REG - 4imprint Group PLC - Final Results
13/03/2024 07:00
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RNS Number : 5958G 4imprint Group PLC 13 March 2024
13 March 2024
4imprint Group plc
Final results for the period ended 30 December 2023
4imprint Group plc (the "Group"), a direct marketer of promotional products,
today announces its final results for the 52 weeks ended 30 December 2023.
Financial overview 2023 2022 Change
$m $m
Revenue 1,326.5 1,140.3 +16%
Operating profit 136.2 102.9 +32%
Profit before tax 140.7 103.7 +36%
Cash and bank deposits 104.5 86.8 +20%
Basic EPS (cents) 377.9 285.6 +32%
Total paid and proposed regular dividend per share (cents) 215.0 160.0 +34%
Total paid and proposed regular dividend per share (pence) 167.8 132.2 +27%
Operational overview
· Continued market share gains driving very strong financial results
· Marketing activities remain productive, including further development
of the brand component
· Net operating margin above 10%, reflecting stability in supply chain
conditions, improvement in year-on-year gross margins and some operational
leverage
· 2,090,000 total orders received in 2023 (2022: 1,860,000); 311,000
new customers acquired in the year (2022: 307,000)
· Group well financed with cash and bank deposits of $104.5m (2022:
$86.8m)
· $20m project to expand capacity at the Oshkosh distribution centre
underway, including planned extension of solar array
Paul Moody, Chairman said:
"The Group has made significant operational and financial progress in 2023,
reflecting a clear strategy and a highly resilient business model.
Trading results in the first two months of 2024 have been in line with both
the Board's expectations and consensus forecasts. We are confident that we
will continue to take market share."
For further information, please contact:
4imprint Group plc MHP Group
Tel. + 44 (0) 20 3709 9680 Tel. + 44 (0) 7884 494112
Kevin Lyons-Tarr, Chief Executive Officer Katie Hunt
David Seekings, Chief Financial Officer Eleni Menikou
Chairman's Statement
Performance summary
Building on the momentum generated by a healthy post-pandemic rebound that
began in 2022, the Group delivered another very strong financial performance
in 2023.
Group revenue for 2023 was $1.33bn, an increase of $0.19bn or 16% over 2022.
Profit before tax for the year was $140.7m (2022: $103.7m), driving an
increase in basic earnings per share to 377.9c, (2022: 285.6c). The business
model was characteristically cash-generative, with cash and bank deposits at
the end of 2023 of $104.5m (2022: $86.8m), leaving the Group well financed
entering 2024.
Total orders received for the full year were up 12% over 2022, a good
performance reflecting continued market share gains. These gains were made
despite challenging year-on-year comparatives from April onwards and a
slow-down in growth in the promotional products industry in the second half of
2023 reflecting a more cautious macroeconomic environment.
The financial dynamics within the business are strong. Considerable progress
was made in gross margin percentage which improved by more than two percentage
points against the prior year. Productivity of marketing spend has remained
encouraging, with our headline revenue per marketing dollar KPI remaining
above $8 for the full year. As trailed in last year's Annual Report,
significant incremental investment in the business was approved by the Board
at the start of 2023. This investment, primarily in people, has enabled us to
consolidate realised gains as well as underpinning future growth prospects. In
combination, these factors resulted in an annual operating margin exceeding
10%.
Strategy
Our strategic direction is clear and has not changed. We aim to deliver
market-beating organic revenue growth by increasing our share in the large but
fragmented markets in which we operate.
We take a long-term view of the business and its prospects. An important
aspect of this is our commitment to the further development of the brand
component of our marketing, which we expect to be a key growth driver in
coming years.
Equally important in ensuring the Group's success is an unwavering commitment
to the 4imprint culture, which has been crucial in allowing us to attract and
retain the depth of talent necessary to underpin our growth ambitions. Our
team members are essential to our success.
The Board remains committed to the Group's strategy and business model as well
as being confident in the strength of its competitive position.
Sustainability
Further good work has been done in pursuing innovative and appropriate ways to
minimise the environmental impact of our operations. Enhanced energy saving
and renewable energy initiatives have continued and valuable work has been
done in calculating and understanding the full extent of our GHG Protocol
Scope 3 emissions.
Significant progress has been made in expanding our Better Choices™
sustainable product initiative. More than 15,000 Better Choices™ 'tags' have
now been applied to items included in the programme and a particular focus has
been on integrating products from our own private label brands into this
initiative.
Pension
In June 2023 we took a significant further step in the Group's long-term
commitment to fully de-risk its legacy defined benefit pension obligations.
Through the purchase of a bulk annuity 'buy-in' insurance policy, we were able
to eliminate inflation, interest rate and longevity risks in respect of
substantially all remaining pension benefits. A cash lump sum of $4.1m was
paid by way of a 'top-up' premium for the transaction, after which balance
sheet volatility will cease and future deficit reduction contributions of
around $4m per year will no longer be required.
Dividend
The Group finished 2023 in a very strong financial position, with cash and
bank deposits of $104.5m (2022: $86.8m). The Board recommends a final dividend
per share of 150.0c (2022: 120.0c), giving a total paid and proposed 2023
regular dividend per share of 215.0c (2022: 160.0c).
The use of the Group's large cash balance is under regular review in
accordance with the Group's capital allocation framework and balance sheet
funding guidelines.
Board
In August 2023 Charlie Brady stepped down from the Board due to a challenging
health issue. Charlie joined the Board in 2015 and over his years with
4imprint made a significant contribution to the strategic development of the
Group. His wit and wisdom are greatly missed by his former Board colleagues.
Outlook
The Group has made significant operational and financial progress in 2023,
reflecting a clear strategy and a highly resilient business model.
Trading results in the first two months of 2024 have been in line with both
the Board's expectations and consensus forecasts. We are confident that we
will continue to take market share.
Paul Moody
Chairman
12 March 2024
Chief Executive's Review
Revenue 2023 2022 Change
$m $m
North America 1,302.6 1,120.5 +16%
UK & Ireland 23.9 19.8 +21%
Total 1,326.5 1,140.3 +16%
Operating profit Change
2023 2022
$m $m
Direct Marketing operations 141.2 107.9 +31%
Head Office costs (5.0) (5.0) 0%
Total 136.2 102.9 +32%
Performance overview
2023 was another year of record results for 4imprint. This remarkable
performance reflects the strength of our strategy in driving continued market
share growth. As ever, this growth was underpinned by the outstanding efforts
of our team members and the strength of the relationships we have with our
supplier partners. Excellent progress has been made in 2023 on several
important initiatives within the business.
As we noted in our half-year report, trading momentum in the first half of
2023 was favourable, with total orders received up 18% over 2022. At the time,
however, we were careful to set these results firmly in the context of weak
prior year comparatives in the first half of 2022. As we expected, the
percentage increases in total order activity over the prior year moderated
over the second half of the year, reflecting the much more challenging
year-on-year comparatives that included a period of significant recovery from
the pandemic.
In addition, the second half of 2023 saw softening demand patterns in the
promotional products industry typical of a less buoyant general economic
environment. Recently released research from ASI, a North American industry
body, indicated that in the fourth quarter of 2023 year-over-year sales for
industry distributors in aggregate were essentially flat, a marked
deceleration as compared to the prior year. We continued to gain market share
against this backdrop.
In total 2,090,000 orders were received in 2023, representing an increase of
12% over 2022. In line with historical patterns, existing customer orders made
up the majority, with 1,561,000 orders representing a 14% increase over 2022.
This strength in existing customer orders gives us reassurance in respect of
the resilience and reliability of the customer file moving forward.
529,000 new customer orders were received in 2023, an increase of 2% over
2022. We acquired 311,000 new customers in the year, representing a gain of 1%
over the 307,000 acquired in 2022. As well as being a function of much tougher
comparatives in the second half of 2022, the relative slow-down in new
customer acquisition also correlates clearly with the softening demand
patterns in the industry.
Average order values in 2023 were 1% above prior year, driven by changes in
the merchandising mix, customer preferences and price adjustments through the
year. This led to a total increase at the demand revenue level (value of
orders received) of 13% over 2022.
As the year progresses, we anticipate that 2024 will bring more normalised
demand comparatives and an improved, more typical balance between new and
existing customer activity.
These demand numbers laid the base for a strong financial performance. Group
revenue for 2023 was $1.33bn, representing an increase of 16% or $0.19bn over
2022. The difference between the 13% increase at demand level and the 16% gain
in reported revenue is explained mostly by a return to normal experience in
2023 in respect of cancelled orders and customer credits/claims. These effects
had been elevated in 2022 due to the global and local supply chain disruption
that caused significant adjustments and delays to order flow in that year.
After a step change in profitability in the prior year, the Group delivered
another very strong result in 2023. Operating profit for 2023 of $136.2m was
32% above the 2022 comparative of $102.9m, producing an operating margin for
the year of 10.3% (2022: 9.0%). Other than the revenue growth outlined above,
three major themes contributed to this strengthening in net return:
· Gross margin percentages improved by more than two percentage points
against the prior year. This favourable movement was driven mainly by price
adjustments, supplier rebates, more stable product input prices and lower
freight costs.
· Productivity of marketing spend was encouraging, with our headline
revenue per marketing dollar KPI remaining above the $8 mark for the full
year. For comparison purposes, this KPI was below $6 in the pre-pandemic year
of 2019.
· Some operational gearing over the fixed and semi-fixed elements of
the cost base, but as anticipated this was lower than usual as a result of the
significant incremental investment in the business, primarily in people, to
support what is now a much larger business.
The 4imprint direct marketing business model remains very cash generative,
with free cash flow in the year of $128.5m (2022: $63.9m) leading to cash and
bank deposits at the 2023 year-end of $104.5m (2022: $86.8m).
Operational highlights
Significant operational progress was made in 2023. Much of this was related to
bolstering resources in the business after a particularly demanding year
managing $350m in incremental organic revenue growth in 2022.
· People. Our team members are essential to our current and future
success. In our 2022 Annual Report we identified our intention to make a
significant investment in the business in 2023, primarily in people, in order
to consolidate existing gains and strengthen our platform for future
profitable growth. Even though the labour market has remained tight, we have
been able to attract the high-quality talent that we need in a variety of
areas across the business, both in terms of those who directly support our
increasing order count as well as people to strengthen our organisational
structure for the future. The results have been tangible: whereas the second
half of 2022 was a time of acute stress operationally, 2023 was calm and
efficient, leading to lower order adjustments and cancellations, better
credits/claims experience and shorter lead times, all of which led to improved
customer service. We have continued with the development of our 'hybrid'
working environment for team members who previously would have worked in the
office. This model will remain as a permanent option for desk-based team
members.
· Marketing. The development of and investment in the brand component
of our marketing mix has been the key catalyst behind our materially improved
marketing productivity in recent years as compared to historical performance.
We are confident that the brand element has settled into our proven cycle of
continued investment in testing and refining the marketing mix. Most recently
we have had initial success in our testing into 'streaming' TV which will now
become part of our brand marketing investment. The improved flexibility
offered by this evolved marketing portfolio enables us to take full advantage
of the immediate market share opportunity, at the same time as strengthening
the business for the long term.
· Supply. The supply chain position in 2023 stands in stark contrast to
2022. Through most of 2022 we dealt with acute pressure stemming from
challenges around global logistics, inventory availability and production
capacity to keep up with demand. During that time we relied on the deep
relationships we have with our key Tier 1 suppliers to manage these issues as
best we could. Thankfully, during 2023 these supply chain challenges have now
been fully resolved, taking delays and friction out of the process and
enabling us to deliver the '4imprint Certain' service that our customers come
to us for.
· Screen-printing. Our new screen-print facility in Appleton,
Wisconsin, went live for production in April 2023. We have been fortunate to
recruit the team members required for the new operation. A second shift
launched in the first quarter of 2024, and our intention is to scale up
further to support our overall apparel decoration capability.
· Oshkosh facilities. The Board has authorised a further major
expansion at our distribution centre site in Oshkosh, Wisconsin. This facility
expansion is aimed primarily at supporting the continued growth of the apparel
category of our product range. The current footprint will increase from just
over 300,000 sq.ft. to at least 450,000 sq.ft. Construction is already under
way, with a target operational date of Q3 2024. The overall cost of the
project will be around $20m.
Sustainability
Good progress was made on our ESG agenda in 2023.
· We maintained and renewed our CarbonNeutral(®) business
certification.
· The team has worked on further energy and waste reduction
initiatives, including a renewable energy initiative through our local energy
provider, with the ultimate goal of moving towards clean energy initiatives
and reducing reliance on carbon offset products.
· The existing solar panel array will be supplemented and extended in
capacity as part of the expansion project at the Oshkosh distribution centre.
· There has been exciting progress in expanding and developing our
Better Choices™ sustainable products range. More than 15,000 Better
Choices™ 'tags' (2022: 8,000) have now been applied to items meeting
qualification for the programme.
Looking ahead
Our operations are robust and scalable, especially in the light of the
investment in the business highlighted in this report. We are confident that
we will continue to take share in the markets in which we operate.
Financial Review
2023 2022
$m $m
Operating profit 136.2 102.9
Net finance income 4.5 0.8
Profit before tax 140.7 103.7
Taxation (34.5) (23.6)
Profit for the period 106.2 80.1
The Group's revenue, gross profit and operating profit in the period,
summarising expense by function, were as follows:
2023 2022
$m $m
Revenue 1,326.5 1,140.3
Gross profit 401.9 321.9
Marketing costs (159.9) (128.7)
Selling costs (47.2) (38.6)
Administration and central costs (56.8) (50.4)
Share option charges and related social security costs (1.1) (0.8)
Defined benefit pension plan administration costs (0.7) (0.5)
Operating profit 136.2 102.9
Operating result
Following the record-breaking organic growth levels recorded in 2022, the
business saw continued encouraging results at the demand level in 2023,
particularly in the first quarter against a relatively weak,
pandemic-affected, 2022 comparative, before moderating from April onwards as
the comparatives became significantly more challenging. This growth in demand,
together with a significant improvement in the supply chain leading to shorter
order cycle times, lower order cancellation rates and credits/claims, drove
revenue to $1.33bn, an increase of $0.19bn or 16% compared to $1.14bn in 2022.
The gross profit percentage of 30.3% improved markedly from 28.2% in 2022,
benefitting from previously implemented price adjustments, improved supplier
rebates, more stable product input prices and lower freight costs.
Marketing costs increased to 12% of revenue compared to 11% in 2022,
reflecting a return to our usual cycle of continued investment in the testing
and refinement of the marketing mix. The revenue per marketing dollar KPI of
$8.30 for 2023 (2022: $8.86) represents a material improvement from our
pre-pandemic historical norms following the expansion of the brand advertising
component of the mix.
Selling, administration and central costs together increased 17% to $104.0m
(2022: $89.0m) reflecting planned investment in people, most notably customer
service resources, and higher incentive compensation costs in line with
trading performance.
The factors outlined above, combined with the financial leverage in the
business model, delivered further material uplifts in operating profit to
$136.2m (2022: $102.9m) and operating margin to 10.3% (2022: 9.0%).
Foreign exchange
The primary US dollar exchange rates relevant to the Group's 2023 results were
as follows:
2023 2022
Year-end Average Year-end Average
Sterling 1.27 1.24 1.20 1.24
Canadian dollars 0.76 0.74 0.74 0.77
The Group reports in US dollars, its primary trading currency. It also
transacts business in Canadian dollars, Sterling and Euros. Sterling/US dollar
is the exchange rate most likely to impact the Group's financial performance.
The primary foreign exchange considerations relevant to the Group's operations
are as follows:
· Translational risk in the income statement remains low with the
majority of the Group's revenue arising in US dollars, the Group's reporting
currency.
· Most of the constituent elements of the Group balance sheet are US
dollar-based.
· The Group generates cash mostly in US dollars, but its primary
applications of post-tax cash are Shareholder dividends, some Head Office
costs and, up until the end of July 2023, pension deficit reduction
contributions, all of which are paid in Sterling.
As such, the Group's cash position is sensitive to Sterling/US dollar exchange
movements. To the extent that Sterling weakens against the US dollar, more
funds are available in payment currency to fund these cash outflows.
Share option charges
A total of $1.1m (2022: $0.8m) was charged in the period in respect of IFRS 2
'Share-based Payments'. This was made up of two elements: (i) executive awards
under the Deferred Bonus Plan (DBP) and 2015 Incentive Plan; and (ii) charges
in respect of employee savings-related share schemes.
Current options and awards outstanding are 78,705 shares under the US Employee
Stock Purchase Plan, 10,956 shares under the UK Save As You Earn scheme, and
42,631 shares under the DBP and 2015 Incentive Plan. Awards under the DBP in
respect of 2023 are anticipated to be made in late March 2024.
Net finance income
Net finance income for the period was $4.5m (2022: $0.8m). This comprises
interest earned on cash deposits, lease interest charges under IFRS 16, and
the net income on the defined benefit pension plan assets and liabilities.
Net finance income has increased significantly over 2022 due to improved
yields and significant cash deposits, particularly in the US where interest
rates rose steadily through 2022 and 2023 in response to economic conditions.
Taxation
The tax charge for the period was $34.5m (2022: $23.6m) giving an effective
tax rate of 25% (2022: 23%). The primary component of the charge relates to
current tax of $32.1m (2022: $24.0m) on US taxable profits.
Earnings per share
Basic earnings per share increased 32% to 377.9c (2022: 285.6c), reflecting
the 33% increase in profit after tax and a weighted average number of shares
in issue similar to prior year.
Dividends
Dividends are determined in US dollars and paid in Sterling, converted at the
exchange rate on the date that the dividend is declared.
The Board has proposed a final dividend of 150.0c per share (2022: 120.0c)
which, together with the interim dividend of 65.0c per share, gives a total
paid and proposed regular dividend relating to 2023 of 215.0c per share (2022:
160.0c), an increase of 34% compared to prior year.
The final dividend has been converted to Sterling at an exchange rate of
£1.00/$1.2818. This results in a final dividend per share payable to
Shareholders of 117.0p (2022: 99.2p), which, combined with the interim
dividend paid of 50.8p per share, gives a total dividend per share for the
period of 167.8p (2022: 132.2p).
The final dividend will be paid on 3 June 2024 to Shareholders on the register
at the close of business on 3 May 2024.
Defined benefit pension plan
The Group sponsors a legacy UK defined benefit pension plan (the "Plan") which
has been closed to new members and future accrual for several years. The Plan
has 122 pensioners and 197 deferred members.
At the end of June 2023, the Trustee of the Plan entered into an agreement
with Legal and General Assurance Society Limited to insure substantially all
remaining pension benefits of the Plan through the purchase of a bulk annuity
policy. The transaction took the form of a buy-in arrangement, with the
insurer funding the Plan for the future payment of liabilities. The fair value
of the bulk annuity policy matches the liabilities being insured, thus
eliminating inflation, interest rate and longevity risks. The premium of
£20.7m was settled by the transfer of the Plan's existing investment
portfolio valued at £17.5m and a cash amount of £3.2m ($4.1m) paid by the
Group.
This buy-in agreement was an investment decision for the Plan, consistent with
both the Trustee's overriding objective to enhance the security of the
benefits payable to members and the Group's long-term commitment to the full
de-risking of its legacy defined benefit pension obligations. As a result of
this transaction, the Group ceased to make monthly deficit funding
contributions to the Plan from August 2023 but will still fund the ongoing
administration costs and settlement of residual liabilities.
At 30 December 2023 the Plan on an IAS 19 basis was in a breakeven position,
compared to a surplus of $1.2m at 31 December 2022. Gross Plan assets and
liabilities under IAS 19 were both $23.3m. The change in the net IAS 19 Plan
position is analysed as follows:
$m
IAS 19 surplus at 31 December 2022 1.2
Company contributions to the Plan 6.5
Administration costs paid by the Plan (0.5)
Pension finance income 0.2
Return on Plan assets (excluding interest income and impact of buy-in policy) (1.1)
Return on Plan assets (in relation to buy-in policy) (4.6)
Remeasurement losses due to changes in assumptions (1.8)
Exchange gain 0.1
IAS 19 surplus at 30 December 2023 -
The net IAS 19 surplus reduced by $1.2m in the period. This was mainly the
result of a negative return on assets and the net impact of entering the
buy-in arrangement discussed above.
A triennial actuarial valuation of the Plan was completed as at 30 September
2022 and this forms the basis of the IAS 19 valuation set out above.
Cash flow
The Group had cash and bank deposits of $104.5m at 30 December 2023, an
increase of $17.7m against the 31 December 2022 balance of $86.8m. Cash flow
in the period is summarised as follows:
2023 2022
$m $m
Operating profit 136.2 102.9
Share option charges 1.1 0.8
Defined benefit pension administration costs paid by the Plan 0.5 0.5
Depreciation and amortisation 4.7 4.0
Lease depreciation 1.7 1.5
Change in working capital 29.2 (8.5)
Capital expenditure (9.7) (8.0)
Underlying operating cash flow 163.7 93.2
Tax and interest (29.9) (20.1)
Consideration for business combination - (1.7)
Defined benefit pension plan contributions (6.5) (4.3)
Proceeds from issue of ordinary shares 2.4 -
Own share transactions (1.0) (0.9)
Capital element of lease payments (1.4) (1.2)
Exchange and other 1.2 (1.1)
Free cash flow 128.5 63.9
Dividends to Shareholders (110.8) (18.7)
Net cash inflow in the period 17.7 45.2
The Group generated underlying operating cash flow of $163.7m (2022: $93.2m),
a conversion rate of 120% of operating profit (2022: 91%). The high conversion
rate is due to the unwinding of the elevated net working capital position from
the 2022 year-end driven by the significant improvement in supply chain
conditions. Capital expenditure includes investments in our screen-printing
operations (machinery and leasehold improvements), embroidery machinery, and
the early phases of an extension to our Oshkosh distribution centre due to be
completed in 2024.
Free cash flow improved by $64.6m to $128.5m (2022: $63.9m). This is
attributable to the excellent trading performance during the period and the
much improved net working capital position at the end of 2023 compared to
2022. Dividends to Shareholders includes the 2022 final and special dividends
of $93.0m paid in June 2023 and the 2023 interim dividend of $17.8m paid in
September 2023.
Balance sheet and Shareholders' funds
Net assets at 30 December 2023 were $134.5m, compared to $140.2m at 31
December 2022. The balance sheet is summarised as follows:
30 December 31 December
2023 2022
$m $m
Non-current assets (excluding pension asset) 51.4 46.7
Working capital (7.9) 20.8
Cash and bank deposits 104.5 86.8
Lease liabilities (12.3) (13.7)
Pension asset - 1.2
Other assets and liabilities - net (1.2) (1.6)
Net assets 134.5 140.2
Shareholders' funds decreased by $5.7m since 31 December 2022. The main
constituent elements of the movement were retained profit in the period of
$106.2m, net of equity dividends paid to Shareholders of $110.8m.
The Group had a net negative working capital balance of $7.9m at 30 December
2023 (31 December 2022: net positive balance of $20.8m). The elevated position
at 31 December 2022 reflected the effects of global and local supply chain
issues, causing a build-up of accrued revenue and inventory on orders being
processed. Significant improvements to supply chain conditions in the period
have driven the reduction in the working capital balance. This normalised net
negative position reflects the strength of our business model, with a high
proportion of customers paying for orders by credit card and the diligent
payment of suppliers to agreed terms.
Balance sheet funding
The Board is committed to aligning the Group's funding with its strategic
priorities. This requires a stable, secure and flexible balance sheet through
different economic cycles. The Group will therefore typically remain ungeared
and hold a positive cash and bank deposits position.
The Board's funding guidelines are unchanged, and aim to provide operational
and financial flexibility:
· To facilitate continued investment in marketing, people and
technology through different economic cycles, recognising that an economic
downturn typically represents a market share opportunity for the business.
· To protect the ability of the business to act swiftly as growth
opportunities arise in accordance with the Group's capital allocation
guidelines.
· To underpin a commitment to Shareholders through the maintenance of
regular interim and final dividend payments.
· To meet our pension contribution commitments as they fall due.
The quantum of the cash target at each year-end will be influenced broadly by
reference to the investment requirements of the business, and the subsequent
year's anticipated full-year ordinary dividend and pension payment
obligations.
The Board will keep these guidelines under review and is prepared to be
flexible if circumstances warrant.
Capital allocation
The Board's capital allocation framework is designed to deliver increasing
Shareholder value, driven by the execution of the Group's growth strategy. The
Group's capital allocation priorities are:
· Organic growth investments
o Either capital projects or those expensed in the income statement.
o Market share opportunities in existing markets.
· Interim and final dividend payments
o Increasing broadly in line with earnings per share through the cycle.
o Aim to at least maintain dividend per share in a downturn.
· Residual legacy pension funding
o Further de-risking initiatives, if viable.
· Mergers and acquisitions
o Not a near-term priority.
o Opportunities that would support organic growth.
· Other Shareholder distributions
o Quantified by reference to cash over and above balance sheet funding
requirement.
o Special dividends most likely method: other methods may be considered.
Treasury policy
The financial requirements of the Group are managed through a centralised
treasury policy. The Group operates cash pooling arrangements for its North
American operations. Forward contracts may be taken out to buy or sell
currencies relating to specific receivables and payables as well as
remittances from overseas subsidiaries. There were no forward contracts open
at the year-end or prior year-end. The Group holds most of its cash with its
principal US and UK bankers.
The Group has a $20.0m working capital facility with its principal US bank,
JPMorgan Chase, N.A. The facility has minimum net income and debt to EBITDA
covenants. The interest rate is the Secured Overnight Financing Rate (SOFR)
plus 1.6%, and the facility expires on 31 May 2025. In addition, an overdraft
facility of £1.0m, with an interest rate of the Bank of England base rate
plus 2.0% (or 2.0% if higher), is available from the Group's principal UK
bank, Lloyds Bank plc, until 31 December 2024. The Group expects these
facilities to be renewed prior to their respective expiry dates.
The Group had cash and bank deposits of $104.5m (2022: $86.8m) at the year-end
and has no current requirement or plans to raise additional equity or core
debt funding.
Estimates and judgments
The preparation of the consolidated financial statements requires management
to make judgments and estimates that affect the application of accounting
policies, the amounts reported for assets and liabilities as at the balance
sheet date and the amounts reported for revenues and expenses during the year.
Critical accounting judgments are those judgments, apart from those involving
estimations, that have been made in the process of applying the Group's
accounting policies and that have the most significant effect on the amounts
recognised in the financial statements. Key assumptions and sources of
estimation uncertainty are those that have a significant risk of resulting in
a material adjustment to the carrying amounts of the Group's assets and
liabilities within the next financial year.
Management considers the critical accounting judgments to be in respect of
revenue and the purchase of a bulk annuity policy.
A review of internal and external indications of impairment was undertaken in
accordance with IAS 36 for both the North American and UK cash-generating
units (CGU). This did not lead to formal impairment reviews being undertaken
for either CGU.
Going concern
In determining the appropriate basis of preparation of the financial
statements for the period ended 30 December 2023, the Directors have
considered the Group's ability to continue as a going concern over the period
to 28 June 2025.
The Group has modelled its cash flow outlook for the period to 28 June 2025,
considering the ongoing uncertainties in the macroeconomic and geopolitical
environment. This forecast shows no liquidity concerns or requirement to
utilise the Group's undrawn facilities.
The Group has also modelled a downside scenario reflecting severe but
plausible downside demand assumptions over a three-year horizon which shows no
liquidity concerns or requirement to utilise the Group's undrawn facilities in
the going concern period.
Based on their assessment, the Directors have not identified any material
uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the Group's and Company's ability
to continue as a going concern from the date the financial statements are
approved until 28 June 2025. Accordingly, they continue to adopt the going
concern basis in preparing the Group's and Company's financial statements.
Principal Risks & Uncertainties
The Board recognises that effective risk management and a robust system of
internal control are integral components of good corporate governance and are
fundamental to the long-term sustainable success of the Group. Risk appetite,
the risk management process, and associated mitigating activities and controls
are all essential elements of the Group's strategic and operational planning
processes.
Risk appetite
4imprint's business model means that it may be affected by numerous risks, not
all of which are within its control. The Board seeks to take a balanced
approach to the risks and uncertainties that it faces, encouraging an appetite
for measured risk-taking that contributes to both the operational agility and
innovative culture that it believes is necessary to meet the Group's strategic
objectives. That risk appetite is, however, tempered by risk identification,
evaluation and management.
Risk management process
The Board has ultimate responsibility for oversight and management of risk and
control across the Group. The Audit Committee assists the Board in fulfilling
its responsibilities to maintain effective governance and oversight of the
Group's risk management and internal controls.
Risks are identified through a variety of sources, including internally from
within the Group including the Board, operational and functional management
teams and the Group Environmental and Business Risk Management Committees, and
externally, to ensure that emerging risks are considered. Risk identification
focuses on those risks which, if they occurred, have the potential to have a
material impact on the Group and the achievement of its strategic, operational
and compliance objectives. Risks are categorised into the following groups:
strategic risks; operational risks; reputational risks; and environmental
risks.
Management is responsible for evaluating each significant risk and
implementing specific risk mitigation activities and controls with the aim of
reducing the resulting residual risk to an acceptable level, as determined in
conjunction with the Group's risk appetite. The Business Risk Management
Committee (BRMC) meets at least three times a year and reviews the
consolidated Group risk register and the mitigating actions and controls and
provides updates to the Audit Committee on a bi-annual basis. This process is
supplemented with risk and control assessments completed by the operating
locations and Group function annually.
An internal audit function has been established during the period with the
recruitment of an experienced Director of Group Internal Audit in October
2023. This will provide the Group with additional independent assurance over
the effectiveness of internal controls, risk management and governance
processes.
Emerging risks
The Group's risk profile will continue to evolve as a result of future events
and uncertainties. Emerging risks are closely monitored at BRMC meetings to
understand the potential impact on the business. Emerging risks that have been
discussed over the period include the threat of strike action at our primary
parcel delivery partner, the potential risks and opportunities presented by
the advancement in artificial intelligence (AI), and potential secondary risks
from the impact of sustained high interest rates on our supplier partners.
Fraud risks
A review of our fraud risk framework and a fraud risk assessment was initiated
during the period to ensure that the Group's governance, identification,
preventative, and detective measures are appropriate to manage this growing
threat. Fraud risks are considered alongside other Group risks.
The Board
The Board undertakes a formal review of the Group's principal and emerging
risks at least annually, assessing them against the Group's risk appetite and
strategic objectives. The Executive Directors will routinely update the Board
on urgent emerging issues and principal risks where the residual risk exceeds
the Group's risk appetite to allow the Board to determine whether the actions
being taken by management are sufficient.
Outlined in Appendix 1 are the current principal risks and uncertainties that
would impact the successful delivery of the Group's strategic goals. These are
consistent with those disclosed in the prior year. The list is not exhaustive
and other, as yet unidentified, factors may have an adverse effect.
Kevin Lyons-Tarr David Seekings
Chief Executive Officer Chief Financial Officer
12 March 2024
Group Income Statement for the 52 weeks ended 30 December 2023
Note 2023 2022
$m $m
Revenue 1 1,326.5 1,140.3
Operating expenses (1,190.3) (1,037.4)
Operating profit 1 136.2 102.9
Finance income 4.7 1.1
Finance costs (0.4) (0.4)
Pension finance income 0.2 0.1
Net finance income 4.5 0.8
Profit before tax 140.7 103.7
Taxation 2 (34.5) (23.6)
Profit for the period 106.2 80.1
Cents Cents
Earnings per share
Basic 3 377.9 285.6
Diluted 3 377.0 285.0
Group Statement of Comprehensive Income for the 52 weeks ended 30 December
2023
Note 2023 2022
$m $m
Profit for the period 106.2 80.1
Other comprehensive income
Items that may be reclassified subsequently to the income statement:
Currency translation differences 1.4 (1.6)
Items that will not be reclassified subsequently to the income statement:
Return on pension plan assets (excluding interest income and impact of buy-in (1.1) (16.4)
policy)
Remeasurement loss on pension buy-in policy (4.6) -
Remeasurement (losses)/gains on post-employment obligations (1.8) 11.9
Tax relating to components of other comprehensive income 2 2.3 1.8
Other comprehensive income for the period, net of tax (3.8) (4.3)
Total comprehensive income for the period, net of tax 102.4 75.8
Group Balance Sheet at 30 December 2023
Note 2023 2022
$m $m
Non-current assets
Intangible assets 1.5 2.0
Property, plant and equipment 34.7 29.2
Right-of-use assets 11.4 13.1
Deferred tax assets 3.8 2.4
Retirement benefit asset 5 - 1.2
51.4 47.9
Current assets
Inventories 13.6 18.1
Trade and other receivables 68.4 87.5
Other financial assets - bank deposits 14.0 35.0
Cash and cash equivalents 90.5 51.8
Corporation tax debtor 0.4 -
186.9 192.4
Current liabilities
Lease liabilities 6 (1.4) (1.4)
Trade and other payables (89.9) (84.8)
Current tax creditor - (1.2)
(91.3) (87.4)
Net current assets 95.6 105.0
Non-current liabilities
Lease liabilities 6 (10.9) (12.3)
Deferred tax liabilities (1.6) (0.4)
(12.5) (12.7)
Net assets 134.5 140.2
Shareholders' equity
Share capital 18.9 18.8
Share premium reserve 70.8 68.5
Other reserves 5.8 4.4
Retained earnings 39.0 48.5
Total Shareholders' equity 134.5 140.2
Group Statement of Changes in Shareholders' Equity for the 52 weeks ended 30
December 2023
Retained earnings
Share Other reserves Profit Total
Share capital premium reserve $m Own shares and loss equity
$m $m $m $m $m
Balance at 2 January 2022 18.8 68.5 6.0 (0.8) (9.5) 83.0
Profit for the period 80.1 80.1
Other comprehensive income
Currency translation differences (1.6) (1.6)
Remeasurement losses on post-employment obligations (4.5) (4.5)
Tax relating to components of other comprehensive income (note 2) 1.8 1.8
Total comprehensive income (1.6) 77.4 75.8
Proceeds from options exercised 0.3 0.3
Own shares utilised 1.1 (1.1) -
Own shares purchased (1.2) (1.2)
Share-based payment charge 0.8 0.8
Deferred tax relating to components of equity (note 2) 0.2 0.2
Dividends (note 4) (18.7) (18.7)
Balance at 31 December 2022 18.8 68.5 4.4 (0.9) 49.4 140.2
Profit for the period 106.2 106.2
Other comprehensive income
Currency translation differences 1.4 1.4
Remeasurement losses on post-employment obligations (7.5) (7.5)
Tax relating to components of other comprehensive income (note 2) 2.3 2.3
Total comprehensive income 1.4 101.0 102.4
Shares issued 0.1 2.3 2.4
Proceeds from options exercised 0.1 0.1
Own shares utilised 0.7 (0.7) -
Own shares purchased (1.1) (1.1)
Share-based payment charge 1.1 1.1
Deferred tax relating to components of equity (note 2) 0.2 0.2
Dividends (note 4) (110.8) (110.8)
Balance at 30 December 2023 18.9 70.8 5.8 (1.3) 40.3 134.5
Group Cash Flow Statement for the 52 weeks ended 30 December 2023
Note 2023 2022
$m $m
Cash flows from operating activities
Cash generated from operations 7 166.9 97.0
Tax paid (33.8) (20.8)
Finance income received 4.3 1.1
Lease interest (0.4) (0.4)
Net cash generated from operating activities 137.0 76.9
Cash flows from investing activities
Purchases of property, plant and equipment (10.0) (7.7)
Purchases of intangible assets - (0.3)
Proceeds from sale of property, plant and equipment 0.3 -
Consideration for business combination - (1.7)
Decrease/(increase) in current asset investments - bank deposits 21.0 (35.0)
Net cash from/(used in) investing activities 11.3 (44.7)
Cash flows from financing activities
Capital element of lease payments (1.4) (1.2)
Proceeds from issue of ordinary shares 2.4 -
Proceeds from share options exercised 0.1 0.3
Purchases of own shares (1.1) (1.2)
Dividends paid to Shareholders 4 (110.8) (18.7)
Net cash used in financing activities (110.8) (20.8)
Net movement in cash and cash equivalents 37.5 11.4
Cash and cash equivalents at beginning of the period 51.8 41.6
Exchange gains/(losses) on cash and cash equivalents 1.2 (1.2)
Cash and cash equivalents at end of the period 90.5 51.8
Notes to the Financial Statements
General information
4imprint Group plc, registered number 177991, is a public limited company
incorporated in England and Wales, domiciled in the UK and listed on the
London Stock Exchange. Its registered office is 25 Southampton Buildings,
London WC2A 1AL.
The Group presents the consolidated financial statements in US dollars and
rounded to $0.1m. Numbers in the financial statements were previously rounded
to $'000, however, given the growth of the Group, it is now considered
appropriate to round numbers to $0.1m. A substantial portion of the Group's
revenue and earnings are denominated in US dollars and the Board is of the
opinion that a US dollar presentation gives the most meaningful view of the
Group's financial performance and position.
Material accounting policy information
The material accounting policies adopted in the preparation of these financial
statements are consistent with those of the annual financial statements for
the period ended 31 December 2022, as described in those annual financial
statements.
Basis of preparation
This announcement was approved by the Board of Directors on 12 March 2024. The
financial information in this announcement does not constitute the Group's
statutory accounts for the periods ended 30 December 2023 or 31 December 2022
but it is derived from those accounts. Statutory accounts for 31 December 2022
have been delivered to the Registrar of Companies, and those for 30 December
2023 will be delivered after the Annual General Meeting. The auditor has
reported on those accounts. Their reports were unqualified, did not include a
reference to any matters to which the auditor drew attention by way of
emphasis without qualifying their report and did not contain a statement under
section 498(2) or (3) of the Companies Act 2006.
The audited consolidated financial statements from which these results are
extracted have been prepared under the historical cost convention in
accordance with UK-adopted International Accounting Standards.
New accounting standards applicable for the first time in this reporting
period have no impact on the Group's results or balance sheet. Note 2
'Taxation' includes disclosures relating to the impact of Pillar Two income
tax legislation in accordance with Amendments to IAS 12 (International Tax
Reform - Pillar Two Model Rules).
Environmental risks
In preparing the financial statements, management has considered the impact of
environmental risks. Whilst the impact of environmental risks is still
developing and therefore all possible future outcomes are uncertain, risks and
mitigating actions known to the Group have been considered in forming
judgments, estimates and assumptions and in assessing going concern and
viability. The main impact of this consisted of the inclusion of cash flows in
the forecasts used to assess impairment, going concern and viability for
energy and waste reduction initiatives, including a planned extension to the
solar array at the Oshkosh distribution centre, and in supporting our product
transition for a low carbon economy with the expansion of our Better
Choices(™) programme. These considerations did not have a material impact on
the financial statements.
Going concern
The financial statements have been prepared on a going concern basis. In
adopting the going concern basis, the Directors have considered: the Group's
business activities, together with the principal risks and uncertainties
likely to affect its future development, performance and position; the
financial position of the Group, its cash flows and liquidity position; and
the Group's financial risk management objectives and its approach to managing
its exposures to currency, credit, liquidity, and capital risks.
The Group continues to maintain a robust financial position in accordance with
its balance sheet funding guidelines, providing it with sufficient access to
liquidity to fund its strategic priorities and anticipated dividend payments.
At 30 December 2023, the Group had cash and bank deposits of $104.5m, no debt,
and undrawn facilities comprising a $20m working capital facility that expires
on 31 May 2025 and £1m overdraft facility that expires on 31 December 2024.
In adopting the going concern basis of preparation, the Directors have
assessed the Group's cash flow forecasts for the period to 28 June 2025, which
reflect current market conditions and incorporate assumptions about demand
activity and revenue, gross margins, and marketing productivity.
In forming its outlook over the going concern period, the Directors considered
the ongoing uncertainties in the macroeconomic and geopolitical environment,
and a variety of potential downsides that the Group might experience, such as
a downturn in general economic conditions and a reduction in the effectiveness
of key marketing techniques. This forecast shows no liquidity concerns or
requirement to utilise the Group's undrawn facilities.
The Group has also modelled a downside scenario reflecting severe but
plausible downside demand assumptions over a three-year horizon. This downside
scenario assumes:
· A severe demand shock occurs at the start of 2024, like that
experienced in 2020 at the start of the pandemic, resulting in revenue for
2024 falling to around 70% of 2023 levels.
· Revenue gradually recovers back towards 2023 levels by the end of
2026.
· Marketing and direct costs flexed in line with revenue, capital
expenditure moderated to reflect the reduction in demand, and dividend
payments reduced in line with earnings per share.
· Other payroll and overhead costs maintained at 2023 levels with an
allowance for inflationary increases to retain capability and capacity to meet
the recovery in demand.
Even under the severe stress built into this scenario, the forecast shows no
liquidity concerns or requirement to utilise the Group's undrawn facilities in
the going concern period. In addition, there are further mitigating actions
that the Group could take, including further cutting marketing costs and
reducing headcount, that are not reflected in the downside scenario
assumptions but would, if required, be fully under the Group's control. Given
recent trading and the outlook for the business the Directors consider that,
whilst plausible, this scenario reflects a remote outcome for the Group.
Based on their assessment, the Directors have not identified any material
uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the Group's and Company's ability
to continue as a going concern from the date the financial statements are
approved until 28 June 2025. Accordingly, they continue to adopt the going
concern basis in preparing the Group's and Company's financial statements.
Estimates and judgments
The preparation of the consolidated financial statements requires management
to make judgments and estimates that affect the application of accounting
policies, the amounts reported for assets and liabilities as at the balance
sheet date and the amounts reported for revenues and expenses during the year.
Critical accounting judgments are those judgments, apart from those involving
estimations, that have been made in the process of applying the Group's
accounting policies and that have the most significant effect on the amounts
recognised in the financial statements. Key assumptions and sources of
estimation uncertainty are those that have a significant risk of resulting in
a material adjustment to the carrying amounts of the Group's assets and
liabilities within the next financial year.
Management considers the following to be the critical accounting judgments and
key assumptions and sources of estimation uncertainty:
Critical accounting judgments
Revenue
For most of its product line, the Group operates a 'drop-ship' business model
whereby suppliers hold blank inventory, imprint the product and ship directly
to customers. In order to determine the amount of revenue to recognise, it is
necessary for the Group to make a judgment to assess if it is acting as
principal or an agent in fulfilling the performance obligations and promises
to customers for these transactions.
The Group has full discretion to accept orders, agrees artwork with the
customer, sets the transaction price, selects the suppliers used to fulfil
orders, and considers its customer satisfaction promises ('on-time or free',
price and quality guarantees) to be integral to meeting its performance
obligations.
Accordingly, the Group is of the opinion that it acts as principal in
providing goods to customers and recognises the gross amount of consideration
as revenue.
Purchase of a bulk annuity policy
During the period, the Trustee of the 4imprint 2016 Pension Plan (the "Plan")
exchanged the existing investment portfolio, including a further cash lump sum
contribution from the Group, for a bulk purchase annuity policy. This policy
insures substantially all the Plan's defined benefit obligations (a buy-in
policy). This was an investment decision made in line with the stated
objective of further de-risking the Plan's obligations. The Plan retains the
legal and constructive obligation to pay the benefits and the Trustee
continues to administer the Plan.
Based upon the above, management's judgment was that the purchase of the
policy did not constitute a settlement, as defined by IAS 19, and the excess
of the cost of the annuity over the IAS 19 valuation of the obligations
covered has been recorded in other comprehensive income.
1 Segmental reporting
The Group has two operating segments, North America and UK & Ireland. The
costs of the Head Office are reported separately to the Board, but this is not
an operating segment.
Revenue 2023 2022
$m $m
North America 1,302.6 1,120.5
UK & Ireland 23.9 19.8
Total Group revenue 1,326.5 1,140.3
2023 2022
Profit $m $m
North America 141.0 108.0
UK & Ireland 0.2 (0.1)
Operating profit from Direct Marketing operations 141.2 107.9
Head Office costs (5.0) (5.0)
Operating profit 136.2 102.9
Net finance income 4.5 0.8
Profit before tax 140.7 103.7
2 Taxation
Taxation recognised in the income statement is as follows:
2023 2022
$m $m
Current tax
UK tax - current 2.0 1.2
Overseas tax - current 32.1 24.0
Total current tax 34.1 25.2
Deferred tax
Origination and reversal of temporary differences 0.4 (1.5)
Adjustment in respect of prior periods - (0.1)
Total deferred tax 0.4 (1.6)
Taxation 34.5 23.6
The tax for the period is different to the standard rate of corporation tax in
the respective countries of operation. The differences are explained below:
2023 2022
$m $m
Profit before tax 140.7 103.7
Profit before tax for each country of operation multiplied by rate of 34.6 25.5
corporation tax applicable in the respective countries
Effects of:
Adjustments in respect of prior periods - (0.1)
Expenses not deductible for tax and non-taxable income (0.1) -
Other differences (0.5) (0.4)
UK tax losses generated/(utilised) in the period 0.9 (0.2)
UK losses recognised for deferred tax (0.4) (1.2)
Taxation 34.5 23.6
'Other differences' includes adjustments in respect of share options, US
leases, and pensions.
'UK losses recognised for deferred tax' relates to changes to the deferred tax
asset in respect of brought forward UK tax losses which are forecast to be
utilised against UK taxable profits over the next three years.
Management does not consider that there are any material uncertain tax
positions.
On 20 June 2023 the UK Finance Bill was substantively enacted in the UK,
including legislation to implement the OECD Pillar Two income taxes for
periods beginning on or after 31 December 2023. The legislation includes an
income inclusion rule and a domestic minimum tax, which together are designed
to ensure a minimum effective tax rate of 15% in each country in which the
Group operates. Similar legislation is being enacted by other governments
around the world. The Group has applied the mandatory temporary exception in
the Amendments to IAS 12 issued in May 2023 and endorsed in July 2023, and has
neither recognised nor disclosed information about deferred tax assets or
liabilities relating to Pillar Two income taxes and there is no current tax
impact on the financial statements for 2023. Based on an assessment of
historic data and forecasts for the period ending 28 December 2024, the Group
does not expect a material exposure to Pillar Two income taxes for 2024.
Income tax credited/(debited) to other comprehensive income is as follows:
2023 2022
$m $m
Current tax relating to post-employment obligations 2.0 1.2
Deferred tax relating to post-employment obligations (0.7) (0.3)
Deferred tax relating to UK tax losses 1.0 0.9
2.3 1.8
Income tax credited to equity is as follows:
2023 2022
$m $m
Deferred tax relating to UK tax losses 0.2 0.1
Deferred tax relating to share options - 0.1
0.2 0.2
3 Earnings per share
Basic earnings per share is calculated by dividing the profit for the
financial period by the weighted average number of shares in issue during the
period excluding shares held by the 4imprint Group plc employee benefit trust
(EBT). The effect of excluding shares held by the EBT is to reduce the average
number by 18,008 (2022: 21,632).
Diluted earnings per share is calculated by adjusting the weighted average
number of shares to assume the conversion of all potentially dilutive ordinary
shares. The share-based payment schemes which are likely to vest at the
balance sheet date at a price below the average price of the Company's
ordinary shares are potentially dilutive.
2023 2022
Number Number
'000 '000
Weighted average number of shares 28,105 28,064
Dilutive effect of share-based payments 66 61
Diluted weighted average number of shares 28,171 28,125
377.9c 285.6c
Basic earnings per share
Diluted earnings per share 377.0c 285.0c
4 Dividends
Equity dividends - ordinary shares 2023 2022
$m $m
Interim paid: 65.0c (2022: 40.0c) 17.8 10.6
Final paid: 120.0c (2022: 30.0c) 34.9 8.1
Special paid: 200.0c (2022: nil) 58.1 -
110.8 18.7
The Directors are proposing a final regular dividend in respect of the period
ended 30 December 2023 of 150.0c per share, an estimated payment amount of
$42.2m. Subject to Shareholder approval at the AGM, this dividend is payable
on 3 June 2024 to Shareholders registered on 3 May 2024. These financial
statements do not reflect this proposed dividend.
5 Pensions
Defined contribution plans
The Group operates defined contribution plans for its UK and US employees. The
regular contributions are charged to the income statement as they are
incurred. The charges recognised in the income statement are:
2023 2022
$m $m
Defined contribution plans - employers' contributions 3.1 2.5
Defined benefit plan
The Group also sponsors a UK defined benefit pension plan (the "Plan") which
is closed to new members and future accrual.
The Plan entered a £20.7m buy-in transaction on 27 June 2023 with Legal and
General Assurance Society Limited to insure substantially all remaining
pension benefits of the Plan through the purchase of a bulk annuity policy.
The premium of £20.7m was settled by the transfer of the Plan's existing
investment portfolio valued at £17.5m and a cash amount of £3.2m ($4.1m)
paid by the Group in July 2023. The difference between the cost of the
insurance policy and the IAS 19 accounting value of the liabilities secured
was £3.7m ($4.6m) and has been recorded within other comprehensive income.
An actuarial valuation of the Plan was undertaken as at 30 September 2022 in
accordance with the funding requirements of the Pensions Act 2004. The
actuarial valuation showed a deficit of £2.6m. A recovery plan was agreed
with the Trustee under which the Company made deficit contributions over the
period between valuation date to July 2023 which fully eliminated the deficit
on the technical provisions' basis. Under the Schedule of Contributions, a
further Company contribution of £0.2m is due in September 2025 should it be
required. However, given that the buy-in contract covers substantially all of
the Plan liabilities, the funding position is expected to be stable over the
period to the next valuation. The Company also agreed to pay the expenses of
running the Plan from 1 July 2023.
The amounts recognised in the income statement are as follows:
2023 2022
$m $m
Administration costs paid by the Plan 0.5 0.5
Administration costs paid by the Company 0.2 -
Pension finance income (0.2) (0.1)
Total defined benefit pension charge 0.5 0.4
The amount recognised in the balance sheet comprises:
2023 2022
$m $m
Present value of funded obligations (23.3) (20.3)
Fair value of the Plan's assets 23.3 21.5
Net retirement benefit asset - 1.2
The principal assumptions applied by the actuaries, as determined by the
Directors, at each period-end were:
2023 2022
% %
Rate of increase in pensions in payment 2.97 3.08
Rate of increase in deferred pensions 2.37 2.66
Discount rate 4.57 4.82
Inflation assumption - RPI 3.07 3.16
- CPI 2.37 2.66
The mortality assumptions reflect the most recent version of the tables used
in the September 2022 triennial valuation. The assumptions imply the following
life expectancies at age 65:
2023 2022
Years Years
Male currently aged 45 21.9 22.3
Female currently aged 45 24.0 24.2
Male currently aged 65 20.7 21.3
Female currently aged 65 22.5 23.1
6 Leases
The Group leases premises in Oshkosh and Appleton, Wisconsin. The lease for
office premises in Oshkosh, which was renewed in 2020, has a five year term
with a five year extension option. A lease term of ten years was reflected in
calculating the lease liability and right-of-use asset upon renewal in 2020.
There has been no significant event or significant change in circumstances
since the initial assessment that would require the lease extension option to
be reassessed. If the five year extension option was not exercised, the lease
liability and right-of-use would reduce by $6.5m as at 30 December 2023.
In addition, there are various items of leasehold land and buildings (mainly
office facilities in London) and machinery on short-term leases, and some
office equipment with low value. The Group applies the IFRS 16 exemptions for
short-term and low-value leases. No leases contain variable payment terms.
Set out below are the carrying amounts of lease liabilities and the movements
during the period:
2023 2022
$m $m
At start of period 13.7 12.0
Additions - 2.9
Interest charge 0.4 0.4
Payments (1.8) (1.6)
At end of period 12.3 13.7
Current 1.4 1.4
Non-current 10.9 12.3
7 Cash generated from operations
2023 2022
$m $m
Profit before tax 140.7 103.7
Adjustments for:
Depreciation of property, plant and equipment 4.3 3.6
Amortisation of intangible assets 0.4 0.4
Depreciation of right-of-use assets 1.7 1.5
Loss on disposal of property, plant and equipment - 0.1
Share option charges 1.1 0.8
Net finance income (4.5) (0.8)
Defined benefit pension administration costs paid by the plan 0.5 0.5
Contributions to defined benefit pension (6.5) (4.3)
plan
Changes in working capital:
Decrease in inventories 4.5 2.5
Decrease/(increase) in trade and other receivables 20.0 (24.2)
Increase in trade and other payables 4.7 13.2
Cash generated from operations 166.9 97.0
Statement of Directors' responsibilities
Each of the Directors confirm, to the best of their knowledge:
· The financial statements within the full Annual Report & Accounts
from which the financial information within this Final Results Announcement
has been extracted, have been prepared in accordance with UK-adopted
International Accounting Standards, give a true and fair view of the assets,
liabilities, financial position and profit of the Company and undertakings
included in the consolidation taken as a whole.
· The Chief Executive's Review and Financial Review, and Principal
Risks & Uncertainties include a fair review of the development and
performance of the business and the position of the Company and undertakings
included in the consolidation taken as a whole, together with a description of
the principal risks and uncertainties that it faces.
Alternative performance measures
An Alternative Performance Measure (APM) is a financial measure of historical
or future financial performance, financial position, or cash flows, other than
a financial measure defined or specified within IFRS.
The Group uses APMs to supplement standard IFRS measures to provide users with
information on underlying trends and additional financial measures, which the
Group considers will aid the users' understanding of the business.
Definitions
Underlying operating profit is operating profit before exceptional items.
Exceptional items are defined below. These items may be volatile in magnitude
and distort the underlying performance measures of the ongoing business. A
reconciliation of underlying operating profit to operating profit is shown in
note 1 when applicable.
Underlying operating margin % is underlying operating profit divided by total
revenue.
Exceptional items are income or costs that are both material and
non-recurring.
Underlying profit before tax is defined as profit before tax excluding
exceptional items. When applicable, a reconciliation of profit before tax to
underlying profit before tax is shown in note 3.
Underlying profit after tax is defined as profit after tax before exceptional
items, net of any related tax charges. When applicable, a reconciliation of
profit before tax to underlying profit after tax is shown in note 3.
Underlying earnings per share is defined as underlying profit after tax
divided by the weighted average number of shares in issue during the financial
year. When applicable, the calculation of underlying EPS is shown in note 3.
Revenue per marketing dollar is the total revenue of the Group divided by the
total marketing expense of the Group. This provides a measure of the
productivity of the marketing expenditure, which is a cornerstone of the
Group's organic revenue growth strategy.
Free cash flow is defined as the movement in cash and cash equivalents and
other financial assets - bank deposits, before distributions to Shareholders
but including exchange gains/(losses) on cash and cash equivalents. It is a
measure of cash available for allocation in line with the Group's capital
allocation policy:
2023 2022
$m $m
Net movement in cash and cash equivalents 37.5 11.4
Add back: (Decrease)/increase in current asset investments - bank deposits (21.0) 35.0
Add back: Dividends paid to Shareholders 110.8 18.7
Less: Exchange gains/(losses) on cash and cash equivalents 1.2 (1.2)
Free cash flow 128.5 63.9
Cash conversion is defined as the percentage of underlying operating cash flow
to underlying operating profit and is provided as a measure of the efficiency
of the Group's business model to generate cash.
Return on average capital employed is defined as underlying profit before tax
divided by the simple average of opening and closing non-current assets,
excluding deferred tax and retirement benefit assets, plus net current assets
and non-current lease liabilities. This is given to show a relative measure of
the Group's efficient use of its capital resources.
Capital expenditure is defined as purchases of property, plant and equipment
and intangible assets, net of proceeds from the sale of property, plant and
equipment. These numbers are extracted from the cash flows from investing
activities shown in the Group cash flow statement.
2023 2022
$m $m
Purchase of property, plant and equipment (10.0) (7.7)
Purchases of intangible assets - (0.3)
Proceeds from sale of property, plant and equipment 0.3 -
Capital expenditure (9.7) (8.0)
Underlying operating cash flow is defined as cash generated from operations,
before pension contributions, less capital expenditure. This reflects the cash
flow directly from the ongoing business operations. This is reconciled to IFRS
measures as follows:
2023 2022
$m $m
Cash generated from operations 166.9 97.0
Add back: Contributions to defined benefit pension plan 6.5 4.3
Less: Loss on disposal of property, plant and equipment - (0.1)
Less: Purchases of property, plant and equipment and intangible assets (10.0) (8.0)
Add: Proceeds from sale of property, plant and equipment 0.3 -
Underlying operating cash flow 163.7 93.2
Cash and bank deposits is defined as cash and cash equivalents and other
financial assets - bank deposits. This measure is used by the Board to
understand the true cash position of the Group when determining the potential
uses of cash under the balance sheet funding and capital allocation policies.
This is reconciled to IFRS measures as follows:
2023 2022
$m $m
Other financial assets - bank deposits 14.0 35.0
Cash and cash equivalents 90.5 51.8
Cash and bank deposits 104.5 86.8
Appendix 1
STRATEGIC RISKS
Macroeconomic conditions
Risk and description
The Group conducts most of its operations in North America and would be
affected by a downturn in general economic conditions in this region or
negative effects from tension in international trade. In previous economic
downturns the promotional products market has typically softened broadly in
line with the general economy.
Strategic relevance Mitigation Direction
· Customer acquisition and retention could fall, impacting revenue in · Management monitors economic and market conditions to ensure that · A challenging macroeconomic and geopolitical environment continues to
current and future periods. appropriate and timely adjustments are made to marketing and other budgets. cause uncertainty in our North American and UK markets, posing downside risks
to general economic conditions and growth.
· The growth and profitability levels called for in the Group's strategic · The customer proposition in terms of promotions, price, value, and
plan may not be achieved. product range can be adjusted to resonate with customer requirements and · Whilst product cost inflation has eased over the period to a more
budgets in changing economic climates. manageable level, persistent inflationary pressures could further drive up
· Cash generation could be reduced broadly corresponding to a reduction in
product, transportation and labour costs.
profitability. · The Group's balance sheet funding policy provides operational and
financial flexibility to facilitate continued investment in the business
through different economic cycles.
Unchanged
Markets and competition
Risk and description
The promotional products markets in which the business operates are intensely
competitive. New or disruptive business models, potentially facilitated or
accelerated by emerging technology and AI, looking to break down our
industry's prevailing distributor/supplier structure may become a threat.
Buying groups and online marketplaces may allow smaller competitors access to
improved pricing and services from suppliers. Private equity interest in the
promotional products industry has increased in recent years, offering
potential funding for existing competitors or new entrants.
Strategic relevance Mitigation Direction
· Aggressive competitive activity or a disruptive new model could result in · Service level, price and satisfaction guarantees are an integral part of · The competitive landscape to date has been relatively consistent on the
pressure on prices, margin erosion and loss of market share, impacting the the customer proposition. Negative or changing customer feedback is distributor side in our main markets.
Group's financial results. investigated and addressed rapidly. Customers are surveyed regularly to
monitor changing customer interests and perceptions.
· The Group's strategy based on achieving organic revenue growth in
fragmented markets may need to be reassessed. · Merchandising and supply chain teams have extensive experience in rapidly Unchanged
adapting the product range to meet evolving consumer demand.
· Customer acquisition and retention could fall, impacting revenue in
current and future periods. · Our aim is to position the business at the forefront of innovation in the
industry, driven by an open-minded culture that is customer-focused, embraces
collaborative supplier relationships, and has an appetite for emerging
technology.
· Management closely monitors competitive activity in the marketplace
including periodic market research studies.
Effectiveness of key marketing techniques and brand development
Risk and description
The success of the business relies on its ability to attract new and retain
existing customers through a variety of marketing techniques. These methods
may become less effective as follows:
· TV/Video/Brand: Fluctuations in available inventory may cause the price
of this technique to increase beyond our acceptable thresholds. The evolving
nature of how consumers access this type of content could change our ability
to effectively access our audience.
· Online: Search engines are an important source for channelling customer
activity to 4imprint's websites. The efficiency of search engine marketing
could be adversely affected if the search engines were to modify their
algorithms or otherwise make substantial changes to their practices, for
example to benefit from the use of emerging technology and AI, and the Group
was unable to respond and adapt to these rapid changes.
· Offline: The flow of print catalogues and sample packages would be
disrupted by the incapacity of the US Postal Service to make deliveries, for
example due to natural disasters or labour activism. Pandemic conditions that
lead to increased levels of people working from remote locations may diminish
the effectiveness of this technique.
The evolving landscape around consumer data privacy preferences and data
privacy legislation potentially affects all marketing techniques if it
compromises our ability to access and analyse customer information or results
in any adverse impacts to our brand image and reputation.
Strategic relevance Mitigation Direction
· If sustained over anything more than a short time period, an externally · TV/Video/Brand: Given that this is the newest element of our marketing · Marketing diversification continues via the successful expansion of the
driven decrease in the effectiveness of key marketing techniques would cause portfolio, our utilisation of this technique is still at a relatively early brand component in the marketing portfolio.
damage to the customer file as customer acquisition and retention fall. This stage of its development, allowing for a high degree of flexibility.
would affect order flow and revenue in the short term and the productivity of
· Much of the offline/print budget has been redeployed towards investment
the customer file over a longer period, impacting growth prospects in future · Online: Management stays very close to evolving technological in brand marketing activities.
years. developments and emerging platforms in the online space. Efforts are focused
on anticipating changes and ensuring compliance with both the requirements of · The business has significantly reduced the amount of data it shares,
· Restrictive data privacy legislation or changes in consumer demands providers and applicable laws. An appetite for technological innovation is increasingly relying on first party data.
around data privacy could decrease the yield on our marketing activities and encouraged by the business.
might increase compliance costs and the possibility of lawsuits.
· Offline: Developments in the US Postal Service are closely monitored
through industry associations and lobbying groups. Alternative parcel carriers Unchanged
are continuously evaluated.
· Data privacy requirements and consumer data preferences are monitored
closely and assessed.
OPERATIONAL RISKS
Business facility disruption
Risk and description
The 4imprint business model means that operations are concentrated in
centralised office, distribution and production facilities. The performance of
the business could be adversely affected if activities at one of these
facilities were to be disrupted, for example, by pandemic, fire, flood, loss
of power or internet/telecommunication failure.
Strategic relevance Mitigation Direction
· The inability to service customer orders over any extended period would · Back-up and business continuity infrastructure is in place to ensure the · There have been no significant changes to the operations of the Group
result in significant revenue loss, deterioration of customer acquisition and risk of customer service disruption is minimised. over the period which materially change the nature or likelihood of this risk.
retention metrics and diminished return on marketing investment.
· Websites are cloud-based, and data is backed up continuously to off-site
· A significant portion of our apparel orders are embroidered in-house at servers.
our distribution centre, therefore disruption at this facility would impact
Unchanged
our ability to fulfil these orders. · Relationships are maintained with third party embroidery contractors to
provide an element of back-up in the event of facility unavailability.
· The Group's reputation for excellent service and reliability may be
damaged. · Our recently acquired screen-printing operations have been located
separately to our existing distribution centre to diversify the risk of
disruption to our facilities.
· A significant proportion of our office and customer service staff can
work from home, mitigating some risk should offices become unavailable.
Domestic supply and delivery
Risk and description
As a consequence of the Group's 'drop-ship' distribution model, trading
operations could be interrupted if: (i) the activities of a key supplier were
disrupted and it was not possible to source an alternative supplier in the
short-term; (ii) a key supplier's own supply chain is compromised by 'force
majeure' events in the country of original product manufacture, for example
natural disasters, social/political unrest or pandemic; or (iii) the primary
parcel delivery partner used by the business suffered significantly degraded
service levels. As the Group continues to grow, the volume of orders placed
with individual suppliers becomes significant.
Strategic relevance Mitigation Direction
· Inability to fulfil customer orders would lead to lost revenue and a · A rigorous selection process is in place for key suppliers, with · Supply chain conditions, initially disrupted by the impact of the
negative impact on customer acquisition and retention statistics. evaluation and monitoring of quality, production capability and capacity, pandemic and later compounded by challenges in the recruitment of staff by
ethical standards, financial stability and business continuity planning. both the Group and our supply partners, have improved significantly over the
· The Group's reputation for excellent service and reliability may be
period. This has led to shorter order cycle times, lower order cancellations
damaged, leading to potential erosion of the value built up in the 4imprint · Very close relationships are maintained with key suppliers, including a and a significant reduction to the elevated working capital position from the
brand. detailed shared knowledge of the supply end of the value chain, allowing swift prior year-end arising from a build-up of accrued revenue and inventory on
understanding of and appropriate reaction to events. orders in process.
· Wherever possible, relationships are maintained with suitable alternative · The risk of strikes at our primary parcel delivery partner has been
suppliers for each product category. averted following the ratification of a new five-year contract by UPS workers.
· Secondary relationships are in place with alternative parcel carriers.
Decreased
Failure or interruption of information technology systems and infrastructure
Risk and description
The business is highly dependent on the efficient functioning of its IT
infrastructure. An interruption or degradation of services, including from a
malicious cyber attack, would affect critical order processing systems and
thereby compromise the ability of the business to deliver on its customer
service proposition.
Strategic relevance Mitigation Direction
· In the short term, orders would be lost and delivery deadlines missed, · There is continuous investment in both the IT team supporting the · The IT platform is mature, and performance has been efficient and
decreasing the efficiency of marketing investment and impacting customer business and the hardware and software system requirements for a stable and resilient.
acquisition and retention. secure operating platform.
· Investment in home working capability has been successful and is a stable
· Revenue and profitability are directly related to order flow and would be · Back-up and recovery processes are in place, including immediate part of the overall IT solution.
adversely affected as a consequence of a major IT failure. replication of data to an alternative site, to minimise the impact of
information technology interruption.
· Depending on the severity of the incident, longer-term reputational
damage could result. · Cloud-based hosting for eCommerce and elements of back-office Unchanged
functionality.
· IT infrastructure in place to support working from home for our
office-based team members.
REPUTATIONAL RISKS
Cyber threats
Risk and description
Malware, ransomware and other malicious cyber threats can lead to system
failure and/or unauthorised access to and misappropriation of customer data,
potentially leading to reputational damage and loss of customer confidence.
This is a rapidly changing environment, with threats from new technology
emerging on an almost daily basis.
Strategic relevance Mitigation Direction
· Revenue and profitability are directly related to order flow and would be · The business employs experienced IT staff whose focus is to identify and · The expected frequency, sophistication and publicity of attacks continues
adversely affected as a consequence of system compromise. mitigate IT security vulnerabilities. to increase. Accordingly, we continue to invest in expertise and technical
solutions, controls and security reviews to counter the increasing external
· A significant security breach could lead to litigation and losses, with a · Investment in software and other resources in this area continues to be a risks.
costly rectification process. In addition, it might be damaging to the Group's high priority.
reputation and brand.
· Technical and physical controls are in place to mitigate unauthorised
· An event of this nature might result in significant expense, impacting access to customer data and there is an ongoing investment process to maintain Unchanged
the Group's ability to meet its strategic objectives. and enhance the integrity and efficiency of the IT infrastructure and its
security.
· Due to the ever-evolving nature of the threat, emerging cyber risks are
addressed by the IT security team on a case-by-case basis.
· Third party cyber security consultants are employed as and when
appropriate.
Supply chain compliance and ethics
Risk and description
Our business model relies on direct (Tier 1) and indirect (Tier 2 and 3)
relationships with suppliers located both within our primary markets and at
overseas locations. 4imprint has for many years had very high ethical
expectations for supply chain compliance, but there is always a risk that our
wider supply chain partners may, from time to time, not comply with our
standards or applicable local laws.
Strategic relevance Mitigation Direction
· Significant or continuing non-compliance with such standards and laws · Key Tier 1 suppliers must commit to cascading our ethical sourcing · Our supplier compliance programme is well established.
could result in serious damage to our reputation and brand image. expectations down to their Tier 2 and Tier 3 supply chain partners.
· Whilst visits to, and audits of, both domestic and overseas suppliers
· This could have an adverse effect on our ability to acquire and retain · Specifically, we require our suppliers to comply with our supplier have returned to more normalised levels, challenges in visiting certain
customers and therefore our longer-term revenue prospects and financial compliance documentation, including the '4imprint Supply Chain Code of locations persist.
condition. Conduct' and the '4imprint Factory & Product Compliance Expectations'
document.
· We are active in promoting audit coverage of our supply chain at many Unchanged
levels, and in ensuring that product safety and testing protocols are adequate
and up to date.
Legal, regulatory and compliance
Risk and description
We are subject to, and must comply with, extensive laws and regulations,
particularly in our primary US market, including those relating to data
privacy legislation.
Strategic relevance Mitigation Direction
· If we or our employees, suppliers and other partners fail to comply with · Consultation with subject matter experts, specialist external legal · Obligations continue to be complied with and monitored.
any of these laws or regulations, such failure could subject us to fines, advisers and Government agencies as appropriate.
sanctions or other penalties that could negatively affect our brand,
reputation and financial condition. · US General Counsel recruited during 2022 and additional resources
committed to strengthen our in-house capabilities. Unchanged
ENVIRONMENTAL RISKS
Climate change
Risk and description
Climate change potentially affects our operations, facilities, supply chain,
team members, communities and our customers in a variety of ways. As such, it
presents a multitude of risks to the business and threatens our ability to
achieve our strategic objectives.
Strategic relevance Mitigation Direction
· Extreme weather-related events that impact our customers and/or our · The flexible nature of our 'drop-ship' model allows for relatively rapid · There remains a global sense of urgency in relation to climate change. As
suppliers can have 'episodic' negative impact on revenue, customer acquisition adjustment to episodes of extreme weather. The business has very low customer such, the risks in this area remain elevated, albeit they are considered to
and retention, and they can also cause increases to our product and concentration which helps mitigate an element of the risk as well. have been stable over the period.
distribution costs. Some of our suppliers are located in geographic areas that
are subject to increased risk of these events in the long term. · The business became 'carbon neutral' in 2021 in respect of Scopes 1 and 2
and meaningful elements of Scope 3, a year earlier than originally targeted.
· Further, in the medium term, if the business is not seen to be taking
Unchanged
deliberate and tangible actions to reduce its GHG emissions, the Group's · Our solar array project at the Oshkosh distribution centre became fully
reputation and brand may be damaged. operational during 2022, significantly increasing the portion of the Group's
power requirements generated from renewable sources.
· Management is actively monitoring and measuring progress towards further
environmental goals, most notably further GHG reductions in Scopes 1 and 2 and
meaningful elements of Scope 3.
Products and market trends
Risk and description
The transition to a low carbon economy may lead to changing product trends or
consumer preferences that render certain products undesirable or obsolete
whilst increasing demand for others.
Strategic relevance Mitigation Direction
· Failure to anticipate accurately, and respond to, trends and shifts in · Our merchandising teams actively collaborate with our suppliers to · The transition to a low carbon economy is driving changes in consumer
consumer preferences by adjusting the mix of existing product offers may lead continuously curate our range of products to adapt to and meet the needs and preferences towards sustainable products.
to lower demand for our products, impacting our market position and ability to tastes of our customers.
generate revenue growth.
· However, the fact that most of the products in our broad range are also
· Our Better Choices™ initiative has been launched to highlight sold unbranded in the retail setting, and with an increasing number of
promotional products that have sustainable attributes, giving our customers products being 'tagged' with our Better Choices™ designation, the pace of
the ability to research product attributes and supplier standards and the transition towards sustainable choices is likely to remain quite
certifications related to sustainability, environmental impact, workplace manageable.
culture and more.
· Additional resources have been committed to strengthen our sustainability
team and assist in delivering our initiatives in this rapidly evolving area. Unchanged
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