4imprint is the leading direct marketer of promotional products in the US, Canada, the UK and Ireland. 97% of 2018 revenues were generated in the US and Canada.
4imprint’s interims (published end July) showed 16% revenue growth (all organic) and a further small tick up in underlying operating margin to 4.8% (H118: 4.7%). The brand promotion initiative, launched in H118, is delivering online traffic and conversion better than initial expectations. We lifted our FY19 revenue and EPS forecasts on the figures, by 4% and 3% respectively. For FY20e the EPS uplift was 5%. Management’s revenue target of $1bn by FY22e looks likely to be achieved ahead of schedule. The group has a five-year average cash conversion of 103% and a cash-rich balance sheet and we regard the current share price as well underpinned, with further potential upside.
The PPAI, an industry body, estimates the value of the US promotional products distribution market at US$25bn. 4imprint is the largest distributor in this large and diverse market, yet has market share of around 3%. Q219 sales for the market were up 5.4%, having increased by 4.9% in FY18. 4imprint has consistently grown faster than the market, building share through its reputation for quality, reliability and customer service. There are no direct comparators, as the other larger players have differentiated business models.