4imprint Group — Update 19 January 2017

4imprint Group (LSE: FOUR)

Last close As at 20/06/2024

GBP61.00

170.00 (2.87%)

Market capitalisation

GBP1,719m

More on this equity

Research: TMT

4imprint Group — Update 19 January 2017

4imprint Group

Fiona Orford-Williams

Written by

Fiona Orford-Williams

Director, TMT

TMT

4imprint Group

Premium growth continues

Trading update

Media

19 January 2017

Price

1,795p

Market cap

£504m

$1.23/£

Net cash ($m) at end FY16

21.5

Shares in issue

28.1m

Free float

88%

Code

FOUR

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

1.4

2.9

48.4

Rel (local)

(1.8)

(0.4)

20.2

52-week high/low

1,879p

1,140p

Business description

4imprint is the leading direct marketer of promotional products in the US, Canada, the UK and Ireland. 96% of 2015 revenues were generated in the US and Canada.

Next events

Full year results

8 March 2017

Analysts

Fiona Orford-Williams

+44 (0)20 3077 5739

Bridie Barrett

+44 (0)20 3077 5700

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
end

Revenue ($m)

PBT*
($m)

EPS*
(c)

DPS
(c)

P/E
(x)

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

Investments

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

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt and Sydney. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by 4imprint Group and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “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.

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, 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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt and Sydney. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by 4imprint Group and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “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.

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, 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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

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