4imprint Group — US growth promoters

4imprint Group (LSE: FOUR)

Last close As at 27/03/2024

GBP63.40

60.00 (0.96%)

Market capitalisation

GBP1,770m

More on this equity

Research: TMT

4imprint Group — US growth promoters

4imprint’s results show continued strong progress, with FY18 revenues up 18% on the prior year, coming in just ahead of our forecasts. The growth was supported by additional brand awareness spend, with revenue per marketing dollar holding up very well at $5.63 (FY17: $5.67). The group continues to be well placed to carry on growing its market share in the substantial and fragmented promotional goods sector, on margins that should edge ahead. Our FY19 revenue forecast is lifted 2%, with a slightly lower increase in earnings reflecting further brand support marketing. The group has strong cash conversion (100%) and a cash rich balance sheet. We consider that there is further potential upside to the share price.

Fiona Orford-Williams

Written by

Fiona Orford-Williams

Director, TMT

TMT

4imprint Group

US growth promoters

Full-year results

Media

5 March 2019

Price

2035p

Market cap

£572m

$1.32/£

Net cash ($m) as at 31 December 2018

27.5

Shares in issue

28.1m

Free float

97.5%

Code

FOUR

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

3.8

1.5

9.7

Rel (local)

2.1

(0.8)

9.0

52-week high/low

2,260p

1,575p

Business description

4imprint is the leading direct marketer of promotional products in the US, Canada, the UK and Ireland. 97% of 2018 revenues were generated in the US and Canada.

Next events

AGM

Early May 2019

Half-year report

Late July/early August

Analysts

Fiona Orford-Williams

+44 (0)20 3077 5739

Russell Pointon

+44 (0)20 3077 5700

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

4imprint’s results show continued strong progress, with FY18 revenues up 18% on the prior year, coming in just ahead of our forecasts. The growth was supported by additional brand awareness spend, with revenue per marketing dollar holding up very well at $5.63 (FY17: $5.67). The group continues to be well placed to carry on growing its market share in the substantial and fragmented promotional goods sector, on margins that should edge ahead. Our FY19 revenue forecast is lifted 2%, with a slightly lower increase in earnings reflecting further brand support marketing. The group has strong cash conversion (100%) and a cash rich balance sheet. We consider that there is further potential upside to the share price.

Year end

Revenue ($m)

PBT*
($m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/17

627.5

42.5

107.7

58.1

24.9

2.2

12/18

738.4

46.4

132.3

70.0

20.3

2.6

12/19e

812.3

52.6

147.0

80.0

18.3

3.0

12/20e

877.3

57.4

159.5

87.5

16.8

3.3

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

Driving growth through data-driven marketing

We published a detailed report in January and these results confirm our perception that the strategy of recruiting and retaining customers through a range of data-driven marketing techniques is capable of delivering growth well ahead of the market (which is estimated by management to be growing at 5.0%). There were 1.389m customer orders processed in the year, up 17%. The group is comfortably on track to meet the self-imposed objective of hitting $1bn of revenue by FY22. The brand awareness campaign has increased both direct and search traffic to the website and will form an ongoing part of the marketing mix. We have incorporated this into our modelled operating margin. Our FY19 and FY20 PBT and EPS forecasts are lifted 1% at this early stage of the year, which has reportedly started well.

Plenty of cash to invest for the next stage

The pace of growth – in particular the successful build of the apparel offering – has meant that additional capacity at the main Oshkosh distribution centre, put in three years ago to cater for the next five years, now needs to be extended again. $5m of capex has been allocated for this project in the current year (H1). Despite this, and a progressive dividend (up 20% for FY18), our model shows net cash (there is no debt) building to $38.1m by the year-end and to $55.1m by the end of FY20e.

Valuation: Continued positive trading momentum

The group trades at a premium to quoted UK marketing services groups, but there is little in common with this group operationally. 4imprint’s long, positive trading record, cash conversion and progressive dividend also single it out. A DCF on our numbers indicates further potential upside, suggesting a value of £23.26 (on a WACC of 9% and terminal growth of 3.0%), from £22.87 at the time of our last note.

Exhibit 1: Financial summary

$000s

2016

2017

2018

2019e

2020e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

558,223

627,518

738,418

812,250

877,250

Cost of Sales

(374,137)

(422,299)

(502,230)

(550,503)

(591,582)

Gross Profit

184,087

205,219

236,188

261,747

285,667

EBITDA

 

 

40,766

45,092

48,823

55,723

60,504

Operating Profit (before amort. and except).

38,377

42,580

46,178

52,378

57,159

Intangible Amortisation

(499)

(464)

(445)

(445)

(445)

Operating Profit (after amort. and before except.)

37,878

42,116

45,733

51,933

56,714

Operating Profit

34,696

41,284

44,341

51,033

55,814

Net Interest

(24)

(122)

227

247

261

Net pension finance charge

(521)

(503)

(403)

(403)

(403)

Profit Before Tax (norm)

 

 

38,353

42,458

46,405

52,625

57,420

Profit Before Tax (IFRS)

 

 

34,151

40,659

44,165

50,877

55,672

Tax

(9,672)

(11,734)

(8,956)

(10,913)

(12,248)

Profit After Tax (norm)

28,681

30,724

37,449

41,712

45,172

Profit After Tax (IFRS)

24,479

28,925

35,209

39,964

43,424

Discontinued businesses

0

0

0

0

0

Net income (norm)

 

 

27,773

30,291

37,175

41,337

44,787

Net income (IFRS)

 

 

24,479

28,925

35,209

39,964

43,424

Average Number of Shares Outstanding (m)

28.1

28.0

28.0

28.0

28.0

EPS - normalised (c)

 

 

98.7

107.7

132.3

147.0

159.5

EPS - (IFRS) (c)

 

 

87.3

103.1

125.7

142.5

155.0

Dividend per share (c)

52.5

58.1

70.0

80.0

87.5

Gross Margin (%)

33.0

32.7

32.0

32.2

32.6

EBITDA Margin (%)

7.3

7.2

6.6

6.9

6.9

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

6.9

6.8

6.3

6.4

6.5

BALANCE SHEET

Fixed Assets

 

 

25,050

25,879

25,732

31,532

32,232

Intangible Assets

0

0

0

0

0

Other intangible assets

1,082

1,138

1,084

1,084

1,084

Tangible Assets

18,938

18,829

19,012

24,812

25,512

Investments

0

0

0

0

0

Deferred tax assets

5,030

5,912

5,636

5,636

5,636

Current Assets

 

 

65,662

82,831

84,234

100,750

122,985

Stocks

4,179

7,940

9,878

11,083

12,209

Debtors

39,800

44,124

46,872

51,559

55,684

Cash

21,683

30,767

27,484

38,108

55,091

Other

0

0

0

0

0

Current Liabilities

 

 

(40,363)

(49,024)

(50,752)

(55,827)

(60,294)

Creditors

(40,363)

(48,878)

(50,752)

(55,827)

(60,294)

Short term borrowings

0

0

0

0

0

Long Term Liabilities

 

 

(21,024)

(18,604)

(15,947)

(13,037)

(10,037)

Long term borrowings

0

0

0

0

0

Other long term liabilities (including pension)

(21,024)

(18,604)

(15,947)

(13,037)

(10,037)

Net Assets

 

 

29,325

41,082

43,267

63,418

84,886

CASH FLOW

Operating Cash Flow

 

 

46,804

44,576

45,583

56,418

60,080

Net Interest

(23)

(122)

227

247

261

Tax

(9,423)

(12,751)

(7,844)

(11,288)

(12,632)

Capex

(3,267)

(2,359)

(2,855)

(8,700)

(3,600)

Acquisitions/disposals

0

0

0

0

0

Pension contributions

(17,354)

(3,675)

(3,932)

(3,500)

(3,500)

Financing

(270)

(1,359)

(465)

(2,000)

(500)

Dividends

(12,141)

(15,845)

(32,984)

(20,553)

(23,126)

Other

0

0

0

0

0

Net Cash Flow

4,326

8,465

(2,270)

10,624

16,983

Opening net debt/(cash)

 

 

(18,381)

(21,683)

(30,767)

(27,484)

(38,108)

Net impact of disposals etc

0

0

0

0

0

Other

(1,024)

619

(1,013)

(0)

0

Closing net debt/(cash)

 

 

(21,683)

(30,767)

(27,484)

(38,108)

(55,091)

Source: 4imprint Group 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 £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 Edison analyst 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 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). 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

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

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 (nor will such persons be able to purchase shares in the placing).

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

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. 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

1,185 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

1,185 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

More on 4imprint Group

View All

Latest from the TMT sector

View All TMT content

Research: Investment Companies

BlackRock Latin American IT — New experienced lead managers

BlackRock Latin American Investment Trust (BRLA) has two experienced new co-managers, Ed Kuczma and Sam Vecht, who are part of BlackRock’s well-resourced global emerging markets equities team and were appointed to manage BRLA in December 2018, following the resignation of former lead manager Will Landers. Kuczma had worked closely with Landers for a number of years and says the transition should be smooth. The managers are constructive on the outlook for Latin American equities in 2019, following a series of headwinds in 2018, citing improving economies, attractive valuations and a more benign political environment. BRLA’s board adopted a new, higher dividend policy in FY18. The trust yields 4.0% based on three interim payments during the last financial year; the total distribution should rise in FY19 based on four quarterly dividend payments.

Continue Reading

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free