Pebble Beach : Final Results 2020

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 ("MAR"). Upon the publication of this announcement, the inside information is now considered to be in the public domain for the purposes of MAR.

Pebble Beach Systems Group plc

Final Results for the year ended 31 December 2020

Pebble Beach Systems Group plc (AIM: "PEB", "Pebble" or the "Group"), a leading global software business specialising in playout automation and content management solutions for the broadcast and streaming service markets, is pleased to announce its final results for the year ended 31 December 2020.

Financial Headlines
	2020	2019
Revenue	£8.4m	£11.2m
Gross profit	£6.4m	£8.3m
Gross margin	77%	74%
Adjusted EBITDA*	£2.7m	£3.8m
% of Revenue	32%	34%
Net profit for the year	£1.3m	£1.5m
Adjusted diluted earnings per share*	1.1p	1.8p
Basic earnings per share	1.0p	1.1p
Order Intake	£7.8m	£10.3m
Cash generated from operations	£2.5m	£2.4m
Net Debt	£7.7m	£8.4m

Headlines

• Trading in the year impacted by COVID-19 with customers being slow to make investment decisions impacting orders and revenue
• Encouraging uptake in activity in the first quarter of 2021, with orders up 86% in Q1 2021 compared with the same pre-COVID-19 quarter of 2020
• Implemented cost savings to maintain the adjusted EBITDA above 30% despite COVID-19 headwinds reducing revenue by 25%
• Seamless transition to remote working as the UK Government imposed a series of lockdowns
• Workforce capability maintained with no redundancies or use of the Government furlough schemes
• Reduced long-term bank debt by a further £1m
• Extension to bank loan agreement securing the facility until 30 November 2022

*Adjusted EBITDA, a non-IFRS measure, is EBITDA before non-recurring items and foreign exchange gains. Adjusted earnings per share is calculated by excluding foreign exchange gains or losses, amortisation of acquired intangibles, non-recurring items and the share-based payment charge, after tax effects.

Peter Mayhead, Chief Executive Officer of Pebble Beach Systems Group plc, said:

I am immensely proud with the way that our company delivered excellent results during a difficult period. Our investment in technology is key to the future success of our growth strategy and we always look to our customers in the broadcast markets for validation of our approach. Engagement with those customers verifies that they are facing significant challenges as they look to balance many competing pressures; the advent of remote production, the reduction of barriers to entry as internet-based platforms enable new entrants into the market, and increasing content costs driven by hit shows from the major streaming services.

When added to the growing competition for advertising spend from social media, the need for innovation is clear. To sustain their competitive edge, broadcasters must build on their historic ability to channelise and distribute content to an audience whose platform of choice is still overwhelmingly linear. They are doing this by investing in technology that enables them to leverage the benefits of digital-based workflows.

To that end in 2018, Pebble commenced work on developing our new digital platform "Oceans". As an entirely new platform based on the latest technologies, Oceans offers rapid application development, remote operation, security, licensing flexibility, and storage flexibility. At the same time, the platform has at its core, the ability for our customers to continue to utilise their investment in our current product suite.

I am delighted to report that in addition to releasing the award-winning Oceans platform for customer installation during 2020, we also released Pebble Control. This solution expands our portfolio to offer IP connection management, enabling our customers to establish all-IP workflows, regardless of the scale of their operations.

2020 was a challenging year for all, yet our commitment to delivering on our annual plan in line with our company's values enabled us to weather the storm without the need for staff furlough, redundancies, or reduction in our technology investment. We look forward to 2021 with a high level of optimism as we continue to launch new applications to the market, broadening our suite of cutting-edge, fully integrated, and scalable capabilities.

- ends -

For further information please contact:

Peter Mayhead - CEO
David Dewhurst - CFO	[phone]

finnCap Ltd (Nominated Adviser and Broker)

Marc Milmo / Teddy Whiley - Corporate Finance [phone]

Tim Redfern / Sunila de Silva - ECM

The Company is quoted on the LSE AIM market (PEB.L). More information can be found at www.pebbleplc.com.

About Pebble Beach Systems

Pebble Beach Systems (trading as Pebble) is a world leader in designing and delivering automation, integrated channel and virtualised playout solutions, with scalable products designed for applications of all sizes. Founded in 2000, Pebble has commissioned systems in more than 70 countries, with proven installations ranging from single up to over 150 channels in operation, and around 2000 channels currently on air under the control of our automation technology. An innovative, agile company, Pebble is focused on discovering its customers' requirements and pain points, designing solutions which will address these elegantly and efficiently, and delivering and supporting these professionally and in accordance with its users' needs.

Forward-looking statements

Certain statements in this announcement are forward-looking. Although the Group believes that the expectations reflected in these forward- looking statements are reasonable, it can give no assurance that these expectations will prove to be correct. Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements. The Group undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise. Nothing in this announcement should be construed as a profit forecast.

CHAIRMAN'S STATEMENT

INTRODUCTION

In common with the majority of companies across all sectors, 2020 was a year like no other in our history. I am incredibly proud of the robust way that the Group responded to the challenges presented by the COVID-19 pandemic and continues to do so.

The year saw some customers cancel anticipated projects and others delay investment decisions as they understandably focused on addressing the challenges that COVID-19 created for their own business. This led to an inevitable reduction in orders in the year from £10.3 million to £7.8 million which had consequential effect on revenue. However, as the new year started, we began to see customers look forwards again which saw an upturn in customer engagement, a growth in our pipeline and by the end of Q1 2021 our orders were up 86% on the comparable period last year.

The opportunity for our technology remains significant with COVID-19 having an undeniable impact on the broadcast sector. 2020 saw a return to traditional media as a source of news and information, an increase in the need for remote production technology and an increase in interest for forms of subscription-based offerings. In this environment, cloud and IP-based technology are seen as important tools to deliver against these sector trends. The accelerated investment we have made in our new digital platform, Oceans, has all the benefits of current technologies enabling our customers to establish all-IP workflows whilst retaining at its core the ability for our customers to continue to utilize their investment in our existing installed solutions. We believe the increased investment in our technology is critical to our delivery of next generation cloud-based solutions.

Coupled with the technology enhancements we were able to progress in 2020, the year also saw the resilience of our operating model being demonstrated. Our employees made a seamless transition to homeworking continuing to be highly productive in meeting our customers' needs. Our level of service and solutions delivery ensured that all staff were fully engaged throughout the year and no redundancies were considered. Additionally, we had no requirement to make use of the Government furlough schemes. These facts demonstrate the underlying strength of the Group. Notwithstanding the ongoing investment in technology development, we have also paid down another £1.0 million of our long-term debt. We have maintained our discipline on costs and have been able to deliver strong margins in unprecedented market conditions. We are confident of growth in 2021 and in our ability to deliver success for all our stakeholders.

FINANCIAL RESULTS

Revenue for 2020 of £8.4 million (2019: £11.2 million). Recurring revenue from support contracts was up 10%

to £4.0 million (2019: £3.6 million).

Gross profit in 2020 was £6.4 million at a margin of 77% (2019: £8.3 million (74%)).

Adjusted EBITDA of £2.7 million in 2020 (2019: £3.8 million), before depreciation and amortisation, of £1.2 million

(2019: £2.0 million) are deducted.

The Group continues to view investment in the development of new products and services as key to future growth and we will continue to invest in innovation and new technologies. In 2020, Pebble Beach Systems capitalised £1.3 million of development costs (amortised £0.8 million), (2019: £1.0 million) (amortised £0.8 million).

Net finance costs were slightly lower in 2020 reflecting the Group's pay-down of some of its revolving credit facility ("RCF") offsetting more than the full year impact of an increased interest rate of 3.53% (2019: 3.30%). The available RCF as at 31 December 2020 was reduced to £8.5 million, all of which had been drawn fully down (2019: £9.5 million, of which £9.5 million had been fully drawn down). Interest paid on the RCF was £0.3 million

(2019: £0.4 million).

The net profit for the year was £1.3 million (2019: £1.5 million).

DEBT

At 31 December 2020, the Group's net debt (excluding debt related to leases following the implementation of IFRS 16) was £7.7 million (2019: £8.4 million), comprising net cash of £0.8 million (2019: £1.1 million) and the drawn down RCF from Santander of £8.5 million (2019: £9.5 million).

We enjoy a close relationship with our bank and have kept up a regular dialogue over the last 12 months during the COVID-19 pandemic. During 2020, we agreed a capital repayment holiday in June 2020 under the Government's initiative, and we also agreed a reduced level of repayment in December 2020. These actions were taken to mitigate potential cashflow risks caused by the uncertainties relating to the pandemic. During 2020 we repaid £1.0 million of the RCF and did not take on any new debt available under the Government loan support schemes. Post year end, on 10 March 2021, we signed a 12-month extension to the current £8.5 million loan agreement. The agreement secures the facility until 30 November 2022 with revised quarterly repayments and EBITDA covenant test levels reduced to reflect the current trading environment. This agreement was based on the budget for 2021 and forecasts for the following two years.

GOING CONCERN

The directors are required to assess the Company's and the Group's ability to continue to trade as a going concern. The details of this review are covered in the extract from the Notes to the Financial Statements below. The Board concluded, from its thorough assessment of the detailed forecasts, that the Group will have sufficient resources to meet its liabilities during the review period through to 30 June 2022 and that it is appropriate that the Group and the Company prepare accounts on a going concern basis.

BOARD CHANGES

As previously announced, we were pleased to make two new appointments to the Board; on 1 May 2020, Richard Logan was appointed to the Board as Non-Executive Director and on 5 October 2020, David Dewhurst was appointed as Chief Financial Officer.

TRADING OUTLOOK

The results achieved in 2020, in such unfavourable conditions, came from the combined efforts of each and every member of staff. Their determination and perseverance throughout 2020 has clearly demonstrated that our strong culture of resilience, enthusiasm, expertise, agility and dedication allows us to look forward with optimism as the world returns to some level of normality.

2021 started slowly as customers continued their cautious approach to investment decision making. As the first quarter has unfolded customer confidence has returned and the order intake for the first quarter closed at £4.0 million, up 86% compared with £2.2 million in the same quarter of 2020, which was largely pre-COVID-19. £1.5 million of these orders had been in the pipeline for several months but it is reassuring to see that our customers are emerging from the difficulties of 2020 and planning expansions of their broadcast and streaming services.

With the vaccine programme gathering momentum around the world, we feel confident that more customers will take the investment decisions that have been delayed by the pandemic. Our pipeline remains strong and has continued to grow in 2021 and reflects the market opportunity for our technology. We are continuing with the increased investment in our product suite which is critical to the delivery of cloud-based solutions to work alongside our on-premise solutions. The Board is confident that the Group is well positioned to support our customers as they transition from traditional broadcast infrastructure to more flexible IP-based technologies.

John Varney

Non-Executive Chairman

For the year ended 31 December 2020

FINANCIAL REVIEW

For the year ended 31 December 2020

Continuing Operations

	2020	2019	Change
	£'m	£'m	%
Pebble Beach Systems	8.4	11.2	(25.1)
Total Revenue	8.4	11.2	(25.1)
Pebble Beach Systems	3.3	4.5	(26.8)
PLC costs	(0.6)	(0.7)	11.8
Total adjusted EBITDA	2.7	3.8	(29.4)

Cash flows

The Group held cash and cash equivalents of £0.8 million at 31 December 2020 (2019: £1.1 million). The table below summarises the cash flows for the year.

	2020	2019
	£'m	£'m
Cash generated from operating activities	2.1	2.0
Net cash used in investing activities	(1.4)	(1.1)
Net cash used in financing activities	(1.0)	(1.1)
Net decrease in cash and cash equivalents	(0.3)	(0.2)
Cash and cash equivalents at 1 January	1.1	1.3
Cash and cash equivalents at 31 December	0.8	1.1

As at 31 December 2020 net debt was £7.7 million (cash £0.8 million and bank debt of £8.5 million). At the end of March 2021, net debt had reduced to £7.1 million. The Group was using £8.5 million of its available facilities in December 2020.

Foreign exchange

The principal exchange rates used by the Group in translating overseas profits and net assets into sterling are set out in the table below.

	Average	Average	Year end	Year end
	rate	rate	rate	rate
Rate compared to £ sterling	2020	2019	2020	2019
US dollar	1.284	1.277	1.365	1.321
Risk management

The Board regularly reviews the full range of business risks facing the Group. The approach adopted is to identify, evaluate and manage the likely impact of risk on the Group's business objectives. Where the risks are unavoidable, they are managed through business controls and where appropriate through insurance and treasury activities.

The Group has a programme of regular risk assessment, which incorporates internal control reviews of both a financial and non-financial nature. A process of continuous review has been in place throughout the year at an operating company level to consider the risk environment and the effectiveness of controls. The results of reviews, initiatives and progress on implementing control improvements are regularly reported to the Board.

Environmental, Social and Governance (ESG)

The Group is committed to ESG considerations and the Board understands that these criteria are an increasingly important component of investors' evaluation of companies in which they want to invest. In addition to our robust governance, the Board takes regular account of the significance of social and environmental matters.