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 indicates some encouraging signs, albeit within continuing general caution around the impact of COVID-19 on the US economy. Average order value is increasing as the proportion of apparel in the mix rises, with overall weekly revenue over the last four weeks around 65% of prior year. This is in line with the assumptions underlying our model and there are no changes to our forecasts. The group has a strong balance sheet, with $40.1m of cash at end October (lease debt only). We continue to view 4imprint as a high-quality investment proposition.
4imprint Group |
Business model strengths play out |
Trading update |
Media |
30 October 2020 |
Share price performance
Business description
Next events
Analyst
4imprint Group is a research client of Edison Investment Research Limited |
4imprint’s trading update indicates some encouraging signs, albeit within continuing general caution around the impact of COVID-19 on the US economy. Average order value is increasing as the proportion of apparel in the mix rises, with overall weekly revenue over the last four weeks around 65% of prior year. This is in line with the assumptions underlying our model and there are no changes to our forecasts. The group has a strong balance sheet, with $40.1m of cash at end October (lease debt only). We continue to view 4imprint as a high-quality investment proposition.
Year end |
Revenue ($m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/18 |
738.4 |
46.1 |
129.4 |
70.0 |
20.8 |
2.6 |
12/19 |
860.8 |
55.6 |
157.2 |
84.0** |
17.2 |
3.1 |
12/20e |
535.0 |
0.5 |
0.3 |
0.0 |
N/A |
N/A |
12/21e |
600.0 |
15.0 |
40.6 |
20.0 |
66.4 |
0.7 |
Note: *PBT and EPS are normalised, excluding exceptional items. **84c declared, 25c paid.
Apparel volumes now level with prior year
Volumes and order value continue to tick back up from the initial sharp retrenchment in April, when year-on-year weekly order intake was down at 20% of prior year. For the last four weeks, this is running at 60% of prior year, with weekly revenues up 65%. The emphasis on driving the apparel offering over the last couple of years, with investment in in-house finishing (embroidery or printing), has given 4imprint greater resilience, with these unit volumes now broadly level with those delivered last year. With trade fair activity suppressed, demand for hard goods that are typically given away (mugs, pens, water bottles, etc) has unsurprisingly been lower. Apparel has a higher inherent utility and is commonly used within organisations, as well as for giveaways.
Marketing at the front and centre
4imprint’s sophisticated marketing effort can be rapidly tailored to focus on different categories, with spend also flexed to reflect the opportunities, as described in our September Outlook note. The recent tilt more towards brand promotion continues to help build awareness and drive new customer acquisition, which should reap greater rewards as more normal trading patterns resume. The group’s cash resource, with $40.1m at end October (our model shows $22.5m at end FY20, post seasonal reversal of the working capital cash flows), means that there is plenty of firepower to increase marketing spend when circumstances are more responsive.
Valuation: Strong fundamentals and many 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 12.0x, compared to marketing services stocks on 6.9x.
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
|
|
Research: TMT
In Resilient in the downturn we highlighted how a strong showing from mVISE’s services business (+6% y-o-y) saw it deliver growth, margin uplift and cash flow in H1 despite the COVID-19 pandemic. However, this was partially offset by another shortfall in product sales, which were affected. Nevertheless, mVISE remains confident about its longer-term prospects here. This appears to be shared by the market; consensus sees sales growth accelerating to 15% in FY21 and the rating (c 18x FY21 EV/EBIT) stands at a premium to a pure-play service company.
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