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Research: TMT
4imprint Group
4imprint Group |
Premium growth continues |
Trading update |
Media |
19 January 2017 |
Share price performance
Business description
Next events
Analysts
4imprint Group is a research client of Edison Investment Research Limited |
4imprint continues to deliver premium growth as it builds market share across its large and fragmented market, estimated to be worth around $25bn. The group’s data-driven marketing investment approach and efficient fulfilment are supporting this profitable (and organically scalable) growth, while the strong cash generation has allowed the historic pension issues to be fully addressed with a one-off contribution of $14.5m in the period. The group ended the year with net cash of $21.5m, up from $18.4m at end FY15. With our 35% forecast increase in the FY16 dividend (in line with the interim), the valuation premium continues to look well supported.
Year |
Revenue ($m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/14 |
415.8 |
27.9 |
71.5 |
32.4 |
30.9 |
1.5 |
12/15 |
497.2 |
33.5 |
87.5 |
38.9 |
25.2 |
1.8 |
12/16e |
560.0 |
37.7 |
94.6 |
52.5 |
23.3 |
2.4 |
12/17e |
616.0 |
41.6 |
104.6 |
57.5 |
21.1 |
2.6 |
12/18e |
662.0 |
45.0 |
113.1 |
62.5 |
19.5 |
2.8 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
FY16 PBT top end of market range
FY16 revenue growth at $558.2m (Edison forecast $560m) was ahead 13% like-for-like (adjusted for a 53-week year in 2015), despite the offset from translating the UK results into the US$ accounting currency. This progress stems from 4imprint’s investments in data-driven marketing and in operational efficiency, helping it to win market share from smaller and more localised distributors. Underlying FY16 PBT will be at the high end of the market range of £37.5-38.4m (Edison forecast £37.7m). We have maintained our 2017 numbers for now (+10% revenue growth) and made our first tentative projections into FY18, based on a slight slowing of the top-line growth rate from 10% in FY17 to 7.5% (OECD forecast for US GDP growth for 2018 is currently 5.48%).
Strong cash performance
The progress translates to a strong cash performance, where the estimated year-end net cash of $21.5m is despite the one-off pension contribution of $14.5m made in H116 on top of the normal capex and pension contributions. Now that the pension position has been ‘normalised’, capital allocation constraints on that front have been lifted and returning cash to shareholders has gained greater prominence. The interim dividend was raised by 35% and we are assuming that there will be a similar uplift in the final payment.
Valuation: Justified premium rating
While on a P/E and an EV/EBITDA basis 4imprint trades ahead of the smaller UK-based marketing services sector (FY16e P/E of 23.3x vs 11.3x; 15.0x EV/EBITDA vs 7.5x), these stocks have little in common in terms of business model or geography. There are no direct quoted peers in either the UK or the US. The premium rating reflects the further growth opportunity and management’s record in delivering on its ambitions, including consistent high growth in earnings per share.
Exhibit 1: Financial summary
$000s |
2013 |
2014 |
2015 |
2016e |
2017e |
2018e |
|||
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
|||
PROFIT & LOSS |
|||||||||
Revenue |
|
|
332,936 |
415,773 |
497,219 |
560,000 |
616,000 |
662,000 |
|
Cost of Sales |
(223,915) |
(278,564) |
(334,622) |
(376,886) |
(414,264) |
(445,538) |
|||
Gross Profit |
109,021 |
137,210 |
162,598 |
183,114 |
201,736 |
216,462 |
|||
EBITDA |
|
|
21,490 |
29,460 |
35,478 |
39,716 |
44,185 |
47,658 |
|
Operating Profit (before amort and except) |
19,494 |
27,759 |
33,519 |
37,616 |
41,587 |
44,958 |
|||
Operating Profit |
14,530 |
23,239 |
31,127 |
32,146 |
39,917 |
43,288 |
|||
Net Interest |
61 |
100 |
30 |
34 |
38 |
42 |
|||
Net pension finance charge |
0 |
0 |
0 |
0 |
0 |
0 |
|||
Profit Before Tax (norm) |
|
|
19,555 |
27,859 |
33,549 |
37,650 |
41,625 |
45,000 |
|
Profit Before Tax (FRS 3) |
|
|
14,472 |
23,339 |
31,157 |
32,180 |
39,955 |
43,330 |
|
Tax |
(3,857) |
(6,982) |
(8,462) |
(9,654) |
(11,986) |
(12,999) |
|||
Profit After Tax (norm) |
15,698 |
20,877 |
25,087 |
27,996 |
29,639 |
32,001 |
|||
Profit After Tax (FRS 3) |
10,615 |
16,357 |
22,695 |
22,526 |
27,969 |
30,331 |
|||
Discontinued businesses |
0 |
0 |
0 |
0 |
0 |
0 |
|||
Net income (norm) |
|
|
14,701 |
20,121 |
24,587 |
26,731 |
29,554 |
31,950 |
|
Net income (IFRS) |
|
|
10,615 |
16,357 |
22,695 |
22,526 |
27,967 |
30,331 |
|
Average Number of Shares Outstanding (m) |
26.5 |
27.4 |
27.9 |
28.1 |
28.1 |
28.1 |
|||
EPS - normalised fully diluted (c) |
|
|
52.8 |
71.5 |
87.5 |
94.6 |
104.6 |
113.1 |
|
EPS - (IFRS) (c) |
|
|
40.1 |
59.7 |
81.3 |
80.2 |
99.6 |
108.0 |
|
Dividend per share (c) |
27.7 |
32.4 |
38.9 |
52.5 |
57.5 |
62.5 |
|||
Gross Margin (%) |
32.7 |
33.0 |
32.7 |
32.7 |
32.7 |
32.7 |
|||
EBITDA Margin (%) |
6.5 |
7.1 |
7.1 |
7.1 |
7.2 |
7.2 |
|||
Operating Margin (before GW and except.) (%) |
5.9 |
6.7 |
6.7 |
6.7 |
6.8 |
6.8 |
|||
BALANCE SHEET |
|||||||||
Fixed Assets |
|
|
16,476 |
15,197 |
23,753 |
25,253 |
26,253 |
27,153 |
|
Intangible Assets |
0 |
0 |
0 |
0 |
0 |
0 |
|||
Other intangible assets |
1,349 |
1,298 |
1,211 |
1,211 |
1,211 |
1,211 |
|||
Tangible Assets |
8,803 |
9,105 |
18,154 |
19,654 |
20,654 |
21,554 |
|||
|
0 |
0 |
0 |
0 |
0 |
0 |
|||
Deferred tax assets |
6,324 |
4,794 |
4,388 |
4,388 |
4,388 |
4,388 |
|||
Current Assets |
|
|
73,605 |
59,464 |
66,035 |
73,561 |
90,772 |
106,439 |
|
Stocks |
3,686 |
4,353 |
4,460 |
4,872 |
5,252 |
5,645 |
|||
Debtors |
30,105 |
36,810 |
43,194 |
47,188 |
50,869 |
54,394 |
|||
Cash |
25,990 |
18,301 |
18,381 |
21,500 |
34,650 |
46,400 |
|||
Other |
13,824 |
0 |
0 |
0 |
0 |
0 |
|||
Current Liabilities |
|
|
(29,931) |
(36,278) |
(38,222) |
(43,636) |
(48,960) |
(52,616) |
|
Creditors |
(29,931) |
(36,049) |
(37,254) |
(43,636) |
(48,960) |
(52,616) |
|||
Short term borrowings |
0 |
0 |
0 |
0 |
0 |
0 |
|||
Long Term Liabilities |
|
|
(27,398) |
(24,015) |
(23,114) |
(13,455) |
(13,455) |
(13,455) |
|
Long term borrowings |
0 |
0 |
0 |
0 |
0 |
0 |
|||
Other long term liabilities |
(27,398) |
(24,015) |
(23,114) |
(13,455) |
(13,455) |
(13,455) |
|||
Net Assets |
|
|
32,752 |
14,368 |
28,452 |
41,723 |
54,610 |
67,521 |
|
CASH FLOW |
|||||||||
Operating Cash Flow |
|
|
22,879 |
27,230 |
30,622 |
45,368 |
45,750 |
46,700 |
|
Net Interest |
86 |
120 |
30 |
34 |
38 |
42 |
|||
Tax |
(2,714) |
(6,187) |
(8,730) |
(9,451) |
(11,299) |
(12,316) |
|||
Capex |
(2,028) |
(2,092) |
(10,912) |
(3,100) |
(3,100) |
(3,100) |
|||
Acquisitions/disposals |
1,484 |
9,717 |
0 |
0 |
0 |
0 |
|||
Pension contributions |
(4,966) |
(26,544) |
(825) |
(17,000) |
(3,000) |
(3,000) |
|||
Financing |
122 |
(1,316) |
0 |
0 |
0 |
0 |
|||
Dividends |
(6,558) |
(7,924) |
(9,604) |
(12,132) |
(15,208) |
(16,613) |
|||
Other |
(113) |
(689) |
(501) |
(600) |
0 |
0 |
|||
Net Cash Flow |
8,192 |
(7,685) |
80 |
3,119 |
13,181 |
11,714 |
|||
Opening net debt/(cash) |
|
|
(17,251) |
(25,990) |
(18,301) |
(18,381) |
(21,500) |
(34,650) |
|
Net impact of disposals etc |
0 |
0 |
0 |
0 |
0 |
0 |
|||
Other |
547 |
(4) |
0 |
0 |
(31) |
36 |
|||
Closing net debt/(cash) |
|
|
(25,990) |
(18,301) |
(18,381) |
(21,500) |
(34,650) |
(46,400) |
Source: Company accounts, Edison Investment Research
|
|
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