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Research: TMT
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.
4imprint Group |
Upgrade from US reopening progress |
AGM update |
Media |
18 May 2021 |
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Business description
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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* |
EPS* |
DPS |
P/E |
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
|
|
Research: TMT
FY20 was a year of groundwork for Exasol, with the IPO and a later fund raise injecting resources into a previously cash-strapped business. From H220, Exasol started to invest those funds into the business, boosting the sales and marketing function and strengthening the R&D team. Considering the minimum six-month sales cycle, FY20 reported revenue growth of 9% saw little benefit from this investment. FY21 should see an acceleration in growth as sales and marketing initiatives start to have an impact and new product launches later this year should provide further support in FY22.
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