Back on track for $1bn revenue

4imprint Group 9 May 2022 Update
Download PDF

4imprint Group

Back on track for $1bn revenue

Trading update

Media

9 May 2022

Price

2,900p

Market cap

£685m

US$1.23: £

Net cash ($m) at 1 January 2022

41.6

Shares in issue

28.1m

Free float

97.6%

Code

FOUR

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

2.3

5.9

24.6

Rel (local)

5.7

9.1

23.0

52-week high/low

3,170p

2,250p

Business description

4imprint Group is a leading direct marketer of promotional products in the United States, Canada, the UK and Ireland. In FY21, 98% of revenues were generated in the United States and Canada.

Next events

AGM

24 May 2022

H122 results

Mid-August 2022

Analyst

Fiona Orford-Williams

+44 (0)20 3077 5739

4imprint Group is a research client of Edison Investment Research Limited

4imprint has announced that trading over the first four months of the year was stronger than anticipated. Both order volumes and average order values are up double digits over the same period in 2019, resulting in revenues up 27% on the pre-COVID comparison. The group is now back on track to reach its long-held FY22 target of $1bn revenue and we have upgraded our forecast accordingly. Our new forecasts show a more robust recovery in operating margin, despite the economic uncertainty and inflation impact. 4imprint is a high-quality business in a large and growing market, underpinned by marketing expertise and a strong balance sheet.

Year end

Revenue ($m)

PBT*
($m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/20

560.0

3.8

11.0

0.0

N/A

N/A

12/21

787.3

30.2

80.3

45.0

44.6

1.3

12/22e

1,000.0

53.5

144.8

80.0

24.8

2.2

12/23e

1,125.0

64.8

172.8

95.0

20.8

2.7

Note: *PBT and EPS (fully diluted) are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Recovery in operating margin

We were previously at the lower end of the forecast range, building in caution over the pace of recovery in the US economy. The strength of these indicated numbers lead us to increase our revenue forecasts from $900m to $1bn for the current year and from $1bn to $1.2bn for FY23, roughly where we expected the business to be trading at this point before the onset of the pandemic. Management is now guiding to an FY22 operating profit figure above the highest current market forecast, which we believe to be $52m. With the momentum from these early weeks, we lift our operating profit forecast from $40.5m to $53.9m, representing an operating margin of 5.4% and flowing through to a year-end forecast net cash figure of $64.25m. We envisage a further margin uplift to 5.8% in FY23 with greater fixed cost recovery.

Some market uncertainties built in

As we have pointed out in previous reports, in some ways 4imprint’s trading reflects the health of the US economy. In its guidance, management acknowledges there will be increasing attention paid to the impact of inflation on customer budgets and the threat of recession, on top of ongoing concerns regarding stock availability and cost inflation for both stock and staff. However, these are factored into the numbers (as much as is sensible at this stage) and it is the exceptionally strong rebound in customer activity over these early weeks of the year that has led to this update ahead of the AGM scheduled for 24 May 2022.

Valuation: Upgrade and sterling weakness lift DCF

The share price has responded well to the update, recovering to the broad levels of March and April, before the more recent setback. At the time of our last note in March, our DCF suggested a value of £34.01 per share. The upgrade to forecasts would take this to £39.27 per share and adding in the significant weakening of sterling, the implied value rises to £43.10 per share.

Exhibit 1: Financial summary

$000s

2019

2020

2021

2022e

2023e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

860,844

560,040

787,322

1,000,000

1,125,000

Cost of Sales

(585,543)

(402,100)

(561,306)

(710,000)

(798,750)

Gross Profit

275,301

157,940

226,016

290,000

326,250

EBITDA

 

 

57,904

8,905

35,660

59,250

70,500

Operating profit (before amort. and excepts.)

 

 

53,620

3,972

30,646

53,850

65,100

Intangible Amortisation

0

0

0

0

0

Operating profit (before amort. and excepts.)

 

 

53,620

3,972

30,646

53,850

65,100

Exceptionals

0

0

0

0

0

Impairment

0

0

0

0

0

Operating Profit

53,620

3,972

30,646

53,850

65,100

Net Interest

373

(129)

(417)

(350)

(350)

Profit Before Tax (norm)

 

 

53,993

3,843

30,229

53,500

64,750

Profit Before Tax (IFRS)

 

 

53,993

3,843

30,229

53,500

64,750

Tax

(11,276)

(753)

(7,643)

(13,375)

(16,188)

Profit After Tax (norm)

42,717

3,090

22,586

40,125

48,563

Profit After Tax (IFRS)

42,717

3,090

22,586

40,125

48,563

Discontinued businesses

0

0

0

0

0

Net income (norm)

 

 

42,717

3,090

22,586

40,660

48,563

Net income (IFRS)

 

 

42,717

3,090

22,586

40,125

48,563

Average Number of Shares Outstanding (m)

28.0

28.0

28.1

28.1

28.1

EPS - normalised fully diluted (c)

 

 

152.4

11.0

80.3

144.8

172.8

EPS - (IFRS) (c)

 

 

152.4

11.0

80.2

142.9

172.7

Dividend per share (c)

84.0

0.0

45.0

80.0

95.0

Gross Margin (%)

32.0

28.2

28.7

29.0

29.0

EBITDA Margin (%)

6.7

1.6

4.5

5.9

6.3

Operating Margin (before GW and except.) (%)

6.2

0.7

3.9

5.4

5.8

BALANCE SHEET

Fixed Assets

 

 

31,844

43,269

38,037

37,797

35,557

Intangible Assets

0

0

0

0

0

Other intangible assets

1,152

1,100

1,045

1,045

1,045

Tangible Assets

24,369

24,832

24,667

25,767

24,867

Right of use assets

1,985

13,065

11,725

10,385

9,045

Deferred tax assets

4,338

4,272

600

600

600

Current Assets

 

 

105,631

89,812

127,771

165,147

198,167

Stocks

11,456

11,271

20,559

24,154

27,445

Debtors

53,039

38,775

63,589

74,709

84,888

Cash

41,136

39,766

41,589

64,250

83,800

Other

0

0

2,034

2,034

2,034

Current Liabilities

 

 

(60,839)

(51,118)

(73,027)

(94,725)

(106,422)

Creditors

(59,209)

(50,001)

(71,877)

(93,575)

(105,272)

Short term borrowings

0

0

0

0

0

Lease liabilities

(1,630)

(1,117)

(1,150)

(1,150)

(1,150)

Long Term Liabilities

 

 

(13,688)

(16,592)

(11,789)

(10,589)

(9,506)

Long term borrowings

0

0

0

0

0

Lease liabilities

(415)

(12,089)

(10,939)

(9,739)

(8,539)

Other long term liabilities

(13,273)

(4,503)

(850)

(850)

(967)

Net Assets

 

 

62,948

65,371

80,992

97,630

117,796

CASH FLOW

Operating Cash Flow

 

 

59,841

16,462

22,846

60,500

67,850

Net Interest

751

(13)

(417)

(350)

(350)

Tax

(10,318)

(507)

(6,414)

(9,240)

(13,688)

Capex

(8,178)

(3,724)

(3,465)

(6,500)

(4,500)

Acquisitions/disposals

0

0

0

0

0

Pension contributions

(3,593)

(13,278)

(4,589)

(4,000)

(4,000)

Financing

(2,567)

941

(843)

(800)

(800)

Dividends

(20,659)

0

(4,134)

(15,879)

(23,854)

Other

(1,687)

(1,418)

(1,109)

(1,100)

(1,100)

Net Cash Flow

13,590

(1,537)

1,875

22,631

19,559

Opening net debt/(cash)

 

 

(27,484)

(41,136)

(39,766)

(41,590)

(64,250)

Net impact of disposals etc

0

0

0

0

0

Other

62

167

(52)

29

0

Closing net debt/(cash)

 

 

(41,136)

(39,766)

(41,590)

(64,250)

(83,809)

Source: Company accounts, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by 4imprint Group and prepared and issued by Edison, in consideration of a fee payable by 4imprint Group. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by 4imprint Group and prepared and issued by Edison, in consideration of a fee payable by 4imprint Group. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Share this with friends and colleagues

You may be interested in