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Research: TMT
4imprint’s trading update indicates that order intake in Q4 was a little better than we had anticipated. Unaudited FY20 revenue was reported at c $560m, or 5% above our prior forecast. We remain circumspect around trading prospects for FY21, given the impact of the pandemic on corporate America and leave our forecast unchanged for now. The indicated year-end net cash balance at $39.8m (excluding lease debt) was well ahead of our projected figure ($22.5m in our modelling), and close to the $40.1m reported in October, implying that cash collections have held up strongly. We continue to view 4imprint as a high-quality investment proposition.
4imprint Group |
Better Q4 order intake |
Year-end trading update |
Media |
21 January 2021 |
Share price performance
Business description
Next events
Analyst
4imprint Group is a research client of Edison Investment Research Limited |
4imprint’s trading update indicates that order intake in Q4 was a little better than we had anticipated. Unaudited FY20 revenue was reported at c $560m, or 5% above our prior forecast. We remain circumspect around trading prospects for FY21, given the impact of the pandemic on corporate America and leave our forecast unchanged for now. The indicated year-end net cash balance at $39.8m (excluding lease debt) was well ahead of our projected figure ($22.5m in our modelling), and close to the $40.1m reported in October, implying that cash collections have held up strongly. We continue to view 4imprint as a high-quality investment proposition.
Year end |
Revenue ($m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/18 |
738.4 |
46.1 |
129.4 |
70.0 |
23.3 |
2.3 |
12/19 |
860.8 |
55.6 |
157.2 |
84.0** |
19.2 |
2.8 |
12/20e |
535.0 |
0.5 |
0.3 |
0.0 |
N/A |
0.0 |
12/21e |
600.0 |
15.0 |
40.6 |
20.0 |
74.4 |
0.7 |
Note: *PBT and EPS are normalised, excluding exceptional items. **84c declared, 25c paid. FY20e do not reflect the trading update
FY20 indicated results slightly outstrip forecasts
Q4 order levels were at around 70% of the prior year, compared to the 65% we had factored into our modelling, resulting in a revenue figure 5% ahead of our estimate. Underlying PBT is expected to be in line with management expectations. The extent of outperformance will also depend on the order mix, particularly with respect to apparel. Many occasions that give rise for the requirement for promotional goods – such as conferences and trade fairs – are currently in abeyance, varying by the extent of lockdown state by state. It may be the case that the boost to Q4 orders is from employers looking to reward loyal customers or improve staff morale. We will update on publication of the full year results in March Given the extent of the continuing uncertainty, we prefer to leave our FY21e projection as is until that time, when the outlook may be clearer.
Very strong cash performance
The indicated year-end net cash figure of $39.8m is well ahead of our projection. This will be partly due to the stronger trading, but also implies that there has been good control of working capital. This additional cash resource will be available for deployment towards the targeted marketing programmes as economic conditions gradually become more encouraging. The timing, however, remains very uncertain.
Valuation: Mix of strong fundamentals and unknowns
With continuing uncertainty regarding how and at what speed the US economy will continue to recover, our earnings forecasts remain tentative and valuation judgements based on them are subjective. 4imprint has a market-leading position, a low fixed-cost base and limited capital requirements, attractive cash flow characteristics and a cash positive balance sheet, all of which justify its premium rating. 4imprint trades on an FY19 EV/EBITDA of c 14x, compared to marketing services stocks on 9.5x.
Exhibit 1: Financial summary
$000s |
2018 |
2019 |
*2020e |
2021e |
||
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||
Revenue |
|
|
738,418 |
860,844 |
535,000 |
600,000 |
Cost of Sales |
(500,531) |
(585,543) |
(379,437) |
(410,813) |
||
Gross Profit |
237,887 |
275,301 |
155,564 |
189,187 |
||
EBITDA |
|
|
48,507 |
59,144 |
3,875 |
18,775 |
Operating Profit (before amort. and except). |
|
|
45,862 |
54,860 |
475 |
14,975 |
Intangible Amortisation |
0 |
0 |
0 |
0 |
||
Operating Profit (after amort. and before except.) |
|
|
45,862 |
54,860 |
475 |
14,975 |
Operating Profit |
44,322 |
53,620 |
(625) |
13,775 |
||
Net Interest |
227 |
751 |
25 |
25 |
||
Net pension finance charge |
(403) |
(378) |
(378) |
(378) |
||
Profit Before Tax (norm) |
|
|
46,089 |
55,611 |
500 |
15,000 |
Profit Before Tax (IFRS) |
|
|
44,146 |
53,993 |
(578) |
13,822 |
Tax |
(8,952) |
(11,276) |
(21) |
(2,865) |
||
Profit After Tax (norm) |
36,734 |
44,335 |
79 |
11,735 |
||
Profit After Tax (IFRS) |
35,194 |
42,717 |
(599) |
10,957 |
||
Discontinued businesses |
(100) |
0 |
0 |
0 |
||
Net income (norm) |
|
|
36,360 |
44,203 |
78 |
11,388 |
Net income (IFRS) |
|
|
35,094 |
42,717 |
(1,399) |
10,157 |
Average Number of Shares Outstanding (m) |
28.0 |
28.0 |
28.0 |
28.0 |
||
EPS - normalised (c) |
|
|
129.4 |
157.2 |
0.3 |
40.6 |
EPS - (IFRS) (c) |
|
|
125.6 |
152.4 |
(2.1) |
39.1 |
Dividend per share (c) |
70.0 |
84.0 |
0.0 |
20.0 |
||
Gross Margin (%) |
32.2 |
32.0 |
29.1 |
31.5 |
||
EBITDA Margin (%) |
6.6 |
6.9 |
0.7 |
3.1 |
||
Operating Margin (before GW and except.) (%) |
6.2 |
6.4 |
0.1 |
2.5 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
25,732 |
31,844 |
30,577 |
30,077 |
Intangible Assets |
0 |
0 |
0 |
0 |
||
Other intangible assets |
1,084 |
1,152 |
1,152 |
1,152 |
||
Tangible Assets |
19,012 |
24,369 |
24,687 |
24,587 |
||
Right of use assets |
0 |
1,985 |
400 |
0 |
||
Deferred tax assets |
5,636 |
4,338 |
4,338 |
4,338 |
||
Current Assets |
|
|
84,234 |
105,631 |
61,690 |
70,653 |
Stocks |
9,878 |
11,456 |
7,476 |
8,384 |
||
Debtors |
46,872 |
53,039 |
31,315 |
35,119 |
||
Cash |
27,484 |
41,136 |
22,900 |
27,150 |
||
Other |
0 |
0 |
0 |
0 |
||
Current Liabilities |
|
|
(50,752) |
(60,839) |
(39,957) |
(44,363) |
Creditors |
(50,752) |
(59,209) |
(39,557) |
(44,363) |
||
Short term / lease borrowings |
0 |
(1,630) |
(400) |
0 |
||
Long Term Liabilities |
|
|
(15,947) |
(13,688) |
(1,348) |
(968) |
Long term borrowings |
0 |
(415) |
0 |
0 |
||
Other long-term liabilities (including pension) |
(15,947) |
(13,273) |
(1,348) |
(968) |
||
Net Assets |
|
|
43,267 |
62,948 |
50,962 |
55,399 |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
45,583 |
57,796 |
600 |
20,700 |
Net Interest |
227 |
751 |
25 |
25 |
||
Tax |
(7,844) |
(10,318) |
(141) |
(3,212) |
||
Capex |
(2,855) |
(8,178) |
(3,718) |
(3,700) |
||
Acquisitions/disposals |
0 |
0 |
0 |
0 |
||
Pension contributions |
(3,932) |
(3,593) |
(12,700) |
(3,500) |
||
Financing |
(465) |
(2,567) |
900 |
(2,200) |
||
Dividends |
(32,984) |
(20,659) |
0 |
(1,853) |
||
Other |
0 |
(1,687) |
(1,622) |
(1,622) |
||
Net Cash Flow |
(2,270) |
11,545 |
(16,656) |
4,638 |
||
Opening net debt/(cash) |
|
|
(30,767) |
(27,484) |
(39,091) |
**(22,500) |
Net impact of disposals etc |
0 |
0 |
0 |
0 |
||
Other |
(1,013) |
62 |
65 |
12 |
||
Closing net debt/(cash) |
|
|
(27,484) |
(39,091) |
(22,500) |
**(27,150) |
Source: Company accounts, Edison Investment Research; *FY20 estimates have not been adjusted for the FY20 trading update; **Opening and ending FY21e net cash balance estimates are not to be relied upon given the January 2021 trading statement’s reporting of a 2020 year‐end unaudited net cash figure of $39.8m
|
|
Research: Consumer
Evolva is starting FY21 with the launch of a new product, L-arabinose (previously known as EVE-X157/Z4). It is a natural sugar blocker and reducing sugar used in health ingredients and flavours and fragrances. It is fully renewable, sustainable and made by fermentation. The product is already FEMA GRAS-approved for use in food and beverages and has a wide range of applications. Evolva estimates the current market for the product at CHF250m. Commercial discussions with major customers are ongoing and Evolva expects to supply its first volumes in FY21. The launch of this new product shows the breadth of Evolva’s offering and the strength of its pipeline. As a reminder, our model assumes no contribution from L-arabinose.
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