The Nomination Committee chaired by Richard Law has
responsibility to identify and nominate for the approval of the
Board candidates to fill Board vacancies as and when they arise.
The Committee also reviews the structure, size, diversity
and composition of the Board and makes recommendations
concerning the annual reappointment of Directors and
identification and nomination of new Directors. The
Committee will retain as necessary external selection
consultants in support of this responsibility.
In respect of new appointments, the Committee will
undertake an evaluation of the balance of skills, experience,
independence and knowledge on the existing Board and, in
the light of this evaluation prepare a detailed description of
the role, candidate profile and capabilities required for the
particular appointment.
The Nomination Committee will meet as and when necessary,
but at least twice a year. Yvonne Monaghan and Stuart Warriner
are the other members of the Nomination Committee.
The Pebble Group plc Annual Report 2019
31
CORPORATE GOVERNANCE
Corporate governance statement
Delivering
long-term growth.
Principle 1: Establish a strategy and business model which promote long-term value for shareholders
The Board has a clear strategy for delivering long-term
shareholder value.
The Company’s business model and strategy are set out on
pages 13-14 of this report and the principal risks are set out
on pages 26-29.
The Group’s vision is to become the partner of choice for
both global brands that use promotional products as a key
stakeholder engagement tool and SME distributors that seek
to professionalise and grow their promotional products
business in North America. The Group has a proven track
record of delivering strong organic growth, as well as growth
through acquisition.
The Group’s strategy is to continue its profitable growth in
the following ways:
• attract additional clients;
• increase spend from existing clients by extending existing
relationships into new geographies as well as increasing
market share in Europe, the US and Asia;
• attracting additional partners using the Facilisgroup software;
and
• increasing the number of services offered to Facilisgroup
partners.
The Board holds at least one strategy session each year. An
update on strategy will be given in the Strategic Report that
is included each year in the Annual Report and Accounts.
There is a risk management framework in place through
which the risk of any adverse effects in the implementation
of the strategy is monitored.
Principle 2: Seek to understand and meet shareholder needs and expectations
Prior to Admission, the Company’s executive management
undertook a roadshow which has informed the Company as
to its shareholders’ expectations following Admission. There
will be an active dialogue maintained with shareholders
through a planned programme of investor relations. This
activity is a keystone of the Company’s corporate
communications programme and is headed by the Chief
Executive Officer supported by members of the Group
finance team.
The Company has engaged advisers to support the Group
finance team with both presentation of key information to
the market and to provide feedback directly to the Board
from investor meetings, webinars and events. An update on
investor sentiment and or shareholding changes is provided
at every Board meeting.
There is also a designated email address for investor
relations, investors@thepebblegroup.com, and all contact
details are included on the Group’s website.
The Board will attend the Company’s AGM and will be
available to answer questions posed by shareholders, both
during the meeting and following the AGM.
The CEO and CFO will regularly meet with shareholders and
analysts following the release of key information (including
financial information) to the market and the Chairman is also
available to meet with major shareholders if required.
32
The Pebble Group plc Annual Report 2019
Principle 3: Take into account wider stakeholder and social responsibilities and their implications
for long-term success
We recognise that we are responsible not only to our
shareholders and employees, but to a wider group of
stakeholders (including our customers and suppliers) and
the communities in which we operate.
The Company is committed to the highest standards of
corporate social responsibility in its activities and this is
outlined in the Section 172 Statement on page 15 and
Environmental, social and governance on pages 16-17.
The Company’s key stakeholder groups are:
• employees;
• shareholders (both institutional and private);
• clients and Partners; and
• suppliers.
Employees
Employees are consulted throughout the organisation and
are given many opportunities to provide feedback during
regular meetings and annual appraisals. Recruitment and
retention have also been supported by this regular
communication. There is a comprehensive Code of Conduct
in place setting out the ethical expectations of all employees.
Shareholders
An active dialogue is maintained with shareholders by the Group
finance team supported by the Chairman, CFO and CEO.
Customers and partners
Customer requests and queries are handled courteously and
promptly by the customer services team. Product ranges are
refreshed and updated by our design teams to meet the
changing needs of our new and existing customer base.
Suppliers
We build long-standing relationships with our suppliers
which therefore understand our values and expectation of
business behaviour. There is a comprehensive Code of
Practice that is issued to all UK, European, US and Far East
suppliers enforcing the importance of control and
supervision in their work environments.
Relationships with customers and suppliers alike are
maintained throughout the organisation, providing a strong
engagement and feedback loop.
Social responsibility
The Group is committed to sourcing, designing and offering
products which support social responsibility and
environmental sustainability. The Group collaborates with all
stakeholders including its clients and suppliers to ensure the
integrity and reputation of the brands it works with.
Through its audit processes, continuous supplier review and
formal contracting, the Group manages and supports its
clients with a socially responsible supply chain including safe
working conditions and best practice employment terms.
For more information see pages 16-17.
Principle 4: Embed effective risk management, considering both opportunities and threats,
throughout the organisation
The Board uses a considered approach to risk management
with the need to accept a certain level of strategic risk to
achieve its objectives of capital growth for shareholders. The
risks facing the business are set out in the Admission
Document and on pages 26-29 of this report.
The Company has in place a risk management framework
and risk register which assist the Board in identifying,
assessing, and mitigating the risks faced by the Company to
an acceptable level.
This covers:
• the Board’s appetite to risk;
• the responsibility for internal control;
• the Board process for the review of processes and
controls, including independent checking by other
departments or a formal internal audit function; and
• risk responsibility, mitigating actions and monitoring
processes in place.
The risk management framework is reviewed at Audit
Committee meetings and reported to the Board on a
bi-annual basis.
The Pebble Group plc Annual Report 2019
33
Corporate governance statement
Principle 5: Maintain the board as a well-functioning, balanced team led by the chair
The Directors acknowledge the importance of high
standards of corporate governance and believe the QCA
Code provides the best fit for the Group by setting out a
standard best practice for small and mid-sized quoted
companies, particularly those on AIM.
The Board includes a balance of Executive and Non-
executive Directors, with three Non-executive Directors
and two Executive Directors. The Board is managed by the
Chairman, who has the overall responsibility for strategy,
risk and corporate governance.
The Board's activities are supported by Nomination, Audit
and Remuneration Committees. Details of these Committees
are set out on page 31 of this report and their terms of
reference are set out on the Company’s website.
The Board and its Committees receive high quality accurate and
timely information on a regular basis (daily, weekly or monthly as
appropriate). The Board meets at least ten times per year.
All the Directors have appropriate skills and experience for
the roles they perform at the Company, including as
members of Board Committees. They are subject to
election by shareholders at the first AGM after their
appointment to the Board. They will continue to seek
reappointment at least once every three years in
accordance with our Articles of Association. Details of the
Director seeking re-election at the 2020 AGM can be found
in the Directors’ Report and in the Notice of the Annual
General Meeting.
The Company is satisfied that the current Board is
sufficiently resourced to discharge its governance
obligations on behalf of all stakeholders and will consider
the requirement for additional Non-executive Directors as
the Company fulfils its growth objectives.
The Board believes that the three Non-executive Directors
are independent, with Yvonne Monaghan fulfilling the role of
Senior Independent Director.
Principle 6: Ensure that between them the directors have the necessary up-to-date experience,
skills and capabilities
The Board is represented by an appropriately diverse mix of
individuals, given its size. Experiences are varied and
contribute to maintaining a balanced Board that has the
appropriate level and range of skill to push the Company
forward. Details of the skills and experience of the Directors
are provided on pages 36-37 of this report and also on the
Company’s website.
The Board is not dominated by any one individual and all
Directors have the ability to challenge proposals put
forward to the meeting and decisions are reached
democratically. The Board and Committees receive training
as appropriate, including technical updates on the latest
accounting, auditing, tax and reporting developments. The
balance of skills of the Board is reviewed at least on an
annual basis. The Board has access to professional advisers
at the Company’s expense if necessary.
The Directors also receive regular briefings and updates
from the Company's Nominated adviser in respect of
continued compliance with, inter alia, the AIM Rules.
The Company’s statement on its Audit, Remuneration and
Nomination Committees can be found on page 31 of this
report and on the website.
Principle 7: Evaluate board performance based on clear and relevant objectives, seeking
continuous improvement
The Board has committed to performing a formal evaluation
of performance in its first year of existence. The outcomes
of this will be described in the Company’s Annual Report
and Accounts for the year ended 31 December 2020. The
Company is currently formalising this process.
The key assessments that will be made in relation to the
effectiveness of the Directors are:
• contributions are relevant and effective;
• skills remain current and relevant for their role on the Board;
• they are committed and able to devote a suitable amount
of time to undertaking their duties as a Director; and
• if their role is as an independent Director, that they remain
independent.
The Nomination Committee may use the results of the
evaluation process when reviewing the composition of the
Board for selecting any new Board members, and in
succession planning for the Directors of the Board as well as
key Executive Team members. The Board considers
succession planning to be a matter of high priority and this
is reviewed annually by the Nomination Committee where
recommendations are then presented to the Board for
consideration. Succession planning requirements relating to
all members of the executive management team are
considered by the CEO on a quarterly basis.
34
The Pebble Group plc Annual Report 2019
CORPORATE GOVERNANCE Principle 8: Promote a corporate culture that is based on ethical values and behaviours
The Company has a responsibility towards its employees
and other stakeholders. The Board promotes an ethical
corporate culture by having a documented Code of Ethics
which is followed in each territory in which it operates, with
any areas of non-compliance reported to the Board.
At Board level, there are terms of reference for each of its
Committees, requiring regular disclosure of Directors’ other
interests, and following a share dealing code, all of which
require high standards of behaviour.
The Company’s employment policies, such as those applying
to whistleblowing and anti-bribery, also assist in embedding
a culture of ethical behaviour for all employees and the
Company’s commitment to upholding human rights of all
individuals is clearly documented in its Modern Slavery Act
2015 Statement.
The Company's policies set out its zero-tolerance approach
towards any form of discrimination, inappropriate or
unethical behaviour relating to bribery, corruption or
business conduct in all territories in which it operates.
This culture is set by the Board and regularly considered
and discussed at Board meetings.
Principle 9: Maintain governance structures and processes that are fit for purpose and support
good decision making by the board
The Board has a formal schedule of matters reserved for its
attention, including approval of strategic plans and
acquisitions and meets at least ten times per year.
The role of each member of the Board is clearly defined.
The Chairman is responsible for the operation of the Board.
The Chief Executive Officer is responsible for proposing the
strategic direction of the Board and implementing the
strategy once approved. The Chief Financial Officer is
responsible for all financial matters and engagement with
shareholders. Board roles can be found on the Corporate
Governance section of the Company’s website.
The Board is supported by the Audit, Remuneration and
Nomination Committees in discharging its responsibilities.
Each of the Committees has access to information and
external advice, as necessary, to enable the Committee to
fulfil its duties.
The Audit Committee has primary responsibility for
monitoring the quality of internal controls to ensure that the
financial performance of the Group is properly measured
and reported on.
The Remuneration Committee will review the performance
of the Executive Directors, Chairman of the Board and
senior management of the Group and make
recommendations to the Board on matters relating to their
remuneration and terms of service.
The Nomination Committee will lead the process for Board
appointments and make recommendations to the Board.
The terms of reference of these Committees are
summarised in the Admission Document and can be found on
the Corporate Governance section of the Company’s
website.
Principle 10: Communicate how the company is governed and is performing by maintaining a
dialogue with shareholders and other relevant stakeholders
These responses to the principles of the QCA Code and the
information that is contained in this report provide details
to all stakeholders on how the Company is governed.
The Company will communicate with its shareholders
through:
• the Annual Report and Accounts;
• half-year report announcements;
• Regulatory Information Service (“RIS”) announcements;
• the Annual General Meeting (“AGM”); and
• one-to-one meetings with large existing or potential
new shareholders.
As outlined at principle 2, the Company maintains an active
dialogue with its shareholders through a planned
programme of investor relations.
A range of Company information is included on the website
(www.thepebblegroup.com) and further information can be
requested from investors@thepebblegroup.com.
The Pebble Group plc Annual Report 2019
35
CORPORATE GOVERNANCE
Board of Directors
Leading with
experience.
Richard Law
Non-executive Chairman
Christopher (Chris) Lee
Chief Executive Officer
Claire Thomson
Chief Financial Officer
Tenure
Four months
Tenure
20 years
Tenure
12 years
Experience
Chris led the private equity backed
management buy-outs of Brand
Addition in 2012 and 2017 and the
acquisitions of Gateway CDI and
Facilisgroup in 2016 and 2018 and the
listing of The Pebble Group onto AIM in
2019. Chris qualified as a Chartered
Certified Accountant (ACCA) and
worked in the audit division of Ernst &
Young from 1997 to 2000.
Experience
Claire has led the finance, banking,
legal and compliance aspects of the
businesses which now comprise the
Group for over 12 years, taking the role
of Chief Financial Officer following the
management buy-out of Brand
Addition in 2012. Claire is a qualified
Chartered Accountant and, prior to
joining the Group, spent 11 years in
audit at PricewaterhouseCoopers LLP,
having joined in 1997. Claire has a BA
Hons degree in English and American
Literature from the University
of Manchester.
Experience
Richard is currently the Chairman of
product intelligence and performance
accelerator Vypr and was previously
Chairman of car financing platform
Zuto. Richard retired as Chief
Executive Officer of AIM-quoted GB
Group plc in 2017, having led the
company from a market capitalisation
of £5m to £500m. Richard first joined
GB Group in 1993 as Finance Director
and was then made Group Finance
Director in 1998 and then Chief
Executive Officer in 2002. Richard has
a BSc degree in Engineering from
Imperial College London and started
his career working as an engineer with
multi-national companies in the UK and
Australia. Richard then spent six years
as a Corporate Financier for Ernst &
Young, having joined in 1987.
Committee membership
N A R
36
The Pebble Group plc Annual Report 2019
Yvonne Monaghan
Independent Non-executive
Director and Senior
Independent Director
Tenure
Four months
Experience
Yvonne is a qualified Chartered
Accountant and spent five years in audit
at Deloitte Haskins & Sells, before
joining Johnson Service Group PLC in
1984. Yvonne has a BSc Honours degree
in Pharmacology and Physiology from
the University of Manchester.
Other appointments
Yvonne has been the Chief Financial
Officer of Johnson Service Group PLC
since 2007 and played an important
role in returning the company to a
growth strategy, managing a number of
acquisitions and disposals. She has
been a Non-executive Director of NWF
Group plc since 2013 but will be
stepping down from this role in
September 2020.
Committee membership
N A R
Stuart Warriner
Independent
Non-executive Director
Tenure
Four months
Experience
Stuart has extensive corporate finance
experience across a range of sectors,
having spent over 30 years at
PricewaterhouseCoopers where he
was a partner in its corporate finance
business. Stuart has an MA in
Economics from the University of
Cambridge and is a qualified
Chartered Accountant.
Other appointments
Stuart has been a Managing Director at
GCA Altium since 2017.
Committee membership
N A R
BOARD COMPOSITION
40+
Executive (2)
Non-executive (2)
Chairman (1)
BOARD GENDER DIVERSITY
60+
Male (60%)
Female (40%)
KEY TO COMMITTEE MEMBERSHIP
A Audit Committee
R Remuneration Committee
N Nomination Committee
Committee Chair
The Pebble Group plc Annual Report 2019
37
40
+
20
+
C
40
+
x
Audit Committee report
Monitoring the quality
of internal controls.
Dear shareholder,
I am pleased to present the Audit Committee Report for
the year ended 31 December 2019.
The Audit Committee was formed at IPO and has had two
meetings. The priorities for these initial meetings have been
the actions required in support of the year-end audit
process, appointment of external auditors, approval of audit
fees, review of the Annual Report and Accounts and review
of the risk register and internal controls.
Composition and experience of the Audit Committee
The Audit Committee is chaired by me as an Independent
Non-executive Director and consists of all Non-executive
Directors. All three Non-executive Directors are qualified
Chartered Accountants, and all have considerable industry
experience in senior financial and operational roles.
Responsibilities
The Audit Committee has primary responsibility for
reviewing the effectiveness of the Group’s internal controls,
monitoring the integrity of the Group’s financial statements
and the external announcements of the Group’s results,
approving the appointment and remuneration of the
Group’s external auditors, reviewing their reports and
ensuring their independence is maintained, in all cases
having due regard to the interests of shareholders.
The Audit Committee will report to the Board on all these
matters and will meet at least twice in each financial year.
The terms of reference of the Audit Committee have been
formally approved by the Board, are available on the
Company’s website and will be available at the AGM.
External audit
The Audit Committee has responsibility for the appointment
and remuneration of the Group’s external auditors and
satisfying itself that they maintain their independence
regardless of any non-audit work performed by them. The
Group is aware of the updated Ethical Standard guidance
governing the performance of non-audit work by the
auditors, the impact of which will be reviewed during 2020,
and any changes required to ensure compliance with the
recommendations will be implemented.
Committee composition
• Yvonne Monaghan (Chair)
• Richard Law
• Stuart Warriner
38
The Pebble Group plc Annual Report 2019
CORPORATE GOVERNANCE The Audit Committee assesses whether suitable accounting
policies have been adopted and whether appropriate
estimates and judgements have been made by
management. The Committee also reviews accounting
papers prepared by management, and reviews reports by
the external auditors. The specific areas reviewed by the
Committee during the year were:
• appropriateness of the merger accounting principles in the
preparation of the Group financial statements;
• appropriateness of the treatment of costs in relation to
the IPO and the presentation in the Group financial
statements;
• appropriateness of the disclosure in the financial
statements, given the first year as a listed Group;
• accounting for the acquisition of Facilisgroup;
• review of the capitalisation of development costs;
• appropriateness of the carrying value of goodwill,
intangibles and investments; and
• review of the potential impact and disclosure of the
impact of COVID-19.
Yvonne Monaghan
Chair of the Audit Committee
8 April 2020
The respective responsibilities of the Directors and external
auditors in connection with the Group financial statements are
explained in the Statement of Directors’ Responsibilities on
page 47 and the Auditors’ Report on pages 48-52. Details of
services provided by and fees payable to the auditors are
shown in note 9 of the Group financial statements.
One of the principal duties of the Audit Committee is to
make recommendations to the Board in relation to the
appointment of the external auditors.
PricewaterhouseCoopers have been the Company’s
external auditors for many years and in line with best
practice guidance are required to rotate the audit partner
responsible for the Group and subsidiary audits every five
years as a listed plc. There will be a new audit partner in
place for the year ending December 2020.
Internal control and risk management
The Audit Committee will support the Board in reviewing
the risk management methodology and the effectiveness of
internal control. Regular internal control updates will be
provided to the Audit Committee; these will include
reviewing and updating the risk register and assessing the
mitigating actions in place and updates to action plans
agreed in previous meetings.
Internal audit
The Group does not have a formal internal audit function at
the present time but acknowledges the importance that
internal audit can play in establishing and monitoring an
effective control environment. The Committee will review
and consider the most appropriate way of monitoring the
internal control environment across the Group following
which an appropriate system of review for the size and
complexity of the organisation will be implemented.
Significant issues considered in relation to the
financial statements
At the request of the Board, the Audit Committee
considered whether the 2019 Annual report and Accounts
were fair, balanced and understandable and whether they
provided the necessary information for shareholders to
assess the Group’s performance, business model and
strategy. The Committee was satisfied that, taken as a
whole, the 2019 Annual Report and Accounts is fair,
balanced and understandable.
The Pebble Group plc Annual Report 2019
39
Directors’ remuneration report
Ensuring key
personnel deliver the
Company’s objectives.
This report is for the period to 31 December
2019. It sets out the remuneration policy and the
detailed remuneration for the Executive and
Non-executive Directors of the Company. As an
AIM-quoted company, the information is
disclosed to fulfil the requirements of AIM Rule
19. Pebble Group plc is not required to comply
with the Large and Medium-sized Companies
and Groups (Accounts and Reports)
(Amendment) Regulations 2013. The information
is unaudited except where stated.
Dear shareholders,
I am pleased to introduce the Directors’ Remuneration
Report for the 2019 financial year, our first since our IPO in
December 2019. This letter introduces the report, outlines
the major decisions on Directors’ remuneration during the
year and explains the context in which these decisions have
been taken.
Pebble is committed to high standards of corporate
governance and our policy and disclosures on Directors’
remuneration are intended to reflect this approach. We
welcome shareholder feedback. From 2021 we will put an
advisory resolution on remuneration to shareholders at our
AGM. We will not do this for the 2020 AGM because the
advisory vote is intended to allow shareholders to indicate
their support for remuneration decisions taken in the
reported year and Pebble was a private company until
5 December 2019.
Committee composition
• Stuart Warriner (Chair)
• Richard Law
• Yvonne Monaghan
40
The Pebble Group plc Annual Report 2019
CORPORATE GOVERNANCE Decisions made in response to COVID-19
In response to COVID-19 a number of decisions were made
in relation to remuneration after the year end. The
Executive Directors and the Non-executive Directors have
agreed to a 40% reduction in base salary and fees
respectively, for an initial three-month period from 1 April
2020. In addition, the Executive Directors have taken the
decision to defer payment of their allocation of the IPO
bonus in order to preserve the cash within the Group. The
implementation of both the annual bonus scheme for the
Executive Directors and the Long Term Incentive Plan for
the Group has been deferred. These decisions will be
reviewed later in the year.
I hope that you find the report helpful and informative and I
look forward to receiving feedback from our investors on
the information presented.
Stuart Warriner
Remuneration Committee Chair
8 April 2020
Remuneration policy
The Company’s approach to remuneration is that the overall
package should be sufficiently attractive to recruit,
motivate and retain individuals of a high calibre with
significant technical and strategic expertise. The Company
needs to ensure that key personnel can deliver the
Company’s objectives and value for shareholders in a
competitive sector.
Following its IPO, Pebble has adopted a new remuneration
policy reflecting its status as an AIM company. The four main
elements of the remuneration package are basic salary,
benefits, annual performance related bonuses and long-term
share incentives. Policy in each area is detailed in this report.
Performance and decisions on remuneration taken
The Company performed strongly during the year, details of
which have been provided throughout the Strategic Report.
During 2019, the Group completed its IPO on AIM which
involved a significant amount of work by the management and
Executive Directors. In order to recognise the efforts of the
team, an accrual was agreed by the former board prior to the
IPO for a one-off conditional incentive scheme (the “IPO
bonus”) for the wider team, including the Executive Directors,
for a total cost of £750,000 including the payment of all
employers’ National Insurance contributions to HM Revenue
and Customs. No other bonuses were paid or accrued in the
financial year in respect of the Executive Directors and the IPO
bonus was based on the performance of the individual. It was
allocated and approved following the year end. As part of the
structuring of the Admission to AIM, the IPO bonus accrual was
identified as a debt-like item and the selling shareholders left
cash in the business on IPO to satisfy these payments. Details
of the amounts due to our CEO and CFO are set out later in
this report.
New salary levels were agreed for the CEO and CFO at the
time of the IPO and were effective from 1 January 2020.
The Pebble Group plc Annual Report 2019
41
Remuneration report
Composition of the Committee
The Committee members since IPO have been Stuart
Warriner (Chair), Yvonne Monaghan and Richard Law. The
Committee will normally meet three times a year to review
the remuneration of the Executive Directors and other
Executive Team members. The views of the Chief Executive
are sought in respect of awards to the other Executive
Director and Executive Team members.
Remuneration policy
The Committee’s overall approach is focused on ensuring the
Company’s remuneration policy is aligned with shareholders’
interests whilst also enabling the Company to attract, retain
and motivate high quality executive management. The
Committee will take into account periodic external
comparisons to examine current market trends and practices
at equivalent roles in similar companies.
The key objectives of the Company’s remuneration policy
are to:
• align Executive and shareholder interests;
• underpin an effective pay-for-performance culture; and
• support retention, motivation and recruitment of
talented people.
The Committee aims to achieve an appropriate balance
between fixed and variable remuneration, and between
variable remuneration based on short-term and
longer-term performance. Fixed remuneration includes
base salary, benefits and pension. Variable remuneration
includes annual bonus and awards made under the Long
Term Incentive Plan.
This part of the report sets out the remuneration policy
with regard to the Executive Directors. The policy on each
element of remuneration and how it operates is detailed in
the table.
Elements of Remuneration
Link to remuneration
policy/strategy
Element
Base salary To help recruit and
retain high
performing
Executives. Reflects
the individual’s
experience, role and
importance to
the business.
Operation
Maximum opportunity
Performance metric
Basic salary is reviewed annually as
at 1 January with reference to each
Executive Director’s performance
and contribution during the year,
Company performance, the scope of
the Executive Directors,
responsibilities and consideration of
competitive pressures.
There is no prescribed
maximum annual base
salary or salary increase.
The Committee is guided
by the general increase
for the broader employee
population, but has
discretion to decide a
lower or a higher increase.
The Committee considers
individual and Company
performance when setting
base salary.
Benefits
To help recruit and
retain high performing
Executives. To
provide market
competitive benefits.
Benefits are in line with those
offered to other senior management
employees and may include medical
expenses cover and life insurance
cover. The CEO and CFO also receive
permanent health insurance.
Pension
To help recruit and
retain high performing
Executives. To
provide market
competitive pensions.
The CEO and CFO receive an
employer‘s pension contribution or a
cash supplement.
Annual
bonus
To incentivise and
reward performance.
To align the interests
of the Executives
and shareholders in
the short and
medium term.
Parameters, performance criteria,
weightings and targets are set at the
start of each year. Payments are made
in cash following completion of the year
subject to the Committee’s assessment
of performance against targets and
other matters it deems relevant.
No maximum
potential value.
None.
CEO and CFO, 5% of
base salary.
This percentage is in line
with the pension
contribution made by
the Company to its UK
workforce.
The maximum bonus
opportunity for the CEO
and CFO is 100% of
base salary.
None.
Performance measures
may include financial,
non-financial, personal and
strategic objectives.
Performance criteria and
weightings may be
changed from year to year.
At present the
performance target is
expected to be based on
adjusted EBITDA.
42
The Pebble Group plc Annual Report 2019
CORPORATE GOVERNANCE Element
Link to remuneration
policy/strategy
Operation
Maximum opportunity
Performance metric
Long Term
Incentive
Plan
To incentivise and
reward long-term
performance and
value creation. To
align the interests of
Executives and
shareholders in the
long term.
Non-
executive
Directors
To provide fees
appropriate to time
commitments and
responsibilities of
each role.
Executive Directors are eligible to
receive awards under the Long Term
Incentive Plan at the discretion of
the Committee.
Awards are granted as nil-cost
options or conditional awards which
vest after three years subject to the
meeting of objective performance
conditions specified at award. Awards
are subject to malus and clawback
provisions. An additional holding
period post vesting may be applied.
Dividend equivalents may be added
to awards.
Non-executive Directors are paid a
base fee in cash. Fees are reviewed
periodically. In addition, reasonable
business expenses maybe reimbursed.
The annual award to the
CEO and CFO is 100% of
base salary.
The Board is guided by
the general increase for
the broader employee
population and takes
into account relevant
market movements.
Performance measures
may include financial and
non-financial objectives.
Performance criteria
and weightings may
be changed from year
to year.
For awards made in 2020,
70% of the award will be
subject to a cumulative EPS
target with 30% subject
to an absolute total
shareholder return
(“TSR”) target.
Malus and clawback
Both annual bonus and long-term incentive awards are
subject to malus and clawback provisions covering two
years. Reasons for malus and clawback being applied would
include material misstatement in audited results, discovery
of errors or inaccuracies in the assessment of any
performance condition, fraud or gross misconduct, and
events or behaviour which lead to the censure of the Group
by a regulatory authority or have a significant detrimental
impact on the reputation of the Group.
Remuneration of employees below the Board
Employees below the Board receive base salary, benefits and
annual bonus, and senior members of staff are invited to
participate in the LTIP. Pay and conditions throughout the
Group are taken into consideration when setting
remuneration policy. The Committee does not consult other
employees when setting executive remuneration.
Shareholder consultation
The Committee’s policy is to consult with major shareholders
in respect of significant decisions on executive remuneration.
Executive Directors’ service contracts and
payments for loss of office
Our Executive Directors have rolling service contracts dated
28 November 2019 with an indefinite term, but a fixed
period of 12 months’ notice of termination. Our approach
to remuneration in each of the circumstances in which an
Executive Director may leave is determined by the
Remuneration Committee in accordance with the rules of
any applicable scheme.
Non-executive Directors' letters of appointment
The Non-executive Directors do not have service contracts
but instead have letters of appointment dated 28 November
2019 which contain a three-month notice period.
Consideration of new Executive Directors or senior
executives
When recruiting or promoting any senior executive, we seek
to apply consistent policies on fixed and variable
remuneration components in line with the remuneration
policy set our above. This helps to ensure that any new
Executive Directors or senior executive is on the same
remuneration footing as existing Executives Directors or
senior executives respectively, while still taking into account
the skill and experience of the individual, the market rate
for a candidate of that experience and the importance of
securing the relevant individual.
The Pebble Group plc Annual Report 2019
43
Remuneration report
Annual Report on Remuneration
This section sets out details of remuneration in 2019.
Fees of Non-executive Directors
Fees for Non-Executive Directors effective 28 November 2019 were:
Name
Richard Law
Yvonne Monaghan
Stuart Warriner
Role
Chairman
Non-executive Director
Non-executive Director
Committee Chair
Nomination
Audit
Remuneration
Annual fee
£100,000
£45,000
£45,000
Summary of Director’s total remuneration (audited)
Name
Executive
Christopher Lee
Claire Thomson
Non-executive
Richard Law
Yvonne Monaghan
Stuart Warriner
Salary/fee
IPO bonus
Pension
Benefits
2019 total
2018 total
210,000
144,428
170,000
130,000
14,462
15,417
2,283
1,625
396,745
291,470
258,595
184,340
8,333
3,750
3,750
-
-
-
-
-
-
-
-
-
8,333
3,750
3,750
-
-
-
As detailed above, the Executive Directors have taken the decision to defer payment of their allocation of the IPO bonus in order
to preserve cash within the Group.
Except as set out above, no bonus or long-term incentive arrangements were paid or put in place during 2019.
Long-term incentive plans
There were no outstanding long-term incentive awards in place at 31 December 2019.
Director’s interests in shares
The interests of the Directors as at 31 December 2019 in the shares of the Company were:
Name
Richard Law
Christopher Lee
Claire Thomson
Yvonne Monaghan
Stuart Warriner
31 December 2019
Number
% of issued shares
95,238
5,941,515
2,857,243
15,000
–
0.1%
3.6%
1.7%
0.0%
–
Directors’ remuneration for the year commencing 1 January 2020
As set out in the AIM Admission Document, the salaries for
CEO and CFO effective 1 January 2020 were £270,000 and
£200,000, respectively.
The Committee will consider the implementation of both an
annual bonus scheme and long-term incentive awards later
in 2020. Any such schemes will operate as set out in the
policy table above.
Salaries for CEO and CFO and fees for the Chairman and
Non-executive Directors will remain as set out above for 2020.
In response to COVID-19 the Board of Directors has agreed
to a 40% reduction in salaries and fees for an initial
three-month period from 1 April 2020.
44
The Pebble Group plc Annual Report 2019
CORPORATE GOVERNANCE Directors’ report
For the year ended 31 December 2019
The Directors present their report together with the
audited Group financial statements of The Pebble Group plc
(formerly The Pebble Group Limited up to 22 November
2019) (the “Company”) and the Company for the year ended
31 December 2019.
Business review and future developments
A review of the performance of the Group during the year,
including principal risks and uncertainties, key performance
indicators and comments on future developments is given in
the Strategic Report.
Results and dividends
The Group recorded revenue in the year of £107.2m
(2018: £93.0m) and loss after tax of £(12.3)m
(2018: profit of £0.3m).
Events after the balance sheet date
We are carefully monitoring the situation concerning
COVID-19 and any impact it may have on the business. Any
such impact has been treated as a non-adjusting post
balance sheet event for the purpose of considering the
carrying values of assets included in the balance sheet as at
31 December 2019. Given the current uncertainties, any
potential financial effect cannot be estimated.
Financial risk management
Information relating to the principal risks and uncertainties
of the Group has been included within the Strategic Report
on pages 26-29. Further information relating to the financial
risk of the Group has been included within note 24, financial
risk management.
Directors and their interests
The Directors of the Company who were in office during the
year and up to the date of signing the Group financial
statements were:
Richard Law
appointed 28 November 2019
Christopher Lee
appointed 17 October 2019
Yvonne Monaghan
appointed 28 November 2019
Claire Thomson
Stuart Warriner
appointed 17 October 2019
appointed 28 November 2019
In accordance with the Articles of Association, a third of the
Board is required to stand for re-election at the forthcoming
AGM; therefore Richard Law will be retiring by rotation and
seeking re-election by the Company’s shareholders. The
Directors confirm that, having conducted a performance
evaluation, Richard Law continues to contribute and
demonstrate commitment to his role.
The Directors who held office during the year and as at
31 December 2019 had the following interests in the
ordinary shares of the Company:
The market price of the Company’s shares at the end of the
financial year was 1.39p and the range of market prices
during the period from IPO to the year end was between
1.05p and 1.39p.
Further details on related party transactions with Directors
are provided in note 26 of the Group financial statements.
Directors’ insurance
The Company maintains Directors’ and Officers’ liability
insurance for the Directors, which was in force from their
dates of appointment and up to the date of this report.
Significant shareholdings
As at 7 April 2020, the Company has been advised, in
accordance with the Disclosure and Transparency Rules of
the Financial Conduct Authority, or was made aware
through the IPO process of the following notifiable interests
in 3% or more of its voting rights.
Liontrust Asset Management plc
Elysian Capital
BlackRock Advisors (UK) Limited
Capital International, UK
30,189,461 18.03%
23,258,664 13.89%
22,372,675 13.36%
9,175,000 5.48%
M&G Investment Management Limited
8,500,000 5.07%
Merian Global Investors
7,689,039 4.59%
Fidelity Worldwide Investment (FIL)
7,000,000 4.18%
Soros Fund management, L.L.C
Christopher Lee
6,500,000 3.88%
5,941,515 3.55%
Lombard Odier Asset Management, London
5,100,000 3.05%
Legal & General Investment Management
5,100,000 3.05%
Employees
The Group regularly provides employees with information on
matters of concern to them, consulting them or their
representatives regularly so that their views can be taken into
account when making decisions that are likely to affect their
interests. Employee involvement in the Group is encouraged,
as common goals and awareness of the Group’s strategy play
a major role in delivering its strategic objectives.
The Group recognises its responsibility to employ disabled
persons in suitable employment and gives full and fair
consideration to such persons, including any employee who
becomes disabled, having regard to their particular
aptitudes and abilities. Where practicable, disabled
employees are treated equally with all other employees in
respect of their eligibility for training, career development
and promotion.
Further details on how the Company communicates with its
employees can be found in the Section 172 Statement on
page 15.
Name of Director
Richard Law
Christopher Lee
Claire Thomson
Yvonne Monaghan
Number
95,238
5,941,515
2,857,243
15,000
The Pebble Group plc Annual Report 2019
45
Directors’ statement as to disclosure of
information to auditors
The Directors of the Company at the date of the approval
of this report confirm that:
• so far as each Director is aware, there is no relevant
audit information of which the Company’s auditors are
unaware; and
• each Director has taken all the steps that they ought to
have taken as a Director to make themselves aware of any
relevant audit information and to establish that the
Company’s auditors are aware of that information.
Independent auditors
The auditors, PricewaterhouseCoopers LLP, have indicated
their willingness to continue in office and a resolution
concerning their reappointment will be proposed at the
AGM.
By order of the Board
Claire Thomson
Company Secretary
The Pebble Group PLC
Broadway House
Trafford Wharf Road
Manchester
M17 1DD
Registered number: 12231361
8 April 2020
Directors’ report
For the year ended 31 December 2019
Political donations
It is the Company’s policy not to make political donations.
The Directors confirm that no donations for political
purposes were made during the year (2018: nil).
Share capital and voting
The Company has two classes of equity share, 0.01p
ordinary shares and 0.01p deferred shares. The ordinary
shares have full voting, dividend and capital distribution
rights, including on winding up. They are non-redeemable.
The deferred shares have no voting, dividend or other
distribution rights. On a return of capital, the holders of the
deferred shares shall be entitled to receive only the
amount paid up or credited as paid up and shall become
entitled to receive such amount only once the holders of
the ordinary shares have been paid in or credited as paid
up thereon plus £250,000. The deferred shares are not
redeemable. The rights and obligations attaching to these
shares are governed by the Companies Act 2006 and the
Company’s Articles.
As at 31 December 2019, the Company’s issued share
capital comprised 167,450,893 ordinary shares of 0.01p and
12,564,501 deferred shares of 0.01p, totalling 180,015,394.
Appointment and replacement of Directors and
changes to constitution
Rules governing the appointment and replacement of
Directors and those relating to the amendments of the
Company’s Articles of Association are contained within the
Articles of Association, a copy of which can be found on
the Company website at www.thepebblegroup.com.
Notice of Annual General meeting
Details of business to be conducted at this year’s AGM are
contained in the Notice of the Annual General Meeting
which will be communicated to shareholders separately. It
is the opinion of the Directors that the passing of these
resolutions are in the best interest of the shareholders.
Corporate governance
The Group’s Statement on Corporate Governance can be
found in the Corporate Governance section of this Annual
Report on pages 30-47, which is incorporated by reference
and forms part of this Director’s Report. It can also be
found on the Company’s website.
46
The Pebble Group plc Annual Report 2019
CORPORATE GOVERNANCE Statement of Directors’ responsibilities
In respect of the financial statements
The Directors are responsible for preparing the Annual
Report and the financial statements in accordance with
applicable law and regulation.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the
Directors have prepared the Group financial statements in
accordance with International Financial Reporting Standards
(“IFRSs”) as adopted by the European Union and Company
financial statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom
Accounting Standards, comprising FRS 102 “The Financial
Reporting Standard applicable in the UK and Republic of
Ireland”, and applicable law). Under company law the
Directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the
state of affairs of the Group and Company and of the profit
or loss of the Group and Company for that period. In
preparing the financial statements, the Directors are
required to:
• select suitable accounting policies and then apply them
consistently;
• state whether applicable IFRSs as adopted by the
European Union have been followed for the Group
financial statements and United Kingdom Accounting
Standards, comprising FRS 102, have been followed for
the Company financial statements, subject to any
material departures disclosed and explained in the
financial statements;
• make judgements and accounting estimates that are
reasonable and prudent; and
• prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the Group
and Company will continue in business.
The Directors are also responsible for safeguarding the
assets of the Group and Company and hence for taking
reasonable steps for the prevention and detection of fraud
and other irregularities.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the Group and Company's transactions and disclose with
reasonable accuracy at any time the financial position of the
Group and Company and enable them to ensure that the
financial statements comply with the Companies Act 2006.
The Directors are responsible for the maintenance and
integrity of the Company’s website. Legislation in the United
Kingdom governing the preparation and dissemination
of financial statements may differ from legislation in
other jurisdictions.
Directors' confirmations
The Directors consider that the Annual Report and
Accounts, taken as a whole, is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the Group and Company’s position
and performance, business model and strategy.
In the case of each Director in office at the date the
Directors’ Report is approved:
• so far as the Director is aware, there is no relevant audit
information of which the Group and Company’s auditors
are unaware; and
• they have taken all the steps that they ought to have taken
as a Director in order to make themselves aware of any
relevant audit information and to establish that the Group
and Company’s auditors are aware of that information.
The Pebble Group plc Annual Report 2019
47
Independent auditors’ report to the members of The Pebble Group plc
Report on the audit of the Group financial statements
Opinion
In our opinion, The Pebble Group plc’s Group financial statements (the “financial statements”):
• give a true and fair view of the state of the Group’s affairs as at 31 December 2019 and of its loss and cash flows for the
year then ended;
• have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the
European Union; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report (the "Annual Report"), which comprise: the
Consolidated statement of financial position as at 31 December 2019; the Consolidated income statement and Consolidated
statement of other comprehensive income, the Consolidated cash flow statement, and the Consolidated statement of
changes in equity for the year then ended; and the notes to the financial statements, which include a description of the
significant accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our
responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial
statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed entities, and we have
fulfilled our other ethical responsibilities in accordance with these requirements.
Our audit approach
Overview
Materiality
exceptional items.
• Overall Group materiality: £377,000, based on 2.5% of consolidated EBITDA, adjusted for
Audit scope
Key audit
matters
• The Group engagement team has performed a full scope audit of three significant components
within the Group. The audited components accounted for 97% of consolidated revenue, 95%
of consolidated loss before tax and 89% of consolidated Adjusted EBITDA.
• Impact of COVID-19.
• Valuation of capitalised development costs.
• Accounting for the Initial Public Offering (“IPO”).
• Finalisation of acquisition accounting for Facilis Group.
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial
statements. In particular, we looked at where the Directors made subjective judgements, for example in respect of
significant accounting estimates that involved making assumptions and considering future events that are inherently
uncertain. As in all of our audits we also addressed the risk of management override of internal controls, including
evaluating whether there was evidence of bias by the Directors that represented a risk of material misstatement due to
fraud.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of
the financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit
strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any
comments we make on the results of our procedures thereon, were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
48
The Pebble Group plc Annual Report 2019
FINANCIAL STATEMENTS Key audit matter
How our audit addressed the key audit matter
Impact of COVID-19
Refer to note 2(b) and note 27 for further details.
The ongoing and evolving COVID-19 pandemic, and the
related government responses to this crisis, is having a
significant impact on the economies of those countries in
which the Group operates. There is a high level of
uncertainty as to the duration of the pandemic and what its
lasting impact will be on those economies.
The Directors have considered the potential impact to the
Group of the ongoing COVID-19 pandemic in several areas,
including the assessment of going concern, the carrying value
of the Group’s assets and disclosures to be included in the
financial statements.
In relation to the Group’s going concern assessment, the
Directors adjusted the cash flow forecasts for the period to
the end of December 2021 to reflect a number of severe but
plausible downside scenarios resulting from the direct and
indirect consequences of COVID-19, including, for example, a
prolonged reduction in demand. This included an assessment
of mitigating actions, such as restricting non-essential capital
expenditure and employee related cost savings.
The Directors also considered the impact of COVID-19, as a
post balance sheet event, on the carrying value of the
Group’s assets. It was concluded that this is a non-adjusting
post balance sheet event and, as such, no changes to the
carrying value of assets as at 31 December 2019 are required.
We re-evaluated our risk assessment in particular in
relation to the appropriateness of the going concern
basis of preparation of the financial statements. Based
on the change in circumstances from the date of our
planning due to COVID-19, and the evaluation performed
by the Directors, we increased the risk to significant.
We agreed that the management accounts for the
financial year to date were consistent with the starting
point of the Directors’ revised cash flow forecasts. We
also checked the arithmetical accuracy of management’s
forecasts for the period to the end of December 2021.
We evaluated management’s downside scenarios,
including a worst-case scenario, and challenged their
adequacy and underlying assumptions, including the level
of reduction in sales, the period of such reduction and
the timing and rate of anticipated sales recovery. In doing
so, we examined evidence relating to committed
customer orders, receipts of cash since 31 December
2019, and communications with key customers regarding
intent to settle outstanding receipts due.
We examined supporting evidence for the cost
mitigations included within the forecasts to corroborate
their reasonableness, including an assessment of the
Directors’ ability to take actions to implement these
mitigations if necessary.
On the basis of the procedures above, we evaluated the
level of forecast liquidity and agreed with management’s
assessment that there would likely be a sufficient level of
working capital throughout the period to the end of
December 2021 and banking covenants would likely be
met over the same period. We also corroborated the
drawdown in March 2020 of funds from the Group’s
revolving credit facility totalling £7.7m.
We recalculated the impact on the Group’s banking
covenants and corroborated the applicable ratios to the
underlying agreement. We evaluated the likelihood of
circumstances arising in which a covenant may be
breached.
We read management’s disclosures in the financial
statements in relation to the impact of COVID-19 and are
satisfied that they are consistent with the assessment
performed and correctly identify COVID-19 as a non-
adjusting post balance sheet event. We also read the
disclosures made in the other information and did not
identify any inconsistencies with the financial statements.
Our conclusions relating to going concern are included
below.
The Pebble Group plc Annual Report 2019
49
Independent auditors’ report to the members of The Pebble Group plc
Key audit matter
How our audit addressed the key audit matter
Valuation of capitalised development costs
Refer to note 2(j), note 3(b) and note 12 for further details.
The Group capitalised costs of £1.5m during the year ended
31 December 2019 primarily in relation to the development
of its primary customer-facing platforms in Brand Addition
and Facilis. The net book value of such capitalised costs as
at 31 December 2019 was £4.5m.
There is a risk that capitalised development costs are
incorrectly valued on the closing balance sheet. This can
arise where internally generated costs (such as wages and
salaries) are incorrectly recorded and/or where
impairments are required but not recognised in the financial
statements.
We focused on this area due to the inherent level of
judgement involved in assessing whether costs capitalised
meet the recognition criteria of IAS 38 'Intangible assets',
and also due to the estimation required in forecasting
future cash inflows to support the valuation of capitalised
development costs at 31 December 2019.
Accounting for the Initial Public Offering (“IPO”)
Refer to note 2(a) and note 7 for further details.
The Group listed on the Alternative Investment Market
(“AIM”) in December 2019. The accounting for the IPO
involves complex and judgemental transactions, and
therefore there is a risk that these transactions are not
accurately calculated or recorded, or are incomplete.
Finalisation of acquisition accounting for Facilis Group
Refer to note 2(a) and note 25 for further details.
On 4 December 2018, the Group acquired 100% of the
share capital of Facilisgroup Canada Inc and Facilisgroup
LLP (together the Facilis Group).
The acquisition accounting in note 25 has been restated to
reflect the following matters. See note 12 for further details.
An element of the purchase price is required to be treated
as post-combination remuneration by IFRS 3. This has
resulted in a reduction to the resulting goodwill. The
Consolidated income statement for the year ended 31
December 2018 has also been restated to reflect the
charge applicable from acquisition date for that year.
Additional consideration paid during 2019 has been included
in the calculation of goodwill at the acquisition date,
resulting in an increase to goodwill and current liabilities.
A separate intangible asset of £9.4m relating to customer
relationships existing at the date of acquisition has been
recognised. The useful economic life of this intangible asset
has been assessed as 20 years.
50
The Pebble Group plc Annual Report 2019
We assessed whether the development costs capitalised
met the criteria set within IAS 38 ‘Intangible assets’ and
did not identify any such costs not fulfilling these criteria.
We corroborated a sample of capitalised development
costs to source documentation, including invoices and
contracts of employment, and determined that they had
been recorded correctly.
We agreed, on a sample basis, that the proportion of
internal employee costs capitalised was appropriate
based upon their roles and responsibilities.
We compared the net book value of capitalised costs to
management’s estimates of future cash inflows
attributable to them, and concur that no impairments
are required at 31 December 2019.
We assessed the useful economic lives of the intangible
assets as applied by management in determining the
amortisation charge and agreed that these lives are
appropriate for the assets to which they relate, and have
been accurately applied.
We performed an independent completeness
assessment to verify that all IPO-related adjustments
have been identified.
We validated IPO adjustments to supporting
documentation, and verified these have been
appropriately accounted for in the financial statements.
We have also assessed the appropriateness of the
disclosures included in notes to the financial statements
to reflect these changes during the year.
We read the contract of sale and agreed that the
elements of the purchase price which are linked to
ongoing employment have been treated appropriately in
the restated accounting.
We examined management’s calculation of the
accounting entries including the spread of the post-
combination remuneration expense and agreed the key
inputs to the relevant parts of the contract of sale.
We engaged our internal valuations team to assist us in
assessing the key assumptions applied in the Directors’
valuation of the acquired customer contracts, including
the estimated cash flows, growth rate, attrition rate and
discount rate. We evaluated whether these assumptions
were consistent with our understanding of Facilis Group’s
performance and historic trends.
We assessed the useful economic life of the intangible
asset by comparing this to historic information and
considering any likely changes in customer patterns. We
also agreed that amortisation has been accurately
recognised based on this estimate.
We considered whether any other intangible assets
should have been identified by the Directors, based on
our understanding of the transaction, our knowledge of
the business, the purchase agreement and discussions
with the Directors.
FINANCIAL STATEMENTS How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the
industry in which it operates.
There are 19 statutory entities, of which there are 3 significant trading components within the Group which were subject to
a full scope audit. We performed specific audit procedures over a further 3 trading components, and testing of certain
financial statement line items at a consolidated level, which gave us the evidence we needed for our opinion on the Group
financial statements as a whole.
We gained an understanding of the legal and regulatory framework applicable to the Group and the industry in which it
operates, and considered the risk of acts by the Group which were contrary to applicable laws and regulations, including
fraud. We designed audit procedures to respond to the risk, recognising that the risk of not detecting a material
misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate
concealment by, for example, forgery or intentional misrepresentations, or through collusion. We focused on laws and
regulations that could give rise to material misstatement in the Group financial statements, including, but not limited to, the
Companies Act 2006, the Listing Rules and UK and US tax legislation. Our tests included, but were not limited to, review of
legal correspondence and enquiries of management. There are inherent limitations in the audit procedures described
above and the further removed non-compliance with laws and regulations is from the events and transactions reflected in
the financial statements, the less likely we would become aware of it.
We did not identify any key audit matters relating to irregularities, including fraud. As in all our audits we also addressed the
risk of management override of internal controls, including testing journals and evaluating whether there was evidence of
bias by the Directors that represented a risk of material misstatement due to fraud.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for
materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature,
timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating
the effect of misstatements, both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall Group materiality
£377,000
How we determined it
2.5% of consolidated EBITDA, adjusted for exceptional items.
Rationale for benchmark applied
Based on the benchmarks used in the Annual Report, EBITDA is the primary
measure used by the shareholders in assessing the performance of the Group, and
is a generally accepted auditing benchmark.
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group
materiality. The range of materiality allocated across components was between £69,000 and £355,000. Certain
components were audited to a local statutory audit materiality that was also less than our overall Group materiality.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above
£18,800 as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
Conclusions relating to going concern
ISAs (UK) require us to report to you when:
• the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is not
appropriate; or
• the Directors have not disclosed in the financial statements any identified material uncertainties that may cast significant
doubt about the Group’s ability to continue to adopt the going concern basis of accounting for a period of at least
twelve months from the date when the financial statements are authorised for issue.
We have nothing to report in respect of the above matters.
However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group’s
ability to continue as a going concern.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our
auditors’ report thereon. The Directors are responsible for the other information. Our opinion on the financial statements
does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent
otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained
in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material
The Pebble Group plc Annual Report 2019
51
Independent auditors’ report to the members of The Pebble Group plc
misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the
financial statements or a material misstatement of the other information. If, based on the work we have performed, we
conclude that there is a material misstatement of this other information, we are required to report that fact. We have
nothing to report based on these responsibilities.
With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the
UK Companies Act 2006 have been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, ISAs (UK) require us also
to report certain opinions and matters as described below.
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and
Directors’ Report for the year ended 31 December 2019 is consistent with the financial statements and has been prepared
in accordance with applicable legal requirements.
In light of the knowledge and understanding of the group and its environment obtained in the course of the audit, we did
not identify any material misstatements in the Strategic Report and Directors’ Report.
Responsibilities for the financial statements and the audit
Responsibilities of the Directors for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities, the directors are responsible for the preparation of
the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair
view. The Directors are also responsible for such internal control as they determine is necessary to enable the preparation
of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless
the Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs
(UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance
with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept
or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it
may come save where expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• certain disclosures of Directors’ remuneration specified by law are not made.
We have no exceptions to report arising from this responsibility.
Other matter
We have reported separately on the Company financial statements of The Pebble Group plc for the period ended 31
December 2019.
Nicholas Boden (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Manchester
8 April 2020
52
The Pebble Group plc Annual Report 2019
FINANCIAL STATEMENTS Consolidated income statement
For the year ended 31 December 2019
Revenue
Cost of goods sold
Gross profit
Operating expenses
Operating expenses – exceptional
Total operating expenses
Operating (loss)/profit
Analysed as:
Adjusted EBITDA1
Depreciation
Amortisation
Exceptional items
Private equity monitoring costs
Total operating (loss)/profit
Finance expense
(Loss)/profit before taxation
Income tax expense
(Loss)/profit for the year
Basic and diluted (loss)/earnings per share
Year ended
31 December
2019
£’000
Year ended
31 December
2018
(Restated)
£’000
107,163
(67,107)
40,056
(27,585)
(17,338)
92,957
(64,827)
28,130
(19,650)
(1,303)
(44,923)
(20,953)
(4,867)
7,177
15,172
(1,246)
(1,455)
(17,338)
–
(4,867)
(5,426)
(10,293)
(2,032)
(12,325)
(12.56)p
10,109
(1,013)
(569)
(1,303)
(47)
7,177
(5,843)
1,334
(1,025)
309
0.34p
Note
4
5
5
7
13
12
7
7
8
10
11
Note 1: Adjusted EBITDA, which is defined as profit before finance costs, tax, depreciation, amortisation, exceptional items and private equity monitoring costs is a non-GAAP metric
used by management and is not an IFRS disclosure.
All results derive from continuing operations.
The Pebble Group plc Annual Report 2019
53
Consolidated statement of other comprehensive income
For the year ended 31 December 2019
Items that may be subsequently reclassified to profit and loss
Foreign operations – foreign currency translation differences
Other comprehensive (expense)/income for the year
(Loss)/profit for the year
Total comprehensive (expense)/income for the year
Year ended
31 December
2019
£’000
Note
Year ended
31 December
2018
(Restated)
£’000
(569)
(569)
(12,325)
(12,894)
152
152
309
461
54
The Pebble Group plc Annual Report 2019
FINANCIAL STATEMENTS Consolidated statement of financial position
As at 31 December 2019
ASSETS
Non-current assets
Intangible assets
Property, plant and equipment
Deferred tax assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
TOTAL ASSETS
LIABILITIES
Non-current liabilities
Borrowings
Lease liability
Deferred tax liabilities
Total non-current liabilities
Current liabilities
Borrowings
Lease liability
Trade and other payables
Current tax liabilities
Total current liabilities
TOTAL LIABILITIES
NET ASSETS/(LIABILITIES)
Equity and reserves
Share capital
Share premium
Merger reserve
Translation reserve
Retained earnings/(accumulated losses)
TOTAL EQUITY
As at
31 December
2019
£’000
Note
As at
31 December
2018
(Restated)
£’000
12
13
14
16
17
18
19
20
22
50,167
6,081
167
56,415
7,952
25,544
8,861
42,357
98,772
–
5,502
1,816
7,318
–
838
27,569
149
28,556
35,874
62,898
1,800
78,451
(103,581)
(896)
87,124
62,898
50,548
4,794
269
55,611
7,450
26,625
8,150
42,225
97,836
64,007
4,248
1,978
70,233
1,192
899
28,317
608
31,016
101,249
(3,413)
58
942
–
(327)
(4,086)
(3,413)
The notes on pages 58-90 are an integral part of these financial statements.
The financial statements on pages 53-90 were approved by the Board of Directors and authorised for issue on 8 April
2020, and were signed on its behalf by:
C Thomson
Director
The Pebble Group plc Annual Report 2019
55
Consolidated statement of changes in equity
For the year ended 31 December 2019
At 1 January 2018
Profit for the year (restated)
Other comprehensive income for the year
Total comprehensive income
At 31 December 2018 (restated)
Loss for the year
Other comprehensive expense for the year
Total comprehensive expense
Issue of shares in year
Group reorganisation (note 22)
Bonus issue of shares
Capital reduction
New shares issued on IPO
Share
capital
£’000
58
–
–
–
58
–
–
–
58
(58)
104,523
(103,535)
Share
premium
£’000
942
–
–
–
942
–
–
–
–
–
–
–
–
–
–
–
–
105,236
(942)
(104,294)
–
–
(104,523)
–
–
754
78,451
Merger
reserve
£’000
Translation
reserve
£’000
(Accumulated
losses)/
retained
earnings
£’000
Total
equity
£’000
(479)
(4,395)
(3,874)
–
152
152
(327)
–
(569)
(569)
–
–
–
–
–
–
309
–
309
309
152
461
(4,086)
(3,413)
(12,325)
(12,325)
–
(569)
(12,325)
(12,894)
–
–
–
103,535
105,294
(105,294)
–
–
–
79,205
103,535
79,205
Total transactions with owners recognised
in equity
1,742
77,509
(103,581)
At 31 December 2019
1,800
78,451
(103,581)
(896)
87,124
62,898
The notes on pages 58-90 are an integral part of these financial statements.
56
The Pebble Group plc Annual Report 2019
FINANCIAL STATEMENTS Consolidated cash flow statement
For the year ended 31 December 2019
Operating (loss)/profit
Adjustments for:
– Amortisation
– Depreciation
– Loss on disposal of fixed assets
Cash flows from operating activities before changes in working capital
– Change in inventories
– Change in trade receivables
– Change in trade payables
Cash flows from operating activities
– Income taxes paid
Net cash flows from operating activities
Cash flows from investing activities
– Purchase of property, plant and equipment
– Purchase of intangible assets
– Acquisition of subsidiaries and net cash outflows on change in ownership
Net cash flows used in investing activities
Cash flows from financing activities
– Repayment of borrowings
– Lease payments
– Interest paid
– Receipts from new secured loan facilities
– Debt issue cost
– Ordinary shares issued
Net cash flows from financing activities
NET CASH FLOWS
Cash and cash equivalents at beginning of year
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at end of year
The notes on pages 58-90 are an integral part of these financial statements.
Year ended
31 December
2019
£’000
Year ended
31 December
2018
£’000
Note
(4,867)
7,177
12
13
16
17
20
13
12
25
1,455
1,246
18
(2,148)
(502)
1,081
545
(1,024)
(2,486)
(3,510)
(603)
(1,483)
(1,293)
(3,379)
19
(62,312)
(1,190)
(7,894)
–
–
79,205
7,809
920
8,150
(209)
8,861
18
18
569
1,013
–
8,759
203
(2,689)
1,124
7,397
(979)
6,418
(633)
(602)
(10,223)
(11,458)
(784)
(1,066)
(1,680)
11,580
(672)
–
7,378
2,338
6,288
(476)
8,150
The Pebble Group plc Annual Report 2019
57
Notes to the Group financial statements
1. General information
The principal activity of The Pebble Group plc (formerly The
Pebble Group Limited) (the “Company”) is that of a holding
company and the principal activity of the Company and its
subsidiaries (the “Group”) is the sale of products, services
and technology 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
technology, 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 International Financial Reporting Standards
("IFRS"), IFRS Interpretations Committee ("IFRIC IC")
interpretations endorsed by the European Union and those
parts of the Companies Act 2006 that remain applicable to
companies reporting under IFRS. 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).
Initial public offering (“IPO”)
The Company's shares were admitted to trading on the
Alternative Investment Market (“AIM”), a market operated by
the London Stock Exchange, on 5 December 2019. These
financial statements are the Company’s first subsequent to
its admission to AIM. In connection with the admission to
AIM, the Group undertook a Group reorganisation of its
corporate structure which resulted in the Company
becoming the ultimate holding company of the Group.
Prior to the reorganisation the ultimate holding company
was The Pebble Group (Holdings) Limited. The transaction
was accounted for as a capital reorganisation rather than
a reverse acquisition since it did not meet the definition of
a business combination under IFRS 3. In a capital
reorganisation, the consolidated financial statements of
the Group reflect the predecessor carrying amounts of
The Pebble Group (Holdings) Limited with comparative
information of The Pebble Group (Holdings) Limited
presented for all periods since no substantive economic
changes have occurred.
58
The Pebble Group plc Annual Report 2019
Group reorganisation
The principal steps of the Group reorganisation were as
follows:
The Company was incorporated on 27 September 2019 as a
private company limited by shares in England and Wales,
with the allotment of one share of £1.
On 5 November 2019:
• the one ordinary share of £1.00 in issue was subdivided
and redesignated as 100 B ordinary shares of £0.001 each;
and
• the Company allotted and credited as fully paid 13,711,749
A preference shares of £0.00001 each, 599,417 B
preference shares of £0.00001 each, 7,882,522 A ordinary
shares of £0.005 each, 210,991 B ordinary shares of £0.01
each, 726,475 C1 ordinary shares of £0.01 each and
931,253 C2 ordinary shares of £0.01 each in exchange
for the entire issued share capital of The Pebble Group
(Holdings) Limited pursuant to an exchange agreement
entered into between the Company and the then
shareholders of The Pebble Group (Holdings) Limited.
On 21 November 2019, the Company allotted, by way of
a bonus issue, an aggregate of:
• 14,180,657,078 A ordinary shares of £0.005 each;
• 379,752,709 B ordinary shares of £0.01 each;
• 1,306,928,525 C1 ordinary shares of £0.01 each; and
• 1,675,324,147 C2 ordinary shares of £0.01 each,
to the existing shareholders of the Company, at a rate of
1,799 new ordinary shares of the relevant class in the capital
of the Company for each ordinary share of that class held at
that time.
On 21 November 2019, by ordinary resolution:
• the 14,188,539,600 A ordinary shares of £0.005 each in
issue were consolidated into 70,942,698 A ordinary shares
of £1.00 each;
• the 379,963,800 B ordinary shares of £0.01 each in issue
were consolidated into 1,899,819 B ordinary shares of
£2.00 each;
• the 1,307,655,000 C1 ordinary shares of £0.01 each in issue
were consolidated into 6,538,275 C1 ordinary shares of
£2.00 each; and
• the 1,676,255,400 C2 ordinary shares of £0.01 each in
issue were consolidated into 8,381,277 C2 ordinary shares
of £2.00 each.
Again on 21 November 2019, the Company, as a private
company limited by shares at the time, undertook a
reduction of share capital by way of solvency statement in
accordance with Sections 641 to 644 of the Companies Act.
The reduction of capital reduced the amount standing to
the credit of the Company’s share capital by:
• Cancelling 99p of the paid-up capital on each A ordinary
share of £1.00 and £1.98 of the paid-up capital on each
B ordinary share of £2.00, C1 ordinary share of £2.00 and
C2 ordinary share of £2.00; and
• Reducing the nominal value of each A ordinary share to
£0.01 and each B ordinary share, C1 ordinary share and
C2 ordinary share to £0.02.
FINANCIAL STATEMENTS 2. Accounting policies (continued)
On 29 November 2019 by special resolution and conditional
upon Admission (which happened on 5 December 2019):
• the 70,942,698 A ordinary shares of £0.01 each in issue
following the reduction of capital were converted, with
effect from immediately prior to Admission, into
70,942,698 ordinary shares of £0.01 each;
• the 1,899,819 B ordinary shares of £0.02 each in issue
following the reduction of capital were converted, with
effect from immediately prior to Admission, into 1,937,655
ordinary shares of £0.01 each and 1,861,983 deferred
shares of £0.01 each;
• the 6,538,275 C1 ordinary shares of £0.02 each in issue
following the reduction of capital were subdivided and
converted, with effect from immediately prior to
Admission, into 8,386,329 ordinary shares of £0.01 each
and 4,690,221 deferred shares of £0.01 each; and
• the 8,381,277 C2 ordinary shares of £0.02 each in issue
following the reduction of capital were subdivided and
converted, with effect from immediately prior to
Admission, into 10,750,257 ordinary shares of £0.01 each
and 6,012,297 deferred shares of £0.01 each.
On 5 December 2019 the Company issued 75,433,954
ordinary shares of £0.01 each, for consideration of
£79,205,652 in an IPO, with the balance recorded as share
premium. IPO costs of £3,873,000 have all been charged to
the income statement.
The insertion of the Company as a new holding company
by way of a share for share exchange constitutes a Group
reorganisation and the transaction is accounted for as a
capital reorganisation. Under merger accounting principles,
the assets and liabilities of the subsidiaries are consolidated
at book value in the Group financial statements and the
consolidated reserves are adjusted to reflect the statutory
share capital, share premium and merger reserve of the
Company as if it had always existed.
On 6 December 2019 all of the A preference shares and
B preference shares were redeemed.
Restatement
The restatement at 31 December 2018 is to reflect:
(i)
(ii)
Work in progress treated as intangible assets rather
than fixed assets (and as at 1 January 2018). The net
book value reclassified as at 1 January 2018 was
£1,420,000.
Re-evaluation of the provisional purchase price
allocation of the 2018 Facilisgroup acquisition. Firstly to
recognise a separate customer relationship intangible
asset of £9,420,000 at acquisition date, with a
corresponding reduction in goodwill. Secondly, to
reflect an additional amount of £1,293,000 within
consideration in calculating goodwill, which related to
the amount due, and paid, in 2019 for the final working
capital acquired and not linked to ongoing employment
of the vendors (see note 12).
(iii) Treatment of deferred payments to the vendors of
Facilisgroup as post-acquisition expenses charged to
profit and loss rather than forming part of the
consideration payable for the acquisition. This resulted
in a reduction to goodwill as reported at 31 December
2018 of £11,503,000 and a corresponding decrease of
the same amount to deferred consideration and
current liabilities. The deferred contingent payments
required the vendors to remain in employment with the
Group for the duration of the deferral period. As such,
they are treated as remuneration for post-acquisition
services and the cost charged to profit and loss over
the deferral periods, rather than forming part of the
settlement consideration. The deferred contingent
payments have been charged to exceptional operating
expenses in the income statement in the year ended
31 December 2019 (£13,465,000) and 31 December 2018
(£460,000).
Restatements (i) and (ii) have an impact of £nil on net assets
as at 31 December 2018 and on profit before tax for the
year then ended. Restatement (iii) has an adverse impact of
£460,000 on the net assets as at 31 December 2018 and on
profit before tax for the year then ended. The impact on
earnings per share for the year ended 31 December 2018
was a reduction of 0.50p.
(b) Going concern
The Group meets its day-to-day working capital
requirements through its own cash balances and committed
banking facilities. 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 2021.
The outbreak of the COVID-19 pandemic, and in particular
its impact on the Corporate Programmes business within
the Group, has necessitated that these projections address
a number of different scenarios of increasing severity in
order to confirm that, under each one, the Group can
continue to operate as a going concern. These scenarios
included assessing the impact of a material reduction of
sales in all areas of the Group and in particular the
Corporate Programmes business.
The cost saving actions taken to date by the Directors as
applied to all scenarios assessed under this analysis
demonstrated that the Group had sufficient liquidity and
headroom against covenants to continue to operate as a
going concern. The analysis also identified that if actual
outcomes were below management’s expectations then
there were additional actions that the Directors could take,
in relation to the Corporate Programmes business (including
either significantly reduced levels or temporary suspension
of operations), or more widely if necessary, to further
reduce costs and rebase Group overheads to a level
appropriate to a new run rate of sales at the point this
becomes established. The Directors acknowledge that
these actions may be required in the medium term to
protect Group overall profitability and specifically those
parts of the Group less affected by the pandemic.
Taking account of all scenarios modelled and their impact
on trading performance, all forecasts and projections show
that the Group is expected to have headroom against
covenants 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 the foreseeable
future. For this reason, they continue to adopt the going
The Pebble Group plc Annual Report 2019
59
Notes to the Group financial statements
(continued)
2. Accounting policies (continued)
concern basis in preparing the Group and Company financial
statements. On 19 March, as a precautionary measure to
ensure the Group has access to cash during this period,
£7.7m of the Group’s committed facility was drawn down
leaving a further £1.3m remaining to cover ancillaries
available if required.
(c) New standards, amendments and
interpretations
There are no new and revised IFRSs that have been issued
but are not yet effective that are expected to have a
material impact on the financial statements in future
periods and have therefore not been noted.
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 to the Group financial statements.
(d) 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.
(e) Revenue
Revenue arises from the provision of services through
technology 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 services to its customers as
described below. Variable consideration, in the form of
rebates, is recognised at a point in time.
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
60
The Pebble Group plc Annual Report 2019
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 payables 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 contract assets on the
statement of financial position. A small number of
customers are invoiced in advance and these amounts are
deferred and presented within contract liabilities.
Facilisgroup provision of technology, 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.
(f) EBITDA and Adjusted EBITDA
Earnings before Interest, Taxation, Depreciation and
Amortisation (“EBITDA”) and Adjusted EBITDA are non-GAAP
measures used by management to assess the operating
performance of the Group. EBITDA is defined as profit
before finance costs, tax, depreciation and amortisation.
Exceptional items and private equity monitoring costs are
excluded from EBITDA to calculate Adjusted EBITDA.
The Directors primarily use the Adjusted EBITDA measure
when making decisions about the Group’s activities. As
these are non-GAAP measures, EBITDA and Adjusted
EBITDA measures used by other entities may not be
calculated in the same way and hence are not directly
comparable.
(g) Exceptional items
The Group’s income statement separately identifies
exceptional items. Such items are those that in the
Directors’ judgement are one-off in nature or non-
operating and need to be disclosed separately by virtue of
their size or incidence and may include, but are not limited
to, restructuring costs, professional fees and other costs
directly related to the purchase of businesses, contingent
consideration payments to vendors of acquired businesses
where the vendors are required to remain employed by the
Group, and the raising of capital. In determining whether an
item should be disclosed as an exceptional item, the
Directors consider quantitative and qualitative factors such
as the frequency, predictability of occurrence and
significance. This is consistent with the way financial
performance is measured by management and reported to
the Board.
FINANCIAL STATEMENTS 2. Accounting policies (continued)
(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.
(i) Finance costs
Finance costs of financial liabilities are recognised in the
income statement over the term of such instruments at a
constant rate on the carrying amount. Issue costs relating to
financial instruments are recognised in the income
statement over the term of the debt at a constant rate over
the instrument‘s life. Foreign exchange differences on
revaluation of foreign currency borrowings are also
presented within finance costs.
(j) 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 12.
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
in 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.
The Pebble Group plc Annual Report 2019
61
Notes to the Group financial statements
(continued)
2. Accounting policies (continued)
(j) Intangible assets (continued)
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;
• Computer software – 3-5 years;
• Development costs – 3 years.
(k) 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 as well as contract assets
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.
(m) Financial instruments
Financial assets
Non-derivative financial assets are classified as either
financial assets at amortised cost, fair value through profit
or loss or fair value through other comprehensive income.
The Group derecognises a financial asset when the
contractual rights to the cash flows from the asset expire,
or it transfers the rights to receive the contractual cash
flows in a transaction in which substantially all of the risks
62
The Pebble Group plc Annual Report 2019
and rewards of ownership of the financial asset are
transferred. The basis of classification depends on the
Group’s business model and the contractual cash flow
characteristics of the financial asset. All financial assets
of the Group are held at amortised cost.
Financial assets include trade and other receivables and
cash and cash equivalents. Trade and other receivables are
amounts due from customers for services performed in the
ordinary course of business. If collection is expected in one
year or less, they are classified as current assets. If not, they
are presented as non-current assets.
Trade receivables are recognised initially at fair value and
subsequently measured at amortised cost using the
effective interest method, less provision for impairment.
Under IFRS 9, the Group elected to use the simplified
approach to measure the loss allowance at an amount equal
to lifetime expected credit losses for trade receivables. A
provision for impairment of trade receivables is established
when there is objective evidence that the Group will not be
able to collect all amounts due according to the original
terms of the receivables. Significant financial difficulties of
the counterparty, probability that the counterparty will
enter bankruptcy or financial reorganisation, and default or
delinquency in payments are considered indicators that the
trade receivable is impaired. In addition, IFRS 9 requires the
Group to consider forward-looking information and the
probability of default when calculating expected credit
losses. The measurement of expected credit losses reflects
an unbiased and probability weighted amount that is
determined by evaluating the range of possible outcomes as
well as incorporating the time value of money. The expected
loss rates are based on the payment profiles of sales over
the year and the corresponding historical credit losses
experienced within this period. The historical loss rates are
adjusted to reflect current and forward-looking information
on factors affecting the ability of the customers to settle
the receivables.
The Group considers reasonable and supportable
customer-specific and market information about past
events, current conditions and forecasts of future economic
conditions when measuring expected credit losses. The
amount of the provision is the difference between the
carrying amount and the present value of estimated future
cash flows of the asset, discounted, where material, at the
original effective interest rate. The carrying amount of the
asset is reduced through the use of an allowance account,
and the amount of the loss is recognised in the
Consolidated income statement within "operating
expenses".
When a trade receivable is uncollectable, it is written off
against the allowance account for trade receivables.
Subsequent recoveries of amounts previously written off
are credited against "operating expenses" in the
Consolidated income statement. Only when amounts are
confirmed irrecoverable, are they written off to the
Consolidated income statement.
FINANCIAL STATEMENTS 2. Accounting policies (continued)
Financial liabilities
Non-derivative financial liabilities are initially recognised at
fair value less any directly attributable transaction costs.
Subsequent to initial recognition, these liabilities are
measured at amortised cost using the effective interest
method. The Group’s borrowings, finance leases, trade and
most other payables fall into this category of financial
instruments.
The Group derecognises a financial liability when its
contractual obligations are discharged, cancelled or expire.
Financial derivatives
The Group uses derivative financial instruments to hedge its
exposure to risks arising from operational activities,
principally foreign exchange and interest rate risk. In
accordance with treasury policy, the Group does not hold
or issue derivative financial instruments for trading
purposes. The Group does not hedge account for these
items. Any gain or loss arising from derivative financial
instruments is based on changes in fair value, which is
determined by direct reference to active market
transactions or using a valuation technique where no active
market exists. At certain times the Group has foreign
currency forward contracts and interest rate caps that fall
into this category.
(n) 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 Pounds 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.
(o) 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.
Depreciation is calculated 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:
Leasehold property – 3-15 years
Fixtures and fittings – 5 years
Computer hardware – 5 years
(p) Cash and cash equivalents
Cash and cash equivalents comprise cash balances. Bank
borrowings that are repayable on demand and form an
integral part of the Group's cash management are included
as a component of cash and cash equivalents for the
purpose only of the statement of cash flows.
(q) Inventories
Inventories are valued at the lower of cost and net realisable
value on a FIFO basis. Cost comprises purchase price plus
associated freight and duty costs for imported goods.
Inventories are regularly assessed for evidence of
impairment. Where such evidence is identified, a provision
is recognised to reduce the value of stock to its selling price
after incurring any future costs to sell.
(r) 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.
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.
The Pebble Group plc Annual Report 2019
63
Notes to the Group financial statements
(continued)
2. Accounting policies (continued)
(r) Leases (continued)
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 13.
Short-term leases and low value assets
The Group has elected not to recognise right-of-use assets
and lease liabilities for short-term lease of machinery 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.
(s) Segmental reporting
The Group reports its business activities in two areas being
the:
• Brand Addition – sale of promotional product through
services provided under framework contracts on an
international basis; and
• Facilisgroup – provision of technology, 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 Board of Directors, which has been
identified as the Chief Operating Decision Maker. The Board
of Directors consists of the Executive Directors and the
Non-executive Directors.
(t) Employee benefits
The Group provides a range of benefits to employees,
including annual bonus arrangements, paid holiday
arrangements and defined contribution pension plans.
(i) 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.
(ii) 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
accruals within trade and other payables in the balance
sheet. The assets of the plans are held separately from the
Group in independently administered funds.
(u) Equity, reserves and dividend payments
Share capital
Share capital represents the nominal (par) value of shares
that have been issued.
64
The Pebble Group plc Annual Report 2019
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.
Merger reserve
During the year the Company became the ultimate parent
company of the Group. The merger reserve was created
during the year as a result of the share for share exchange
under which The Pebble Group plc (formerly The Pebble
Group Limited) became the parent undertaking prior to the
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.
Retained earnings
Retained earnings includes all current and prior period
retained profits and losses, including foreign currency
translation differences arising from the translation of
financial statements of the Group’s foreign entities.
All transactions with owners of the parent are recorded
separately within equity.
Dividends are recognised when approved by the Group’s
shareholders or, in the case of interim dividends, when the
dividend has been paid.
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.
Goodwill relates to the various acquisitions made and
amounts to £35,882,000 as at 31 December 2019. The
estimates used in the impairment calculation are set out in
note 12.
FINANCIAL STATEMENTS 3. Judgements in applying accounting policies
and key sources of estimation uncertainty
(continued)
Valuation of acquired intangibles
IFRS 3 requires separately identifiable intangible assets
to be recognised on acquisitions. During the year, the
Directors finalised their previously preliminary assessment
of fair value of assets and liabilities acquired of Facilisgroup.
A separate customer relationships intangible asset was
recognised. The principal estimates used in valuing this
intangible asset are the future cash flows estimated to be
generated from these contracts, expected customer
attrition, growth in revenues and the selection of
appropriate discount rates to apply to the cash flows.
The Directors’ assessment of these estimates was based on
up-to-date information and evidence available at the time
of finalising the valuation.
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.
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.
The useful economic lives applied are set out in the
accounting policies and are reviewed annually.
(b) Accounting judgements
Judgements in applying accounting policies and
key sources of estimation uncertainty
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. After
capitalisation, management monitors whether the
recognition requirements continue to be met and whether
there are any indicators that capitalised costs may be
impaired.
Capitalised development expenditure is analysed further
in note 12.
4. Segmental analysis
The Chief Operating Decision Maker (“CODM”) has been
identified as the Board of Directors. The Board reviews the
Group’s internal reporting in order to assess performance
and allocate resources. The Board has determined that the
operating segments, based on these reports, are:
• Brand Addition – sale of promotional product through
complex services provided under framework contracts on
an international basis; and
• Facilisgroup – provision of technology, consolidated buying
power and community learning and networking events to
SME promotional product distributors in North America
through subscription-based services.
Segment information about the above businesses is
presented below.
The Board assesses the performance of the operating
segments based on Adjusted EBITDA. Finance income and
costs are not included in the segment result that is
assessed by the Board and the majority of finance costs are
borne by centrally managed Group holding companies.
Other information provided to the Board 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. Segment liabilities
exclude IPO related items that are held centrally.
The Pebble Group plc Annual Report 2019
65
Notes to the Group financial statements
(continued)
4. Segmental analysis (continued)
Major customers
In 2019 there was one major customer that individually accounted for at least 10% of total revenues (2018: one customer).
The revenues relating to this customer in 2019 were £13,073,000 (2018: £15,069,000) and related to the Brand Addition
segment.
Analysis of revenue by geographical destination
United Kingdom
Continental Europe
America
Rest of World
Total revenue
Year ended
31 December
2019
£’000
Year ended
31 December
2018
£’000
30,162
31,805
31,616
13,580
107,163
28,089
28,840
20,366
15,662
92,957
The geographical revenue information above is based on the location of the customer.
All the above revenues are generated from contracts with customers and are recognised at a point in time or over time as
follows:
At a point in time
Over time
Total revenue
Year ended
31 December
2019
£’000
Year ended
31 December
2018
£’000
97,872
9,291
107,163
92,279
678
92,957
All non-current assets of the Group reside in the UK, with the exception of non-current assets with a net book value of
£20,307,000 (restated 2018: £19,701,000) which were located in North America and £309,000 (2018: £564,000) located in
other foreign countries.
66
The Pebble Group plc Annual Report 2019
FINANCIAL STATEMENTS 4. Segmental analysis (continued)
Income statement for the year ended 31 December 2019
Revenue
Cost of goods sold
Gross profit
Operating expenses
Operating expenses – exceptional
Total operating expenses
Operating profit/(loss)
Analysed as:
Adjusted EBITDA
Depreciation
Amortisation
Exceptional items
Private equity monitoring costs
Total operating profit/(loss)
Finance expense
Profit/(loss) before taxation
Income tax expense
Profit/(loss) for the year
Central
operations
£’000
Year ended
31 December
2019
£’000
Brand
Addition
£’000
97,872
(67,107)
30,765
(21,685)
–
Facilisgroup
£’000
9,291
–
9,291
(5,277)
(13,465)
(21,685)
(18,742)
9,080
(9,451)
10,703
(1,012)
(611)
5,092
(234)
(844)
–
–
–
(623)
(3,873)
(4,496)
(4,496)
(623)
–
–
–
–
(13,465)
(3,873)
–
–
9,080
(9,451)
(4,496)
(481)
8,599
(1,651)
(37)
(4,908)
(9,488)
(1,011)
(9,404)
630
(9,404)
7,578
(10,499)
107,163
(67,107)
40,056
(27,585)
(17,338)
(44,923)
(4,867)
15,172
(1,246)
(1,455)
(17,338)
–
(4,867)
(5,426)
(10,293)
(2,032)
(12,325)
The Pebble Group plc Annual Report 2019
67
Notes to the Group financial statements
(continued)
4. Segmental analysis (continued)
Statement of financial position as at 31 December 2019
Brand
Addition
£’000
Facilisgroup
£’000
Central
operations
£’000
As at
31 December
2019
£’000
39,666
5,303
167
45,136
7,952
24,079
5,931
37,962
10,501
778
–
11,279
–
1,403
1,083
2,486
83,098
13,765
5,151
–
5,151
724
22,314
252
23,290
28,441
54,657
351
1,816
2,167
114
1,321
(60)
1,375
3,542
–
–
–
–
–
62
1,847
1,909
1,909
–
–
–
–
3,934
(43)
3,891
3,891
50,167
6,081
167
56,415
7,952
25,544
8,861
42,357
98,772
5,502
1,816
7,318
838
27,569
149
28,556
35,874
62,898
10,223
(1,982)
ASSETS
Non-current assets
Intangible assets
Property, plant and equipment
Deferred tax assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
TOTAL ASSETS
LIABILITIES
Non-current liabilities
Lease liability
Deferred tax liability
Total non-current liabilities
Current liabilities
Lease liability
Trade and other payables
Current tax liabilities
Total current liabilities
TOTAL LIABILITIES
NET ASSETS/(LIABILITIES)
68
The Pebble Group plc Annual Report 2019
FINANCIAL STATEMENTS 4. Segmental analysis (continued)
Income statement for the year ended 31 December 2018
Revenue
Cost of goods sold
Gross profit
Operating expenses
Operating expenses – exceptional
Total operating expenses
Operating profit/(loss)
Analysed as:
Adjusted EBITDA
Depreciation
Amortisation
Exceptional items
Private equity monitoring costs
Total operating profit/(loss)
Finance expense
Profit/(loss) before taxation
Income tax expense
Profit/(loss) for the year
Facilisgroup
£’000
Central
operations
£’000
Year ended
31 December
2018
(Restated)
£’000
678
–
678
(309)
(154)
(463)
215
483
(113)
–
(154)
–
215
–
215
(97)
118
–
–
–
20
(912)
(892)
(892)
67
–
–
(912)
(47)
(892)
92,957
(64,827)
28,130
(19,650)
(1,303)
(20,953)
7,177
10,109
(1,013)
(569)
(1,303)
(47)
7,177
(5,632)
(5,843)
(6,254)
468
(6,254)
1,334
(1,025)
309
Brand
Addition
£’000
92,279
(64,827)
27,452
(19,361)
(237)
(19,598)
7,854
9,560
(900)
(569)
(237)
–
7,854
(481)
7,372
(1,396)
6,444
The Pebble Group plc Annual Report 2019
69
Brand
Addition
£’000
Facilisgroup
£’000
Central
operations
£’000
As at
31 December
2018
(Restated)
£’000
37,508
3,831
269
41,608
7,450
25,301
5,892
38,643
80,251
–
3,780
–
3,780
–
793
24,457
475
25,725
29,505
50,746
13,040
963
–
14,003
–
1,266
1,438
2,704
16,707
–
–
–
–
–
58
820
878
878
50,548
4,794
269
55,611
7,450
26,625
8,150
42,225
97,836
–
64,007
64,007
468
1,978
–
–
4,248
1,978
2,446
64,007
70,233
–
106
711
153
970
1,192
–
3,149
(20)
4,321
1,192
899
28,317
608
31,016
3,416
68,328
101,249
13,291
(67,450)
(3,413)
Notes to the Group financial statements
(continued)
4. Segmental analysis (continued)
Statement of financial position as at 31 December 2018
ASSETS
Non-current assets
Intangible assets
Property, plant and equipment
Deferred tax assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
TOTAL ASSETS
LIABILITIES
Non-current liabilities
Borrowings
Lease liability
Deferred tax liability
Total non-current liabilities
Current liabilities
Borrowings
Lease liability
Trade and other payables
Current tax liabilities
Total current liabilities
TOTAL LIABILITIES
NET ASSETS/(LIABILITIES)
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The Pebble Group plc Annual Report 2019
FINANCIAL STATEMENTS 5. Expenses by nature
Inventory recognised as an expense
Other cost of sales
Staff costs (note 6)
Exceptional items (note 7)
Amortisation of intangible assets (note 12)
Depreciation of property, plant and equipment (note 13)
Auditors’ remuneration (note 9)
Foreign exchange gain and movement in foreign exchange derivative contracts
Increase/decrease in provision for expected credit losses
Other external charges
Total cost of sales and operating expenses
Depreciation and amortisation are charged to operating expenses in the income statement.
6. Employees and Directors
Personnel costs are analysed below:
Staff costs (including Directors) consist of:
Wages and salaries
Social security costs
Other pension costs
Total personnel expenses
Year ended
31 December
2019
£’000
Year ended
31 December
2018
(Restated)
£’000
61,924
5,183
18,896
17,338
1,455
1,246
359
(353)
–
5,982
112,030
59,234
5,593
14,519
1,303
569
1,013
108
(158)
4
3,483
85,780
Year ended
31 December
2019
£’000
Year ended
31 December
2018
£’000
16,805
1,622
469
18,896
12,651
1,447
421
14,519
Additional personnel costs of £961,000 (2018: £464,000) have been capitalised as intangible assets (see note 12). Personnel
costs above exclude the exceptional deferred contingent payments of £13,465,000 (2018: £460,000) (see notes 7 and 25).
Defined contribution scheme
The amount recognised in the income statement as an expense in relation to the Group's defined contribution plans is
£469,000 (2018: £421,000). Included within accruals and other creditors is £60,000 (2018: £70,000) for outstanding
contributions to the defined contribution plans.
During the year, the monthly average number of the Group’s employees (including Executive Directors and temporary
employees) was as follows:
By function:
Management
Sales and distribution
Administration
Total employees
Year ended
31 December
2019
No.
Year ended
31 December
2018
No.
9
225
193
427
7
197
162
366
The Directors have recategorised employees presented in the comparative information between sales and distribution and
administration functions.
The Pebble Group plc Annual Report 2019
71
Notes to the Group financial statements
(continued)
6. Employees and Directors (continued)
Key management compensation
Key management of the Group is considered to be the Board of Directors. Details of Directors’ remuneration is disclosed in
the Report of the Remuneration Committee on page 44. Remuneration paid to these individuals on an aggregated basis is
as follows:
Salaries including bonuses and social security costs
Pension contributions
Total remuneration
7. Operating expenses – exceptional
Reorganisation and restructuring
Transaction and IPO related costs
Contingent consideration payments to vendors of Facilisgroup
Total transaction and IPO related items
Private equity monitoring costs
Year ended
31 December
2019
£’000
Year ended
31 December
2018
£’000
654
30
684
353
45
398
Year ended
31 December
2019
£’000
Year ended
31 December
2018
(Restated)
£’000
–
3,873
13,465
17,338
17,338
–
175
668
460
1,128
1,303
47
Exceptional items relate to the following:
• reorganisation and restructuring - costs were incurred in relation to relocation of some of the Group’s operations in
Germany to the UK during 2017 and 2018;
• transaction and IPO related costs - incremental external costs related to the acquisition in 2018 and IPO in 2019 and
which relate to professional fees, the write-off of unamortised loan note fees as of the date of the IPO, and IPO related
bonus payments; and
• the sale and purchase agreement for the acquisition of Facilisgroup in December 2018 detailed deferred payments to be
made to the vendors for the sale of the shares. These payments required the vendors to remain in employment with the
Group for the duration of the 24-month deferral period. Hence, they are treated as remuneration for post-acquisition
services and the cost charged to profit and loss over the deferral period. All the deferred payments were settled in full
prior to Admission. The deferred contingent payments required the vendors to remain in employment with the Group for
the duration of the deferral period. As such, they are treated as remuneration for post-acquisition services and the cost
charged to profit and loss over the deferral periods, rather than forming part of the settlement consideration. The
deferred contingent payments have been charged to exceptional operating expenses in the income statement in the year
ended 31 December 2019 (£13,465,000) and 31 December 2018 (£460,000).
Private equity costs include monitoring and other fees that will not be incurred post-IPO.
8. Finance expense
An analysis is set out below:
Bank loans
Other loans
Preference shares
Other interest
Amortisation of debt issue costs up to IPO date
Net foreign exchange (gain)/loss on revaluation of debt
Unwind of discount on lease liabilities
Total finance expense
72
The Pebble Group plc Annual Report 2019
Year ended
31 December
2019
£’000
Year ended
31 December
2018
£’000
1,041
2,939
1,562
253
412
(1,200)
419
5,426
1,020
2,083
1,524
86
343
455
332
5,843
FINANCIAL STATEMENTS 9. Auditors’ remuneration
Fees payable to the Company’s auditors for the audit of The Pebble Group plc
(formerly The Pebble Group Limited)
Fees payable to the Company’s auditors in respect of:
Audit of the Company’s subsidiaries
Other assurance services
Fees for taxation advisory services
Acquisition and IPO related
Total auditors’ remuneration
10. Income tax expense
Current income tax
– UK corporation tax charge for the year
– Adjustments in respect of prior years
– Foreign tax
Total current income tax
Deferred tax
– Deferred tax
Total deferred tax
Total income tax expense
Year ended
31 December
2019
£’000
Year ended
31 December
2018
£’000
48
105
12
80
114
359
3
55
3
48
–
108
Year ended
31 December
2019
£’000
Year ended
31 December
2018
£’000
472
(85)
1,639
2,026
6
6
399
–
645
1,044
(19)
(19)
2,032
1,025
Current taxes comprise the income taxes of the Group companies which posted a taxable profit for the year, while
deferred taxes show changes in deferred tax assets and liabilities which were recognised by the Group on the temporary
differences between the carrying amount of assets and liabilities and their amount calculated for tax purposes, and on
consolidation adjustments, calculated using the rates that are expected to apply in the year these differences will reverse.
Analysis of charge in year
Reconciliation of total tax charge:
(Loss)/profit before taxes
(Loss)/profit on ordinary activities multiplied by the rate of corporation
tax in the UK of 19% (2018: 19%)
Effects of:
Adjustments in respect of prior years
Non-deductible expenses and interest expense
Differences in tax rates in overseas jurisdictions
Losses carried forward to future periods (not recognised for deferred tax)
Utilisation of unrecognised deferred tax brought forward
Total income tax expense
Year ended
31 December
2019
£’000
Year ended
31 December
2018
(Restated)
£’000
(10,293)
1,334
(1,956)
(85)
3,586
313
276
(102)
2,032
253
–
524
178
78
(8)
1,025
Factors that may affect future tax charges
In the Spring Budget 2020, the government announced that the previously enacted decrease in the corporate tax rate from
19% to 17% from 1 April 2020 would no longer happen and that rates would remain at 19% for the foreseeable future. The
new law was substantively enacted by a resolution under the Provisional Collection of Taxes Act 1968 on 17 March 2020.
The Pebble Group plc Annual Report 2019
73
Notes to the Group financial statements
(continued)
11. Earnings per share
Basic and diluted 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. As at 31 December 2019, no instruments with a
potential or actual dilutive impact were in issue and therefore diluted EPS is the same as basic EPS.
The calculation of basic profit per share is based on the following data:
Statutory EPS
Year ended
31 December
2019
Year ended
31 December
2018
(Restated)
Earnings (£’000)
(Loss)/earnings for the purposes of basic earnings per
share being profit for the year attributable to equity shareholders
(12,325)
309
Number of shares
Weighted average number of shares for the purposes of basic earnings per share
Basic and diluted (loss)/earnings per ordinary share (pence)
97,390,317
92,016,939
(12.56)
0.34
Pro-forma EPS
The calculation of pro-forma earnings per share is based on the weighted average number of shares in issue post
Admission on 5 December 2019. This has been applied retrospectively to the number of shares in issue at 31 December
2018 and the metric has been restated to ensure that the adjusted earnings per share figures are comparable over the two
periods.
Year ended
31 December
2019
Year ended
31 December
2018
(Restated)
Earnings (£’000)
(Loss)/earnings for the purposes of basic earnings per
share being profit for the year attributable to equity shareholders
(12,325)
309
Number of shares
Weighted average number of shares for the purposes of basic earnings per share
Basic and diluted pro-forma (loss)/earnings per ordinary share (pence)
167,450,893 167,450,893
(7.36)
0.18
Adjusted EPS
The calculation of adjusted earnings per share is based on the after tax adjusted operating profit after adding back certain
costs as detailed in the table below. Adjusted earnings per share figures are given to exclude the effects of amortisation of
acquired intangible assets and exceptional items, all net of taxation, and are considered to show the underlying
performance of the Group.
The weighted average number of shares uses the number of shares in issue post Admission on 5 December 2019. This has
been applied retrospectively to the number of shares in issue at 31 December 2018 (on the same basis as pro-forma EPS
above) and the metric has been restated to ensure that the adjusted earnings per share figures are comparable over the
two periods.
Earnings (£’000)
Earnings for the purposes of basic earnings per share being adjusted earnings
Number of shares
Weighted average number of shares for the purposes of basic earnings per share
Basic and diluted adjusted earnings per ordinary share (pence)
Year ended
31 December
2019
Year ended
31 December
2018
(Restated)
4,702
1,543
167,450,893 167,450,893
2.81
0.92
74
The Pebble Group plc Annual Report 2019
FINANCIAL STATEMENTS 11. Earnings per share (continued)
The calculation of basic adjusted earnings per share is based on the following data:
(Loss)/profit for the period attributable to equity shareholders
Add back/(deduct):
Amortisation charge on acquired intangible assets
Exceptional items
Private equity monitoring costs
Tax effect of the above
Adjusted earnings
12. Intangible assets
Cost
Balance at 1 January 2018 (restated)
Acquisitions (restated)
Additions (restated)
Reclassifications (restated)
Year ended
31 December
2019
£’000
Year ended
31 December
2018
(Restated)
£’000
(12,325)
309
525
17,338
–
(836)
4,702
66
1,303
47
(182)
1,543
Goodwill
£’000
Customer
relationships
£’000
Software and
Development
costs
£’000
Work in
progress
£’000
32,981
2,977
–
–
1,331
9,420
–
–
6,894
1,420
643
602
474
–
487
(474)
Total
£’000
42,626
13,040
1,089
–
Balance at 31 December 2018 (restated)
35,958
10,751
8,613
1,433
56,755
FX difference on translation
Additions
Reclassifications
Balance at 31 December 2019
Accumulated amortisation
Balance at 1 January 2018
Charge for year
Balance at 31 December 2018
FX difference on translation
Charge for year
Balance at 31 December 2019
Net book value
At 31 December 2017 (restated)
At 31 December 2018 (restated)
At 31 December 2019
(76)
–
–
(314)
–
–
35,882
10,437
–
–
–
–
–
–
44
66
110
–
525
635
32,981
35,958
1,287
10,641
35,882
9,802
(37)
1,184
1,396
11,156
5,594
503
6,097
(18)
930
7,009
1,300
2,516
4,147
–
299
(1,396)
336
–
–
–
–
–
–
(427)
1,483
–
57,811
5,638
569
6,207
(18)
1,455
7,644
1,420
1,433
36,988
50,548
336
50,167
Personnel costs of £961,000 (2018: £464,000) have been capitalised as intangible assets.
The Pebble Group plc Annual Report 2019
75
Notes to the Group financial statements
(continued)
12. Intangible assets (continued)
The restatement at 31 December 2018 is to reflect:
(i)
Work in progress treated as intangible assets rather than fixed assets (and as at 1 January 2018). The net book value
reclassified as at 1 January 2018 was £1,420,000.
(ii) Re-evaluation of the provisional purchase price allocation of the 2018 Facilisgroup acquisition. Firstly to recognise a
separate customer relationship intangible asset of £9,420,000 at acquisition date, with a corresponding reduction in
goodwill. Secondly, to reflect an additional amount of £1,293,000 within consideration in calculating goodwill, which
related to the amount due, and paid, in 2019 for the final working capital acquired and not linked to ongoing
employment of the vendors.
(iii) Treatment of deferred payments to the vendors of Facilisgroup as post-acquisition expenses charged to profit and loss
rather than forming part of the consideration payable for the acquisition. This resulted in a reduction to goodwill as
reported at 31 December 2018 of £11,503,000 and a corresponding decrease of the same amount to deferred
consideration and current liabilities. The deferred contingent payments required the vendors to remain in employment
with the Group for the duration of the deferral period. As such, they are treated as remuneration for post-acquisition
services and the cost charged to profit and loss over the deferral periods, rather than forming part of the settlement
consideration. The deferred contingent payments have been charged to exceptional operating expenses in the income
statement in the year ended 31 December 2019 (£13,465,000) and 31 December 2018 (£460,000).
The acquisition relates to the acquisition of the Facilisgroup companies in December 2018.
The remaining amortisation periods for customer relationships are between 17 and 19 years (2018: 18 and 20 years) and for
software and development costs are between 1 and 3 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 cash-generating unit. The value in use
calculations were based on projected cash flows in perpetuity. Budgeted cash flows for 2020 to 2024 were used. These
were based on a three-year forecast with growth rates of 7% (Facilisgroup) to 8% (Brand Addition) applied for the following
years. Subsequent years were based on a reduced rate of growth of 3.0% into perpetuity.
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 cash-generating units and
do not form a basis for estimating the consolidated profits of the Group in the future.
The Directors used an estimated market pre-tax weighted average cost of capital (“WACC”) of 12.4% to discount the cash
flows used for the Brand Addition CGU and 13% for the Facilisgroup CGU. The value in use calculations described above,
together with sensitivity analysis using reasonable assumptions, indicate significant 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:
As at 31
December
2019
£’000
32,981
2,901
35,882
As at 31
December
2018
(Restated)
£’000
32,981
2,977
35,958
Brand Addition
Facilisgroup
76
The Pebble Group plc Annual Report 2019
FINANCIAL STATEMENTS 13. Property, plant and equipment
Cost
Balance at 1 January 2018 (restated)
Impact of foreign exchange translation
Acquisitions
Additions (restated)
Disposals
Reclassifications
Balance at 31 December 2018 (restated)
Impact of foreign exchange translation
Additions
Disposals
Leasehold
property
£’000
Fixtures and
fittings
£’000
Computer
hardware
£’000
Right-of-use
assets
£’000
Total
£’000
1,000
2,206
1,678
7,993
12,877
13
190
13
(17)
–
(2)
118
50
–
(7)
3
272
100
–
7
–
638
70
–
–
14
1,218
233
(17)
–
1,199
2,365
2,060
8,701
14,325
2
49
–
(54)
293
–
(20)
261
(26)
(145)
2,101
(151)
(217)
2,704
(177)
Balance at 31 December 2019
1,250
2,604
2,275
10,506
16,635
Accumulated depreciation
Balance at 1 January 2018
Impact of foreign exchange translation
Acquisitions
Charge for the year
Balance at 31 December 2018
Disposals
Impact of foreign exchange translation
Charge for the year
781
13
15
115
924
–
5
107
1,998
1,505
3,973
(2)
12
69
3
106
112
–
114
717
2,077
1,726
4,804
–
(48)
79
(22)
(10)
171
–
(148)
889
8,257
14
247
1,013
9,531
(22)
(201)
1,246
Balance at 31 December 2019
1,036
2,108
1,865
5,545
10,554
Net book value
Balance at 31 December 2017 (restated)
Balance at 31 December 2018 (restated)
Balance at 31 December 2019
Right-of-use assets – net book value
Balance at 31 December 2017
Balance at 31 December 2018
Balance at 31 December 2019
219
275
214
3,843
3,644
4,800
208
288
496
143
79
21
173
334
410
34
174
140
4,020
3,897
4,961
–
–
–
4,620
4,794
6,081
4,020
3,897
4,961
The restatement at 31 December 2018 is to reflect work in progress treated as intangible assets rather than fixed assets
(and as at 1 January 2018).
The Pebble Group plc Annual Report 2019
77
Notes to the Group financial statements
(continued)
14. Deferred tax assets and liabilities
Deferred tax assets and liabilities are analysed as follows.
Accelerated capital allowances
On intangible assets
As at 31
December
2019
£’000
As at 31
December
2018
(Restated)
£’000
167
269
(1,816)
(1,978)
The above amounts reflect the differences between the carrying and tax amounts of the following balance sheet headings
as at each year end.
Changes during each year are as follows:
Balance at 1 January 2018
Tax credit in respect of current year
Prior period adjustment
On acquisition of acquired intangibles (note 25)
Balance at 31 December 2018
Tax (charge)/credit in respect of current year
Foreign exchange translation
Balance at 31 December 2019
Asset
£’000
250
11
8
–
269
(102)
–
167
Liability
£’000
(Restated)
–
–
–
(1,978)
(1,978)
96
66
(1,816)
There are unrecognised deferred tax assets relating to capital losses of £9,900,000 (2018: £9,900,000) and in respect of
trading losses of £276,000 (2018: £nil). The Directors have assessed that there will not be sufficient taxable profits available
in future periods, for the entities in the Group in which these losses reside, in order to utilise these losses.
15. Investments
The Company directly owns the whole of the issued ordinary shares of the following subsidiary undertakings.
The Directors believe that the carrying value of the investments is supported by their underlying net assets and future
trading forecast.
Name
Registered address
Principal activity
Class of share
Percentage holding
The Pebble Group (Holdings) Limited Broadway
Holding company
Ordinary
100%
Project Amber Bidco Limited
H.I.G Milan UK Topco Limited
H.I.G Milan UK Midco Limited
H.I.G Milan UK Bidco Limited
Brand Addition Limited
Product Plus International Limited
Gearworks Limited
Brand Addition Asia Limited
Brand Addition Ireland Limited
Brand Addition Reklam Urunleri
Dagitim ve Ticaret Limited Sirketi
Trafford Wharf Road
Manchester
M17 1DD
Unit 1605
16th Floor
Tower 3 Enterprise
Square
No. 9 Sheung Yuet Road
Kowloon, Hong Kong
Unit G2
Calmount Business Park
Ballymount, Dublin 12
Buyukdere Caddesi
Meydan Sokak Spring
Giz Plaza Kat:13
Sisli-Istanbul, Turkey
78
The Pebble Group plc Annual Report 2019
Holding company
Holding company
Holding company
Holding company
Ordinary
Ordinary
Ordinary
Ordinary
Promotional merchandise
Ordinary
Non-trading
Ordinary
Promotional merchandise
Ordinary
100%
100%
100%
100%
100%
100%
100%
Promotional merchandise
Ordinary
100%
Promotional merchandise
Ordinary
100%
FINANCIAL STATEMENTS 15. Investments (continued)
Name
Registered address
Principal activity
Class of share
Percentage holding
Brand Addition (Shanghai) Trading
Co., Limited
Room 302, Qian Li
Center (building T6)
Baolong Plaza, No 6
311 Xinlong Road
Qibao Town, Minhang
District
Shanghai, China
Promotional merchandise
Ordinary
100%
H.I.G. Milan Germany Bidco GmbH
Brand Addition GmbH
Heydastrasse 13-15
58093 Hagen, Germany
Holding company
Ordinary
Promotional merchandise
Ordinary
The Pebble Group US Bidco Inc.
Gateway CDI Inc.
Facilisgroup LLP
909 North 20th Street
Saint Louis, MO 63103
Holding company
Ordinary
Promotional merchandise
Ordinary
1000 Clark Ave
Saint Louis, MO 63102
Promotional merchandise
service provider
Ordinary
100%
100%
100%
100%
100%
The Pebble Group Canada Bidco
Limited
5320 Canotek Road
Gloucester, ON K1J 9C1
Holding company
Ordinary
100%
Facilisgroup Canada Inc.
Weber Facilis Holdings Inc.
Rochette Facilis Holding Inc.
Promotional merchandise
service provider
Ordinary
100%
Holding company
Ordinary
100%
Holding company
Ordinary
100%
3029 Barlow Crescent
Dunrobin, ON K0A 1T0
394 Roosevelt Ave
Ottawa, ON K2A 1Z3
Other than The Pebble Group (Holdings) Limited, which is directly held by the parent, all subsidiaries are indirectly held.
16. Inventories
Work in progress
Finished goods for resale
Total closing inventories
Stocks are stated after provisions for impairment of £88,000 (2018: £132,000).
There is no difference between the replacement cost of stocks and carrying value.
As at 31
December
2019
£’000
As at 31
December
2018
£’000
104
7,848
7,952
–
7,450
7,450
The Pebble Group plc Annual Report 2019
79
Notes to the Group financial statements
(continued)
17. Trade and other receivables
Amounts falling due within one year:
Trade receivables not past due
Trade receivables past due
Provision for trade receivables
Trade receivables net
Contract assets
Other debtors
FX derivative
Prepayments
Currency analysis
Sterling
Euro
US Dollar
Chinese Renminbi
Other
Total trade and other receivables
As at
31 December
2019
£’000
As at
31 December
2018
£’000
18,575
2,892
(45)
21,422
1,676
1,542
58
846
17,936
3,812
(45)
21,703
2,160
1,877
–
885
25,544
26,625
As at
31 December
2019
£’000
As at
31 December
2018
£’000
10,367
7,537
5,860
1,474
306
9,812
8,146
5,972
2,307
388
25,544
26,625
Any fair value difference on trade and other receivables is not material. Trade and other receivables are considered past
due once they have passed their contracted due date. Trade and other receivables are assessed for impairment based
upon the expected credit losses model.
The Group’s customer base is predominantly made up of high quality organisations with a high credit rating. In order to
manage credit risk the Directors set limits for customers based on a combination of payment history and third-party credit
references. Credit limits are reviewed on a regular basis in conjunction with debt ageing and collection history. The
maturity analysis of financial assets (which comprise trade receivables, other debtors and contract assets) is analysed
below:
Trade receivables, other receivables and
accrued income
– Not yet due
– Up to 3 months overdue
– 3 to 6 months past due
– Over 6 months past due
Gross
£’000
Provision
£’000
21,793
2,307
332
253
24,685
–
–
–
(45)
(45)
2019
net
£’000
21,793
2,307
332
208
Gross
£’000
Provision
£’000
22,094
3,126
357
208
–
–
–
(45)
(45)
2018
net
£’000
22,094
3,126
357
163
25,740
24,640
25,785
The Group uses objective evidence as well as considering forward-looking information and the probability of default when
calculating expected credit losses. The maturity of financial assets is therefore used as an indicator as to the probability of
default. The maximum amount of exposure to credit risk is the total value of unprovided trade and other receivables as set
out above. There are no amounts outstanding on financial assets that were written off during the reporting period and
which are still subject to enforcement activity.
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest method, less provision for impairment. The Group uses the simplified approach to measure the loss allowance at
an amount equal to lifetime expected credit losses for trade receivables. There is limited concentration of credit risk with
respect to trade receivables due to the diverse and unrelated nature of the Group’s customers. Accordingly, the Directors
believe that no further credit provision is required in excess of the provision for impairment of receivables.
80
The Pebble Group plc Annual Report 2019
FINANCIAL STATEMENTS 18. Cash and cash equivalents
Cash and cash equivalents
Currency analysis
Sterling
Euro
US Dollar
Other
Total cash and cash equivalents
19. Non-current liabilities
Bank loans and overdrafts
Other loans
Preference shares
IFRS 16 lease liability (note 21)
Total non–current liabilities
Borrowings are repayable as follows:
Bank loans
Between two and five years
Debt issue costs
Other loans
Between two and five years
Debt issue costs
Preference shares
Between two and five years
IFRS 16 lease liability
Between two and five years
In more than five years
Total borrowings
As at
31 December
2019
£’000
As at
31 December
2018
£’000
8,861
8,150
As at
31 December
2019
£’000
As at
31 December
2018
£’000
1,241
2,623
3,545
1,452
8,861
529
3,218
3,643
760
8,150
As at
31 December
2019
£’000
As at
31 December
2018
(Restated)
£’000
–
–
–
5,502
5,502
19,941
27,297
16,769
4,248
68,255
As at
31 December
2019
£’000
As at
31 December
2018
(Restated)
£’000
–
–
–
–
–
2,998
2,504
5,502
21,092
(1,151)
27,706
(409)
16,769
2,503
1,745
68,255
The above carrying values of the borrowings equate to the fair values. Borrowings are secured against all the assets of the
Group.
The Pebble Group plc Annual Report 2019
81
Notes to the Group financial statements
(continued)
19. Non-current liabilities (continued)
Average interest rates at the balance sheet date
Bank loans
Other loans
Preference shares
Currency analysis
Sterling
Euro
US Dollar
Chinese Renminbi
Other
As at
31 December
2019
%
As at
31 December
2018
%
–
–
–
3.88
10.00
10.00
As at
31 December
2019
£’000
As at
31 December
2018
(Restated)
£’000
3,055
24
2,124
–
299
42,031
20,521
5,199
79
425
5,502
68,255
As part of the IPO process, the bank loans and other loans were settled in full and the preference shares were redeemed
on 6 December 2019.
Bank loans
Bank loans were secured by way of fixed and floating charge over all assets of the Group. Interest was charged at a
EURIBOR or LIBOR linked variable rate. No security was given for other loans.
Additional loan facilities of £11,580,000 were received in the year ended 31 December 2018 to fund the Facilisgroup
acquisition. Debt issue costs associated with these loans were £672,000.
Debt issue costs of £2,091,000 (2018: £2,091,000) capitalised against the bank and other loans raised were being amortised
over the term of the loans but have been amortised in full in 2019. Amortisation of £1,730,000 (2018: £343,000) has been
charged during the year, with £412,000 included within finance expense relating to the period up to IPO and £1,318,000
included within exceptional items being the remaining unamortised fees at IPO date.
Other loans
Other loans related to mezzanine finance and investor loans issued to the Group. Mezzanine finance was unsecured and
bears interest at market rates. Interest was charged at a variable rate linked to EURIBOR. Investor loans were unsecured
and accrued interest at a fixed rate of 10%.
Preference shares
The Group has held A and B preference shares as follows:
At 1 January 2018 and 31 December 2018
Group reorganisation
Issued for share for share exchange on 5 November 2019
Redeemed on 6 December 2019
At 31 December 2019
A
preference
shares
£0.00001
B
preference
shares
£0.00001
Total
preference
share capital
£
13,711,749
599,417
(13,711,749)
(599,417)
13,711,749
599,417
(13,711,749)
(599,417)
–
–
143
(143)
143
(143)
–
The 10% cumulative A and B preference shares were mandatorily redeemable at a fixed future date and were redeemed on
6 December 2019 following Admission. Dividends accrued at 10% compounding and were non-discretionary. The closing
amounts were therefore £nil (2018: £16,769,000) and included accumulated interest of £nil (2018: £2,458,000).
IFRS 16 lease liability
See note 21 for further detail on the IFRS 16 lease liability.
82
The Pebble Group plc Annual Report 2019
FINANCIAL STATEMENTS 20. Current liabilities
Bank loans and overdrafts
IFRS 16 lease liability (note 21)
Corporation tax
Trade payables
Other taxation and social security
Other payables
Accruals
Contract liabilities
Deferred consideration (note 25)
Total current liabilities
As at
31 December
2019
£’000
As at
31 December
2018
(Restated)
£’000
–
838
149
1,192
899
608
16,577
18,823
107
1,096
8,155
1,634
–
451
1,087
5,145
1,058
1,753
28,556
31,016
Revenues totalling £1,058,000 were recognised in the year ended 31 December 2019 that were included in the contract
liability balance as at 31 December 2018.
Currency analysis
Sterling
Euro
US Dollar
Chinese Renminbi
Other
Total current liabilities
The fair value of financial liabilities approximates to their carrying value due to short maturities.
21. Leases
Amounts recognised in the Consolidated statement of financial position
The Consolidated statement of financial position shows the following amounts relating to leases:
Right-of-use assets
Balance at 1 January 2018
New leases recognised in the year
Recognised on acquisition
Depreciation charge for the year
Balance at 31 December 2018
Impact of foreign exchange translation
New leases recognised in the year
Disposal
Depreciation charge for the year
Balance at 31 December 2019
As at
31 December
2019
£’000
As at
31 December
2018
(Restated)
£’000
17,473
3,735
6,150
788
410
16,669
5,575
6,789
1,634
349
28,556
31,016
£’000
4,020
70
524
(717)
3,897
3
2,101
(151)
(889)
4,961
These are included within “Property, plant and equipment” in the Consolidated Statement of Financial Position.
The Pebble Group plc Annual Report 2019
83
Notes to the Group financial statements
(continued)
21. Leases (continued)
Lease liabilities
Maturity analysis – contractual undiscounted cash flows:
Less than one year
More than one year, less than two years
More than two years, less than three years
More than three years, less than four years
More than four years, less than five years
More than five years
Total undiscounted lease liabilities at year end
Finance costs
Total discounted lease liabilities at year end
Lease liabilities included in the statement of financial position:
Current
Non-current
Amounts recognised in the Consolidated income statement
The Consolidated income statement shows the following amounts relating to leases:
Depreciation charge – leasehold property
Depreciation charge – fixtures and fittings
Depreciation charge – computer hardware
Interest expense (within finance expense)
As at
31 December
2019
£’000
As at
31 December
2018
£’000
1,044
1,305
1,070
977
933
2,822
8,151
(1,811)
6,340
838
5,502
6,340
1,220
1,004
850
770
676
1,941
6,461
(1,314)
5,147
899
4,248
5,147
As at
31 December
2019
£’000
As at
31 December
2018
£’000
782
54
53
889
419
633
65
19
717
332
The above leases relate to office space, computer equipment and motor vehicles. The net book value by category is set
out in note 13.
Any expense for short-term and low-value leases is not material and has not been presented.
84
The Pebble Group plc Annual Report 2019
FINANCIAL STATEMENTS 22. Share capital
The authorised, issued and fully paid number of shares are set out below:
Ordinary
shares
Number
Deferred
shares
Number
A ordinary
shares
Number
B ordinary
shares
Number
C1 ordinary
shares
Number
C2 ordinary
shares
Number
Total share
capital
£
Share
premium
£
7,882,522
211,091
726,475
931,253
58,099
941,899
–
–
–
100
–
–
–
–
1
–
–
–
(7,882,522)
(211,091)
(726,475)
(931,253)
(58,099)
(941,899)
At 1 January 2018
and 31 December
2018
Issued on 27
September 2019
Subdivision
Group
reorganisation
Issued for share
for share
exchange on 5
November 2019
Bonus issue
Share
consolidation
Capital reduction
–
1
(1)
–
–
–
–
–
–
–
–
–
–
7,882,522
210,991
726,475
931,253
58,099
– 14,180,657,078 379,752,709 1,306,928,525 1,675,324,147 104,523,339
– (14,117,596,902) (378,063,981) (1,301,116,725) (1,667,874,123)
–
–
–
–
–
– (103,535,625)
–
–
–
–
–
Share conversion 92,016,939 12,564,501
(70,942,698)
(1,899,819)
(6,538,275)
(8,381,277)
–
Issue on IPO
75,433,954
–
At 31 December
2019
167,450,893 12,564,501
–
–
–
–
–
–
–
–
754,340 78,451,312
1,800,154 78,451,312
The ordinary shares have full voting, dividend and capital distribution rights, including on winding up. They are
non–redeemable.
The holders of the deferred shares are not entitled to vote or participate in a dividend or other distribution. On a return of
capital, the holders of the deferred shares shall be entitled to receive only the amount paid up or credited as paid up and
shall become entitled to receive such amount only once the holders of the ordinary shares have been paid in respect of
each ordinary share the amount paid up or credited as paid up thereon plus £250,000,000. The deferred shares are
non-redeemable by the holders. The Company intends to purchase all of the deferred shares on the date of the
Company's Annual General Meeting in 2020, on the basis of each of the eight holders of deferred shares receiving no more
than £1 each in respect of such purchase. Accordingly, the deferred shares are excluded from the calculation of earnings
per share as presented in note 11.
The Company was incorporated on 27 September 2019 as a private company limited by shares in England and Wales, with
the allotment of 1 share of £1.
On 5 November 2019:
• the one ordinary share of £1.00 in issue was subdivided and redesignated as 100 B ordinary shares of £0.001 each; and
• the Company allotted and credited as fully paid 13,711,749 A preference shares of £0.00001 each, 599,417 B preference
shares of £0.00001 each, 7,882,522 A ordinary shares of £0.005 each, 210,991 B ordinary shares of £0.01 each, 726,475 C1
ordinary shares of £0.01 each and 931,253 C2 ordinary shares of £0.01 each in exchange for the entire issued share capital
of The Pebble Group (Holdings) Limited pursuant to an exchange agreement entered into between the Company and the
then shareholders of The Pebble Group (Holdings) Limited.
On 21 November 2019, the Company allotted, by way of a bonus issue, an aggregate of:
• 14,180,657,078 A ordinary shares of £0.005 each;
• 379,752,709 B ordinary shares of £0.01 each;
• 1,306,928,525 C1 ordinary shares of £0.01 each; and
• 1,675,324,147 C2 ordinary shares of £0.01 each,
to the existing shareholders of the Company, at a rate of 1,799 new ordinary shares of the relevant class in the capital of the
Company for each ordinary share of that class held at that time.
The Pebble Group plc Annual Report 2019
85
Notes to the Group financial statements
(continued)
22. Share capital (continued)
On 21 November 2019, by ordinary resolution:
• the 14,188,539,600 A ordinary shares of £0.005 each in issue were consolidated into 70,942,698 A ordinary shares of
£1.00 each;
• the 379,963,800 B ordinary shares of £0.01 each in issue were consolidated into 1,899,819 B ordinary shares of
£2.00 each;
• the 1,307,655,000 C1 ordinary shares of £0.01 each in issue were consolidated into 6,538,275 C1 ordinary shares of £2.00
each; and
• the 1,676,255,400 C2 ordinary shares of £0.01 each in issue were consolidated into 8,381,277 C2 ordinary shares of
£2.00 each.
Again on 21 November 2019, the Company, as a private company limited by shares at the time, undertook a reduction of
share capital by way of solvency statement in accordance with Sections 641 to 644 of the Companies Act. The reduction of
capital reduced the amount standing to the credit of the Company’s share capital by:
• cancelling 99p of the paid-up capital on each A ordinary share of £1.00 and £1.98 of the paid-up capital on each B
ordinary share of £2.00, C1 share of £2.00 and C2 ordinary share of £2.00; and
• reducing the nominal value of each A ordinary share to £0.01 and each B ordinary share, C1 ordinary share and C2
ordinary share to £0.02.
On 29 November 2019 by special resolution and conditional upon Admission (which happened on 5 December 2019):
• the 70,942,698 A ordinary shares of £0.01 each in issue following the reduction of capital were converted, with effect
from immediately prior to Admission, into 70,942,698 ordinary shares of £0.01 each;
• the 1,899,819 B ordinary shares of £0.02 each in issue following the reduction of capital were converted, with effect from
immediately prior to Admission, into 1,937,655 ordinary shares of £0.01 each and 1,861,983 deferred shares of £0.01 each;
• the 6,538,275 C1 ordinary shares of £0.02 each in issue following the reduction of capital were subdivided and converted,
with effect from immediately prior to Admission, into 8,386,329 ordinary shares of £0.01 each and 4,690,221 deferred
shares of £0.01 each; and
• the 8,381,277 C2 ordinary shares of £0.02 each in issue following the reduction of capital were subdivided and converted,
with effect from immediately prior to Admission, into 10,750,257 ordinary shares of £0.01 each and 6,012,297 deferred
shares of £0.01 each.
On 5 December 2019 the Company issued 75,433,954 ordinary shares of £0.01 each, for consideration of £79,205,652 in an
IPO, with the balance recorded as share premium. IPO costs of £3,873,000 have all been charged to the income statement.
23. Analysis and reconciliation of net debt
Cash at bank and in hand
Current borrowings
Non-current borrowings
Net debt (restated)
Cash at bank and in hand
Current borrowings
Non-current borrowings
Net (debt)/cash
1 January
2018
£’000
6,288
(1,517)
(55,699)
(50,928)
1 January
2019
£’000
8,150
(2,091)
(68,255)
(62,196)
Acquisitions
£’000
–
(106)
(468)
(574)
Acquisitions
£’000
–
–
–
–
Other
non-cash
changes
£’000
(476)
(2,318)
(1,180)
(3,974)
Other
non-cash
changes
£’000
(209)
(1,046)
(5,687)
Cash flow
£’000
2,338
1,850
31 December
2018
£’000
8,150
(2,091)
(10,908)
(68,255)
(6,720)
(62,196)
Cash flow
£’000
920
2,299
68,440
31 December
2019
£’000
8,861
(838)
(5,502)
(6,942)
71,659
2,521
Other non-cash changes include foreign exchange movements, accrued interest, and transfers between current and
non-current borrowings.
86
The Pebble Group plc Annual Report 2019
FINANCIAL STATEMENTS Credit risk
The Group’s principal financial assets are cash and trade
receivables. The credit risk associated with cash is limited,
as the counterparties have high credit ratings assigned by
international credit-rating agencies. The principal credit risk
arises therefore from the Group’s trade receivables. In
order to manage credit risk the Directors set limits for
customers based on a combination of payment history and
third-party credit references. Credit limits are reviewed on
a regular basis in conjunction with debt ageing and
collection history. The credit losses historically incurred by
the Group have been negligible as referred in note 17.
Interest rate risk, including cash flow interest rate
risk
The Group finances its operations through retained profits.
The Group is therefore not susceptible to interest rate risk.
Sensitivity to interest rate fluctuations
Borrowings have historically been held at a mixture of fixed
and floating rates. The Group has historically managed its
exposure to interest rate risk using an interest rate cap.
Hedge accounting was not applied. All borrowings other
than lease liabilities were settled on Admission, reducing the
interest rate risk significantly.
A 1% increase in the interest rate applied to interest bearing
borrowings would have reduced 2019 profit before tax by
£63,000 (2018: £703,000). A 1% reduction would have had
the equal and opposite effect on 2019 profit before tax.
24. Financial risk management and financial
instruments by category
The Group uses various financial instruments. These include
preference shares, loan notes and other loans, cash, issued
equity instruments and various items, such as trade
receivables and trade payables that arise directly from its
operations. The main purpose of these financial instruments
is to raise finance for the Group’s operations.
The existence of these financial instruments exposes the
Group to a number of financial risks, which are described in
more detail below.
The main risks arising from the Group’s financial instruments
are market risk, credit risk and liquidity risk. The Directors
review and agree policies for managing each of these risks
and they are summarised below.
Market risk
Market risk encompasses three types of risk, being currency
risk, interest rate risk and price risk. In this instance price
risk has been ignored as it is not considered a material risk
to the business. The Group’s policies for managing interest
rate risk are set out in the subsection entitled “interest rate
risk” opposite.
Currency risk
The Group contracts with certain customers and suppliers
in Euros and Dollars and manages this foreign currency risk
using forward foreign exchange contracts. Hedge
accounting is not applied. The Group’s exposure to foreign
currency risk at the end of the reporting period is set out in
notes 17,18 19 and 20.
As the Group derives an amount of its earnings from
overseas operations, the Group is affected by movements
in exchange rates. This would affect both the balance sheet
and the income statement. For a 10% strengthening in the
Sterling exchange rate, the trading operating profit would
reduce by £606,000 (2018: £227,000) and the net assets
would decrease by £1,027,000 (2018: £662,000). A 10%
weakening of the Sterling against the individual functional
currencies would have the equal and opposite effect on
operating profit and net assets as shown above on the basis
that all other variables remain constant.
Liquidity risk
The Group seeks to manage financial risk by ensuring
sufficient liquidity is available to meet foreseeable needs by
closely managing the cash balance.
The Group policy throughout the period has been to ensure
continuity of funding. Short-term flexibility is achieved by
revolving working capital facilities. The maturity of
borrowings is set out in note 19 to the financial statements.
The Company is party to a Group cross-guarantee banking
arrangement, which is a revolving credit facility of
£10,000,000 expiring in November 2023. Interest is charged
at a rate of LIBOR + 1.9%. As at year end the facility had not
been used and the balance was £nil.
The Pebble Group plc Annual Report 2019
87
Notes to the Group financial statements
(continued)
24. Financial risk management and financial instruments by category (continued)
Summary of financial assets and liabilities by category
The carrying amount of financial assets and liabilities recognised may also be categorised as follows:
Financial assets
Financial assets measured at amortised cost
Trade and other receivables
Contract assets
Cash and cash equivalents
Financial assets measured at fair value through profit or loss
FX derivative asset
Financial liabilities
Financial liabilities measured at amortised cost
Non-current:
Borrowings
Lease liabilities
Current:
Borrowings
Lease liabilities
Trade and other payables
Accruals
Contract liabilities
Deferred consideration
Net financial assets and liabilities
Non-financial assets and liabilities
Plant, property and equipment
Goodwill
Other intangible assets
Inventory
Prepayments
Deferred tax asset
Deferred tax liability
Other taxation and social security
Current tax liabilities
Total equity
As at
31 December
2019
£’000
As at
31 December
2018
(Restated)
£’000
22,964
1,676
8,861
33,501
58
33,559
23,580
2,160
8,150
33,890
–
33,890
–
(5,502)
(64,007)
(4,248)
–
(838)
(17,673)
(8,155)
(1,634)
–
(1,192)
(899)
(20,517)
(5,145)
(1,058)
(1,753)
(33,802)
(98,212)
(243)
(64,322)
6,081
35,882
14,285
7,952
846
167
(1,816)
(107)
(149)
63,141
62,898
4,794
35,958
14,590
7,450
885
269
(1,978)
(451)
(608)
60,909
(3,413)
The maturity analysis for borrowings and lease liabilities is presented in note 19. All other financial liabilities have a maturity
of less than 12 months (i.e. are all current).
88
The Pebble Group plc Annual Report 2019
FINANCIAL STATEMENTS 24. Financial risk management and financial instruments by category (continued)
Capital management policies and procedures
The Group’s capital management objectives are:
• to ensure the Group’s ability to continue as a going concern; and
• to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.
This is achieved through close management of working capital and regular reviews of pricing. Decisions on whether to raise
funding using debt or equity are made by the Board based on the requirements of the business.
Capital for the reporting period under review is shown in the table on the previous page.
The only derivative financial instrument assets used by the Group are foreign currency forward contracts that are disclosed
in the table in note 24. These derivatives are only used for economic hedging purposes and not as speculative investments.
They are classified as “held for trading” for accounting purposes and are accounted for at fair value through profit or loss.
They are presented as current assets or liabilities to the extent they are expected to be settled within 12 months after the
end of the reporting period.
The gross value of foreign currency forward contracts held at the end of the reporting period was $3,950,000 and
€5,250,000. The contracts matured within two to seven months of the year end.
25. Business combinations
On 4 December 2018, the Group acquired 100% of the share capital of Facilisgroup Canada Inc, incorporated in Canada,
and Facilisgroup LLP, incorporated in the US. The Facilisgroup companies are subscription-based businesses, providing
technology, consolidated buying power and community learning and networking events to SME distributors in the
promotional products sector. The total payments to be made as assessed at the acquisition date included £11,747,000
which was paid in cash at the date of acquisition. Additional deferred payments, the amount of which were contingent
upon working capital levels and EBITDA generated by the acquired group, were estimated to be worth £11,503,000 at the
acquisition date.
As part of the IPO, the deferred contingent payments were settled with a final payment of £13,925,000, which was paid on
6 December 2019. Also, during 2019, an additional amount of £1,293,000 was paid representing an adjustment for the final
working capital acquired and not linked to ongoing employment of the vendors. This has been included in consideration for
the purposes of calculating goodwill as at 31 December 2018. Total payments for the acquired group were £26,965,000.
The deferred contingent payments required the vendors to remain in employment with the Group for the duration of the
deferral period. As such, they are treated as remuneration for post-acquisition services and the cost charged to profit and
loss over the deferral periods, rather than forming part of the settlement consideration. The deferred contingent payments
have been charged to exceptional operating expenses in the income statement in the year ended 31 December 2019
(£13,465,000) and 31 December 2018 (£460,000).
Recognised amounts of identifiable assets and assumed liabilities are as follows:
Tangible assets
Intangible assets
Intangible assets – customer relationships
Trade and other debtors
Cash
Trade and other creditors
Deferred tax on acquired intangibles
Total identifiable net assets
Goodwill as at 31 December 2018 (restated)
Total
Satisfied by:
Cash consideration at the date of acquisition
Deferred consideration – working capital adjustment paid in 2019
(addition to goodwill in 2019)
Total consideration paid
Book value
£’000
Adjustments
£’000
(Restated)
Fair value
£’000
(Restated)
971
702
–
998
1,524
(1,515)
–
2,680
–
(59)
9,420
–
–
–
(1,978)
7,383
971
643
9,420
998
1,524
(1,515)
(1,978)
10,063
2,977
13,040
11,747
1,293
13,040
The Pebble Group plc Annual Report 2019
89
The Group and Beechbrook Private Debt Ill SARL were
related parties as Beechbrook Private Debt SARL Ill was a
minority shareholder in The Pebble Group (Holdings)
Limited until Admission.
The Group had issued loan notes with a nominal value of
£481,388 to Beechbrook Private Debt Ill SARL. The loan
notes bore interest compounded at rates between 4% and
10% per annum. Total interest payable at the year ended
31 December 2019 was £43,716 (2018: £42,978) and the total
outstanding balance of £151,936 was settled on Admission
and the year-end balance was £nil (2018: £42,978).
The Group had issued preference shares with a nominal
value of £609,411 to Beechbrook Private Debt Ill SARL.
Dividends accrued on the preference shares at a
compounding rate of 10%. The total amount accrued in the
year was £65,342 (2018: £64,915) and the total outstanding
balance of £169,993 was settled on Admission and the
year-end balance was £nil (2018: £64,915).
During the year, management charges of £nil (2018: £52,050)
were invoiced to the Group by Elysian Capital LLP.
27. Post balance sheet events
As referred in note 2(b), we are carefully monitoring the
situation concerning COVID-19 and any impact it may have
on the business. Any such impact has been treated as a
non-adjusting post balance sheet event for the purpose of
considering the carrying values of assets included in the
balance sheet as at 31 December 2019. Given the current
uncertainties, any potential financial effect cannot
be estimated.
Notes to the Group financial statements
(continued)
26. Related party transactions
The Directors consider there to be no ultimate controlling
party following Admission in December 2019. During the
current and prior year, related parties include
representatives of major shareholder, Elysian Capital LLP,
and parent and intermediate parent entities ultimately
owned by the same shareholders. Related party balances
with the Company are as follows, with key management
compensation given in note 6.
From 8 May 2017 the Group and Elysian Capital LLP were
related parties due to the existence of common members/
directorships and because the private equity funds Elysian
Capital II LP and Elysian Executive Management LP, which
are managed by Elysian Capital LLP, owned a controlling
interest in The Pebble Group (Holdings) Limited up to
Admission in December 2019. The Group had issued loan
notes with a nominal value of £7,151,380 to Elysian Capital II
LP and £493,064 to Elysian Capital Executive Management.
The loan notes bore interest compounded at 10% per
annum. Total interest payable in the year was £832,438
(2018: £761,700) and the total outstanding balance of
£2,145,115 was repaid on Admission and the balance at year
end was £nil (2018: £761,700). The Group had issued
preference shares with a nominal value of £12,257,240 to
Elysian Capital II LP and £845,098 to Elysian Capital
Executive Management. Dividends accrued on the
preference shares at a compounding rate of 10%. The total
amount accrued in the year was £1,404,845
(2018: £1,395,688) and the total outstanding balance of
£3,654,858 was repaid on Admission and the balance at
year end was £nil (2018: £1,395,688).
A number of the Group’s senior managers were
shareholders in The Pebble Group (Holdings) Limited up to
the date of Admission and of The Pebble Group plc
(formerly The Pebble Group Limited) post Admission. This
includes certain Directors as set out in the Directors'
Remuneration Report on page 44. The Group had issued
loan notes with a nominal value of £555,316 to management.
The loan notes bore interest compounded at rates between
4% and 10% per annum. Total interest payable in the year
was £46,256 (2018: £45,171) and the total outstanding
balance of £120,110 was repaid on Admission and the
balance at the year end was £nil (2018: £45,171).
The Group had issued preference shares with a nominal
value of £599,417 to management. Dividends accrued on the
preference shares at a compounding rate of 10%. The total
amount accrued in the year was £64,270 (2018: £63,850)
and the total outstanding balance of £167,206 was repaid on
Admission and the year-end balance was £nil
(2018: £63,850).
90
The Pebble Group plc Annual Report 2019
FINANCIAL STATEMENTS Independent auditors’ report to the members of The Pebble Group plc
Report on the audit of the Company financial statements
Opinion
In our opinion, The Pebble Group plc’s Company financial statements (the “financial statements”):
• give a true and fair view of the state of the Company’s affairs as at 31 December 2019;
• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards, comprising FRS 102 “The Financial Reporting Standard applicable in the UK and Republic
of Ireland”, and applicable law); and
• have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report (the “Annual Report”), which comprise: the
Company balance sheet as at 31 December 2019 and the Company statement of changes in equity for the period then
ended; and the notes to the financial statements, which include a description of the significant accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our
responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial
statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed entities, and we have
fulfilled our other ethical responsibilities in accordance with these requirements.
Our audit approach
Overview
Materiality
Overall materiality: £339,000, based on 1% of total assets, restricted to 90% of Group financial
statement materiality.
Audit scope
This is the first financial period for the entity. We performed full scope audit procedures over
The Pebble Group plc (the parent company of the Group).
Key audit
matters
• Impact of COVID-19.
• Accounting for the Initial Public Offering (“IPO”).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial
statements. In particular, we looked at where the Directors made subjective judgements, for example in respect of
significant accounting estimates that involved making assumptions and considering future events that are inherently
uncertain. As in all of our audits we also addressed the risk of management override of internal controls, including
evaluating whether there was evidence of bias by the Directors that represented a risk of material misstatement due
to fraud.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of
the financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit
strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any
comments we make on the results of our procedures thereon, were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
The Pebble Group plc Annual Report 2019
91
Independent auditors’ report to the members of The Pebble Group plc
Key audit matter
How our audit addressed the key audit matter
Impact of COVID-19
Refer to note 11 for further details.
The ongoing and evolving COVID-19 pandemic, and the
related government responses to this crisis, is having a
significant impact on the economies of those countries in
which the Company and its subsidiaries (the "Group")
operates. There is a high level of uncertainty as to the
duration of the pandemic and what its lasting impact will be
on those economies.
The Directors have considered the potential impact to the
Company of the ongoing COVID-19 pandemic in several
areas, including the assessment of going concern, the
carrying value of the Company’s assets and disclosures to
be included in the financial statements. The going concern
assessment for the Company is predominantly based upon
the assessment for the Group as a whole.
In relation to the Group’s going concern assessment, the
Directors adjusted the cash flow forecasts for the period to
the end of December 2021 to reflect a number of severe
but plausible downside scenarios resulting from the direct
and indirect consequences of COVID-19, including, for
example, a prolonged reduction in demand. This included
an assessment of mitigating actions, such as restricting
non-essential capital expenditure and employee related
cost savings.
The Directors also considered the impact of COVID-19, as a
post balance sheet event, on the carrying value of the
Company’s assets. It was concluded that this is a
non-adjusting post balance sheet event, and as such, no
changes to the carrying value of assets as at 31 December
2019 are required.
Accounting for the Initial Public Offering (“IPO”)
Refer to note 2(a) and note 10 for further details.
The Company listed on the Alternative Investment Market
(“AIM”) in December 2019. The accounting for the IPO
involves complex and judgemental transactions, and
therefore there is a risk that these transactions are not
accurately calculated or recorded, or are incomplete.
92
The Pebble Group plc Annual Report 2019
We re-evaluated our risk assessment in particular in
relation to the appropriateness of the going concern
basis of preparation of the financial statements. Based
on the change in circumstances from the date of our
planning due to COVID-19, and the evaluation performed
by the Directors, we increased the risk to significant.
We agreed that the management accounts for the
financial year to date were consistent with the starting
point of the Directors’ revised cash flow forecasts. We
also checked the arithmetical accuracy of management’s
forecasts for the period to the end of December 2021.
We evaluated management’s downside scenarios,
including a worst-case scenario, and challenged their
adequacy and underlying assumptions, including the level
of reduction in sales, the period of such reduction and
the timing and rate of anticipated sales recovery. In doing
so, we examined evidence relating to committed
customer orders, receipts of cash since 31 December
2019, and communications with key customers regarding
intent to settle outstanding receipts due.
We examined supporting evidence for the cost
mitigations included within the forecasts to corroborate
their reasonableness, including an assessment of the
Directors’ ability to take actions to implement these
mitigations if necessary.
On the basis of the procedures above, we evaluated the
level of forecast liquidity and agreed with management’s
assessment that there would likely be a sufficient level of
working capital throughout the period to the end of
December 2021 and banking covenants would likely be
met over the same period. We also corroborated the
drawdown in March 2020 of funds from the Company’s
revolving credit facility totalling £7.7m.
We recalculated the impact on the Group’s banking
covenants and corroborated the applicable ratios to the
underlying agreement. We evaluated the likelihood of
circumstances arising in which a covenant may
be breached.
We read management’s disclosures in the financial
statements in relation to the impact of COVID-19 and are
satisfied that they are consistent with the assessment
performed and correctly identify COVID-19 as a
non-adjusting post balance sheet event. We also read the
disclosures made in the other information and did not
identify any inconsistencies with the financial statements.
Our conclusions relating to going concern are
included below.
We performed an independent completeness assessment
to verify that all IPO related adjustments have been
identified.
We validated IPO adjustments to supporting
documentation, and verified these have been
appropriately accounted for in the financial statements.
We have also assessed the appropriateness of the
disclosures included in notes to the financial statements
to reflect these changes during the period.
FINANCIAL STATEMENTS How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of the Company, the accounting processes and controls, and the
industry in which it operates.
We gained an understanding of the legal and regulatory framework applicable to the Company and the industry in which it
operates, and considered the risk of acts by the Company which were contrary to applicable laws and regulations, including
fraud. We designed audit procedures to respond to the risk, recognising that the risk of not detecting a material
misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate
concealment by, for example, forgery or intentional misrepresentations, or through collusion. We focused on laws and
regulations that could give rise to material misstatement in the Company financial statements, including, but not limited to,
the Companies Act 2006, the Listing Rules and UK tax legislation. Our tests included, but were not limited to, review of
legal correspondence and enquires of management. There are inherent limitations in the audit procedures described
above and the further removed non-compliance with laws and regulations is from the events and transactions reflected in
the financial statements, the less likely we would become aware of it.
We did not identify any key audit matters relating to irregularities, including fraud. As in all our audits we also addressed the
risk of management override of internal controls, including testing journals and evaluating whether there was evidence of
bias by the Directors that represented a risk of material misstatement due to fraud.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for
materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature,
timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating
the effect of misstatements, both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall materiality
£339,000
How we determined it
1% of total assets.
Rationale for benchmark applied
The Company is a non-trading holding company. The entity’s assets relate solely to
their ownership of the subsidiary trading companies and thus reflect the Company’s
purpose. Company materiality has been restricted to ensure it is not greater than
90% of the Group’s financial statement materiality.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above
£16,950 as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
Conclusions relating to going concern
ISAs (UK) require us to report to you when:
• the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is not
appropriate; or
• the Directors have not disclosed in the financial statements any identified material uncertainties that may cast significant
doubt about the Company’s ability to continue to adopt the going concern basis of accounting for a period of at least
twelve months from the date when the financial statements are authorised for issue.
We have nothing to report in respect of the above matters.
However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the
company’s ability to continue as a going concern.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our
auditors’ report thereon. The Directors are responsible for the other information. Our opinion on the financial statements
does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent
otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained
in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material
misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the
financial statements or a material misstatement of the other information. If, based on the work we have performed, we
conclude that there is a material misstatement of this other information, we are required to report that fact. We have
nothing to report based on these responsibilities.
The Pebble Group plc Annual Report 2019
93
Independent auditors’ report to the members of The Pebble Group plc
With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the
UK Companies Act 2006 have been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, ISAs (UK) require us also
to report certain opinions and matters as described below.
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and
Directors’ Report for the period ended 31 December 2019 is consistent with the financial statements and has been
prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we
did not identify any material misstatements in the Strategic Report and Directors’ Report.
Responsibilities for the financial statements and the audit
Responsibilities of the Directors for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities, the Directors are responsible for the preparation of
the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair
view. The Directors are also responsible for such internal control as they determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless
the Directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs
(UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance
with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept
or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it
may come save where expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been
received from branches not visited by us; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• the financial statements are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Other matter
We have reported separately on the Group financial statements of The Pebble Group plc for the year ended 31 December 2019.
Nicholas Boden (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Manchester
8 April 2020
94
The Pebble Group plc Annual Report 2019
FINANCIAL STATEMENTS Company balance sheet
As at 31 December 2019
Fixed assets
Investments
Current assets
Trade and other receivables
Creditors: amounts falling due within one year
Net current assets
Total assets less current liabilities
Net assets
Capital and reserves
Called up share capital
Share premium
Other reserves
Retained earnings
Total shareholders’ funds
Note
5
6
7
8
10
10
10
2019
£’000
126,106
59,602
59,602
(1,975)
57,627
183,733
183,733
1,800
78,451
713
102,769
183,733
The Company has taken advantage of the exemption permitted by Section 408 of the Companies Act 2006 not to produce
its own profit and loss account. The loss for the period dealt within the financial statements of the Company was £766,000.
The Company financial statements on pages 95-101 were approved by the Board of Directors on 8 April 2020 and were
signed on its behalf by:
C Thomson
Director
The notes on pages 97-101 form part of these Company financial statements.
The Pebble Group plc Annual Report 2019
95
Company statement of changes in equity
For the period ended 31 December 2019
Share
capital
£’000
Share
premium
£’000
Other
reserve
£’000
Retained
earnings
£’000
Total
equity
£’000
–
(766)
(766)
–
–
–
–
(766)
(766)
105,236
(104,523)
–
–
713
713
–
–
103,535
105,294
–
–
–
79,205
103,535
184,499
102,769
183,733
On incorporation on 27 September 2019
Loss for the period
Total comprehensive expense for the period
Transactions with owners:
Shares issued in the period
Bonus issue of shares
Capital reduction
Issue of shares on IPO
Total transactions with owners, recognised in equity
Balance at 31 December 2019
–
–
–
58
104,523
(103,535)
754
1,800
1,800
–
–
–
–
–
–
78,451
78,451
78,451
The notes on pages 97-101 form part of these Company financial statements.
96
The Pebble Group plc Annual Report 2019
FINANCIAL STATEMENTS Notes to the Company financial statements
1. General information
The Pebble Group plc (formerly The Pebble Group Limited)
(the “Company”) was incorporated in the United Kingdom
on 27 September 2019 and is a public company limited by
shares, registered and domiciled in England & 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. The
Company’s principal activity is that of a holding company.
2. Accounting policies
(a) Initial public offering (“IPO”)
The Company's shares were admitted to trading on the
Alternative Investment Market (“AIM”), a market operated by
the London Stock Exchange, on 5 December 2019. These
financial statements are the Company’s first subsequent to
its admission to AIM and followed a Group reorganisation to
facilitate the IPO, further details of which can be found
under the basis of preparation paragraph in the
consolidated financial statements.
These financial statements have been prepared under
merger accounting principles because the transaction under
which the Company became the holding company of The
Pebble Group (Holdings) Limited, the previous parent
undertaking of the Pebble trading operations, was a Group
reorganisation as the Company did not actively trade at that
time.
(b) Reporting framework
The separate financial statements of the Company have
been prepared in accordance with Financial Reporting
Standard 102, the Financial Reporting Standard applicable in
the UK and Republic of Ireland (“FRS 102”), on the going
concern basis under the historical cost convention, and in
accordance with the Companies Act 2006.
The financial information is presented in Sterling and has
been rounded to the nearest thousand (£’000). The
Company has presented a period from incorporation on
27 September 2019 to 31 December 2019.
The principal accounting policies, which have been applied
consistently to all the years presented, are set out below.
(c) Financial Reporting Standard 102 – reduced
disclosure exemptions
The following exemptions from the requirements in FRS 102
have been applied in the preparation of these financial
statements:
• the requirements of section 7 Statement of Cash Flows;
• the requirements of section 3 Financial Statement
Presentation, paragraph 3.17 (d);
• the requirements of section 11 Financial Instruments,
paragraphs 11.41(b), 11.41(c), 11.41(e). 11.41(f), 11.42, 11.44 to
11.45, 11.48(a)(iii), 11.48(a)(iv),11.48(b) and 11.48(c);
• the requirements of section 12 Other Financial
Instruments, paragraphs 12.26 to 12.27, 12.29(a), 12.29(b)
and 12.w9A; and,
• the requirements of section 33 Related Party Disclosures,
paragraphs 33.7.
This information is included in the consolidated financial
statements found earlier in this report.
(d) Company profit and loss account
The Company has not presented its own profit and loss
account as permitted by Section 408 of the Companies Act
2006. The Company’s loss after taxation for the period was
£766,000. There are no material differences between the
loss after taxation in the current period and its historical
cost equivalent. Accordingly, no note of historical cost
profits and losses has been presented.
(e) Going concern
The Company meets its day-to-day working capital
requirements through cash generated from the subgroup in
which it holds its investment and utilising its overdraft
facility to fund peak seasonal demands. The Directors have
prepared cash flow forecasts and projections for the two
years ending 31 December 2021 for the Group; see the
going concern disclosure within the Group accounts. Based
on this, the Directors are satisfied that the Company has
adequate resources to continue in operational existence for
the foreseeable future. For this reason, they continue to
adopt the going concern basis in preparing the Company
financial statements.
(f) Dividend distribution
The distribution of a dividend to the Company’s
shareholders is recognised as a liability in the Company’s
financial statements in the year in which it is approved by
the Company’s shareholders.
(g) Investment in subsidiary undertakings
Investments in subsidiaries are stated at cost less
accumulated impairment.
(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.
The Pebble Group plc Annual Report 2019
97
Notes to the Company financial statements
(continued)
current carrying amount does not exceed what the carrying
amount would have been had the impairment not previously
been recognised. The impairment reversal is recognised in
profit or loss.
Financial assets are derecognised when (a) the contractual
rights to the cash flows from the asset expire or are settled,
or (b) substantially all the risks and rewards of the ownership
of the asset are transferred to another party or (c) despite
having retained some significant risks and rewards of
ownership, control of the asset has been transferred to
another party who has the practical ability to unilaterally sell
the asset to an unrelated third party without imposing
additional restrictions.
(ii) Financial liabilities
Basic financial liabilities, including trade and other payables,
are initially recognised at transaction price.
Trade payables are obligations to pay for goods or services
that have been acquired in the ordinary course of business
from suppliers. Accounts payable are classified as current
liabilities if payment is due within one year or less. If not,
they are presented as non-current liabilities. Trade payables
are recognised initially at transaction price and
subsequently measured at amortised cost using the
effective interest method.
3. Critical accounting estimates and
judgements
In the preparation of the Company financial statements, the
Directors, in applying the accounting policies of the
Company, 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.
Non-current asset impairment
The Directors are required to assess whether there are any
indicators of impairment at each reporting date. All relevant
potential indicators are considered, including the
performance of the underlying trading group and the results
of the Group’s impairment reviews performed as at the
same date. The Directors exercise their judgement in
determining whether any such indicators exist. Where an
indicator of impairment is identified in relation to the
Company’s investments, a full impairment review is
performed.
The Directors performed their assessment and concluded
that no impairment indicators existed at 31 December 2019
and, as such, a full impairment review over the Company’s
investments in subsidiaries was not performed.
2. Accounting policies (continued)
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.
(i) Share capital
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares are shown in
equity as a deduction, net of tax, from the proceeds
of issue.
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.
(j) Merger relief reserve
During the year the Company became the ultimate parent
company of the Group. The merger relief reserve included
in other reserves was created during the year as a result of
the share for share exchange under which The Pebble
Group plc (formerly The Pebble Group Limited) became the
parent undertaking prior to the IPO. The merger relief
reserve includes the premium received on the issue of
share capital in the share for share exchange.
(k) Retained earnings
Retained earnings includes all current and prior period
retained profits and losses separately within equity.
All transactions with owners of the parent are recorded.
(l) Cash and cash equivalents
Cash and cash equivalents comprise cash balances.
(m) Financial instruments
The Company has chosen to adopt Sections 11 and 12 of
FRS 102 in respect of financial instruments.
(i) Financial assets
Basic financial assets, including trade and other receivables,
cash and bank balances and investments, are initially
recognised at transaction price, unless the arrangement
constitutes a financing transaction, where the transaction is
measured at the present value of the future receipts
discounted at a market rate of interest. Such assets are
subsequently carried at amortised cost using the effective
interest method.
At the end of each reporting period financial assets
measured at amortised cost are assessed for objective
evidence of impairment. If an asset is impaired the
impairment loss is the difference between the carrying
amount and the present value of the estimated cash flows
discounted at the asset's original effective interest rate.
The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an
event occurring after the impairment was recognised, the
impairment is reversed. The reversal is such that the
98
The Pebble Group plc Annual Report 2019
FINANCIAL STATEMENTS 4. Remuneration of Directors and auditors
Details of Directors’ remuneration are shown in the Directors’ Remuneration Report on page 44 of the Group financial
statements. Details of auditors’ remuneration are shown in note 9 of the Group financial statements. The Company has
no employees.
5. Investments
Cost and carrying amount
On incorporation
Additions
At 31 December 2019
£’000
–
126,106
126,106
On 5 November 2019, the Company acquired the entire share capital of The Pebble Group (Holdings) Limited by way of a
share for share exchange, with the issue of shares as set out in note 22 to the Group financial statements. The fair value of
shares acquired was £119,606,000.
On 6 December 2019, the Company subscribed for additional share capital in The Pebble Group (Holdings) Limited at a
value of £6,500,000.
The Directors believe that the carrying value of the investments is supported by their underlying net assets.
The Company directly owns the whole of the issued ordinary shares of the following subsidiary undertakings:
Name
Registered address
Principal activity
Class of share
Percentage holding
The Pebble Group (Holdings) Limited Broadway
Holding company
Ordinary
100%
Project Amber Bidco Limited
H.I.G Milan UK Topco Limited
H.I.G Milan UK Midco Limited
H.I.G Milan UK Bidco Limited
Brand Addition Limited
Product Plus International Limited
Gearworks Limited
Brand Addition Asia Limited
Brand Addition Ireland Limited
Brand Addition Reklam Urunleri
Dagitim ve Ticaret Limited Sirketi
Brand Addition (Shanghai) Trading
Co., Limited
Trafford Wharf Road
Manchester
M17 1DD
Unit 1605
16th Floor
Tower 3 Enterprise
Square
No. 9 Sheung Yuet Road
Kowloon, Hong Kong
Unit G2
Calmount Business Park
Ballymount, Dublin 12
Buyukdere Caddesi
Meydan Sokak Spring
Giz Plaza Kat:13
Sisli-Istanbul, Turkey
Room 302, Qian Li
Center (building T6)
Baolong Plaza, No 6
311 Xinlong Road
Qibao Town, Minhang
District
Shanghai, China
Holding company
Holding company
Holding company
Holding company
Ordinary
Ordinary
Ordinary
Ordinary
Promotional merchandise
Ordinary
Non-trading
Ordinary
Promotional merchandise
Ordinary
100%
100%
100%
100%
100%
100%
100%
Promotional merchandise
Ordinary
100%
Promotional merchandise
Ordinary
100%
Promotional merchandise
Ordinary
100%
H.I.G. Milan Germany Bidco GmbH
Brand Addition GmbH
Heydastrasse 13-15
58093 Hagen, Germany
Holding company
Ordinary
Promotional merchandise
Ordinary
The Pebble Group US Bidco Inc.
Gateway CDI Inc.
Facilisgroup LLP
909 North 20th Street
Saint Louis, MO 63103
Holding company
Ordinary
Promotional merchandise
Ordinary
1000 Clark Ave
Saint Louis, MO 63102
Promotional merchandise
service provider
Ordinary
100%
100%
100%
100%
100%
The Pebble Group plc Annual Report 2019
99
Notes to the Company financial statements
(continued)
5. Investments (continued)
Name
Registered address
Principal activity
Class of share
Percentage holding
The Pebble Group Canada Bidco
Limited
5320 Canotek Road
Gloucester, ON K1J 9C1
Holding company
Ordinary
100%
Facilisgroup Canada Inc.
Weber Facilis Holdings Inc.
Rochette Facilis Holding Inc.
Promotional merchandise
service provider
Ordinary
100%
Holding company
Ordinary
100%
Holding company
Ordinary
100%
3029 Barlow Crescent
Dunrobin, ON K0A 1T0
394 Roosevelt Ave
Ottawa, ON K2A 1Z3
Other than The Pebble Group (Holdings) Limited, which is directly held by the parent, all subsidiaries are indirectly held.
6. Trade and other receivables
Amounts owed by Group undertakings
Other debtors
All of the amounts owed by Group undertakings shown above are repayable on demand.
7. Creditors: amounts falling due within one year
Accruals and deferred income
2019
£’000
59,568
34
59,602
2019
£’000
1,975
1,975
The Company is party to a Group cross-guarantee banking arrangement, which is a revolving credit facility of £10,000,000
expiring in November 2023. Interest is charged at a rate of LIBOR + 1.9%. As at year end the facility had not been used and
the balance was £nil.
8. Called up share capital
Details of movements in shares are set out in note 22 to the Group financial statements.
9. Related party transactions
The Company has taken advantage of the exemption included in Section 33 of FRS 102 "Related Party Disclosures" to not
disclose details of transactions with Group undertakings, on the grounds that it is the parent company of a Group whose
financial statements are publicly available.
Directors’ transactions
Details of the Directors’ interests in the ordinary share capital of the Company are provided in the Directors’ Report.
100
The Pebble Group plc Annual Report 2019
FINANCIAL STATEMENTS 10. Reserves
Admission to AIM
This note should be read in conjunction with the Statement
of changes in equity. The Group’s Admission to AIM involved
a number of transactions for the Company which are
explained in detail in note 2 to the Group financial
statements and summarised below:
Group reorganisation
Prior to Admission, the Company acquired the entire share
capital of The Pebble Group (Holdings) Limited in exchange
for issuing the same number of its own ordinary A, B, C1 and
C2 shares and A and B preference shares to the existing
shareholders of The Pebble Group (Holdings) Limited. This
transaction was under common control and treated as a
capital restructuring and not a business combination. The
Company recorded the investment at fair value and applied
Group reconstruction relief, leading to the creation of the
other reserves (merger relief reserve) of £105,236,000.
The Company subsequently made a bonus issue of shares of
1,799 for every share held, following which the Company
completed a share consolidation and capital reduction.
As part of the IPO, the Company issued a further £0.01
ordinary shares at £1.05 per share.
Share premium reserve
Includes premiums on issue of share capital.
Merger relief reserve
Merger relief reserve which has been included in other
reserves, includes premiums received on the issue of share
capital in a share for share exchange.
Retained earnings
Includes all current and previous retained profits and losses.
11. Post balance sheet events
As referred in note 2(b) to the Group financial statements,
we are carefully monitoring the situation concerning
COVID-19 and any impact it may have on the business. Any
such impact has been treated as a non-adjusting post
balance sheet event for the purpose of considering the
carrying values of assets included in the balance sheet as at
31 December 2019. Given the current uncertainties, any
potential financial effect cannot be estimated.
The Pebble Group plc Annual Report 2019
101
31 December 2019
8 April 2020
30 April 2020
24 June 2020
Early September 2020
October 2020
31 December 2020
Financial calendar
Financial year end
Preliminary announcement of full-year results
Publication of Annual Report and financial statements
Annual General Meeting
Preliminary announcement of half-year results
Publication of Interim Report
Financial year end
Company information
Nominated adviser
Grant Thornton UK LLP
30 Finsbury Square
London EC2A 1AG
Broker
Joh. Berenberg, Gossler & Co. KG, London Branch
60 Threadneedle Street
London EC2R 8HP
Auditors
PricewaterhouseCoopers LLP
No 1 Spinningfields
Hardman Square
Manchester M3 3EB
Legal adviser
Addleshaw Goddard LLP
One St Peter’s Square
Manchester M2 3DE
Registrar
Equiniti Group plc
Broadgate Tower
20 Primrose Street
London EC2A 2EW
Financial PR
Belvedere PR
25 Finsbury Circus
London EC2M 7EE
Registered office
The Pebble Group plc
Broadway House
Trafford Wharf Road
Trafford Park
Manchester
M17 1DD
Company number: 12231361
102
The Pebble Group plc Annual Report 2019
FINANCIAL STATEMENTS The material used in this report has
been harvested in a responsible
manner from an FSC accredited mill.
Designed by Design Portfolio.
Produced and printed by Perivan.
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Broadway House
Trafford Wharf Road
Trafford Park
Manchester M17 1DD