4imprint Group — Better Q4 order intake

4imprint Group (LSE: FOUR)

Last close As at 27/03/2024

GBP63.40

60.00 (0.96%)

Market capitalisation

GBP1,770m

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Research: TMT

4imprint Group — Better Q4 order intake

4imprint’s trading update indicates that order intake in Q4 was a little better than we had anticipated. Unaudited FY20 revenue was reported at c $560m, or 5% above our prior forecast. We remain circumspect around trading prospects for FY21, given the impact of the pandemic on corporate America and leave our forecast unchanged for now. The indicated year-end net cash balance at $39.8m (excluding lease debt) was well ahead of our projected figure ($22.5m in our modelling), and close to the $40.1m reported in October, implying that cash collections have held up strongly. We continue to view 4imprint as a high-quality investment proposition.

Fiona Orford-Williams

Written by

Fiona Orford-Williams

Director, TMT

TMT

4imprint Group

Better Q4 order intake

Year-end trading update

Media

21 January 2021

Price

2,205p

Market cap

£619m

$1.37:£1

Net cash ($m) at 31 December 2020

39.8

Shares in issue

28.1m

Free float

98.2%

Code

FOUR

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(11.2)

10.2

(33.1)

Rel (local)

(14.1)

(4.2)

(25.6)

52-week high/low

3,420p

1,320p

Business description

4imprint is the leading direct marketer of promotional products in the US, Canada, the UK and Ireland. In FY19, 97% of revenues were generated in the US and Canada.

Next events

Final results

16 March 2021

Analyst

Fiona Orford-Williams

+44 (0)20 3077 5739

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

4imprint’s trading update indicates that order intake in Q4 was a little better than we had anticipated. Unaudited FY20 revenue was reported at c $560m, or 5% above our prior forecast. We remain circumspect around trading prospects for FY21, given the impact of the pandemic on corporate America and leave our forecast unchanged for now. The indicated year-end net cash balance at $39.8m (excluding lease debt) was well ahead of our projected figure ($22.5m in our modelling), and close to the $40.1m reported in October, implying that cash collections have held up strongly. We continue to view 4imprint as a high-quality investment proposition.

Year end

Revenue ($m)

PBT*
($m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/18

738.4

46.1

129.4

70.0

23.3

2.3

12/19

860.8

55.6

157.2

84.0**

19.2

2.8

12/20e

535.0

0.5

0.3

0.0

N/A

0.0

12/21e

600.0

15.0

40.6

20.0

74.4

0.7

Note: *PBT and EPS are normalised, excluding exceptional items. **84c declared, 25c paid. FY20e do not reflect the trading update

FY20 indicated results slightly outstrip forecasts

Q4 order levels were at around 70% of the prior year, compared to the 65% we had factored into our modelling, resulting in a revenue figure 5% ahead of our estimate. Underlying PBT is expected to be in line with management expectations. The extent of outperformance will also depend on the order mix, particularly with respect to apparel. Many occasions that give rise for the requirement for promotional goods – such as conferences and trade fairs – are currently in abeyance, varying by the extent of lockdown state by state. It may be the case that the boost to Q4 orders is from employers looking to reward loyal customers or improve staff morale. We will update on publication of the full year results in March Given the extent of the continuing uncertainty, we prefer to leave our FY21e projection as is until that time, when the outlook may be clearer.

Very strong cash performance

The indicated year-end net cash figure of $39.8m is well ahead of our projection. This will be partly due to the stronger trading, but also implies that there has been good control of working capital. This additional cash resource will be available for deployment towards the targeted marketing programmes as economic conditions gradually become more encouraging. The timing, however, remains very uncertain.

Valuation: Mix of strong fundamentals and unknowns

With continuing uncertainty regarding how and at what speed the US economy will continue to recover, our earnings forecasts remain tentative and valuation judgements based on them are subjective. 4imprint has a market-leading position, a low fixed-cost base and limited capital requirements, attractive cash flow characteristics and a cash positive balance sheet, all of which justify its premium rating. 4imprint trades on an FY19 EV/EBITDA of c 14x, compared to marketing services stocks on 9.5x.

Exhibit 1: Financial summary

$000s

2018

2019

*2020e

2021e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

738,418

860,844

535,000

600,000

Cost of Sales

(500,531)

(585,543)

(379,437)

(410,813)

Gross Profit

237,887

275,301

155,564

189,187

EBITDA

 

 

48,507

59,144

3,875

18,775

Operating Profit (before amort. and except).

 

 

45,862

54,860

475

14,975

Intangible Amortisation

0

0

0

0

Operating Profit (after amort. and before except.)

 

 

45,862

54,860

475

14,975

Operating Profit

44,322

53,620

(625)

13,775

Net Interest

227

751

25

25

Net pension finance charge

(403)

(378)

(378)

(378)

Profit Before Tax (norm)

 

 

46,089

55,611

500

15,000

Profit Before Tax (IFRS)

 

 

44,146

53,993

(578)

13,822

Tax

(8,952)

(11,276)

(21)

(2,865)

Profit After Tax (norm)

36,734

44,335

79

11,735

Profit After Tax (IFRS)

35,194

42,717

(599)

10,957

Discontinued businesses

(100)

0

0

0

Net income (norm)

 

 

36,360

44,203

78

11,388

Net income (IFRS)

 

 

35,094

42,717

(1,399)

10,157

Average Number of Shares Outstanding (m)

28.0

28.0

28.0

28.0

EPS - normalised (c)

 

 

129.4

157.2

0.3

40.6

EPS - (IFRS) (c)

 

 

125.6

152.4

(2.1)

39.1

Dividend per share (c)

70.0

84.0

0.0

20.0

Gross Margin (%)

32.2

32.0

29.1

31.5

EBITDA Margin (%)

6.6

6.9

0.7

3.1

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

6.2

6.4

0.1

2.5

BALANCE SHEET

Fixed Assets

 

 

25,732

31,844

30,577

30,077

Intangible Assets

0

0

0

0

Other intangible assets

1,084

1,152

1,152

1,152

Tangible Assets

19,012

24,369

24,687

24,587

Right of use assets

0

1,985

400

0

Deferred tax assets

5,636

4,338

4,338

4,338

Current Assets

 

 

84,234

105,631

61,690

70,653

Stocks

9,878

11,456

7,476

8,384

Debtors

46,872

53,039

31,315

35,119

Cash

27,484

41,136

22,900

27,150

Other

0

0

0

0

Current Liabilities

 

 

(50,752)

(60,839)

(39,957)

(44,363)

Creditors

(50,752)

(59,209)

(39,557)

(44,363)

Short term / lease borrowings

0

(1,630)

(400)

0

Long Term Liabilities

 

 

(15,947)

(13,688)

(1,348)

(968)

Long term borrowings

0

(415)

0

0

Other long-term liabilities (including pension)

(15,947)

(13,273)

(1,348)

(968)

Net Assets

 

 

43,267

62,948

50,962

55,399

CASH FLOW

Operating Cash Flow

 

 

45,583

57,796

600

20,700

Net Interest

227

751

25

25

Tax

(7,844)

(10,318)

(141)

(3,212)

Capex

(2,855)

(8,178)

(3,718)

(3,700)

Acquisitions/disposals

0

0

0

0

Pension contributions

(3,932)

(3,593)

(12,700)

(3,500)

Financing

(465)

(2,567)

900

(2,200)

Dividends

(32,984)

(20,659)

0

(1,853)

Other

0

(1,687)

(1,622)

(1,622)

Net Cash Flow

(2,270)

11,545

(16,656)

4,638

Opening net debt/(cash)

 

 

(30,767)

(27,484)

(39,091)

**(22,500)

Net impact of disposals etc

0

0

0

0

Other

(1,013)

62

65

12

Closing net debt/(cash)

 

 

(27,484)

(39,091)

(22,500)

**(27,150)

Source: Company accounts, Edison Investment Research; *FY20 estimates have not been adjusted for the FY20 trading update; **Opening and ending FY21e net cash balance estimates are not to be relied upon given the January 2021 trading statement’s reporting of a 2020 yearend unaudited net cash figure of $39.8m


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 £49,500 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 2021 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

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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.

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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 £49,500 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 2021 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

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