4imprint Group — Upgrade from US reopening progress

4imprint Group (LSE: FOUR)

Last close As at 27/03/2024

GBP62.80

150.00 (2.45%)

Market capitalisation

GBP1,770m

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Research: TMT

4imprint Group — Upgrade from US reopening progress

4imprint’s AGM statement indicates improving momentum in its order intake as the US economy reopens. Having lifted our forecast numbers initially in March, we are now raising our FY21 revenue projection from $645m to $700m and our FY22e revenue by 6% to $765m. The operating margin is also on a recovering trend. In FY21, we would expect the group to put further funds into marketing spend to benefit from a strengthening trading backdrop, constraining the recovery in operating margin. Thereafter we anticipate margins reverting towards historical levels. The balance sheet remains strong, with end April net cash of $44m.

Fiona Orford-Williams

Written by

Fiona Orford-Williams

Director, TMT

TMT

4imprint Group

Upgrade from US reopening progress

AGM update

Media

18 May 2021

Price

2300p

Market cap

£646m

$1.38/£

Net cash ($m) at end April 2021
(excluding $13.2m end-Dec lease liabilities)

44.0

Shares in issue

28.1m

Free float

95.9%

Code

FOUR

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(6.7)

(5.0)

16.6

Rel (local)

(6.6)

(9.5)

(7.1)

52-week high/low

2,850p

1,744p

Business description

4imprint Group is the leading direct marketer of promotional products in the US, Canada, the UK and Ireland. In FY20, 98% of revenues were generated in the United States and Canada.

Next events

Interim results

11 August 2021

Analyst

Fiona Orford-Williams

+44 (0)20 3077 5739

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

4imprint’s AGM statement indicates improving momentum in its order intake as the US economy reopens. Having lifted our forecast numbers initially in March, we are now raising our FY21 revenue projection from $645m to $700m and our FY22e revenue by 6% to $765m. The operating margin is also on a recovering trend. In FY21, we would expect the group to put further funds into marketing spend to benefit from a strengthening trading backdrop, constraining the recovery in operating margin. Thereafter we anticipate margins reverting towards historical levels. The balance sheet remains strong, with end April net cash of $44m.

Year end

Revenue ($m)

PBT*
($m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/19

860.8

55.6

157.2

84.0

14.63

2.6

12/20

560.0

5.0

13.8

0.0

N/A

N/A

12/21e

700.0

21.1

58.5

25.0

54.3

0.8

12/22e

765.0

31.4

86.9

35.0

36.5

1.1

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

May order intake at 85% of May 2019

At the time of the finals in March, management reported order intake running at 65% of 2019 levels in January and February (comparisons with FY20 are not going to be useful over the course of this year). At that stage we lifted our FY20 forecast revenue from $600m to $645m, gradually building the comparative percentage against FY19 to 74% over the first half and towards 92% by the year-end. We now retain the same year-end assumption, but build in greater acceleration, based on the AGM update that order intake in April reached 80% of FY19 and May to date is at 85%. This results in an uplift in forecast revenue to $700m. With limited visibility into FY22, we are assuming further recovery, with 9% revenue growth.

Operating margins rebuilding

4imprint’s business model revolves around its marketing, with margin managed to be broadly stable in normal trading conditions by flexing marketing spend. The operating margin (before exceptionals) was in a range of 5.7% to 6.9% over FY11–FY19. While the marketing tap was turned down during the most challenged recent trading months, it was not turned off but reoriented. As conditions ease, we expect marketing spend to increase to take advantage of market opportunities, with operating margins recovering over time to previous levels.

Valuation: Premium rating maintained

4imprint benefits from 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 FY21 EV/EBITDA of 33.6x, compared to marketing services stocks on 13.2x, but we expect that recovery and growth in future years will narrow this valuation gap.

Exhibit 1: Financial summary

$000s

2019

2020

2021e

2022e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

860,844

560,040

700,000

765,000

Cost of Sales

(585,543)

(402,100)

(495,812)

(529,042)

Gross Profit

275,301

157,940

204,188

235,958

EBITDA

 

 

59,144

8,417

24,875

35,125

Operating Profit (before amort. and except).

 

 

54,860

5,017

21,075

31,325

Intangible Amortisation

0

0

0

0

Operating Profit (after amort. and before except.)

 

 

54,860

5,017

21,075

31,325

Exceptionals

0

0

0

0

Impairment

0

0

0

0

DB Pension administration charges

(312)

(420)

(420)

(420)

Pensions and share options

(928)

(625)

(800)

(800)

Operating Profit

53,620

3,972

19,855

30,105

Net Interest

751

(25)

25

25

Net pension finance charge

(378)

(104)

(104)

(104)

Profit Before Tax (norm)

 

 

55,611

4,992

21,100

31,350

Profit Before Tax (IFRS)

 

 

53,993

3,843

19,776

30,026

Tax

(11,276)

(753)

(4,351)

(6,583)

Profit After Tax (norm)

44,335

4,239

16,749

24,766

Profit After Tax (IFRS)

42,717

3,090

15,425

23,442

Discontinued businesses

0

0

0

0

Net income (norm)

 

 

44,203

3,894

16,458

24,453

Net income (IFRS)

 

 

42,717

3,090

15,425

23,442

Average Number of Shares Outstanding (m)

28.0

28.0

28.0

28.0

EPS - normalised (c)

 

 

157.2

13.8

58.5

86.9

EPS - (IFRS) (c)

 

 

152.4

11.0

55.0

83.6

Dividend per share (c)

84.0

0.0

25.0

35.0

Gross Margin (%)

32.0

28.2

29.2

30.8

EBITDA Margin (%)

6.9

1.5

3.6

4.6

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

6.4

0.9

3.0

4.1

BALANCE SHEET

Fixed Assets

 

 

31,844

43,269

43,169

43,069

Intangible Assets

0

0

0

0

Other intangible assets

1,152

1,100

1,100

1,100

Tangible Assets

24,369

24,832

24,732

24,632

Right of use assets

1,985

13,065

13,065

13,065

Deferred tax assets

4,338

4,272

4,272

4,272

Current Assets

 

 

105,631

89,812

106,842

117,040

Stocks

11,456

11,271

14,088

15,396

Debtors

53,039

38,775

48,465

52,966

Cash

41,136

39,766

44,289

48,678

Other

0

0

0

0

Current Liabilities

 

 

(60,839)

(51,118)

(63,614)

(69,417)

Creditors

(59,209)

(50,001)

(62,497)

(68,300)

Short term borrowings

0

0

0

0

Lease liabilities

(1,630)

(1,117)

(1,117)

(1,117)

Long Term Liabilities

 

 

(13,688)

(16,592)

(12,467)

(12,467)

Long term borrowings

0

0

0

0

Lease liabilities

(415)

(12,089)

(12,089)

(12,089)

Other long term liabilities (including pension)

(13,273)

(4,503)

(378)

(378)

Net Assets

 

 

62,948

65,371

73,930

78,224

CASH FLOW

Operating Cash Flow

 

 

56,248

7,322

22,900

30,700

Net Interest

706

(13)

25

25

Tax

(10,318)

(507)

(4,642)

(6,897)

Capex

(8,178)

(3,724)

(3,700)

(3,700)

Acquisitions/disposals

0

0

0

0

Pension contributions

(3,593)

(4,138)

(3,900)

(3,900)

Financing

(2,567)

941

(2,200)

(2,200)

Dividends

(20,659)

0

(2,317)

(7,947)

Other

(1,687)

(1,418)

(1,622)

(1,622)

Net Cash Flow

9,952

(1,537)

4,544

4,459

Opening net debt/(cash)

 

 

(27,484)

(41,136)

(39,766)

(44,289)

Net impact of disposals etc

3,638

0

0

0

Other

62

167

(21)

(70)

Closing net debt/(cash)

 

 

(41,136)

(39,766)

(44,289)

(48,678)

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 £49,500 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 2021 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.

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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

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 £49,500 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 2021 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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