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Currency in GBP
Last close As at 02/06/2023
GBP47.00
▲ 95.00 (2.06%)
Market capitalisation
GBP1,320m
Research: TMT
4imprint’s trading update shows the spring 2018 brand marketing campaign continuing to generate supplementary revenues, as was the case at the interims. We have again edged our forecasts ahead (around 1% at both the revenue and earnings levels), to the higher end of the previous range of market estimates. There is still a substantial opportunity to exploit, given the market size (estimated by ASI at US$23.6bn) and the group’s leading position. While the group trades at a premium to the UK marketing sector, the drift in the share price has made the valuation more attractive, particularly on a DCF basis. The group remains highly cash-generative, with funding growth and a progressive dividend.
4imprint Group |
Branding awareness |
Trading update |
Media |
1 November 2018 |
Share price performance
Business description
Next events
Analysts
4imprint Group is a research client of Edison Investment Research Limited |
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4imprint’s trading update shows the spring 2018 brand marketing campaign continuing to generate supplementary revenues, as was the case at the interims. We have again edged our forecasts ahead (around 1% at both the revenue and earnings levels), to the higher end of the previous range of market estimates. There is still a substantial opportunity to exploit, given the market size (estimated by ASI at US$23.6bn) and the group’s leading position. While the group trades at a premium to the UK marketing sector, the drift in the share price has made the valuation more attractive. The group remains highly cash-generative, with funding growth and a progressive dividend.
Year end |
Revenue ($m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/16 |
558.2 |
38.4 |
98.7 |
52.5 |
23.5 |
2.3 |
12/17 |
627.5 |
42.5 |
107.7 |
58.1 |
21.5 |
2.5 |
12/18e |
725.0 |
45.1 |
126.9 |
65.0 |
18.3 |
2.8 |
12/19e |
797.5 |
52.3 |
147.0 |
80.0 |
15.8 |
3.5 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Marketing driving upgrades
The marketing campaign was designed to improve awareness, moving the brand ‘front-of-mind’ within the target audience. The use of traditional media to achieve this aim was initially regarded with some scepticism, but it has been more successful than expected, with momentum rolling into H218 from both new customers and in stimulating return visits from existing customers. Management indicates that the $7m allocated for FY18 will all be spent, given the returns achieved. In March 2018, when the project was announced, we were forecasting FY18 revenues of $692m and PBT of $42.5m. These were raised in May and again in July with the interims.
$1bn revenue target by FY22
To achieve management’s ambition of US$1bn of revenue in FY22, top-line growth beyond our published forecast period would need to be at a CAGR of 7.9%. From FY11 to FY17, the group grew its top line by 18.1% CAGR. We have slightly more circumspect growth assumptions in our modelling, but the CAGR from FY11 through FY19e is nevertheless 16.7%. The growth target therefore looks eminently achievable, given the group’s market share of around 3.0%.
Valuation: A drift too far
The share price is down around 20% from its peak, hit in early September. While 4imprint continues to trade at a healthy premium to the UK small-/mid-cap marketing service companies (which are currently valued at a FY18e EV/EBITDA of 7.6x and a P/E of 10.8x), they have significantly different business models and (often) more volatile financial histories. A DCF, based on the growth required to hit the FY22 $1bn revenue target and on EBITDA margins returning to FY17 levels post the marketing project, suggests a share price of 2120p.
Exhibit 1: Financial summary
$000s |
2016 |
2017 |
2018e |
2019e |
||
Year-end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||
Revenue |
|
|
558,223 |
627,518 |
725,000 |
797,500 |
Cost of Sales |
(374,137) |
(422,299) |
(490,350) |
(537,803) |
||
Gross Profit |
184,087 |
205,219 |
234,650 |
259,697 |
||
EBITDA |
|
|
40,766 |
45,062 |
48,214 |
55,436 |
Operating Profit (before amort. and except). |
38,377 |
42,580 |
45,050 |
52,272 |
||
Intangible Amortisation |
(499) |
(464) |
(464) |
(464) |
||
Operating Profit (after amort. and before except.) |
37,878 |
42,116 |
44,586 |
51,808 |
||
Operating Profit |
34,696 |
41,284 |
43,886 |
51,108 |
||
Net Interest |
(24) |
(122) |
45 |
50 |
||
Net pension finance charge |
(521) |
(503) |
(503) |
(503) |
||
Profit Before Tax (norm) |
|
|
38,353 |
42,458 |
45,095 |
52,322 |
Profit Before Tax (FRS 3) |
|
|
34,151 |
40,659 |
43,428 |
50,655 |
Tax |
(9,672) |
(11,734) |
(9,120) |
(10,638) |
||
Profit After Tax (norm) |
28,681 |
30,724 |
35,975 |
41,685 |
||
Profit After Tax (FRS 3) |
24,479 |
28,925 |
34,308 |
40,018 |
||
Discontinued businesses |
0 |
0 |
0 |
0 |
||
Net income (norm) |
|
|
27,773 |
30,291 |
35,625 |
41,335 |
Net income (IFRS) |
|
|
24,479 |
28,925 |
34,308 |
40,018 |
Average Number of Shares Outstanding (m) |
28.1 |
28.0 |
28.0 |
28.0 |
||
EPS - normalised (c) |
|
|
98.7 |
107.7 |
126.9 |
147.0 |
EPS - (IFRS) (c) |
|
|
87.3 |
103.1 |
122.5 |
142.7 |
Dividend per share (c) |
52.5 |
58.1 |
65.0 |
80.0 |
||
Gross Margin (%) |
33.0 |
32.7 |
32.4 |
32.6 |
||
EBITDA Margin (%) |
7.3 |
7.2 |
6.7 |
7.0 |
||
Operating Margin (before GW and except.) (%) |
6.9 |
6.8 |
6.2 |
6.6 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
25,050 |
25,879 |
26,179 |
26,779 |
Intangible Assets |
0 |
0 |
0 |
0 |
||
Other intangible assets |
1,082 |
1,138 |
1,138 |
1,138 |
||
Tangible Assets |
18,938 |
18,829 |
19,129 |
19,729 |
||
Investments |
0 |
0 |
0 |
0 |
||
Deferred tax assets |
5,030 |
5,912 |
5,912 |
5,912 |
||
Current Assets |
|
|
65,662 |
82,904 |
84,633 |
107,619 |
Stocks |
4,179 |
5,356 |
6,064 |
6,671 |
||
Debtors |
39,800 |
46,781 |
53,562 |
58,918 |
||
Cash |
21,683 |
30,767 |
25,007 |
42,030 |
||
Other |
0 |
0 |
0 |
0 |
||
Current Liabilities |
|
|
(40,363) |
(47,821) |
(53,575) |
(58,330) |
Creditors |
(40,363) |
(47,675) |
(53,429) |
(58,184) |
||
Short term borrowings |
0 |
0 |
0 |
0 |
||
Long Term Liabilities |
|
|
(21,024) |
(18,869) |
(15,476) |
(12,476) |
Long term borrowings |
0 |
0 |
0 |
0 |
||
Other long term liabilities (including pension) |
(21,024) |
(18,869) |
(15,476) |
(12,476) |
||
Net Assets |
|
|
29,325 |
42,093 |
41,761 |
63,592 |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
46,804 |
44,576 |
45,900 |
54,475 |
Net Interest |
(23) |
(122) |
45 |
50 |
||
Tax |
(9,423) |
(12,751) |
(9,470) |
(10,988) |
||
Capex |
(3,267) |
(2,359) |
(3,000) |
(3,300) |
||
Acquisitions/disposals |
0 |
0 |
0 |
0 |
||
Pension contributions |
(17,354) |
(3,675) |
(3,700) |
(3,600) |
||
Financing |
(270) |
(1,359) |
(1,420) |
0 |
||
Dividends |
(12,141) |
(15,845) |
(34,115) |
(19,614) |
||
Other |
0 |
0 |
0 |
0 |
||
Net Cash Flow |
4,326 |
8,465 |
(5,760) |
17,023 |
||
Opening net debt/(cash) |
|
|
(18,381) |
(21,683) |
(30,767) |
(25,007) |
Net impact of disposals etc |
0 |
0 |
0 |
0 |
||
Other |
(1,024) |
619 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(21,683) |
(30,767) |
(25,007) |
(42,030) |
Source: 4imprint accounts, Edison Investment Research
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Genesis Energy leverages its diversified energy business model to generate attractive shareholder remuneration, with Bloomberg consensus estimates implying an FY19e dividend yield of 7.2%, towards the top end of utilities globally. The company has a strong track record on delivering attractive remuneration to shareholders and on generating enough cash flow to cover dividend payments.
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