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Last close As at 02/06/2023
GBP47.00
▲ 95.00 (2.06%)
Market capitalisation
GBP1,320m
Research: TMT
A continued strong performance in Q417 delivered 12% revenue growth in FY17 vs FY16, a shade ahead of our previous forecast. We see good top-line momentum into FY18e as the group takes further share in its large and fragmented market, benefiting from its targeted marketing. US taxation reforms will kick in for FY18 and our EPS forecast is lifted by 10%. Cash resource of $30.7m at end FY17 allows for an increased dividend with plenty of scope for additional investment as the business continues to scale. Our new FY19e numbers show further good earnings progress, with the valuation rating coming in to more attractive levels.
4imprint Group |
Strong Q4, US tax change gains |
Trading update |
Media |
17 January 2018 |
Share price performance
Business description
Next events
Analysts
4imprint Group is a research client of Edison Investment Research Limited |
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A continued strong performance in Q417 delivered 12% revenue growth in FY17 vs FY16, a shade ahead of our previous forecast. We see good top-line momentum into FY18e as the group takes further share in its large and fragmented market, benefiting from its targeted marketing. US taxation reforms will kick in for FY18 and our EPS forecast is lifted by 10%. Cash resource of $30.7m at end FY17 allows for an increased dividend with plenty of scope for additional investment as the business continues to scale. Our new FY19e numbers show further good earnings progress, with the valuation rating coming in to more attractive levels.
Year end |
Revenue ($m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/16 |
558.2 |
38.4 |
98.7 |
52.5 |
27.1 |
2.0 |
12/17e |
627.5 |
42.2 |
105.1 |
57.5 |
25.4 |
2.2 |
12/18e |
681.0 |
46.1 |
126.3 |
64.0 |
21.2 |
2.4 |
12/19e |
738.0 |
50.0 |
135.8 |
70.0 |
19.7 |
2.6 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Marketing and data-led growth
4imprint is first and foremost a marketing business and it has been at the forefront of its sector in using data to improve its targeting and content. The business model remains to fuel growth through investing in marketing, while keeping margins broadly stable (EBITDA margin is between 7.1% and 7.3% FY14-19e). FY17 marketing spend was more phased to H2 than usual and the benefit of this should continue to accrue in H118. The underlying market, estimated at $25bn in North America, remains highly fragmented, giving plenty of scope for further expansion.
Beneficial tax changes
4imprint generates around 97% of its revenues (and operating profits) in the US and the changes to US corporate taxation are positive for the group. We were previously using a 29% estimated FY18 tax charge, which is now likely to be in the “low 20s” percent. Greater clarity will be possible by the time of the prelims in March. We have now assumed an effective rate of 22%. Our FY18 EPS forecast moves from 114.8p to 126.3p, an increase of 10%. There will also be a boost to the cash flow from the lower taxation charge and our end-2018 anticipated net cash lifts from $40.5m to $43.0m. We initiate forecasts for FY19, albeit that these are inevitably tentative at this stage. Our revenue estimate is for an 8.4% uplift on the prior year, with EPS growth of 7.5% and a continuing build in net cash to over $58.0m.
Valuation: Strong earnings growth record
4imprint continues to trade at a premium to the UK small/mid-cap marketing service companies (trading on FY17e EV/EBITDA of 8.2x and a P/E of 11.9x). This reflects its differentiated and focused business model, and consistent record of strong earnings growth (26% EPS CAGR FY11-19e, 12% EPS CAGR FY15-19e). It has a cash-rich balance sheet and a growing dividend stream, underpinning the share price.
Exhibit 1: Financial summary
$000s |
2015 |
2016 |
2017e |
2018e |
2019e |
||
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
|||||||
Revenue |
|
|
497,219 |
558,223 |
627,485 |
681,000 |
738,000 |
Cost of Sales |
(334,622) |
(374,137) |
(423,889) |
(458,311) |
(496,671) |
||
Gross Profit |
162,598 |
184,087 |
203,596 |
222,689 |
241,328 |
||
EBITDA |
|
|
35,478 |
40,766 |
45,358 |
49,300 |
53,100 |
Operating Profit (before amort. and except). |
33,519 |
38,377 |
42,160 |
46,100 |
49,900 |
||
Operating Profit |
31,963 |
34,696 |
40,660 |
45,000 |
48,800 |
||
Net Interest |
30 |
(24) |
40 |
45 |
50 |
||
Net pension finance charge |
(836) |
(521) |
(521) |
(521) |
(521) |
||
Profit Before Tax (norm) |
|
|
33,549 |
38,353 |
42,200 |
46,145 |
49,950 |
Profit Before Tax (FRS 3) |
|
|
31,157 |
34,151 |
40,179 |
44,524 |
48,329 |
Tax |
(8,462) |
(9,672) |
(12,013) |
(10,241) |
(11,357) |
||
Profit After Tax (norm) |
25,087 |
28,681 |
30,187 |
35,905 |
38,593 |
||
Profit After Tax (FRS 3) |
22,695 |
24,479 |
28,166 |
34,284 |
36,972 |
||
Discontinued businesses |
0 |
0 |
0 |
0 |
0 |
||
Net income (norm) |
|
|
24,587 |
27,773 |
29,582 |
35,532 |
38,212 |
Net income (IFRS) |
|
|
22,695 |
24,479 |
28,164 |
34,284 |
36,972 |
Average Number of Shares Outstanding (m) |
27.9 |
28.1 |
28.0 |
28.0 |
28.0 |
||
EPS - normalised (c) |
|
|
87.5 |
98.7 |
105.1 |
126.3 |
135.8 |
EPS - (IFRS) (c) |
|
|
81.3 |
87.3 |
100.4 |
122.3 |
131.9 |
Dividend per share (c) |
38.9 |
52.5 |
57.5 |
64.0 |
70.0 |
||
Gross Margin (%) |
32.7 |
33.0 |
32.4 |
32.7 |
32.7 |
||
EBITDA Margin (%) |
7.1 |
7.3 |
7.2 |
7.2 |
7.2 |
||
Operating Margin (before GW and except.) (%) |
6.7 |
6.9 |
6.7 |
6.8 |
6.8 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
23,753 |
25,050 |
25,550 |
26,050 |
26,550 |
Intangible Assets |
0 |
0 |
0 |
0 |
0 |
||
Other intangible assets |
1,211 |
1,082 |
1,082 |
1,082 |
1,082 |
||
Tangible Assets |
18,154 |
18,938 |
19,438 |
19,938 |
20,438 |
||
Investments |
0 |
0 |
0 |
0 |
0 |
||
Deferred tax assets |
4,388 |
5,030 |
5,030 |
5,030 |
5,030 |
||
Current Assets |
|
|
66,035 |
65,662 |
81,124 |
97,675 |
118,691 |
Stocks |
4,460 |
4,179 |
4,791 |
5,200 |
5,748 |
||
Debtors |
43,194 |
39,800 |
45,633 |
49,525 |
54,743 |
||
Cash |
18,381 |
21,683 |
30,700 |
42,950 |
58,200 |
||
Other |
0 |
0 |
0 |
0 |
0 |
||
Current Liabilities |
|
|
(38,222) |
(40,363) |
(44,464) |
(48,256) |
(52,295) |
Creditors |
(37,254) |
(40,363) |
(44,464) |
(48,256) |
(52,295) |
||
Short term borrowings |
0 |
0 |
0 |
0 |
0 |
||
Long Term Liabilities |
|
|
(23,114) |
(21,024) |
(16,660) |
(13,660) |
(10,660) |
Long term borrowings |
0 |
0 |
0 |
0 |
0 |
||
Other long term liabilities (including pension) |
(23,114) |
(21,024) |
(16,660) |
(13,660) |
(10,660) |
||
Net Assets |
|
|
28,452 |
29,325 |
45,551 |
61,809 |
82,287 |
CASH FLOW |
|||||||
Operating Cash Flow |
|
|
30,622 |
46,468 |
42,000 |
47,500 |
51,300 |
Net Interest |
30 |
(23) |
40 |
45 |
50 |
||
Tax |
(8,730) |
(9,423) |
(11,252) |
(12,117) |
(10,985) |
||
Capex |
(10,912) |
(3,267) |
(3,200) |
(3,200) |
(3,200) |
||
Acquisitions/disposals |
0 |
0 |
0 |
0 |
0 |
||
Pension contributions |
(825) |
(17,354) |
(3,300) |
(3,200) |
(3,350) |
||
Financing |
0 |
65 |
0 |
0 |
0 |
||
Dividends |
(9,604) |
(12,141) |
(15,238) |
(16,784) |
(18,567) |
||
Other |
(501) |
1 |
0 |
0 |
0 |
||
Net Cash Flow |
80 |
4,326 |
9,050 |
12,244 |
15,249 |
||
Opening net debt/(cash) |
|
|
(18,301) |
(18,381) |
(21,683) |
(30,700) |
(42,950) |
Net impact of disposals etc |
0 |
0 |
0 |
0 |
0 |
||
Other |
0 |
(1,024) |
(33) |
6 |
1 |
||
Closing net debt/(cash) |
|
|
(18,381) |
(21,683) |
(30,700) |
(42,950) |
(58,200) |
Source: Company accounts, Edison Investment Research
|
|
Research: Metals & Mining
Greggs’ Q4 sales update demonstrates a robust performance in what has been a tough retail market. The company’s self-help strategy shows that this is a business firmly in control of its own destiny. Management expects that the industry-wide cost pressures seen in 2017 will continue in 2018 although at lower levels. Greggs expects to deliver full year results in line with management expectations. A combination of strong trading momentum, easing margin pressures and continued self-help gives us confidence in our 2018 forecasts, which we leave unchanged.
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