4imprint Group — Continued market share gains

4imprint Group (LSE: FOUR)

Last close As at 18/05/2024

GBP61.70

−40.00 (−0.64%)

Market capitalisation

GBP1,739m

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Research: TMT

4imprint Group — Continued market share gains

4imprint’s FY23 results are as outlined in January’s trading update, with 16% top-line growth and a further step up in operating margin to 10.3% from 9.0%. Given that the trading backdrop became more difficult over the final few months, as shown in industry reports, this implies that the group continues to build share in its large and fragmented addressable market for promotional products. 4imprint ended the year with net cash and short-term deposits of $105m after particularly strong cash conversion in H2. This amply allows for the expansion project at the main Oshkosh distribution centre as well as a good uplift in the final dividend, making 215 cents for the year, with the shares trading at a yield of approximately 3%.

Fiona Orford-Williams

Written by

Fiona Orford-Williams

Director, TMT

TMT

4imprint

Continued market share gains

FY23 results

Media

13 March 2024

Price

5,840p

Market cap

£1,647m

US$1.28/£

Net cash and short-term deposits ($m) at 31 December 23 (excluding lease liabilities)

105

Shares in issue

28.2m

Free float

97.6%

Code

FOUR

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

6.0

28.6

30.6

Rel (local)

3.7

24.8

30.4

52-week high/low

5,850p

4,200p

Business description

4imprint Group is a leading direct marketer of promotional products in the United States, Canada, the UK and Ireland. In FY23, 98% of revenues were generated in the United States and Canada.

Next event

AGM

22 May 2024

Analysts

Fiona Orford-Williams

+44 (0)20 3077 5739

Milo Bussell

+44 (0)20 3077 5700

4imprint is a research client of Edison Investment Research Limited

4imprint’s FY23 results are as outlined in January’s trading update, with 16% top-line growth and a further step up in operating margin to 10.3% from 9.0%. Given that the trading backdrop became more difficult over the final few months, as shown in industry reports, this implies that the group continues to build share in its large and fragmented addressable market for promotional products. 4imprint ended the year with net cash and short-term deposits of $105m after particularly strong cash conversion in H2. This amply allows for the expansion project at the main Oshkosh distribution centre as well as a good uplift in the final dividend, making 215 cents for the year, with the shares trading at a yield of approximately 3%.

Year end

Revenue
($m)

PBT*
($m)

EPS*
(c)

DPS**
(c)

P/E
(x)

Yield
(%)

12/21

787

30.2

80.3

45.0

92.8

0.6

12/22

1,140

103.7

285.6

160.0

26.2

2.1

12/23

1,327

140.7

377.9

215.0

19.8

2.9

12/24e

1,430

146.5

395.2

225.0

18.9

3.0

12/25e

1,500

153.8

408.7

232.5

18.3

3.1

Note: *PBT and EPS (fully diluted) are normalised, excluding amortisation of acquired intangibles and exceptional items. **Excluding special dividends.

Continued market outperformance

Industry body ASI estimates that the promotional products market was effectively flat in Q4, having slowed through H2, reflecting the more difficult economic backdrop. 4imprint’s stronger progress highlights how successful it continues to be in driving its revenue base from both existing (returning) customers, who generated 14% more orders year-on-year, and from newly recruited customers. Marketing spend is key to delivering these results and revenue per marketing dollar remained above $8. Spend on brand promotion continues to be an important part of the mix and 4imprint is adding streaming to its linear TV spend. Trading into the first couple of months of the new year has continued in line with our expectations so our FY24 and FY25 are unchanged, bar a slightly higher dividend.

Cash to fund expansion

With few M&A possibilities, cash utilisation priorities remain investment in growing the business and dividend payments to shareholders. $20m is earmarked for expanding the main Oshkosh facility from 300k ft² to 450k ft², including adding to the onsite solar array. This should be in operation by Q424. 4imprint is also scaling up its apparel decoration capacity, but overall maintenance capex requirements are modest, allowing for a generous payout policy.

Valuation: Supported by DCF valuation

The share price has continued to recover from the effect of earlier supply chain issues and is now up 27% year-to-date and up 41% over one year. A discounted cash flow (WACC of 9%, terminal growth of 3%, as before) generates an implied value of £60.31, from £61.15 at the time of our January update note when the USD/GBP rate was 1.266 (now 1.278), and still 3% ahead of the current price.

Exhibit 1: Financial summary

$000s

2021

2022

2023

2024e

2025e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

787,322

1,140,286

1,326,500

1,430,000

1,500,000

Cost of Sales

(561,306)

(818,670)

(924,600)

(996,710)

(1,047,000)

Gross Profit

226,016

321,616

401,900

433,290

453,000

EBITDA

 

 

35,660

108,428

142,600

149,900

157,000

Operating profit (before amort. and excepts.)

 

30,646

102,902

136,200

143,000

150,000

Intangible Amortisation

0

0

0

0

0

Exceptionals

0

0

0

0

0

Operating Profit

30,646

102,902

136,200

143,000

150,000

Net Interest

(417)

804

4,475

3,500

3,800

Profit Before Tax (norm)

 

 

30,229

103,706

140,675

146,500

153,800

Profit Before Tax (IFRS)

 

 

30,229

103,706

140,675

146,500

153,800

Tax

(7,643)

(23,563)

(34,500)

(36,625)

(38,450)

Profit After Tax (norm)

22,586

80,143

106,174

109,875

115,350

Profit After Tax (IFRS)

22,586

80,143

106,174

109,875

115,350

Discontinued businesses

0

0

0

0

0

Net income (norm)

 

 

22,586

80,143

106,259

111,340

115,350

Net income (IFRS)

 

 

22,586

80,143

104,374

109,875

115,350

Average Number of Shares Outstanding (m)

28.1

28.1

28.1

28.2

28.2

EPS - normalised fully diluted (c)

 

 

80.3

285.6

377.9

395.2

408.7

EPS - (IFRS) (c)

 

 

80.5

285.0

377.0

395.1

408.6

Dividend per share (c)

45.0

160.0

215.0

225.0

232.5

Special dividend per share (c)

0.0

200.0

0.0

0.0

(0.0)

Gross Margin (%)

28.7

28.2

30.3

30.3

30.2

EBITDA Margin (%)

4.5

9.5

10.8

10.5

10.5

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

3.9

9.0

10.3

10.0

10.0

BALANCE SHEET

Fixed Assets

 

 

40,011

47,940

51,400

65,100

67,334

Intangible Assets

0

1,010

1,010

1,010

1,010

Other intangible assets

1,045

957

490

490

490

Tangible Assets

24,667

29,255

34,700

49,900

52,900

Right of use assets

11,725

13,103

11,400

9,900

9,900

Deferred tax assets

600

2,381

3,800

3,800

3,034

Retirement benefit asset

 

 

1,974

1,234

0

0

0

Current Assets

 

 

127,771

192,353

186,900

215,566

272,299

Stocks

20,559

18,090

13,600

14,954

15,373

Debtors

63,589

87,511

68,400

75,212

76,527

Cash and short-term deposits

41,589

86,752

104,500

125,000

180,000

Other

2,034

0

400

400

400

Current Liabilities

 

 

(73,027)

(87,401)

(91,280)

(96,256)

(98,813)

Creditors

(71,877)

(85,966)

(89,900)

(94,976)

(97,633)

Short term borrowings

0

0

0

0

0

Lease liabilities

(1,150)

(1,435)

(1,380)

(1,280)

(1,180)

Long Term Liabilities

 

 

(11,789)

(12,672)

(12,520)

(11,320)

(10,078)

Long term borrowings

0

0

0

0

0

Lease liabilities

(10,939)

(12,315)

(10,920)

(9,720)

(9,720)

Other long term liabilities

(850)

(357)

(1,600)

(1,600)

(358)

Net Assets

 

 

82,966

140,220

134,500

173,090

230,742

CASH FLOW

Operating Cash Flow

 

 

22,846

101,317

166,900

135,554

162,889

Net Interest

(409)

699

3,900

3,500

3,800

Tax

(6,414)

(20,755)

(33,800)

(32,660)

(35,950)

Capex

(3,465)

(8,011)

(9,700)

(22,100)

(10,000)

Acquisitions/disposals

0

(1,700)

0

0

0

Pension contributions

(4,589)

(4,367)

(6,500)

0

0

Financing

(843)

(866)

2,500

(900)

(900)

Dividends

(4,134)

(18,722)

(110,800)

(61,691)

(64,283)

Other/ Capital portion of lease repayments

(1,117)

(2,432)

5,250

(1,200)

(500)

Net Cash Flow

1,875

45,163

17,750

20,503

55,056

Opening net debt/(cash and short-term deposits)

 

(39,766)

(41,589)

(86,752)

(104,500)

(125,000)

Net impact of disposals etc

0

0

0

0

0

Other

(53)

0

(2)

(4)

(56)

Closing net debt/(cash and short-term deposits)

 

(41,589)

(86,752)

(104,500)

(125,000)

(180,000)

Source: Company accounts, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by 4imprint and prepared and issued by Edison, in consideration of a fee payable by 4imprint. 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.

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Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

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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

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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

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London +44 (0)20 3077 5700

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United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

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United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

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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 and prepared and issued by Edison, in consideration of a fee payable by 4imprint. 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 2024 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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