4imprint Group — Buoyant orders support further upgrade

4imprint Group (LSE: FOUR)

Currency in GBP

Last close As at 03/02/2023

GBP45.55

40.00 (0.89%)

Market capitalisation

GBP1,279m

Research: TMT

4imprint Group — Buoyant orders support further upgrade

Today’s update from 4imprint shows that the positive trading environment experienced in the first half has continued through Q3. Management has (again) lifted guidance for the full year. It now indicates revenue of around $1.1bn, generating PBT of not less than $90m, and we have raised our forecasts accordingly, with uplifts also to FY23 and FY24 estimates. With the inherent strong cash generation and $79m of cash balances as at end October, we view it as increasingly likely that a special dividend may be declared for FY22 alongside regular payments.

Fiona Orford-Williams

Written by

Fiona Orford-Williams

Director, TMT

TMT

4imprint Group

Buoyant orders support further upgrades

Trading update

Media

4 November 2022

Price

3,550p

Market cap

£997m

£1.15/$

Net cash at 31 October 2022, excluding lease liabilities

$79m

Shares in issue

28.08m

Free float

97.6%

Code

FOUR

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

3.9

14.4

21.2

Rel (local)

(0.1)

19.8

27.6

52-week high/low

4,045p

2,240p

Business description

4imprint Group is a leading direct marketer of promotional products in the United States, Canada, the UK and Ireland. In FY21, 98% of revenues were generated in the United States and Canada.

Next events

FY22 results

February 2023

Analysts

Fiona Orford-Williams

+44 (0)20 3077 5739

Milo Bussell

+44 (0)20 3077 5700

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

Today’s update from 4imprint shows that the positive trading environment experienced in the first half has continued through Q3. Management has (again) lifted guidance for the full year. It now indicates revenue of around $1.1bn, generating PBT of not less than $90m, and we have raised our forecasts accordingly, with uplifts also to FY23 and FY24 estimates. With the inherent strong cash generation and $79m of cash balances as at end October, we view it as increasingly likely that a special dividend may be declared for FY22 alongside regular payments.

Year end

Revenue
($m)

PBT*
($m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/20

560.0

3.8

11.0

0.0

373.2

N/A

12/21

787.3

30.2

80.3

45.0

51.1

1.1

12/22e

1,102.3

90.1

243.4

130.0

16.9

3.2

12/23e

1,215.0

97.2

262.2

145.0

15.7

3.5

12/24e

1,336.5

106.7

287.9

160.0

14.3

3.9

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

Continued positive trading momentum

Revenues to end October were 40% ahead of the prior year, which is 35% up on FY19, showing that this is more than a simple post-lockdown rebound. Order counts were up 32% and average order values ahead by 6%, which will have been a combination of pricing and mix, with an increasing proportion of apparel. The success of the brand awareness campaign has increased the group’s overall marketing efficiency, giving a step change in operating margin to around 8% from the 6% achieved in FY14–19. Our modelling suggests a very small dip from 8.2% in FY22e to 8.0% in FY23e as the group continues to invest to support the growth. Overall, our FY22 PBT and EPS forecasts rise 13%, with an 8% uplift for FY23e and +7% for FY24e (August increases were of 49% for FY22e and 40% for FY23e).

Scope for additional distribution

4imprint is inherently cash generative, with limited capital investment requirements. End October cash was $79m, from $67m at end June, and our modelling suggests a balance of $83m at the FY22 year-end. At these levels of cash resources, we expect that management will be considering declaring a special dividend for FY22e alongside the final dividend. If that additional payment were to be $1/share, payable in H123, that would bring our expected FY23 year-end cash figure broadly in line with that of end FY22. Our financial summary reflects this assumption.

Valuation: DCF suggests meaningful upside

The share price responded very positively to July’s trading update, hitting an all-time high of over £40, before settling back to current levels. At the time of our August update, our DCF suggested a value of £54.58 per share. This subsequent upgrade to forecasts takes this figure to £63.26 per share, with (still) weaker sterling ($/£1.15 vs $/£1.20) boosting the implied value further to £66.01 per share, significantly ahead of the current share price.

Exhibit 1: Financial summary

$000s

2019

2020

2021

2022e

2023e

2024e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

860,844

560,040

787,322

1,102,250

1,215,000

1,336,500

Cost of Sales

(585,543)

(402,100)

(561,306)

(787,098)

(868,725)

(955,597)

Gross Profit

275,301

157,940

226,016

315,152

346,275

380,902

EBITDA

 

 

57,904

8,905

35,660

95,940

103,100

112,600

Operating profit (before amort. and excepts.)

 

 

53,620

3,972

30,646

90,440

97,500

107,000

Intangible Amortisation

0

0

0

0

0

0

Exceptionals

0

0

0

0

0

0

Operating Profit

53,620

3,972

30,646

90,440

97,500

107,000

Net Interest

373

(129)

(417)

(300)

(300)

(300)

Profit Before Tax (norm)

 

 

53,993

3,843

30,229

90,140

97,200

106,700

Profit Before Tax (IFRS)

 

 

53,993

3,843

30,229

90,140

97,200

106,700

Tax

(11,276)

(753)

(7,643)

(21,634)

(23,328)

(25,608)

Profit After Tax (norm)

42,717

3,090

22,586

68,506

73,872

81,092

Profit After Tax (IFRS)

42,717

3,090

22,586

68,506

73,872

81,092

Discontinued businesses

0

0

0

0

0

0

Net income (norm)

 

 

42,717

3,090

22,586

68,506

73,872

81,092

Net income (IFRS)

 

 

42,717

3,090

22,586

68,506

73,872

81,092

Average Number of Shares Outstanding (m)

28.0

28.0

28.1

28.1

28.1

28.1

EPS - normalised fully diluted (c)

 

 

151.9

11.0

80.3

243.4

262.2

287.9

EPS - (IFRS) (c)

 

 

152.4

11.0

80.5

244.1

262.9

288.6

Dividend per share (c)

25.0

0.0

45.0

130.0

145.0

160.0

Special dividend per share (c)

0.0

0.0

0.0

100.0

0.0

0.0

Gross Margin (%)

32.0

28.2

28.7

28.6

28.5

28.5

EBITDA Margin (%)

6.7

1.6

4.5

8.7

8.5

8.4

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

6.2

0.7

3.9

8.2

8.0

8.0

BALANCE SHEET

Fixed Assets

 

 

31,844

43,269

40,011

47,296

49,856

52,416

Intangible Assets

0

0

0

1,010

1,010

1,010

Other intangible assets

1,152

1,100

1,045

1,045

1,045

1,045

Tangible Assets

24,369

24,832

24,667

28,167

28,067

27,967

Right of use assets

1,985

13,065

11,725

10,500

9,160

7,820

Deferred tax assets

4,338

4,272

600

600

600

600

Retirement benefit asset

 

 

0

0

1974

5974

9974

13974

Current Assets

 

 

105,631

89,812

127,771

194,486

207,114

247,460

Stocks

11,456

11,271

20,559

26,624

29,641

30,159

Debtors

53,039

38,775

63,589

82,348

91,679

100,847

Cash

41,136

39,766

41,589

83,480

83,760

114,420

Other

0

0

2,034

2,034

2,034

2,034

Current Liabilities

 

 

(60,839)

(51,118)

(73,027)

(104,293)

(114,844)

(126,213)

Creditors

(59,209)

(50,001)

(71,877)

(103,143)

(113,694)

(125,063)

Short term borrowings

0

0

0

0

0

0

Lease liabilities

(1,630)

(1,117)

(1,150)

(1,150)

(1,150)

(1,150)

Long Term Liabilities

 

 

(13,688)

(16,592)

(11,789)

(10,911)

(9,828)

(8,628)

Long term borrowings

0

0

0

0

0

0

Lease liabilities

(415)

(12,089)

(10,939)

(10,061)

(8,861)

(7,661)

Other long term liabilities

(13,273)

(4,503)

(850)

(850)

(967)

(967)

Net Assets

 

 

62,948

65,371

82,966

126,577

132,298

165,035

CASH FLOW

Operating Cash Flow

 

 

59,841

16,462

22,846

97,500

99,000

106,650

Net Interest

751

(13)

(409)

(300)

(300)

(300)

Tax

(10,318)

(507)

(6,414)

(18,034)

(20,828)

(22,008)

Capex

(8,178)

(3,724)

(3,465)

(9,000)

(5,500)

(5,500)

Acquisitions/disposals

0

0

0

(1,700)

0

0

Pension contributions

(3,593)

(13,278)

(4,589)

(4,000)

(4,000)

(4,000)

Financing

(2,567)

941

(843)

(900)

(900)

(900)

Dividends

(20,659)

0

(4,134)

(20,512)

(65,974)

(42,106)

Other/ Capital portion of lease repayments

(1,687)

(1,418)

(1,117)

(1,200)

(1,200)

(1,200)

Net Cash Flow

13,590

(1,537)

1,875

41,854

298

30,636

Opening net debt/(cash)

 

 

(27,484)

(41,136)

(39,766)

(41,589)

(83,480)

(83,760)

Net impact of disposals etc

0

0

0

0

0

0

Other

62

167

(53)

36

(19)

3

Closing net debt/(cash)

 

 

(41,136)

(39,766)

(41,589)

(83,480)

(83,760)

(114,400)

Source: Company 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 £60,000 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 research department of Edison 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.

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Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

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New Zealand

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United Kingdom

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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.

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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

1185 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

1185 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

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 £60,000 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 research department of Edison 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 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). 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

This document is prepared and provided by Edison 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.

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.

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

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

1185 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

1185 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

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