The Pebble Group plc (PEBB) Earnings Call Transcript & Summary

So thanks for joining us this morning, so with full year results for '24 of Pebble Group. And we'll kind of run you through the presentation from here. I think we'll probably be around about sort of 20 minutes, 25 minutes walking through the actual presentation itself. And then, obviously, take any questions. So if we keep cameras on and on mute, as we get to the end, you can raise hand, we'll sort of bring you in and unmute you for questions. If you've joined us before, we'll do a familiar format. I'll do the listening some highlights; Claire on financials; then I'll dive into Facilis, Claire into Brand Addition we'll do some ESG wrapup towards the end as well. So yes, CEO, CFO, both kind of been here cranking a long time. So definitely emotionally, financially invested in the group. And really sort of happy to take you through who we are. So promotional products, big industry. All companies, all sizes using promotional products. And so we're going to do a tiny bit of show-and-tell here. So if you think of promotional products, I've got my Pebble Group Pen kind of -- my water bottle kind of very proudly in. But -- and that's, I think, what you'll traditionally think of promotional products are about. And for [indiscernible] great business who does that sort of thing as well. But slightly different [indiscernible] one of our business is Brand Addition, does some slightly different things as well. So working with brands like La Prairie and this is sort of a gift repurchase that you'll get if you buy some quite expensive and skin care products. I actually don't know what this does, but it kind of rubs on your face and kind of helps you do that. [indiscernible] Burberry, so they're sort of high-value clients. That's a Christmas bubble that they give to them when they attend their stores and -- as a gift and a thank-you. And here, we have some sort of Nespresso products as well. This makes espresso martinis. And we do this thing again as a gift with purchase so you buy more coffee parts, you kind of buy more from Nespresso, you actually get a gift with purchase as well. So things that are actually sort of a great worth sort of supporting the marketing spend of really large corporates Brand Addition as that kind of products too. So very much we're selling most pens, hats, sort of apparel, but also selling really kind of nice high-end items and to help sort of push the sales of our customers' core business as well. Our lens into that industry, which is $50 billion on a global basis. Half of that is in North America. And our lens into that industry is about $1.6 billion. So that's the group. And we have 2 businesses in that group: Facilisgroup and Brand Addition. So it's Facilis technology business, and so we see $1.5 billion worth of the North American industries' promotional product sales going through our technology. So if you think that is $1.5 billion, but that's 1 million orders, probably 3 million order lines, probably 5 million, 6 million actual sort of quotes and proposals that are going through our system of Facilis. So we have this amazing amount of data that we see and understand about the industry. So knowing which product from which supplier is going to which customer. And that gives us a really sort of interesting lens that people want to work with us and particularly the supply network. Because we have around about 6% of what gets spent in North America comes through Facilisgroup. And that's one of the reasons our preferred suppliers, which still work with us there is because we can give them information where they're doing well, where they're missing out, et cetera. Our second business is Brand Addition. Brand Addition is our product business that does these things, but only working with the really large corporates under contract. And those businesses are people like Nespresso, Unilever, Michelin, Scania, Google, Intel, those really large corporates that outsource their need for promotional merchandise, and Brand Addition sells products to those guys and does that with a contract on a long-term basis. So our lens is $1.6 billion out of the $50 billion total. And so really market-leading businesses in Facilis and Brand Addition. And so why do we think we're a great business and what we've got to do. Sort of starting from left to right, really we really concentrate on, once we have a customer and we have a client build a long-term relationship and helping that business grow. They trust us with their brands. They trust us to help them grow their business. And looking after our existing partners and clients is our first point of growth, making sure we have long-term relationships with those businesses and really look after them when they do join us. Both businesses have been around for a long time. So we have heritage, and they have really important and very good niche market-leading positions in what they do. Facilis in the technology side are supporting small distributors and medium-sized distributors in North America. And Brand Addition is only focused on looking after those large corporates on a global basis. So both businesses that have been part of the industry for a long time and both market-leading in their own way. And it's a large industry. So both have very good opportunities in which to grow. And as we've grown, we're also still making a lot of cash. So both businesses generate cash. We have cash on our balance sheet and actually our cash is increasing. So it gives us options of what to do, definitely one of which is invest in ourselves, but also sort of make returns to shareholders as well. So established businesses with market leading positions in this industry and long-term client relationships is really sort of, I think, stands this group apart from others. And looking at some highlights, Claire, I'll talk you through the 2024 numbers. But if I work from right to left, Brand Addition, our products business, again, very high retention levels. If we go through, we've kind of -- we're kind of [indiscernible] here, but these long-term relationships are built, sort of 90% of the top 20 customers that were with us in 2019, which do a lot of our revenue are still with us today. It's 6 years later since we listed. So starts -- our growth starts with high retention. We've grown the margin in that business from 30 points since listing out through to 35, and that shows you the value that our customers and those large corporates place upon the services that we're delivering to them. And really pleasingly, in the back end of 2024 and early 2025, those businesses that we've been -- that are long-term relationships with us, we've added some more. So new wins in 2024 and 2025 should support our 2025 revenues. Facilis, I spent a long time there in 2024 and really got to understand what was on the minds of our customers, our suppliers, investors and our team. And by spending that time, that we've really evolved some of the things we're doing, really worked hard at operationally improving our business. So that's 2 new key hires have been included in that. And while we've been doing that, the GMV is still moving forward and the spend with our preferred suppliers has moved forward in an industry that's been quite flat. And we're moving from a position of high CapEx spend to slightly sort of lower ongoing spend in Facilisgroup, which is actually going to increase the cash conversion not only for Facilisgroup, but of the overall business. And Claire will talk you through that a little bit more as we go through. So we want to invest in our business and choosing to invest our own cash in our business. And that means we'll be further cash generative but wanting to invest more in that business as well, particularly in Facilisgroup, because if we can make that business grow, then our group has a much higher value than it's been placed upon it today. So Claire will talk you through some numbers and I'll come back and talk to the Facilis a few words.

Thank you. So sharing the highlight -- the financial highlights of the group for '24. The message from us today is that all our key metrics are moving in the right direction. Our revenue for '24 was much more predictable than what we experienced in '23. But also we focused on controlling what we can control. So moving our margins forward and controlling our costs that translated through to improved EBITDA and importantly as Chris touched on, and I'm sure we'll both say quite a lot more as we move through this presentation, improving our cash conversion, reducing our CapEx spend. And you can see there that our net cash move forward, and that was after making incremental distributions. So let's start. I used to have 2 doughnuts, I think, on this slide. So what we're trying to do here is help you understand how the 2 P&Ls or the 2 business models within the group come together. So we move in from left to the right on this slide, and you can see the dark -- the kind of dark gray, black chart, is a revenue of both Facilisgroup and Brand Addition. So Brand Addition, that products business is the lion's share of the group revenue. Facilisgroup, that SaaS revenue that we earn through technology subscriptions is a much smaller proportion as what the overall group's revenue is. As we're moving across, you can see that all of the cost of sales in the group of Brand Addition. So that's the cost of the products that we sell. Facilis is 100% margin. So there's no cost to Facilis in that line. And then both businesses are, obviously, we have costs below margin are just people. So Facilis, we've got that highly efficient translation of the SaaS revenue into EBITDA. Obviously, the cost of running the business and the people in that business is sitting below that. And the same with Brand Addition. So as we get right to the right-hand side, you can see that from the kind of disproportion, that kind of 90-10 split in revenue, Facilis to Brand Addition, then we kind of get to a 50-50 split of EBITDA for the group. Income statement, I touched on this on the highlights page, but our revenue was slightly ahead of where we were in FY '23. But importantly, much more predictable than what we'd experienced back in the second half of 2023. We moved our gross profit margins forward, and that was largely through Brand Addition. We implemented some pricing increases in Brand Addition in '23, and those held and we moved forward a little bit further in '24. And again, as I said and as I touched on, we focus on controlling what we can control while the larger macro environment a little bit more uncertain. And so that kind of good discipline around cost management means that the revenues translate through to high levels of EBITDA. Let's debate whether I include that the balance sheet is pretty -- my messages are very straightforward. It's kind of very clean and high-quality balance sheet. So sitting on there is really all working capital and working capital belongs just to Brand Addition. So it's kind of blue-chip backed assets that translate quickly into cash. And kind of the message that we're saying there is it's a well-invested balance sheet. We've talked about our cash conversion increase and that gives us options in terms of where we'd like to spend the cash. And again, this comes through in the cash flow. So our operating cash conversion in the year was 68%. That compares to about 63% in the previous year. And you can see as you move down the cash flow, that that's coming through from the reduction in our capital spend. We have had some investment into working capital, which is Brand Addition, and that will move with the volumes in Brand Addition and is needed to support that business as it grows. But again, I touched on earlier how we've moved forward in terms of the dividends that we've paid that increased by -- to $2 million in the year. And also, we've got our ongoing share buyback. So what are we going to do with all that cash? And so what we're trying to share with you here is that we've got really good choices ahead of us. So we've got our ongoing uses of cash, so we've always wanted to have a strong balance sheet, which is what we've got. We will always want some cash to invest in working capital to support Brand Addition as it grows. And we'll always have a level of ongoing capital expenditure, but that we've got no debt. And so that gives us some nice options on what do we do with the remaining cash. And first and foremost, we decided that we're going to spend some of that cash in the business that we know, and really focus now on accelerating our organic growth plan in Facilis, and Chris will touch on that in more details as we move through the presentation. We've announced today that our dividend is moving to GBP 1.85p per share from GBP 1.2p last year. So we're kind of returning value to shareholders through dividends, and the share buyback is ongoing. And then kind of what else do we do with that cash? So like I say, we're focusing on one. We're doing 2 and 3, and then we'll think about other options as and when they...

And so we'll come down to Facilis and then Claire will come back and talk a little bit about Brand Addition. So to give you a little overview of Facilis, so it is technology, so an end-to-end order processing system. And system is both technology and best practice processes. So we don't just sell a piece of technology and walk away. We help those customers, those distributors and partners to actually get the best out of that technology by working through best practices. And that makes their businesses more efficient, allows them more time to sell. It helps their cash flows and helps their margins as well. So the technology with best practice is kind of what makes us market-leading. We add on to that a market network. And so, remember, that $1.5 billion worth of GMV of spend that's going through is probably $1 million worth of purchases with suppliers that go through from a distributor. And we try and point those purchases into the preferred purchase that we -- suppliers that we have a contract with. And that gets the distributor or our partner great pricing, a lot of attention. And that sort of -- if we can help the distributor buying well from the preferred supplier, the preferred supplier gets more share of the market than it otherwise would, and we get a rebate back from that supplier as well. So a real win-win-win in terms of that market network that we have the opportunity to do because of our technology. And then we do bring our partners and our suppliers together at events, learning and networking experiences, so they can, again, learn from each other, understand what's going on in the industry, what's happening with tariffs, what's happening with working from home, what's happening with salespeople's commissions, and make their businesses better from it. So it's definitely technology plus a number of other services get added to that. And so we talk about the power to process in terms of our technology. The process is the scale, meaning our best practice, and then the network to grow your business through pulling together the best distributors and the best of preferred suppliers in the industry. So in terms of the market we're actually looking at, $25 billion is North America. So Facilisgroup is exclusively in North America at the moment. And so we moved that $25 billion into 3 segments. And working through each of those in turn. So our core market has been in that $2 million to $20 million growing business from an entrepreneur to an enterprise where the owner-manager of the business has been a good salesperson. They've outgrown just selling themselves into creating a business. They want visibility control of their organization. And that's been the Facilis's heritage in that market. So we think 1,600 distributors, we've got around 240 of them. And looking after those existing customers and growing more of them in that sector is certainly sort of what we wish to do. But then coming around the circle, a number of those distributors grow. So a number of those are plus $20 million right now. And we want to make sure we grow together. And so investing in our technology, particularly through integration, so bringing other technology to talk to Syncore, the name of our technology system, is really important. So we can help those 2 million to 20 million go on a journey to be in that top 100 elite businesses within the whole industry. So we want to go on a journey together with them. And actually, if we can do that, that really kind of helps us sort of break into that market as well and win some of those that are already there. And then what we want to do thirdly is make sure we get in the next generation of -- in our core markets and capture them. And so that's sort of 1 million to 2 million bracket is what we want to do as well. We've invested in technology to help win those businesses, which is now sort of coming to market. And so investing to look after our core customers and help them grow, win more of them, making sure those growing and ambitious businesses we can go on a journey together in terms of them becoming part of the elite, but then backfilling the pipeline with the next generation of winners. So therefore, we are the business of choice for end-to-end order processing systems in North American promotional products industry. That's where we want to be. There's a lot of market to go at. And I think we're building a team and the technology to take advantage of that. So again, I'm not going to read through all this, but that talks about why people choose to use Facilisgroup and both suppliers and distributors. There's some quotes and statistics. But I think just pointing out that top row, why -- what do distributors want? They want to have good visibility of our businesses, growing margin, control of their cash flow and efficient processes. And we've definitely given that through the technology. But also the processes in which we help go through and use that technology, that leads to a very large kind of $1.5 billion of spend in the industry, which gives us a lot of power in terms of the network. And those things coming together, I think, stands Facilisgroup apart. And there's some quotes there from partners and suppliers. And that leads -- I'll just pick out that stat in the middle. But when a partner of distributor chooses to work with us, Facilisgroup through our technology Syncore, and this is on average over the last 6 years, they've grown by 14% of their revenues in the first 2 years that they've been with us. It's a really powerful statistic in an industry that's been growing by 3% to 5%, and even less last year. So that's why partners choose and suppliers choose to work with Facilisgroup. There's some really nice metrics on here. Revenues have been growing, but actually a bit less so in the last couple of years. So we'll come and address that. On the right-hand side there, you'll see retention is good. Gross margin -- EBITDA margins have been excellent. And the KPIs that really sort of influence revenue and EBITDA are the ones below it, number of partners, the GMV that we have in the group and the spend with preferred suppliers. So really nice set of statistics. And what we want to do is balance a little bit more out. So we have sort of great conversion into cash, which comes from strong EBITDA margins. And we've been spending quite a lot in CapEx at the moment and then the growth has slowed slightly. So we just want to put those things in a bit of a rebalance and spend the last sort of 6 to 9 months going, what are the best ways of putting revenue growth, EBITDA margins and CapEx and balancing those out in a slightly different manner? That kind of takes us to this. So the left-hand side will -- I'll just go down the numbers and then I'll kind of go across the chart. So from '22 to '24, we spent quite a lot on expansion in CapEx. So there's always going to be something we should be spending on capital expenditure into our ongoing products to keep evolving and developing ahead of the market. So that's always going to happen. Over and above that, we spent around on average in '22, '23, '24 about 10% of our revenues extra has been spent in supporting new product development. And that's now coming down. And what we want to do is rather than sort of just let all that flow through to extra sort of cash conversion, we'd like to spend a bit of that in OpEx to take advantage of a strong position in the market. There's a large market to go after. And again, rebalancing, we'd like a little bit more sales growth. Cash conversion is going to be higher because of the CapEx spend. But we will sort of take a slightly reduced margin at the cost of growing the sort of benefit of growing our sales line. So trying to translate that into numbers. You can see that's around -- if we talk about percentage of revenue, the 27% to 20% is the percent is around about $4.6 million, $4.7 million, something like that, on a slightly growing revenue number. And that's what we expect to spend on an ongoing basis, that top line, around about 20% of revenue, into capital expenditure to evolve our product. We've been doing some new product developments. And you can see in '22 to '24 average about 10%. That's coming out now. And so we're kind of moving up into that 20% piece. So from 30% of our revenue going into CapEx over the last 3 years, it's going to be 20% in 2025. But rather than let that all flow through into cash, what we'd like to do is spend a bit of that and try and really kind of reinvigorate the sales line because if we can kind of move forward 5%, 10% growth on 45% EBITDA margin, it's a much more powerful basis and growing much slower on a 50% EBITDA margin. And so cash flow and cash conversion is moving forward, and it has done from '23 to '24. We expect it to do so from '24 to '25, but we want to reinvest some of our own cash and backing ourselves to grow the top line. And that's probably the new news that we'll be sharing with you today. So in terms of priorities, really important, we always kind of respect and look after the development and progress of our existing business and our existing customers. That's the sort of base of our long-term growth, making sure we're kind of growing our technology, so we'll be spending less on CapEx, but we absolutely are still evolving our technology. And we have market-leading position in the industry. I want to make that a financially leading position as well and say, sort of rebalance revenue growth with EBITDA returns and cash conversion. Brand Addition?

Okay. Yes. So Brand Addition, products business, and this diagram in the middle there is showing where Brand Addition sits. So Brand Addition is a very large distributor in the industry sitting between the suppliers and the brands and supplying those brands with really cool products to engage their stakeholders. And it's working internationally under contract and, again, has a number of long-term relationships. And so this is helping you understand the Brand Addition's addressable market. And so in that $50 billion global market, we think Brand Addition's addressable market is around about $4 billion. And so large corporates who want to work internationally with cool products but also want somebody to look after that [indiscernible] and has the infrastructure to support their global reach. And also, they want somebody who they can trust with their brands. So that means right materials, right factories, made in the right hands. And so we're -- by choosing Brand Addition, they're never going to be embarrassed. And the stats below there, I think I'm just going to pick out the 2 bar charts. So that shows you, that one in the middle, the revenue by region shows you that Brand Addition really does have the infrastructure to support these brands globally. And anyone, if you look to anyone of our competitors, then they would be very strong, and it may be 1 or possibly 2 regions. But Brand Addition has a presence across all of them, and that's really important to the clients that we want to work with. And again, going back to the theme of long-term relationships, you can see in the chart on the right-hand side that our customers, if they stay with us, and you can see that we've got a number of plus 15 years, but also, we've kind of got a lot of long-term relationships with those new businesses that we bring in. So it's -- the mantra of Brand Addition is win, grow, retain, repeat, and the stats that we got there really support that. It's a really nice start, so I've touched on it a couple of times already. But revenue in a sensible place in '24 versus '23, really moving those margins forward, guiding at 33%, but we were obviously beyond that, and that's where we'd like to keep it, but we'd like to keep the guidance at 33%. And again, that translates to some really nice EBITDA margin. So Brand Addition is a -- you should think of Brand Addition as a 5% growth, 10% EBITDA margin, really a couple of -- we spent a couple of million a year on CapEx, and so kind of really high cash generative business as well. So what's our focus for '25. It's really doing that what I said. So let's hold on to those relationships that we've got. Again, kind of growth starts with retention. Let's continue with attracting some new clients. We saw some momentum start to build at the end of last year, and that's continued into the early part of '25. So kind of, hopefully, that will continue. And then doing that in a really disciplined financial model. And again, that gets you back to the cash generation, 10% EBITDA return.

Thanks, Claire. And sort of some ESG things. I think it's really important to us how we run our business and the results that we get from our business and make those 2 things come together. So ESG seems to sort of oscillate between very popular and not so popular, all of those things. That's kind of almost irrelevant to us. We want to make sure that we are running our business in a way that we think is right. And so sort of looking at the environment, employees caring about kind of long-term relationships, which a lot comes under the banner of ESG and how we want to run our business, no matter sort of how fashionable or unfashionable ESG is. And so we do put a lot into this because we want to run our business properly for the long-term, have a great team that looks after it, both at Pebble Group level and within our businesses. And so we're not going to be blown by the trends. We're going to stick with what we think is right and running our business right, understanding what's important to our stakeholders, including our teams and investors, and customers, and then keeping on that path rather than sort of moving around from place to place. So there will be an ESG report coming out alongside our report accounts and which I think will be a fourth one in the next few weeks. So there's a thorough document. If please kind of review, give us some feedback on those things as well, and better. But it's important to us how we run out our business and the results that we get from it, and those 2 things come together. And that's sort of taking us over to the outlook. And so I think, I suppose, if I split it into 3. Firstly, important to note, cash conversion is increasing, and we're in a good place on our cash, returning monies to shareholders through an extended dividend and the share buyback. That still is in a position to have other options as well. In terms of the start of trading, Facilisgroup got the GMV part slightly ahead and the spend through our preferred supply slightly behind. Just trying to get our arms around what that means because we've got a lot that's coming from importing right now and a lot sort of -- and we're trying to think is that trying to get sort of before tariffs and do all those kind of things. But really trying to get our arms around those GMV and spend we prefer to normally move together. There's a slight sort of imbalance in there, and that's a little unusual for us to trying to understand that. In terms of Brand Addition, our sales order intake has been pretty sensible. If you put that on top of the new product wins, we kind of go over Brand Addition, I think is in quite a good place. And in terms of 5% growth, steady margin of around 33%, 10% EBITDA return on a steady CapEx number. I think that business is in quite a good place. And so when we look forward, we're bound to be asked about things like tariffs and how does that affect us. And so don't forget, as Brand Addition, 3/4 of our business is non-U.S. right? So that side of it is kind of -- not been affected by tariffs at all. Facilisgroup is in the U.S. and some of our preferred suppliers will be working really hard. But tariffs one side, what's most important to our success and sort of the economic background that we need is a stable, kind of strong economy. So tariffs in itself, I think we can, like inflation, like freight rates, we can move around. What we do want is that sort of decent economy. So does tariffs knock on to an economic kind of challenge? So that's what we think. But either way, I know we'll kind of work through it. Market-leading businesses, long-term relationships with our customers who stay with us through the good and the difficult times. And we generate cash. So I will definitely monitor it carefully and thinking through what might happen, but I know we'll get through all those things and come out as strong, if not stronger, with good relationships, more cash being generated. So definitely not panic about everything, but being aware of what is happening in the wider market. And I think -- I hope the message is clear. We're investing back into our business, making the choice to do that with our own cash because that's surely the best use of our cash, is to back ourselves and try and get some more growth, particularly Facilisgroup and keeping our eye on the wider economy and -- but knowing that we can manage our way through that no matter how sort of choppy the waters might get in the short-term. So that's everything. I think I'll kind of take us on to the full screen. And if you do have any questions, if you stick your hands up, raise a hand, we'll be pleased to unmute you, and if you wish to, be seen, and go from there. I don't want to want to go -- there we go. Thank you.

So Rody will go with you first if I try and unmute you. Rody over to you. So Rody can come in or are you struggling to do that? Right. I might try Fiona. Fiona, if having more success with you. Can you unmute?

So first of all, on Facilisgroup, have you now got all the team that you need in place? I know you've made a lot of changes. Have you changed approach to the market particularly. The second one on Facilisgroup is what shifts have been in the competitive landscape? And obviously, noticed what the ASI have got on the landing page now. And the third question is about -- on Brand Addition. You said you've been getting a little bit more interest with new business coming in, in the back end of last year into this year. Have you still got a good lot -- pipeline? Are these significant wins?

Okay. And so we sort of obviously, start with the beginning. I do feel it's got a great team now for Facilis. I've spent a lot of time there over the last 15 months, taking an [ apartment ] in fact. And so -- and sort of put a lot into getting really involved in the day-to-day of that business. And so the main function in that business are sort of -- so we'll go finance and we've got a great person who has already existed in the business. Supply relations, we brought someone through that was already there to manage that important piece. And then on our partner relationships, again somebody who was already in the business. So those 3 functions were looked after. The 2 new functions we brought in is someone to both internally and externally lead technology and product. And so the guy called Matthew Cromar has the history of being at Ariba very much Bay area, whole career, whole life, and he is leading technology internally and externally. And in sort of 9 months, 10 months now he's been with us, has made a great difference. And I really feel that that's been a good hire. And as we've organized ourselves operationally, we've got our technology strategy together, we brought in the CRO as well to do what Matthew Cromar has done in technology to doing in net new acquisition, a gentleman called JC Capote again, kind of a career in NetSuite, Cleverbridge, businesses that are SaaS enterprise selling and been in that all his life. So I think some very clear responsibilities have been given to 3 internal people and then 2 new external coming along. And I think that -- can definitely to take this business to the next level. So I'm really -- we've invested in technology on e-commerce, on the small side of supporting the really long tail of the business. And our e-commerce platform exists, but it's really crowded market. There are lots going on there. Everybody wants something quite different, quite bespoke. So perhaps it's that part of our business what I thought it was originally, and I don't think it will be going forward. But a really nice important piece to round our offering out. And what we've invested in for the long tail, we're bringing that all together under the brand of Syncore. So keep a clear marketing message really. Facilisgroup is our company, Syncore is our technology. And no matter where you are in there, you'll get a slightly different piece of technology and service from us. So that's our evolving message, I think. And then on Brand Addition, do you want to kind of talk about the new sort of wins and what the pipeline are?

Yes, yes. So I think the question was, so we have some momentum and have we still got a strong pipeline. So I think quick answer to that is yes. It's really that fact that we have a team that that's their job and to kind of keep the funnel topped up. And I think the guys in that team are excited about what's on that list. It's always really hard to say if it's going to be a major piece of work. What we've seen over the last kind of 3 or 4 years is that new business is around about 10% of the Brand Addition sales. That dipped slightly in '24, but is kind of building that. So I guess a really long way of saying is people indication of what the spend is going to be, it usually takes us 12 to 18 months to get a really clear view on how that's going. But it's -- the customers are the global brands that want to work with us on an international basis. So they've got the same look and feel as a typical Brand Addition customer and then time will tell where they end up. But they are -- there are some really nice names that we're excited to be working with.

Thanks, Fiona. Joe, I will do my best to allow your mic, and hopefully, if you unmute we should be able to hear you.

Three questions, if I may. Would you like them one at a time or all at once?

Come on, throw us that, Joe.

Excellent. Okay. So firstly, I was going to ask about the key story today, which is increased OpEx. Facilis to understand the trajectory of that OpEx. Is that kind of a step change? Or does it increase gradually? Secondly, at Facilis you talked about the opportunity to go up the size scale and the opportunity to go down the size scale. In your mind, which is more exciting of those 2? And thirdly, again, at Facilis, I'm afraid, you say the year started with the preferred suppliers slightly down. It might be a bit unfair because you may not have got our arms around it, but interested in your initial thoughts as to why that might have happened?

Yes. Okay. So I think I'll slightly extend your first question. And I think it is -- the story of the day is increasing cash conversion. And as our CapEx comes down, and we're choosing to reinvest a proportion of that to invigorate more growth in Facilisgroup. So I think it's important to have that first bit on there because headline is EBITDA reduces, but stand back from there and actually cash conversion is increasing. So I think this is about, as I said before, keeping that, how do we want the balance between revenue growth, EBITDA margins and CapEx to evolve, which basically turns into cash. So how do you want that to evolve? And we think the biggest cash return comes from trying to grow that revenue line a bit more excitedly than we did in the last 2 years. And so that involves a choice to invest cash that we're generating back into the Facilisgroup. And so we said from a margin of 50% EBITDA margin in 2023, 2024, we're guiding you to in the year a margin of 45%. And so that will kind of sort of drift through across the year, but that's where we think in the year finishes out. But take that further down, how does that convert into cash and not at a lower level but a higher level. So I think it's being a public company, there's that headline that says EBITDA is reducing. But then take that a little bit further and stand back and say our cash -- operating cash conversion is increasing and we're spending that to grow the top line. And I think it is a very sensible thing to do, albeit it does create a headline that -- a singular headline which is less attractive than the bigger picture.

Apologize, I was using a bit of shorthand there, but understood.

All right. Very good. Thank you. And in terms of -- what was the -- all right, yes, going up or down. And both, can I say? So I think the narrative 2 or 3 years ago on Facilis was it's a really long tail let's run over there. And it's the best time we must have. We've got 20 people on this call or something like that now. I've got 240 Facilisgroup partners, 100 Facilisgroup suppliers. I probably have more competitors, partners and suppliers will read our information of the investors. And so I think they read all those things and thought, well, what about me? Kind of -- you're kind of running after something new to try and please an audience and forgetting about your core customer. So what I really understood in the last 15 months is our growth starts with our existing businesses. So making sure we have -- we're looking after the core customer and we're supporting their needs, which supports more of -- attracting more of the same. I think that's where we start with growth. And then I do think that -- I ordered a 1, 2 and 3 on that Facilisgroup market side. I think that is our order. So our order is making sure we have those amazing retention levels and grow more of the same, that those businesses we can grow together and support them becoming part of the elite 100, top 100. And we do have probably 10 to 15 businesses already in that plus $20 million, and I want to make sure they choose to stay with us in the medium term. But then what we reference to is kind of have an offering to the next generation of winners to make sure that sort of we top up the sort of less than 2, because they'll be growing into $2 million to $20 million. So I labeled them 1, 2 and 3, and I think that's how you should think of that sort of that priority. And yes, the preferred supply piece, it is really early. So we've got 2.5 months' worth of information. And what we're finding is around about 50% of those purchases generally went through those preferred suppliers. There's a little bit more going through direct imports at the moment, which aren't our preferred. So people buying direct out of principally China. And so that is a little bit different than we've experienced before. So is that about people trying to bring things in pre tariffs? And so we just want to get our arms around that with a couple more data, and we can update you early June at the latest when we have the AGM. So early days in looking at all that. But yes, that's sort of one piece on tariffs is we're trying to understand what that means for the preferred supplier spend. And then probably -- that's important. And then as important, what the tariffs mean to a wider economy? And that obviously has an effect on the end-budgets of the marketers that buy promotional products, and we'll be keeping a close eye on that, Joe. Yes, Rody. I don't know if we want to come back to you. There we go. So hopefully, Rody, if you unmute yourself, we should be okay.

Can you hear me now, guys? Excellent. Sorry about that earlier on. Thanks for the presentation. I had to drop off and drop back on again. So apologies if I ask a question that has been asked already. But I just wondered in terms of -- I mean you talked about new product development through during the presentation and in terms of the costs associated, that's going to be lower. But I'm sure, as you've touched on already, there's a lot of innovation going on within the business. I wonder if you could just sort of talk about which areas you're looking to drive forward in that regard. And also maybe touch on AI, what role that has to play in your business, and if you expect it to have any particular impact across the industry as a whole? And then just sort of 2 kind of Board-level questions. I wonder if you could talk about your thoughts in general at the moment with regard to capital allocation between dividends and buybacks, albeit, obviously, you're investing more in the growth of the business. And I just also wanted to ask, Chris, you were kind of shouldering the burden of Chair, Exec, et cetera, for quite a while. But you've now got a new Chair in place. Just wondering what that -- what your new Chair has brought to the business, whether there's any sort of change of emphasis in terms of the sort of overall thinking.

Okay. Thanks, Rody. And so I think new product development, so I think it's really important to say sort of we spent a lot over '22, '23, '24 in continuing to evolve our existing products, but a couple of new things as well: our e-commerce platform and what we call the orders products looking at the long tail. So the e-commerce platform is now in a state of sort of low overall evolvement or maintenance. And then the orders product, we're really consuming within the wider Syncore product in order just to really have a clearer go-to-market strategy. So in their initial evolvement, there's a high level of CapEx. And that was getting up to a total of 30% of our revenues, which is a high number, we appreciate. So we are absolutely investing in continuing to evolve our products and our product sort of strategy, our product mix. And that's under Matthew Cromar who's done a great job of that. But we are guiding to say we believe the right number to continue to evolve, not to stand continue to evolve, is around 20% of revenue. And of course, what we want to do is increase the dollars that sort of 20% is multiplied by. So putting more dollars in on an increase in top line. So product development continues, but we're definitely guiding you towards a 20% of revenue on a go-forward basis. In terms of AI, I talked earlier about that data that's in -- right at the beginning. There is an incredible amount of data, and I don't think we're using that to a whole degree right now. So we are working with third-party business who are -- they kind of were sort of data specialists, now they call themselves AI specialists, and to help unravel some of that. What trends can we pick up? How can we help our partners and our preferred suppliers get the best out of each other and understand the industry trends? So the biggest, I think, part of AI right now is definitely unraveling that data. We're doing a little bit with our engineers and trying to understand how coding can be a little more efficient and things like that. So there's different pockets of it knocking around. I don't think it changes our end-market in terms of people having engaging products to bring an engagement with our brands' audience. I don't think that changes. But trying to be a little more efficient in some of the administrative duties, we can definitely do. But the big -- the real ongoing thing right now for us is around our data, how can we get more out of that, and support the growth of our partners and our suppliers and their success by using our data very well. I think that's where we come from. Do you want to touch on capital allocation?

Yes. So I think it was the choice between dividend and buybacks. I think we've always said that we would like a progressive dividend policy. And that's kind of -- that's what we're doing, and we're evolving that slightly to, I think, historically, we said 30% of profit after tax or slightly ahead of that. But just making sure that we've got the right level of EPS cover on that. So we've got cash. We want to return value to shareholders and the dividend gives us one option to do that. The buyback we announced last year, so that was GBP 5 million. And that was kind of a little bit of a slow start. It feels like we've gained momentum there. So we're about 2/3 of the way through that, GBP 5 million, and we will continue to do that while it's still good value to shareholders, which we believe it is at the share price, and then probably when we get through the GBP 5 million, we'll look again and see whether we go again on that.

Yes. And then that final point, Rody about sort of Chair Pebble Group and Facilis. So from the Chair change perspective, there was a 3- or 4-month gap, I can't quite remember what it was. So that didn't particularly divert my time at all. Sort of great support with Claire and our Legal and General Counsel, Lucy Penfold sort of -- so with those guys around me, I can say that Chair, sort of having to sit in that seat for a short period of time, actually didn't distract me at all. So there was nothing going on that I felt that was taking me away from the business. So Anne de Kerckhove has come in September, and bringing a slightly different perspective. It's great to have a new set of eyes on our business. She spent time over Facilis, she spent time with the team at Brand Addition. So 6 months, definitely still get our arms around things and our arms around the business. But I've been with the business for 25 years. I think it's my sixth Chair, and every one of them brings something new, and I've kind of definitely learned from them all. And so looking forward to working with them. And I have taken the President role at Facilis for last year because I wanted to really get into the detail and get my arms around that business on a day-to-day basis, lead the team, the customer and the supplier. And I feel as I've done half a job. So I feel as though we've got a great team in place, we've organized 1 or 2 things operationally. We're going to have tech strategy together. I want to see that through to growth. So I feel as I've done half a job right now, and it's going to take a lot to sort of crowbar me out of that at the moment because I do want to see that business through to growth. But equally, if the Board say, there is sort of getting someone else to do that job, we'll make that business better, then I'll give that for a second. I definitely just want the success for Facilisgroup and think doing the role I'm doing is the right thing for that. But equally, I'm not precious about -- I'm precious about Facilisgroup success not [indiscernible] likely. Well, Andrew, let me view and yes, go for it.

Just a quick question. I think Joe has covered most of the stuff I was interested in. It's really your balance sheet is very robust and healthy, and it seems the only exposure to risk you've got there is through the Brand Addition customer base, which could just dent your inventory and your debtors if one of them goes belly up. So what's the largest customer exposure you've got in Brand Addition? And have you got a track record with any of those customers failing?

Yes. So Brand Addition is -- I think the largest customer will be around 10% of revenues. And that is -- I think it will be Nespresso. So if you think, that's on the Nestle side. So our top 5 customers will be Nespresso, under Nestle, Unilever, Michelin, Scania, Intel, Google. I've gotten a little bit further down. So those are our businesses, and I've been in this for 25 years and I'm touching plenty of word, I don't know if we've ever written off like thousands of inventory or thousands of debt, not in tens of thousands.

Yes, yes. So Andrew, from a kind of balance sheet perspective, the stock that we hold on behalf of our clients is underwritten in our contract. So if there's a brand change or a change of contract, then they pay us for that stock. So we're protected there and why we say we're working with some of the largest funds in the world. So in terms of their kind of robust notes and their ability to pay, that's never been a challenge in the kind of best part 20 years that I've been here.

And so what will be the revenue exposure to your largest customer?

Yes, so our largest will be 10% of revenue, so around about GBP 10 million. And then that sort of fluctuates slightly. But that's been the case, I think, for a while. It might have gotten a little bit bigger in 2022, yes. But around about 10% of revenues would be our largest customer. So not kind of wishing to throw the risk out there, so I don't worry about the balance sheet risk there. Of course, with having a large customer, I worry about the retention risk of that customer as opposed to the balance sheet risk of that customer. So that's how I would I try to -- I would think of that, for not wanting to give the risk out there, but that's where we come from, but, yes, that's where we come from.

Great. Thanks for the presentation. Just a couple from me, actually relating to Brand Addition. So obviously, we're slightly below the 2022 peak in revenues. I guess can you help sort of conceptualize where we are on that sort of recovery journey, which sectors are still sort of below where they were in 2022? Is it still the technology we've talked about consumer in the past? And then just secondly, on gross margins in Brand Addition, obviously, sort of guiding towards 33%. I guess, firstly, is 35% peak level? Is 33% conservative? Why should margins necessarily go backwards in 2025?

Okay. So just on that recovery versus '22, so I think in '22 we had the kind of post-COVID bubble in both consumer and technology. So we had -- our consumer businesses, like we said, our Unilever, Nespresso and both of those were really benefiting from kind of products that we were supplying to them being in stores, when other stores are closed, and then we can -- and then we have the working from home and the coffee at home Nespresso brand. So I think really FY '22 was our peak in terms of the contribution from those consumers -- those high-volume consumer customers. And what we saw through '23 is that coming down, and '24, we said we expected that to stabilize against '23, and that's what it did. The story with tech was slightly different. So those businesses were recruiting heavily through '21 and '22. And a lot of what we supply to them is used with their employees. So again, when they made their changes to the number of employees that they were taking on through the -- and through '23, then we saw that come down. We did see that stabilize and start to come back a little bit in 2024, and we expect that to kind of continue again in '25. But we're not -- we're not kind of budgeting internally for that to get back to the '22 peaks. We'll kind of see how that progresses. So I think we're, along that, I think we are -- consumer, we are where we expected to be, and we're not kind of putting anything too much there, and technology, we think, will come back a little bit further. And then on the guidance, I think -- so 35% is what, obviously, where we got to in '24. We think that's a sensible number for where we'll be. But again, kind of give myself a little bit of big room with you guys, and I'll point you to 33%. So we think 35% is that's where we're planning and intending to stay from an internal perspective, but I would put you to 33% to just give myself a little bit of headroom.

Rody you've got your hand up again. Don't know if that's from last time or if there's anything else. I'm going to say that's a no, Rody if you haven't got yourself...

Yes. Sorry, guys. So yes, just one further question for me, please. You highlighted, obviously, during the presentation, that Brand Addition is much smaller, just a U.S. business. I'm just wondering in terms of international growth Brand Addition on the existing footprint, how much of an imperative is that? And how much of an opportunity do you think there is there?

So on that chart, I think it's a really important one. And I saw we had a couple of the keys missing that kind of keeps sort of just [indiscernible] on. So we'll put those in because it was a fairly even spread between U.K., Europe, U.S. and rest of the world. And then that's really -- get any of our competitors and have their revenue split by those 4 brackets and there will be a really dominant line, either Europe or U.S. So Brand Addition has is this office of substance and true office substance around the globe. And that's one thing where we definitely stand out. So we do have an overall new business approach and sales teams within each of those regions. So I don't mind where the growth comes from. You'd say we're actually underweighting in the U.S., in North America. So if that's half of the industry, only 25% of the Brand Addition business, it says that for those U.S. businesses that want a European and Asia presence, we should have those lines called [indiscernible]. I would expect as wins come out to similar sectors to the ones we have already. And the more international and global the opportunity, the more Brand Addition stands out. So I don't really mind -- and so if I think of a lot of the businesses in the top 5, top 10, we do sort of look after those in more than one geography. And that's where Brand Addition stands out. As I said, great product, delivered from the right source, and we can order where that comes from. But then delivered consistency across the globe. That's where Brand Addition stands out when those 3 things are in play. So I think we have no more hands. So I'm under instruction to make some closing remarks. And so what they are -- well, thank you for attending first. I think one of the major messages to come out of this, operating cash conversion is increasing. We're choosing to put a little bit of that back into invigorating the growth in Facilisgroup. But we remain in a very strong cash position. And there's lots of kind of the world -- sort of there's always some things there, since we listed, I can't imagine, it's been COVID, it's been inflation, it's been sort of freight rates, interest rates, and now dealing with tariffs. But I think -- I hope, over time, trying to look at the business results and the way that cash has been managed, customers stay with us over the long-term. I think we're a great business, cash generative, a lot kind of -- a lot of the growth to move into. And no matter what the short-term environment, we definitely come out the other side and remain sort of a major player in the industry. So hopefully, we get credit for that at some point, but we wish to keep moving forward in the business and the rest will look after itself. So we just appreciate your support, your questions. And we're easy to find if there's any follow-up required. So with that, I'll say thank you ever so much. And have a great day. Thank you. Bye-bye.