Moving on up

4imprint Group 28 February 2022 Outlook
Download PDF

4imprint Group

Moving on up

Trading update

Media

28 February 2022

Price

2,640p

Market cap

£745m

$1.36:£1

Net cash ($m) at end December 2021

41.6

Shares in issue

28.1m

Free float

97.7%

Code

FOUR

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

5.6

(7.4)

5.6

Rel (local)

4.9

(7.4)

(4.0)

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 FY20, 98% of revenues were generated in the United States and Canada.

Next events

Final results

16 Mar 22

Analysts

Fiona Orford-Williams

+44 (0)20 3077 5739

Max Hayes

+44 (0)20 3077 5700

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

4imprint’s year-end trading update points to FY21 revenues of $787m, ahead of our expectation of $775m, up 41% on the prior year, after a strong Q4. PBT is indicated at the high end of the (wide) consensus range and we increase our estimate from $22.6m to $30.4m. Supply chain and inflation issues look set to continue, so margins will take longer to recover to the levels pre-COVID-19 pandemic, but the group has a degree of flexibility around substitution and pricing, which should mitigate the heaviest potential trading impact. 4imprint’s long-term growth record, strong cash generation and robust balance sheet underpin the premium rating.

Year end

Revenue ($m)

PBT*
($m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/19

860.8

54.0

152.4

84.0

23.6

2.3

12/20

560.0

3.8

11.0

0.0

327.0

0.0

12/21e

787.0

30.4

82.3

45.0

43.6

1.3

12/22e

900.0

40.0

108.3

60.0

33.3

1.7

12/23e

1,000.0

51.0

138.1

80.0

26.1

2.2

Note: *PBT and EPS are normalised, excluding exceptional items.

US economic rebound

4imprint’s progress is in some ways a proxy for confidence in the health of the US economy. The customer base is basically corporate North America, bar the largest organisations, which handle their promotional goods requirements through (tighter margin) corporate contracts. The widespread shutdowns of FY20 led to a major commercial retrenchment within the economy, with confidence steadily rebuilding through FY21. With any further restrictions more likely to be local than federal, the recovery looks set to continue through FY22, when we now expect 4imprint’s revenue to exceed that achieved in FY19. We introduce forecasts for FY23, when we expect further margin recovery and PBT outstripping FY19 levels.

All about the marketing

4imprint has traditionally been run to achieve a broadly stable operating margin, setting and managing the marketing spend to attract and retain customers and drive growth. Management of the marketing mix remains a key competence. The pandemic interrupted the balance between spend and margin but the decision to keep the spend up on brand awareness is already proving to have been a valuable investment. The balance sheet strength (cash at end FY21 was $41.6m, with lease liabilities only) has enabled management to navigate through the swings in demand and return to dividend payments at the FY21 interims.

Valuation: Premium reflects high-quality growth

4imprint benefits from its scale, low fixed-cost base and limited capital requirements, attractive cash flow characteristics and cash positive balance sheet, all of which justify its premium rating. A DCF suggests a price of £33.29, while it trades on an FY22e EV/EBITDA of 21.5x, versus marketing services stocks on 10.5x. We expect continuing good growth will narrow this valuation gap.

Investment case

Interrupted impressive organic growth record

4imprint presents a unique investment case: a UK-listed company, with British and US management, run out of the US and with 98% of revenues generated in the US. It is a distributor of promotional products across the spectrum of enterprises in North America, with a large range of product across categories from pens to apparel. Up until the onset of the pandemic, it had a very impressive long-term financial record, with revenue growth for the five years from FY13 through to FY19 at a CAGR of 17.2% (10-year CAGR of 15.0%). For obvious reasons related to the severe impact of pandemic-related lockdowns on the US economy, FY20 broke this pattern, with a 35% drop in revenue over the prior year. Growth resumed in FY21, with a strong Q4 helping drive revenues up 41% on prior year, with current year forecasts pushing past the FY19 figure. The strategic objective remains $1bn of revenues, which we now expect to be achieved in FY23e.

Sizeable and fragmented target market

4imprint operates in a large and diverse market. The Advertising Specialty Institute (ASI), an industry body, estimated the value of the US promotional products distribution market in 2020 at US$20.7bn, down from $25.8bn in 2019, but that FY20 figure included substantial quantities of unbranded PPE. Recently released FY21 figures show a good underlying recovery, reflecting the reopening of the US economy, to $23.2bn for the year – a figure likely to contain a much lower proportion of unbranded PPE. After the FY20 retrenchment, 4imprint was the second largest distributor excluding PPE (third with PPE included) yet has an estimated market share of less than 3%. For FY10 to FY19, the market grew at a CAGR of 5.0%. 4imprint has hitherto consistently grown faster than the market, barring FY20 when its decline was broadly in line with the underlying trend (ex PPE). It has achieved this through building market share helped by its reputation for quality, reliability and customer service. There are no direct comparators, as the other large players have differentiated business models, described below.

Marketing mix shifted to reflect circumstances

Understanding 4imprint’s management of marketing is central to understanding the company. With marketing costs typically representing 16-18% of group revenues, this is fundamentally a variable cost and flexing it allows management to control the overall group operating margin. The group’s strong long-term record stems from a data-driven approach to understanding its customers and meeting (and anticipating) their requirements – just as true over the pandemic period as in ‘normal’ trading. The marketing uses data to select what products are presented to which audiences, when and via what channel. The meld of automation and personalisation is very effective in delivering top-line growth, using a range of techniques to drive customer acquisition and retention, complemented with TV and radio campaigns for brand awareness. This portfolio approach to marketing gives the flexibility to adapt quickly to market conditions and how customers have been working. Marketing effectiveness ($1 revenue earned relative to $1 spent) was $5.46 in H121, broadly in line with the 10-year first-half average, despite the spend being more weighted to brand awareness.

Inherent strong cash flow characteristics

4imprint’s cash positive balance sheet afforded it a substantial cushion against the sharp pandemic-prompted revenue downturn. The business’s underlying cash requirements are modest, as it is primarily a marketing and distribution business, with minimal need to invest in large stock positions or substantial pieces of capital equipment. The growth of apparel in the product mix is increasing the working capital requirement, but it remains modest in relation to the size of the balance sheet. Historically, significant cash was absorbed by a legacy pension scheme funding requirement (all in the UK) and a (trustee-agreed) $9.14m lump-sum contribution was paid in May 2020, with the objective to fund the scheme to ‘buy-out’ ready levels by FY25, meaning this is no longer a significant factor.

Forecasts and valuation

The positive year-end trading update indicates FY21 revenues of $787m, which is ahead of our earlier forecast of $775m. With the positive momentum, we have also raised our FY22e revenue estimate to $900m (was $850m) and introduced forecasts for FY23e, where we are looking for $1bn, which was set before the pandemic as a strategic corporate goal. As indicated above, historically the marketing spend was flexed to drive the top line while generating a relatively stable operating margin. This was in a range of 4.9% to 6.7% over FY11–19. We now envisage the management of operating margin (through control of marketing spend) back to the lower end of this range in FY23e. This slight element of caution reflects some ongoing uncertainty about the speed and trajectory of the reopening of the US economy, as well as continuing supply chain issues and labour cost pressures. A DCF based on a WACC of 8%, terminal growth of 3% and medium-term EBITDA margin of 6.5% suggests a valuation of £33.29, 26% above the current level. 4imprint generally trades at a significant premium to other marketing stocks, which have widely differing business models. It is trading on an FY22e EV/EBITDA of 21.5x, compared to a sector rating of 10.5x. Faster growth erodes this premium for FY23e, with 4imprint trading at 17.2x versus sector on 10.2x.

Company description: Direct marketing of promotional products

4imprint’s business model is remarkably straightforward. It supplies customised, promotional products to customers across North America (98% of revenues) and the UK and Ireland (2% of revenues). The company had grown its revenues steadily over many years to FY19. COVID-19 lockdowns had a severe effect on demand as corporate America diverted its attention to managing the immediate impacts, side-lining marketing initiatives.

Despite the dramatic changes in the operating environment, 4imprint’s ethos was unchanged. Management is protective of the group’s reputation for ‘best-in-class’ customer service and of its partnership approach to dealing with its suppliers. In both aspects, the brand’s positioning undoubtedly helped to give a degree (obviously unquantifiable) of resilience against the worst of the market impacts. The scale of the operation is large, running at around 1.4m orders a year, but all are individually customised and of great importance to the customer. The market is highly fragmented; there are reported to be over 30k distributor firms in North America alone. It is, however, substantial, estimated by industry body ASI at $23.2bn in 2021, despite the impact of COVID-19 on the economy. 4imprint’s growth has consistently outstripped the market, with an all-organic revenue CAGR of 13.0% for the period FY11–21e, compared to an estimated market growth of 4.8%. This premium growth is being delivered through the group’s sophisticated direct marketing operation, based on data and covering online and offline approaches to recruit new customers and to drive return visits. Marketing spend is managed with a view to driving the top line while broadly maintaining operating margin. How the spend has been tailored to suit the changed circumstances is described in more detail below.

Customised, promotional products

Promotional products are used by businesses to increase the profile of their services, products or events, and also to motivate staff within their own operations. The product range offered by 4imprint is extensive, from the basic, such as pens, bags and drinkware, through to higher priced items such as apparel, business gifts and full displays for trade shows. All are customised with the name and/or logo of the organisation doing the promotion. As of FY20, 4imprint had over 5,000 products that can be customised and shipped in less than 24 hours (order today, ship tomorrow) and over 600 exclusive lines. Overall, the group lists around 50,000 SKUs, taking into account different colourways, etc. The average order quantity is over 300 items. In FY21, the group handled around 1.4m orders (616k in H121, 815k H221) up from the 960k achieved in the hardest hit year, FY20, and at 90% of the level of 1.59m recorded in FY19. Average order value for FY21 was roughly $550.

Exhibit 1: Sample 4imprint products

Exhibit 2: Sample 4imprint apparel

Source: 4imprint

Source: 4imprint

Exhibit 1: Sample 4imprint products

Source: 4imprint

Exhibit 2: Sample 4imprint apparel

Source: 4imprint

The immediacy of the relationships with both customers and suppliers allows for trends to be quickly identified and addressed. 4imprint only carries a small amount of inventory, principally the own-branded Crossland apparel. The general method of working is on a ‘drop-ship’ basis, whereby the supplier holds the inventory, prints the product and ships it directly to the customer. This gives 4imprint the ability to offer a far higher number of product lines, without any of the associated stock risk. It does require a high degree of trust and co-operation between the group and its supplier base, which it cements through a collaborative/partnership-based approach and prompt payment. The closeness of these relationships held the group in good stead through the COVID-19 pandemic. A supplier operating at lower than usual levels will prefer to work with those they know and trust, in the knowledge that they will be paid, and on time.

At the half year-end in June 2021, 4imprint was holding $12.6m of finished goods and goods for resale (including goods in transit) compared with H121 revenues of $326.8m, up from $11.3m recorded at end FY20. This half-year figure is greater as a proportion of sales than the prior year (3.9% from 3.2%). In part, this reflects the increasing proportion of apparel in the mix (with the need to hold ‘blanks’ ahead of embroidery and finishing) but, in any case, we would regard this as a sensible approach to take given the challenges in supply chain and logistics. The need to ensure smooth fulfilment of customer orders is, if anything, heightened in the circumstances and could prove a competitive advantage.

Over FY20, some promotional product distributors switched their product bias with a move into unbranded PPE. 4imprint added some COVID-19 specific lines, such as hand sanitiser and branded face masks, but they were within the existing product sphere.

The top categories of product in 2021 will likely be updated with the final results but are likely to be broadly the same as those for FY20, below.

Exhibit 3: Top product categories 2020

Rank

Category

Rank

Category

1

Apparel

6

Technology

2

Bags

7

Outdoor and leisure

3

Drinkware

8

Trade show and signage

4

Writing

9

Auto, home and tools

5

Stationery

10

Wellness and safety

Source: 4imprint

While it is easy to envisage a high degree of automation with an online business model, part of the strength of the business is the management of the combination of digital and analogue. This applies both to the marketing and the operational side, where day-to-day activities involve a far higher element of handholding for customers for whom this type of buying is not central to their normal working practices. Customer service personnel talk to customers over the phone to guide them through the process, in normal times from the main office in Oshkosh, Wisconsin, but also over recent months remotely when required.

4imprint employs around 1,100 people, usually supplemented with temporary employees according to the demand cycle across the year. Around 650 (normally) work at the main office, with the balance employed at the distribution centre nearby, also in Oshkosh, Wisconsin. Over 300 are employed in a customer-facing capacity. At the height of the pandemic, the majority of office-based staff worked from home and, as conditions eased, the group adopted a hybrid working model marrying the benefits of flexibility for the workforce with increased efficiency. The distribution centre and embroidery facility was shut for several weeks in FY20, then reopened with reduced throughput and with social distancing, scaling back up as conditions allowed.

Within the main office, there are some specialist teams: one focused on inbound enquiries from Canada, including French speakers; an education team, focused on K-12, colleges and universities, and on licensing; federal, state and local government; Spanish speakers; and a small team specifically dealing with claims and credits. Supplier faults/errors and delivery issues are dealt with by this team and the overall rate of orders needing attention of this type runs at less than 2%.

Exhibit 4: Video of the distribution centre (click to play)

Source: 4imprint

The personal approach is a crucial element of the differentiation over an order from an online platform, such as Amazon. A team member taking an inbound call has access to that customer’s order history and digital artwork and can walk the customer through the options and process or talk through those with an inbound enquiry from a new potential customer, building the level of trust needed to drive longer-term, repeat business.

Having been based in Oshkosh since the early 1990s, 4imprint is a well-established local employer and cultivates its reputation as a preferred employer through offering benefits such as training, onsite medical and dental provision (company-funded), holiday pay and pensions. Staff retention is very good, with turnover in low single digits, with the company’s reputation enhanced locally by the way it treated its staff during the pandemic.

Orders are processed, customised, then despatched, mostly direct from the supplier. The large distribution facility is in an industrial zone on the outskirts of Oshkosh. An idea of the scale is shown in the video below.

The distribution centre has three key roles: ‘Blue Box’ marketing, sample pick and pack and embroidery to customise apparel and bags etc. 4imprint is well known for these Blue Boxes, which are a core element of the marketing, designed to drive customer retention. The contents of the boxes are tailored according to the relevant data, with catalogues and relevant samples enclosed.

Embroidered apparel is the area where 4imprint’s proportion of revenue is lower than the distributor market and is therefore an area of focus in driving the top line. It has a particularly high perceived value and is often used as an element of staff motivation, in addition to the promotional benefit. It obviously sells through at higher price points and boosts basket size. The embroidery side of 4imprint’s offering differs to its other products due to the degree of customisation that must be carried out before despatch. Management has evaluated the business and commercial dynamics of in-housing as opposed to external sourcing. The key issues swaying the argument to an internal solution principally surround scalability, product quality and speed. Unless these can all align, the risk to client satisfaction – and hence quality, repeat business – is too high. Bespoke digital printing is also carried out at the facility for display materials and where transfer printing is preferred or technically superior to embroidery for fabrics and bags. 4imprint has expanded its capacity here, adding three direct-to-garment printing presses.

The UK and Ireland business broadly replicates that in North America, but on a far smaller scale and without the embroidery facility.

Reactive and adaptive marketing drives the top line

4imprint has many years of experience honing what does and does not work when it comes to encouraging existing customers to buy and how to recruit new business customers. Management monitors marketing effectiveness through KPIs such as the number of customers acquired, and the percentage of those customers retained after 12 and after 24 months. The long-term trends for these metrics are shown in the exhibit below, which clearly shows the degree of disruption prompted by the pandemic. The recovery in customer acquisition was already apparent in Q221 and the Q3 trading update, while not citing numbers, referred to customer acquisition remaining strong.

The group uses a wide range of marketing techniques, including a residual element of ‘traditional’ printed catalogues, search engine marketing, email, quantitative analytics, Blue Box physical samples (used for customer retention) and, more recently, television and radio campaigns aimed at boosting brand awareness. The mix has changed in response to the altered trading landscape and is unlikely to revert to previous patterns, with direct mail now a smaller proportion of spend than online or brand support. Catalogue circulation in H121 was at 65% of FY19 levels, but, despite the seeming anachronism, these are likely to remain in the mix as they are still very effective in a B2B context and suit the nature of the businesses that form the core customer constituency, likely sitting on the desk of the targeted individual. Photographic work is carried out in studios at the head office, with models all drawn from the workforce. This has obvious cost benefits but also adds to the authenticity of the branding.

Exhibit 5: Customer acquisition and retention

Source: 4imprint

Linear TV was added to the marketing mix in FY18 to promote the group’s brand awareness rather than to directly drive sales, with results exceeding early expectations. It drives an increased proportion of direct traffic to the website, as opposed to traffic delivered via search/Google, and in inbound interest over the phone. Unprompted brand awareness was in double digits at the time of the interim results, while aided awareness increased by over 20% versus the summer of 2020.

The management of the marketing mix is sophisticated and is based on the data derived from each marketing exercise, which is fed back into the planning. This systemic management of the marketing effort is a vital part of the group’s IP and is key to how the group has been able to build its market share through understanding customers’ needs and buying patterns. This has been even more crucial over the last two years, when flexibility and speed of response have been paramount.

Investment in supplier relationships pays off

We look at the customer landscape in the section below, but it is easy to overlook the importance of the supplier relationships in the business model. 4imprint guards its corporate integrity closely and this extends to its supply chain. Ethical standards on employment and sourcing back through the chain are high and the potential reputational impact of any lowering or breach of these standards on either 4imprint or its clients is considerable. The group’s general approach is that of partnership. Given its industry positioning as market leader, it will tend to be the supplier’s largest customer, but it also endeavours to be a favoured customer through good communication and prompt payment. This attitude has stood the group in strong stead over recent periods, with complexities and delays with shipments from China and the intricacies of the logistics of distribution in North America. With a rapidly shifting product mix and a production environment with novel challenges, solid communication and trust have been essential. Where other distributors may be looking to stretch terms of trade and supply of goods may be constrained if the logistics have been more challenging, the element of trust may be the crucial deciding factor on who to deal with. Being paid on time also helps considerably.

Just as there is ongoing consolidation within the distributors, there has been a mirroring process happening within the supply base, with the bigger suppliers getting bigger and private equity funding having moved into the sector. This trend may well accelerate post pandemic, particularly if the smaller players lack the funding to support the necessary working capital. As 4imprint’s business has scaled up, it has had to manage its supplier relationships to continue to meet customer expectations on quality and on expedited delivery schedules. This has necessitated gravitating to suppliers also of greater scale, where key factors, such as regulatory requirements, product safety and documented provenance, are easier to manage.

There is a natural limit on supplier concentration, given the sheer number of SKUs being offered across the various catalogues and online. In general terms, management estimates that the 10 largest suppliers account for around half of the overall group volume. Roughly one-third (and growing) of the total supplier base supplies multiple product lines, a further third is supplying apparel and the balance have a particular product speciality.

There is a core team of senior merchandisers negotiating larger contracts and conducting social/ compliance audits, with around 25 further team members in support. Goods are designed and produced overseas and shipped to the US for decoration or else sourced domestically.

Supplier prices are normally published and set on an annual basis.

The promotional goods landscape

The size of the US promotional products market for FY21 was estimated at $23.2bn by the industry body ASI. This is a good increase from the $20.7bn estimated market size for FY20, but with this latter figure included around $6.0bn of unbranded PPE, which would not traditionally have been handled, making the recovery even more marked. Although the FY21 market total will also include an element of unbranded PPE, this is likely to represent a much smaller proportion than in the prior year.

Stripping out the unbranded PPE, management estimates that around one-third of the total market is accounted for by corporate programmes, namely contractual relationships with large corporations. Given the overall scale of the promotional products sector, 4imprint can afford to sidestep this corporate programme segment of the market, which would be significantly more capital intensive and contractual in nature. This leaves around two-thirds of the market truly addressable, allowing for considerable further growth before any market share constraints might emerge.

This is a competitive landscape (the other industry body, PPAI, estimates around 30k distributors), but the participants are predominantly small and locally active. Over the last few years, 4imprint’s growth has moved it up the relative ‘league table’ and in FY19 it had the largest sales of all US promotional product distributors, although still only accounted for below 3% of the estimated market.

Exhibit 6: 10-year record and FY21 and FY22 projection of industry, 4imprint and US GDP growth

Source: ASI, US CBO, Company accounts, Edison Investment Research

With the swing to PPE in the mix, and the retrenchment of more traditional categories, 4imprint lost its top slot in FY20 to HALO Branded Solutions (FY20 revenues: $765.7m, +3.6%, boosted by PPE and the prior year acquisition of Axis Promotions; owned by TPG Growth). Second largest by sales was Staples Promotional Products (privately owned), where FY20 revenues were estimated at $643.6m in 2019, although around 30% of this figure is understood to be PPE. Staples has a markedly different business model based on regional field salesforces travelling around the client pool. It is particularly heavily weighted to corporate programmes. Excluding PPE, its FY20 revenue would have been around $450m, below 4imprint’s $560m.

Proforma (FY20 sales: $538.5m) has a franchise-based business model based on printing, design and brand promotion, with a steep pivot to PPE at the height of the pandemic. BDA (FY20 sales: $477.4m, ex PPE $411m) has a strong franchise in licensed sports affiliated merchandise.

Altitude Group is not considered a direct competitor as it is a SaaS and platform business within the sector, as opposed to a distributor.

Amazon has often been cited as a potential threat to 4imprint’s business model. While Amazon is underestimated at any competitor’s peril, we do not believe it will take a significant proportion of this type of trade. As explained above, 4imprint’s operation involves a meaningful amount of interaction with the client to make sure that the design and specification are as required. For distributors selling through the Amazon Marketplace, the commission charged can vary from 15–25% of the sale price. As volumes are modest, due to the personalisation, this proposition is not likely to be that attractive to the core supplier base.

Management

CEO Kevin Lyons-Tarr has been with the business since 1991 and is based in Oshkosh, Wisconsin. He has performed a number of roles within the group, including CIO and COO, and became president of the direct marketing business in 2004. He was appointed as an executive director in 2012 and then CEO in March 2015. David Seekings, the group CFO (KPMG-trained), is also a long-standing employee, having joined as group financial controller in 1996. He moved from the UK to Oshkosh in 2000 to take up the role of CFO of 4imprint direct marketing and was appointed overall group CFO in March 2015, remaining in the US. They are both based (physically) at the centre of the principal office in Oshkosh from where the direct marketing is carried out.

Sensitivities

As has been highlighted by the recent experience, the key sensitivity for 4imprint is the health (or otherwise) of the economy, particularly that of corporate entities across North America. Its particular sweet spot is small and medium-sized commercial enterprises with between 20 and 500 employees. These firms are large enough to be considering marketing their organisations, but not so large as to have the capacity to source directly or be of sufficient scale to take out a corporate programme. As such, the normal economic cyclicality is limited, with some counter-cyclical elements as businesses may be more likely to drive differentiation and bolster their market positioning. The shifts in trading patterns over the pandemic were unprecedented and profound. The group’s strong balance sheet provided the management team with the comfort needed to preserve the integrity of the business, which has set it in good stead for recovery.

Supply chain issues. 4imprint’s suppliers source around 60% of their blank product from China. Repeated lockdowns and their knock-on effects on container shipping, with containers frequently stranded in the wrong place, is complicating the logistics of the operation and raising prices. 4imprints close and longstanding relationships with its supplier base should help mitigate the most egregious impacts.

Marketing efficacy. 4imprint has a strong record of translating its marketing spending into revenue growth through the application of data analysis to its various promotional advertising and marketing drivers. The range of options it uses – and its openness to try new approaches – should enable it to continue to focus its spend on the most effective methods.

Inflation. This is a more pressing issue, with higher pricing for the goods themselves, notably in the costs of shipment and logistics, and in higher labour costs given tight labour markets. The particular issues around container shipping availability and cost should resolve as global trade return to something closer to historic patterns. Labour cost inflation is likely to be more persistent.

Currency. Although the group earns 97% of its revenues in US dollars, it carries its head office costs, pension scheme commitments and pays its dividend in sterling. It reports in US dollars, so a stronger dollar has a positive impact and vice versa.

Competitive risks. As outlined above, there are both large national and localised and regional competitors. However, there are no other direct marketers in these product categories anywhere near the scale of 4imprint. With a focus on quality and service, the competitive risk from predatory pricing is relatively limited. The close and direct relationships to both customers and suppliers should enable the group to continue to have a good sense of market dynamics.

Supplier consolidation/concentration/reputational risks. 4imprint has been going through a process over recent years in migrating its supplier base upscale, with more coherent disciplines on sourcing, which should mitigate the reputational risks, although it would never be possible to eliminate these entirely.

Data security. While the US market is not subject to the GDPR, the reputational risks through any mishandling of data could be considerable and would undermine the relationship of trust that the group has built both with customers and suppliers.

Single site distribution. The bulk of 4imprint’s sales volume is shipped directly from the suppliers. For its own products and for the apparel/embroidery, the group operates from its large distribution centre on the edge of Oshkosh.

Dependence on courier services (UPS is the main courier used). Rising postal costs for catalogues have sometimes been an issue but are an unavoidable cost of business, borne by the client.

Tariffs. The Biden administration has retained the tariffs on Chinese goods that were imposed by his predecessor, despite some pressure from business on the grounds that they contribute to inflation. The categories of goods subject to tariffs is not necessarily logical or consistent. The impact was broadly managed between suppliers and distributors through changes in specifications and the factor is now effectively priced in.

For a long period, the group’s historical pension arrangements were material to the financial outcome. With the work done over previous periods to move the scheme’s liabilities off the balance sheet and the $9.14m one-off contribution made in H120, this no longer represents a particular sensitivity to the financial model. The plan is for the scheme to be funded at a level sufficient to facilitate a buyout within five years.

ESG considerations

4imprint has considered its corporate responsibility as a key facet of its ethos long before ESG became more general practice. It has now formalised its approach. In particular:

4imprint has achieved carbon neutrality in respect of greenhouse gas emissions at its operational facilities regarding Scope 1 and Scope 2, over a year ahead of its original target of December 2022.

The group has recently announced it will build a solar array of 2,600 panels at the main Osh-Kosh distribution centre site, for completion by August 2022. This should provide 40% of the location’s power requirement (included in the modelled capex number).

Good progress is being made on Scope 3 emissions – important given transport is a major component of the business model.

It has achieved external certification of its carbon-neutral status before the target date.

Product labelling on the website is being improved to enable customers to make informed choices about the environmental impact of their purchases.

Grants of $500 for promotional products have been awarded to 1,200 non-profit organisations under the group’s ‘one by one’ programme

Throughout the pandemic, the group prioritised worker retention and kept employees on the payroll, despite there being a period when the main office and the distribution centre were closed.

Recent non-executive appointments mean the group’s board of directors consists of two executive directors, namely the CEO and CFO, and six non-executive directors, of whom three are women. One of these newly appointed directors, Jaz Rabadia, is a chartered energy manager with over 14 years of experience in energy, recycling and sustainability roles. She is head of responsible business and sustainability at JustEat.

Valuation

For a company operating on a ‘mature’ basis, we would normally assess the valuation relative to other quoted businesses with similar operating models. We would then sense-check this valuation via a discounted cash flow analysis. The issue for 4imprint is that there are not any genuine quoted peers to measure it against. For context, therefore, we have looked at the multiples of other smaller/medium-sized marketing services companies and those of a smaller group of US B2B distributors, although they operate in different market segments with greatly differing dynamics.

Marketing service groups context

The UK small- and mid-cap marketing services groups self-evidently have business models substantially different from 4imprint and none have anything like the consistent performance record. They are nevertheless listed in the same sector and provide a particular backdrop.

Exhibit 7: Marketing service companies’ multiples

Price (p)

Perf ytd (%)

P/E last (x)

P/E 1FY (x)

P/E 2FY (x)

P/E 3FY (x)

Hist EV/ sales last (x)

EV/ EBITDA last (x)

EV/ EBITDA 1FY (x)

EV/ EBITDA 2FY (x)

EV/ EBITDA 3FY (x)

M&C Saatchi

180

7

137.4

23.1

19.6

16.5

1.0

9.9

6.4

5.3

5.3

The Mission Group

61.5

(3)

61.5

10.3

8.7

1.1

10.2

5.9

5.4

Kin + Carta

240

(18)

40.3

35.0

26.4

20.3

2.8

23.1

22.0

17.6

14.4

Next Fifteen Communications

1185

(12)

29.1

21.0

20.0

18.4

4.2

17.7

12.8

12.0

10.6

Altitude

30.5

17

2.7

 

 

 

The Pebble Group

112.5

(15)

38.0

28.9

26.1

20.3

2.4

20.6

14.0

12.2

10.3

Average

(4)

61.3

26.4

20.2

18.9

2.4

16.3

12.2

10.5

10.2

4imprint

2650

6

328.2

43.9

33.4

26.2

1.7

124.5

27.5

21.6

17.3

Source: Refinitiv, Edison Investment Research. Note: Prices at 21 February 2022.

4imprint has historically traded at a premium to these stocks, reflecting its financial record, strong balance sheet and high levels of cash conversion. 4imprint’s FY21 EBITDA margin of 4.5%, versus these marketing services companies at 15.8% is simply a reflection of its different business model as a distributor, with those peers shown in the table primarily ‘people’ businesses. Looking back to the same exercise before the onset of the pandemic in January 2019, the stock was trading at a FY1 P/E premium of 47%. Now the premium is 48%, so effectively unchanged relative to peers.

We have historically also looked at US-quoted distributors, but here the pool of relevant stocks is very limited – more so since Core-Mark, a distributor into the convenience food sector, was taken over by PFG for 0.15x historic revenues in summer FY21. Veritiv, a full-service B2B provider of packaging and hygiene products, trades on a FY22 P/E of 10.5x and EV/EBITDA of 6.0x.

DCF is a relevant valuation technique

Given the issues with the peer-based approach and given the group’s financial characteristics – particularly the element of repeat business and the management towards a maintained operating margin – a DCF is our preferred valuation technique.

In Exhibit 8, below, we show a range of terminal growth rates and WACCs, predicated on the projections contained in the financial summary in Exhibit 11. Beyond the explicit forecast period, the assumption is for revenue growth of 8%, which is below that achieved historically (FY11–19 CAGR 17.8%). Using a WACC of 8% and a terminal growth rate of 3%, and assuming that EBITDA margins are stable over FY24–31 at the 6.5% level (which is below the average of 6.9% achieved across FY11–19, just to be conservative), the implied valuation in sterling is £33.29, using an exchange rate of £1:$1.36. This represents a premium of 26% to the current share price.

Exhibit 8: DCF under varying terminal growth and WACC assumptions

WACC

Terminal growth rate

1.00%

2.00%

3.00%

4.00%

5.00%

12.00%

1640

1721

1820

1945

210

11.00%

1815

1921

2054

2226

2454

10.00%

2030

2172

2356

2601

2944

9.00%

2300

2497

2760

3129

3682

8.00%

2650

2933

3329

3923

4913

7.00%

3119

3545

4184

5249

7379

6.00%

3779

4467

5614

7907

14785

5.00%

4774

6006

8479

15890

-

Source: Edison Investment Research

Financials

The positive year-end trading update indicated that FY21 revenues were $787m, ahead of our earlier forecast of $775m. Post the H121 results, which showed revenues 23% ahead of the prior year, we had lifted our full-year revenue forecast to this level from $700m, having previously upgraded in March and then again in May as order counts recovered across the year.

Total order count for the year ended up at 90% of 2019 levels, implying a degree of moderation in H221 – to be expected, given there was bound to be an element of ‘catch-up’ as the US economy reopened. Order counts in May were at 82% of 2019 levels, 96% of 2019 levels for June, and 12% ahead by July. It is particularly encouraging that orders from new customers have been even higher, up 18% on July 2019.

With the positive momentum, we have also raised our FY22e revenue estimate to $900m (was $850m) and initiated forecasts for FY23e, where we are looking for $1bn, which was set before the pandemic as a strategic corporate goal.

We have modelled gross margin at 29% for FY22–23e, which is lower than the level achieved pre-pandemic, which tended to be around 32–33%, but this reflects the increasing proportion of apparel in the mix, as well as a degree of underlying inflation (although the impact of this is shared with the suppliers).

Earnings back in growth

Exhibit 9: Long-term revenue and EBITDA margin

Source: Company accounts, Edison Investment Research

Putting this into a longer-term context, our forecast revenue for FY22 now outstrips that generated in FY19 and growth looks set to resume.

Marketing spend is the largest component of operating cost, historically amounting to 17-18% of group revenue. This marketing spend was flexed to drive the top line while generating a relatively stable operating margin. This was in a range of 4.9% to 6.7% over FY11–19. We now envisage operating margin reverting to the lower end of this range in FY23e. We have taken a relatively cautious view on this front, given the strain in the economy from inflationary pricing pressure on goods and shipping and shortages in the labour market.

The company has until now separately identified the administration costs of the defined benefit pension scheme. Now that the legacy pension scheme funding is no longer a material issue (and indeed the scheme should be ‘buy-out’ ready by mid-2024), those costs are to be absorbed within general administration costs and the related interest charge will be absorbed within the interest line. We have made the requisite adjustments to our presentation of the figures and restated the historic figures in Exhibit 11 below.

Inherent strong cash flow

With the last couple of years having been so disrupted, it is helpful to look at the cash flow over a longer period, as shown below. This clearly shows how cash generative the underlying business is, with limited requirement for capital spend (although plans were obviously curtailed in FY20 and FY21 while the effects of the pandemic were most apparent). Before that, spend was focused on extending and increasing capacity at the distribution centre in Oshkosh, particularly on the embroidery capability. Strain on capacity at the main head office and call centre may be relieved as volumes step up again with the flexibility for some element of remote working, given the experience gained from forced work-from-home periods.

Exhibit 10: Long-term uses of cash FY12–21e

Source: Company accounts, Edison Investment Research

The exhibit above also highlights the effect of the legacy pension scheme. With that situation effectively now resolved, or at least considerably reduced in scale, more operational cash flow should be available for allocation elsewhere. Given the nature of the industry, M&A is not (generally) attractive, given the paucity of operators of scale – hence is comparatively low on the list of capital allocation priorities set out in the FY20 annual report:

Organic growth initiatives

Regular dividend payments

Residual legacy pension funding

M&A opportunities

Other shareholder distributions

Cash-rich balance sheet

The long-held strategy of maintaining a strong, cash-positive balance sheet proved its worth over the last couple of years, enabling management to take a longer-term view and maintaining the capacity to rebuild. There is no debt on the balance sheet bar the lease liabilities, which amounted to $12.7m at the half year. The group does have an undrawn, committed $20m line of credit available, should it be needed.

The cash figure quoted in the year-end trading update of $41.6m was a little lower than we had anticipated ($45.9m), but this is likely to reflect a higher proportion of apparel in the product mix and some management of working capital to cater for the friction in the supply chain. In theory, this latter factor should reverse in FY22.

Exhibit 11: Financial summary

$000s

2019

2020

2021e

2022e

2023e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

860,844

560,040

787,000

900,000

1,000,000

Cost of Sales

(585,543)

(402,100)

(558,126)

(639,000)

(710,000)

Gross Profit

275,301

157,940

228,874

261,000

290,000

EBITDA

 

 

57,904

8,905

35,304

45,004

56,104

Operating Profit (before amort. and except).

 

 

53,620

3,972

30,904

40,504

51,504

Intangible Amortisation

0

0

0

0

0

Operating Profit (after amort. and before except.)

 

 

53,620

3,972

30,904

40,504

51,504

Exceptionals

0

0

0

0

0

Impairment

0

0

0

0

0

Operating Profit

53,620

3,972

30,904

40,504

51,504

Net Interest

373

(129)

(504)

(504)

(504)

Profit Before Tax (norm)

 

 

53,993

3,843

30,400

40,000

51,000

Profit Before Tax (IFRS)

 

 

53,993

3,843

30,400

40,000

51,000

Tax

(11,276)

(753)

(7,214)

(9,600)

(12,158)

Profit After Tax (norm)

42,717

3,090

23,186

30,400

38,842

Profit After Tax (IFRS)

42,717

3,090

23,186

30,400

38,842

Discontinued businesses

0

0

0

0

0

Net income (norm)

 

 

42,717

3,090

23,186

30,400

38,842

Net income (IFRS)

 

 

42,717

3,090

23,186

30,400

38,842

Average Number of Shares Outstanding (m)

28.0

28.0

28.1

28.1

28.1

EPS - normalised (c)

 

 

152.4

11.0

82.3

108.3

138.1

EPS - (IFRS) (c)

 

 

152.4

11.0

82.3

108.3

138.1

Dividend per share (c)

84.0

0.0

45.0

60.0

80.0

Gross Margin (%)

32.0

28.2

29.1

29.0

29.0

EBITDA Margin (%)

6.7

1.6

4.5

5.0

5.6

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

6.2

0.7

3.9

4.5

5.2

BALANCE SHEET

Fixed Assets

 

 

31,844

43,269

41,104

38,964

36,824

Intangible Assets

0

0

0

0

0

Other intangible assets

1,152

1,100

1,100

1,100

1,100

Tangible Assets

24,369

24,832

24,032

23,232

22,432

Right of use assets

1,985

13,065

11,700

10,360

9,020

Deferred tax assets

4,338

4,272

4,272

4,272

4,272

Current Assets

 

 

105,631

89,812

116,228

129,664

147,988

Stocks

11,456

11,271

17,423

19,924

22,359

Debtors

53,039

38,775

57,213

65,428

73,425

Cash

41,136

39,766

41,592

44,312

52,204

Other

0

0

0

0

0

Current Liabilities

 

 

(60,839)

(51,118)

(67,898)

(77,487)

(85,973)

Creditors

(59,209)

(50,001)

(66,781)

(76,370)

(84,856)

Short term borrowings

0

0

0

0

0

Lease liabilities

(1,630)

(1,117)

(1,117)

(1,117)

(1,117)

Long Term Liabilities

 

 

(13,688)

(16,592)

(9,857)

(4,657)

544

Long term borrowings

0

0

0

0

0

Lease liabilities

(415)

(12,089)

(10,889)

(9,689)

(8,489)

Other long term liabilities

(13,273)

(4,503)

1,032

5,032

9,033

Net Assets

 

 

62,948

65,371

79,576

86,484

99,384

CASH FLOW

Operating Cash Flow

 

 

59,841

16,462

23,700

36,450

49,000

Net Interest

751

(13)

(504)

(504)

(504)

Tax

(10,318)

(507)

(7,296)

(9,600)

(12,203)

Capex

(8,178)

(3,724)

(3,600)

(3,700)

(3,800)

Acquisitions/disposals

0

0

0

0

0

Pension contributions

(3,593)

(13,278)

(4,100)

(4,000)

(4,000)

Financing

(2,567)

941

(800)

(800)

(800)

Dividends

(20,659)

0

(4,200)

(14,026)

(18,701)

Other

(1,687)

(1,418)

(1,100)

(1,100)

(1,100)

Net Cash Flow

13,590

(1,537)

2,100

2,720

7,892

Opening net debt/(cash)

 

 

(27,484)

(41,136)

(39,766)

(41,592)

(44,312)

Net impact of disposals etc

0

0

0

0

0

Other

62

167

(274)

0

0

Closing net debt/(cash)

 

 

(41,136)

(39,766)

(41,592)

(44,312)

(52,204)

Source: Company accounts, Edison Investment Research Note: Historic figures restated to reflect expensing of share option and defined benefit administration charges

Contact details

Revenue by geography

25 Southampton Buildings
London WC2A 1AL
UK
+ 44 (0)207 299 7201
www.4imprint.com

Contact details

25 Southampton Buildings
London WC2A 1AL
UK
+ 44 (0)207 299 7201
www.4imprint.com

Revenue by geography

Management team

CEO: Kevin Lyons-Tarr

CFO: David Seekings

Kevin joined the business in 1991, acting in various capacities including CIO and COO, before being appointed president of the direct marketing business in 2004. He was appointed as an executive director in 2012 and as CEO in March 2015.

David is a chartered accountant (KPMG) and joined 4imprint in 1996 as group financial controller. He relocated to the US in 2000 as CFO of the direct marketing business and was appointed as group CFO in 2015.

Non-exec chairman: Paul Moody

Paul joined the board in February 2016 and was appointed chairman in December the same year. He is also non-executive chairman of Card Factory. He spent 17 years at Britvic, the last eight as CEO.

Management team

CEO: Kevin Lyons-Tarr

Kevin joined the business in 1991, acting in various capacities including CIO and COO, before being appointed president of the direct marketing business in 2004. He was appointed as an executive director in 2012 and as CEO in March 2015.

CFO: David Seekings

David is a chartered accountant (KPMG) and joined 4imprint in 1996 as group financial controller. He relocated to the US in 2000 as CFO of the direct marketing business and was appointed as group CFO in 2015.

Non-exec chairman: Paul Moody

Paul joined the board in February 2016 and was appointed chairman in December the same year. He is also non-executive chairman of Card Factory. He spent 17 years at Britvic, the last eight as CEO.

Principal shareholders

(%)

BlackRock Inc

10.03

Montanaro Asset Management

7.60

Baillie Gifford

6.94

Majedie Asset Management

6.37

Mawer Investment Management

6.02

Aberdeen Standard

5.56

Fidelity Intl

4.19

Invesco Asset Management

3.26

Capital Group

3.08


General disclaimer and copyright

This report has been commissioned by 4imprint and prepared and issued by Edison, in consideration of a fee payable by 4imprint. 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 and prepared and issued by Edison, in consideration of a fee payable by 4imprint. 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