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RNS Number : 7008I 4imprint Group PLC 09 August 2023
9
August 2023
4imprint Group plc
Half year results for the 26 weeks ended 1 July 2023 (unaudited)
4imprint Group plc, (the "Group"), a leading direct marketer of promotional
products, today announces its half year results for the 26 weeks ended 1 July
2023.
Financial Overview Half year Half year Change
2023 2022
$m $m
635.5 515.5 +23%
Revenue
63.8 44.0 +45%
Operating profit
66.0 43.9 +50%
Profit before tax
74.5 67.1 +11%
Cash and bank deposits
176.2 118.9 +48%
Basic EPS (cents)
65.0 40.0 +63%
Interim dividend per share (cents)
50.8 33.0 +54%
Interim dividend per share (pence)
The results for the half year and prior half year are unaudited.
Operational Overview
· Customer demand at record levels:
· 1,047,000 total orders received in H1 2023 (H1 2022: 886,000)
· 158,000 new customers acquired in H1 2023 (H1 2022: 146,000)
· Net operating profit margin increased to 10.0% (2022: 8.5%), driven
principally by improvement in gross profit percentage and favourable returns
on marketing spend
· Supply chain challenges experienced in 2022 mostly resolved
· Pension buy-in transaction in June 2023 insured substantially all
remaining pension benefits, de-risking the balance sheet through the
elimination of inflation, interest rate and longevity risks
· Interim dividend of 65.0c per share declared (2022: 40.0c) reflects
performance in the first half of the year and the Group's strong financial
position
Paul Moody, Chairman said:
"The Group's strong first half performance clearly demonstrates that its
strategy and business model are effective in delivering profitable market
share gains.
As a result, the Board's expectation, based on these latest financial results
together with recent internal forecasts, is that full year 2023 Group revenue
will now be slightly above $1.3bn, with profit before tax not less than $125m.
Trading results in the month of July 2023 have been in line with the Board's
expectations."
For further information, please contact:
4imprint Group plc MHP Group
Tel. + 44 (0) 20 3709 9680 Tel. + 44 (0) 7884 494112
hq@4imprint.co.uk (mailto:hq@4imprint.co.uk) 4imprint@mhpg (mailto:4imprint@mhpgroup.com) roup
(mailto:4imprint@mhpgroup.com) .com (mailto:4imprint@mhpgroup.com)
Kevin Lyons-Tarr, Chief Executive Officer Katie Hunt
David Seekings, Chief Financial Officer Eleni Menikou
Chairman's Statement
Performance summary
Following a very satisfactory post-pandemic rebound in 2022, the Group has
delivered another remarkable operational and financial performance in the
first half of 2023.
Group revenue in the first half of 2023 was $635.5m, an increase of $120.0m,
or 23% over the same period in 2022. Profit before tax for the period was
$66.0m (2022: $43.9m), resulting in basic earnings per share of 176.2c (2022:
118.9c). The business model remains very cash-generative, leaving the Group
with cash and bank deposits at the half year of $74.5m (2 July 2022: $67.1m).
Trading momentum in the first half of 2023 was favourable, with total orders
received up 18% over 2022. This result should, however, be set firmly in the
context of relatively weak, pandemic-affected comparatives in the first
quarter of 2022. Further market share gains are anticipated in the second half
of 2023, although we expect the percentage increases in total order activity
seen in the first half to moderate in the second half as a result of more
challenging prior year comparatives.
Strategy
Our strategic direction is uncomplicated and has not changed. We aim to
deliver attractive organic revenue growth by increasing our share in the
fragmented yet substantial markets that we serve. The Group's performance in
the first half of 2023 directly reflects the success of this strategy.
The development of the brand component of our marketing has been a key growth
driver in recent years. This investment continues as we further explore the
interactions of brand with the other elements of the overall marketing mix.
Another key factor in the Group's success in the first half of 2023 has been
the ability to attract and retain the depth of talent required to underpin our
growth. As ever, our team members are absolutely essential to our success.
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 approximately
$4m was paid in July 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
With a substantial cash and bank deposits balance at the half year, the Group
is in a strong financial position. Consequently, and in line with its balance
sheet funding and capital allocation guidelines, the Board has declared an
interim dividend of 65.0c per share (2022: 40.0c), an increase of 63%.
Outlook
The Group's strong first half performance clearly demonstrates that its
strategy and business model are effective in delivering profitable market
share gains.
As a result, the Board's expectation, based on these latest financial results
together with recent internal forecasts, is that full year 2023 Group revenue
will now be slightly above $1.3bn, with profit before tax not less than $125m.
Trading results in the month of July 2023 have been in line with the Board's
expectations.
Paul Moody
Chairman
9 August 2023
Operating and Financial Review
Operating Review
Half year Half year
2023 2022
Revenue $m $m
North America 623.8 505.8
UK & Ireland 11.7 9.7
Total 635.5 515.5
Half year Half year
2023 2022
Operating profit $m $m
Direct Marketing operations 66.3 46.3
Head Office costs (2.5) (2.3)
Total 63.8 44.0
The results for the half year and prior half year are unaudited.
Performance overview
The strong demand patterns seen in the business as 2022 progressed continued
into the first half of 2023, producing further record results.
We flagged in our AGM Trading Update on 24 May 2023 that the total order count
for the first four months of 2023 was running 22% above the same period in
2022. These very strong demand numbers were anticipated in the context of weak
comparatives from the first quarter of 2022, a period that included residual
pandemic effects. By the end of June 2023 the year-to-date order count had
fallen to 18% above prior year, reflecting the more challenging prior year
comparatives in May and June. We expect that percentage increases in total
order activity over prior year will continue to moderate for the remainder of
the year.
In total, 1,047,000 orders were received in the first half of 2023. This
represents an increase of 18% against 886,000 in 2022. Importantly, we have
continued to attract new customers at an encouraging rate; in the first half
of 2023 we acquired 158,000 new customers, an 8% increase over the 146,000
acquired over the same period in 2022. Orders from retained customers were
stable, settling back into predictable cohorts and showing typical or even
slightly improved retention characteristics after the major disruption caused
by the pandemic. Average order values were up by 1% in 2023, contributing to
total demand revenue (value of orders received) 20% greater than the same
period in 2022.
These very encouraging numbers at the demand level laid a solid base for
significant gains in year-on-year financial performance. Group revenue for the
2023 half year was $635.5m (2022: $515.5m), an increase of 23%. Operating
profit for the period was $63.8m, an increase of 45% compared to $44.0m in the
first half of 2022.
Operating profit margin percentage for the Group increased into double digits
at 10.0% (2022: 8.5%). On a broad level, two major factors contributed to this
improvement:
· A strengthening in gross margin percentages due to changes in
product mix, less friction in the supply environment, and careful pricing
adjustments.
· Leverage from continuing favourable returns on marketing spend,
with our primary KPI, revenue per marketing dollar, at $8.22 (2022: $8.19).
The 4imprint direct marketing business model remains very cash generative,
with minimal working capital requirement and underlying operating cash flow
conversion of 152% in the period (H1 2022: 112%). Free cash flow of $80.8m was
generated in the period (H1 2022: $33.6m), contributing to a cash and bank
deposits balance at the 2023 half year of $74.5m (2 July 2022: $67.1m).
Operational highlights
Progress has been made in the following operational areas in the period.
· People. Our people are integral to our 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 ready for future profitable revenue growth.
Despite a tight labour market, we have been able to attract the high quality
talent required to service the increasing demand. We have continued steadily
with the development of our permanent 'hybrid' working environment for
office-based team members, improving the resilience of the business in the
process.
· Marketing. The development of, and investment in, the brand
component of our marketing has resulted in materially improved revenue per
marketing dollar as compared to historical norms, something that we always
believed would be the case over time. As the second half of the year unfolds
and we move further away from prior year comparatives that were influenced by
the pandemic, we will continue to follow our 'test, read, adjust' approach to
our marketing to identify the optimal mix.
· Supply. The supply chain position so far in 2023 stands in stark
contrast to the same timeframe in 2022. The first half of 2022 saw acute
pressure due to challenges around global logistics, inventory availability and
production capacity to keep up with demand. We relied on the deep
relationships that we have with our key tier 1 suppliers to negotiate these
supply chain issues as best we could. Thankfully, these challenges have now
largely been resolved, taking delays and friction out of the process and
enabling us to deliver a much more predictable service for our customers. In
addition, inflationary pressure on cost of product has receded along with
improving market conditions, vindicating the thoughtful approach to pricing
that has been such an important factor in enabling us to deliver the strong
customer acquisition and retention numbers described above.
· Screen-printing. Our new screen-print facility in Appleton,
Wisconsin, went live for production in April 2023. We have been able to
recruit the team members required for the new operation. Our intention is to
scale up further in the coming months to support our overall apparel
decoration capability.
· Oshkosh facilities. We are currently exploring options around a
further expansion at our distribution centre site in Oshkosh, Wisconsin. This
facility expansion will be aimed primarily at supporting the continued growth
of the apparel category of our product range. It is anticipated that detailed
plans will be finalised before the end of 2023, with the associated capital
investment expected to be primarily in 2024.
Summary
We remain confident that significant market share opportunity lies ahead.
Financial Review
Half year Half year
2023 2022
$m $m
Operating profit 63.8 44.0
Net finance income/(cost) 2.2 (0.1)
Profit before tax 66.0 43.9
Taxation (16.5) (10.5)
Profit for the period 49.5 33.4
The results for the half year and prior half year are unaudited.
The Group's operating result in the period, summarising expense by function,
was as follows:
Half year Half year
2023 2022
$m $m
Revenue 635.5 515.5
Gross profit 193.3 147.9
Marketing costs (77.3) (62.9)
Selling costs (22.7) (18.0)
Administration and central costs (28.5) (22.3)
Share option charges and related social security costs (0.5) (0.5)
Defined benefit pension scheme administration costs (0.5) (0.2)
Operating profit 63.8 44.0
Operating result
Following a record year in 2022, the first six months of 2023 saw continued
strong demand, particularly in the first quarter against a relatively weak,
pandemic-affected, 2022 comparative. This led to a total increase at the
demand revenue level (value of orders received) of 20% over 2022, including an
increase in average order value of 1%. Reported revenue for the period was
even higher at 23% above 2022, benefitting from faster order cycle times,
fewer order cancellations and lower claims/credits in a much more robust
supply chain environment.
The gross profit percentage of 30.4% has improved markedly from 28.7% for H1
2022. Revenue gains and much improved supply chain conditions over the period
have resulted in lower transportation costs, greater leverage over direct
labour costs, and a carefully managed balance between supplier cost increases
and customer price adjustments.
The step change in marketing productivity driven largely by investment in the
brand element of the marketing mix has been maintained into 2023, with
marketing costs representing a very efficient 12% of revenue (H1 2022: 12%),
producing revenue per marketing dollar of $8.22 (H1 2022: $8.19).
Selling, administration, and central costs together have increased 27% over H1
2022. This increase is mainly attributable to investment in people, most
notably customer service resource, and higher incentive compensation accruals
in line with trading performance.
These factors, when combined, demonstrate the financial leverage in the
business model, delivering material uplifts in both operating profit to $63.8m
(H1 2022: $44.0m) and operating margin to 10.0% (H1 2022: 8.5%).
Foreign exchange
The primary US dollar exchange rates relevant to the Group's results were as
follows:
Half year 2023 Half year 2022 Full year 2022
Period end Average Period end Average Period end Average
Sterling 1.27 1.23 1.20 1.30 1.20 1.24
Canadian dollars 0.76 0.74 0.77 0.79 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 $0.5m (H1 2022: $0.5m) 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 2015 Incentive Plan and replacement Deferred Bonus Plan
("DBP"); and (ii) charges in respect of the UK SAYE Scheme and US Employee
Stock Purchase Plan.
Current options and awards outstanding are 11,532 share options under the UK
SAYE scheme, 87,000 share options under the US Employee Stock Purchase Plan,
and 42,631 share awards under the 2015 Incentive Plan and DBP.
Net finance income/(cost)
Net finance income in the period was $2.2m (H1 2022: net finance cost $0.1m).
This comprises interest earned on cash deposits, lease interest charges under
IFRS 16, and the net finance income on the defined benefit pension plan assets
and liabilities. Improving deposit rates, particularly in the US where
interest rates have been steadily increasing, combined with significant cash
balances, have driven the improvement in the net interest position over the
prior period.
Taxation
The tax charge for the half year was $16.5m (H1 2022: $10.5m), giving an
effective tax rate of 25% (H1 2022: 24%). The tax charge relates principally
to taxation payable on profits earned in North America.
Earnings per share
Basic earnings per share was 176.2c (H1 2022: 118.9c). The increase reflects
the strong financial results in the period, a consistent effective tax rate,
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 declared an interim dividend per share of 65.0c, (2022: 40.0c),
an increase of 63%. In Sterling, the interim dividend per share will be 50.8p
(2022: 33.0p). The dividend will be paid on 15 September 2023 to Shareholders
on the register at the close of business on 18 August 2023.
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 accruals for several years. The Plan
has 120 pensioners and 202 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 (c.$4m) paid by the
Group after the date of these interim financial statements in early July 2023.
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 will cease 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 1 July 2023, the surplus of the Plan on an IAS 19 basis was $0.1m, compared
to a surplus of $1.2m at 31 December 2022. Gross Plan assets under IAS 19 were
$22.1m, and liabilities were $22.0m.
The change in the surplus is analysed as follows:
$m
IAS 19 surplus at 31 December 2022 1.2
Company contributions to the Plan 2.1
Company contributions to the Plan (buy-in premium shortfall) 4.0
Defined benefit pension scheme administration costs (0.5)
Pension finance income 0.1
Re-measurement loss due to changes in assumptions (0.7)
Return on scheme assets (excluding interest income and impact of buy-in (1.5)
policy)
Return on scheme assets (in relation to buy-in policy) (4.6)
IAS 19 surplus at 1 July 2023 0.1
The surplus reduced by $1.1m in the period. This was mainly the result of a
negative return on assets in the period and the net impact of entering the
buy-in arrangement discussed above.
The preliminary results of the triennial actuarial valuation of the Plan as at
30 September 2022 were used as the basis of the 2023 half year IAS 19
valuation. The triennial Plan valuation will be finalised in the second half
of the year.
Cash flow
The Group had cash and bank deposits of $74.5m at 1 July 2023 (2 July 2022:
$67.1m; 31 December 2022: $86.8m).
Cash flow in the period is summarised as follows:
Half year Half year
2023 2022
$m $m
Operating profit 63.8 44.0
Share option charges 0.5 0.4
Defined benefit pension scheme administration costs 0.5 0.2
Depreciation and amortisation 2.3 2.0
Lease depreciation 0.9 0.7
Change in working capital 32.7 4.5
Capital expenditure (3.5) (2.4)
Underlying operating cash flow 97.2 49.4
Tax paid (16.5) (9.2)
Net interest received 2.1 (0.1)
Consideration for business combination - (1.7)
Defined benefit pension scheme contributions (2.1) (2.2)
Own share transactions (0.4) (1.0)
Capital element of lease payments (0.7) (0.6)
Exchange and other 1.2 (1.0)
Free cash flow 80.8 33.6
Dividends to Shareholders (93.0) (8.1)
Net cash (outflow)/inflow in the period (12.2) 25.5
The Group generated underlying operating cash flow of $97.2m (H1 2022:
$49.4m), a conversion rate of 152% of operating profit. 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) and embroidery machinery.
Free cash flow improved by $47.2m to $80.8m (H1 2022: $33.6m). This is
attributable to the strong trading performance during the period and the
much-improved net working capital position. The 2022 final and special
dividends of $93.0m were paid to Shareholders in June 2023.
Balance sheet and Shareholders' funds
Net assets at 1 July 2023 were $92.5m, compared to $140.2m at 31 December
2022. The balance sheet is summarised as follows:
1 July 31 December
2023 2022
$m $m
Non-current assets 47.9 46.7
Working capital (16.1) 20.8
Cash and bank deposits 74.5 86.8
Lease liabilities (13.0) (13.7)
Pension asset 0.1 1.2
Other liabilities (0.9) (1.6)
Net assets 92.5 140.2
Shareholders' funds decreased by $47.7m since the 2022 year-end. The main
constituent elements of the change were retained profit in the period of
$49.5m, net of equity dividends paid to Shareholders of $(93.0)m.
The Group had a net negative working capital balance of $(16.1)m at 1 July
2023 (31 December 2022: net positive working capital balance $20.8m). The
elevated position at the 2022 year-end reflected the effects of global and
local supply chain issues, causing 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
payment of suppliers to agreed terms.
Financing and liquidity
Full details of the Board's balance sheet funding guidelines and capital
allocation priorities are set out on pages 37 and 38 of the 2022 Annual
Report. The Board retains the same guidelines in both areas.
The primary aim of these guidelines is to provide operational and financial
flexibility through economic cycles, to be able to invest in opportunities as
they arise, and to meet commitments to Shareholders through dividend payments
and residual contributions to the defined benefit pension plan.
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 2023.
The Group had cash and bank deposits of $74.5m at the period 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
period.
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.
A new critical accounting judgment in relation to the purchase of the bulk
annuity policy (buy-in arrangement) and an update to the pension assumptions
are detailed in note 4 to the interim condensed consolidated financial
statements.
Principal risks and uncertainties
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 on a top-down and bottom-up basis from many sources,
including internally, through the Board and operational and functional
management teams, 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 reviews the consolidated Group risk register and the mitigating
actions and controls at regular meetings 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.
The current principal risks and uncertainties that would impact the successful
delivery of the Group's strategic goals are set out on pages 42 to 49 of the
2022 Annual Report, a copy of which is available on the Group's investor
relations website at https://investors.4imprint.com
(https://investors.4imprint.com) . These are:
1. Macroeconomic conditions.
2. Markets & competition.
3. Effectiveness of key marketing techniques and brand development.
4. Business facility disruption.
5. Domestic supply and delivery.
6. Failure or interruption of information technology systems and
infrastructure.
7. Cyber threats.
8. Supply chain compliance & ethics.
9. Legal, regulatory, and compliance.
10. Climate change.
11. Products and market trends.
These risks have not changed materially since year-end. An update to the risk
environment in respect of the domestic supply and delivery risk is provided
below.
Domestic supply and delivery
Supply chain conditions, initially disrupted by the impact of the pandemic and
later compounded by challenges in the recruitment of staff by both the Group
and our supply partners, have improved significantly over the period. This has
led to shorter order cycle times, lower order cancellations and a significant
reduction to the elevated year-end working capital position arising from a
build-up of accrued revenue and inventory on orders in process.
Going concern statement
In adopting the going concern basis for preparing these condensed consolidated
financial statements, the Directors have carefully considered:
· The Group's strategy, market position and business model, as set
out in the Strategic Report section on pages 9 to 19 of the 2022 Annual
Report.
· The principal risks and uncertainties facing the Group, as
outlined in the Principal risks and uncertainties section of this Financial
Review.
· Information contained in this Financial Review concerning the
Group's financial position, cash flows and liquidity.
· Regular management reporting and updates from the Executive
Directors.
· Recent detailed financial forecasts and analysis for the period
to 28 December 2024.
Financial position
The Group had cash and bank deposits of $74.5m at 1 July 2023 (31 December
2022: $86.8m) and maintains a $20.0m working capital facility with its
principal US bank, JPMorgan Chase, N.A., which expires on 31 May 2025, as well
as an overdraft facility of £1.0m with its principal UK bank, Lloyds Bank
plc, which is available until 31 December 2023. Based on our forecast, we have
no requirement to draw on either of these facilities.
Financial modelling
We undertake regular forecasting and budgeting exercises which are reviewed
and approved by the Board. On an annual basis and as described in the
Viability statement in the Financial Review section on pages 38 to 40 of the
2022 Annual Report, we also model a distressed scenario based upon severe, but
plausible, downside demand assumptions to support our assessment of viability.
These forecasts have demonstrated the Group's ability to flex its marketing
and other costs to mitigate the impact of falls in revenue, whilst still
retaining flexibility to further reduce costs should the need arise.
Combined with a healthy cash and bank deposits position maintained in
accordance with our balance sheet funding guidelines, the Board considers the
Group to be in a strong position to withstand severe economic stress and to
take market share opportunities as they arise.
Going concern
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 over the period to 28 December 2024.
Accordingly, they continue to adopt the going concern basis in preparing these
condensed consolidated financial statements.
Kevin Lyons-Tarr David Seekings
Chief Executive Officer Chief Financial Officer
9 August 2023
Condensed Consolidated Income Statement
For the 26 weeks ended 1 July 2023
Half year Half year Full year
2023 2022 2022
Note Unaudited Unaudited Audited
$'000 $'000 $'000
Revenue 6 635,534 515,536 1,140,286
Operating expenses (571,733) (471,553) (1,037,384)
Operating profit 6 63,801 43,983 102,902
Finance income 2,344 108 1,162
Finance costs (245) (205) (425)
Pension finance income 51 27 67
Net finance income/(cost) 2,150 (70) 804
Profit before tax 65,951 43,913 103,706
Taxation 7 (16,488) (10,539) (23,563)
Profit for the period 49,463 33,374 80,143
Cents Cents Cents
Earnings per share
Basic 8 176.23 118.90 285.57
Diluted 8 175.71 118.67 284.95
Condensed Consolidated Statement of Comprehensive Income
For the 26 weeks ended 1 July 2023
Half year Half year Full year
2023 2022 2022
Unaudited Unaudited Audited
$'000 $'000 $'000
Profit for the period 49,463 33,374 80,143
Other comprehensive income
Items that may be reclassified subsequently to the income statement:
Currency translation differences 1,452 (1,269) (1,614)
Items that will not be reclassified subsequently to the income statement:
Return on pension scheme assets (excluding interest income and impact of (1,548) (11,381) (16,374)
buy-in policy)
Re-measurement loss on buy-in policy (note 10) (4,591) - -
Re-measurement (losses)/gains on post-employment obligations (727) 8,201 11,916
Tax relating to components of other comprehensive income 1,193 560 1,756
Other comprehensive income for the period, net of tax (4,221) (3,889) (4,316)
Total comprehensive income for the period, net of tax 45,242 29,485 75,827
Condensed Consolidated Balance Sheet
At 1 July 2023
1 July 2 July 31 Dec
2023 2022 2022
Unaudited Unaudited Audited
Note $'000 $'000 $'000
Non-current assets
Property, plant and equipment 30,791 25,765 29,255
Intangible assets 770 1,002 957
Goodwill 1,010 1,010 1,010
Right-of-use assets 12,256 11,153 13,103
Deferred tax assets 3,034 579 2,381
Retirement benefit asset 10 53 717 1,234
47,914 40,226 47,940
Current assets
Inventories 18,332 22,726 18,090
Trade and other receivables 81,397 82,030 87,511
Current tax debtor - 1,331 -
Other financial assets - bank deposits - - 34,913
Cash and cash equivalents 74,540 67,096 51,839
174,269 173,183 192,353
Current liabilities
Lease liabilities 11 (1,423) (1,246) (1,435)
Trade and other payables (115,807) (96,981) (84,761)
Current tax creditor (512) - (1,205)
(117,742) (98,227) (87,401)
Net current assets 56,527 74,956 104,952
Non-current liabilities
Lease liabilities 11 (11,610) (10,370) (12,315)
Deferred tax liabilities (358) (1,022) (357)
(11,968) (11,392) (12,672)
Net assets 92,473 103,790 140,220
Shareholders' equity
Share capital 18,842 18,842 18,842
Share premium reserve 68,451 68,451 68,451
Other reserves 5,858 4,751 4,406
Retained earnings (678) 11,746 48,521
Total Shareholders' equity 92,473 103,790 140,220
Condensed Consolidated Statement of Changes in Shareholders' Equity
(unaudited)
For the 26 weeks ended 1 July 2023
Retained earnings
Share Other
capital Share reserves
premium
reserve
Own Profit Total
shares and loss equity
$'000 $'000 $'000 $'000 $'000 $'000
Balance at 2 January 2022 18,842 68,451 6,020 (851) (9,496) 82,966
Profit for the period 33,374 33,374
Other comprehensive income (1,269) (2,620) (3,889)
Total comprehensive income (1,269) 30,754 29,485
Proceeds from options exercised 12 12
Own shares utilised 825 (825) -
Own shares purchased (980) (980)
Share-based payment charge 442 442
Dividends (8,135) (8,135)
At 2 July 2022 18,842 68,451 4,751 (1,006) 12,752 103,790
Profit for the period 46,769 46,769
Other comprehensive income (345) (82) (427)
Total comprehensive income (345) 46,687 46,342
Proceeds from options exercised 332 332
Own shares utilised 366 (366) -
Own shares purchased (230) (230)
Share-based payment charge 373 373
Deferred tax relating to share options 52 52
Deferred tax relating to UK tax losses 148 148
Dividends (10,587) (10,587)
At 31 December 2022 18,842 68,451 4,406 (870) 49,391 140,220
Profit for the period 49,463 49,463
Other comprehensive income 1,452 (5,673) (4,221)
Total comprehensive income 1,452 43,790 45,242
Proceeds from options exercised 67 67
Own shares utilised 607 (607) -
Own shares purchased (501) (501)
Share-based payment charge 486 486
Dividends (93,041) (93,041)
Balance at 1 July 2023 18,842 68,451 5,858 (764) 86 92,473
Condensed Consolidated Cash Flow Statement
For the 26 weeks ended 1 July 2023
Half year Half year Full year
2023 2022 2022
Unaudited Unaudited Audited
Note $'000 $'000 $'000
Cash flows from operating activities
Cash generated from operations 12 98,381 49,639 97,040
Tax paid (16,515) (9,151) (20,755)
Finance income received 2,376 108 1,130
Finance costs paid (20) (35) (33)
Lease interest (225) (176) (398)
Net cash generated from operating activities 83,997 40,385 76,984
Cash flows from investing activities
Purchases of property, plant and equipment (3,580) (2,263) (7,719)
Purchases of intangible assets - (179) (341)
Proceeds from sale of property, plant and equipment 124 3 49
Consideration for business combination - (1,700) (1,700)
Decrease/(increase) in current asset investments - bank deposits 36,151 - (35,003)
Net cash used in investing activities 32,695 (4,139) (44,714)
Cash flows from financing activities
Capital element of lease payments (717) (584) (1,225)
Proceeds from share options exercised 67 12 344
Purchases of own shares (501) (980) (1,210)
Dividends paid to Shareholders 9 (93,041) (8,135) (18,722)
Net cash used in financing activities (94,192) (9,687) (20,813)
Net movement in cash and cash equivalents 22,500 26,559 11,457
Cash and cash equivalents at beginning of the period 51,839 41,589 41,589
Exchange gains/(losses) on cash and cash equivalents 201 (1,052) (1,207)
Cash and cash equivalents at end of the period 74,540 67,096 51,839
Notes to the Interim Financial Statements
1 General information
4imprint Group plc 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.
These interim condensed consolidated financial statements, which were
authorised for issue in accordance with a resolution of the Directors on 8
August 2023, do not comprise statutory accounts within the meaning of Section
434 of the Companies Act 2006. Statutory accounts for the period ended 31
December 2022 were approved by the Board of Directors on 14 March 2023 and
delivered to the Registrar of Companies. The report of the auditors on those
accounts was unqualified, did not contain an emphasis of matter paragraph and
did not contain any statement under Section 498 of the Companies Act 2006.
The financial information contained in this report has neither been audited
nor reviewed by the auditors, pursuant to Auditing Practices Board guidance on
Review of Interim Financial Information.
2 Basis of preparation
These interim condensed consolidated financial statements for the 26 weeks
ended 1 July 2023 have been prepared, in US dollars, in accordance with the
Disclosure and Transparency Rules of the Financial Conduct Authority and IAS
34 'Interim Financial Reporting', as adopted by the United Kingdom, and should
be read in conjunction with the Group's financial statements for the period
ended 31 December 2022, which were prepared in accordance with UK-adopted
International Accounting Standards.
As outlined in the Going concern section of the Financial Review, the
Directors consider it appropriate to continue to adopt the going concern basis
in preparing these interim condensed consolidated financial statements.
The tax charge for the interim period is accrued based on the best estimate of
the tax charge for the full financial year.
3 Accounting policies
The accounting policies applied in these interim condensed consolidated
financial statements are consistent with those followed in the preparation of
the Group's annual consolidated financial statements for the period ended 31
December 2022, as described in those annual financial statements. New
accounting standards applicable for the first time in this reporting period
have no impact on the Group's results or balance sheet.
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 Group has applied the
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.
4 Estimates and judgments
The critical accounting judgments and key assumptions and sources of
estimation uncertainty were the same as those applied to the Group's annual
consolidated financial statements for the period ended 31 December 2022,
except for the new critical accounting judgment in relation to the purchase of
a bulk annuity policy and an update to the pensions assumptions, as detailed
below.
Critical accounting judgments
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
funds most of 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.
Key assumptions and sources of estimation uncertainty
Pensions
As detailed in note 10, the Group sponsors a defined benefit pension plan (the
"Plan") closed to new members and future accrual. Most of the obligations of
the plan are funded by a bulk purchase annuity policy, the fair value of
which, on an IAS 19 basis, matches the present value of the obligations being
covered. Period-end valuation of the obligations of the Plan requires a number
of significant actuarial assumptions to be made, including inflation rate,
discount rate and mortality rates. Small changes in assumptions can have a
significant impact on the amounts recorded in other comprehensive income and
on the pension obligations and annuity asset in the balance sheet.
Sensitivities to changes in these assumptions are disclosed in note 10.
5 Financial risk management
The Group's activities expose it to a variety of financial risks: currency
risk; credit risk; liquidity risk; and capital risk. These interim condensed
consolidated financial statements do not include all financial risk management
information and disclosures required in the annual financial statements; they
should be read in conjunction with the Group's annual consolidated financial
statements for the period ended 31 December 2022. There have been no changes
in any financial risk management policies since that date.
6 Segmental analysis
The chief operating decision maker has been identified as the Board of
Directors and the segmental analysis is presented based on the Group's
internal reporting to the Board.
At 1 July 2023, the Group had 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.
Half year Half year 2022 Full year 2022
Revenue 2023 $'000 $'000
$'000
North America 623,797 505,864 1,120,517
UK & Ireland 11,737 9,672 19,769
Total Group revenue 635,534 515,536 1,140,286
Profit Half year 2023 Half year 2022 Full year 2022
$'000 $'000 $000
North America 66,290 46,420 107,965
UK & Ireland 31 (132) (54)
Operating profit from Direct Marketing operations 66,321 46,288 107,911
Head Office costs (2,520) (2,305) (5,009)
Operating profit 63,801 43,983 102,902
Net finance income/(cost) 2,150 (70) 804
Profit before tax 65,951 43,913 103,706
Other segmental information
Assets Liabilities
1 July 2023 2 July 2022 31 Dec 1 July 2 July 2022 31 Dec
$'000 $'000 2022 2023 $'000 2022
$'000 $'000 $'000
North America 139,678 140,731 146,401 (120,496) (105,346) (95,817)
UK & Ireland 4,381 3,948 3,175 (4,446) (3,798) (3,345)
Head Office 78,124 68,730 90,717 (4,768) (475) (911)
222,183 213,409 240,293 (129,710) (109,619) (100,073)
Head Office assets include other financial assets - bank deposits, cash and
cash equivalents, deferred tax assets and the retirement benefit asset. Head
Office liabilities include other payables and accruals.
7 Taxation
The taxation rate was 25%, based on the estimated rate for the full year (H1
2022: 24%; FY 2022: 23%). Tax paid in the period was $16.5m (H1 2022: $9.2m;
FY 2022: $20.8m).
The deferred tax assets/liabilities at 1 July 2023 have been calculated at a
tax rate of 25% (19% in respect of deferred tax items that were expected to
reverse before 1 April 2023 for H1 2022 and FY 2022, and 25% in respect of
deferred tax items expected to reverse after 1 April 2023 for H1 2022 and FY
2022) for UK deferred tax items, and 25% (H1 2022: 25%; FY 2022: 25%) in
respect of US deferred tax items.
8 Earnings per share
Basic and diluted
The basic and diluted earnings per share are calculated based on the following
data:
Half year Half year Full year
2023
2022
2022
$'000 $'000 $'000
Profit after tax 49,463 33,374 80,143
Half year Half year Full year
2023 2022
2022
Number Number Number
000's 000's 000's
Basic weighted average number of shares 28,068 28,070 28,064
Adjustment for employee share options 82 53 61
Diluted weighted average number of shares 28,150 28,123 28,125
Cents Cents Cents
Basic earnings per share 176.23 118.90 285.57
Diluted earnings per share 175.71 118.67 284.95
The basic weighted average number of shares excludes shares held in the
4imprint Group plc employee benefit trust. The effect of this is to reduce the
average by 17,444 (H1 2022: 15,931; FY 2022: 21,632).
9 Dividends Half year Half year Full year
2023 2022 2022
$'000 $'000 $'000
Dividends paid in the period 93,041 8,135 18,722
Cents Cents Cents
Dividends per share declared - Interim 65.00 40.00 40.00
- Final - - 120.00
- Special - - 200.00
The interim dividend for 2023 of 65.00c per ordinary share (interim 2022:
40.00c; final 2022: 120.00c; special 2022: 200.00c) will be paid on 15
September 2023 to Shareholders on the register at the close of business on 18
August 2023.
10 Employee pension schemes
The Group operates defined contribution pension schemes for its UK and US
employees. The regular contributions are charged to the income statement as
they are incurred.
The Group also sponsors a UK defined benefit pension scheme (the "Plan") which
is closed to new members and future accrual. The funds of the scheme are held
in trust, administered by a corporate Trustee, and are independent of the
Group's finances.
The preliminary results of the triennial actuarial valuation of the Plan as at
30 September 2022 have been updated on an approximate basis to 1 July 2023 in
accordance with IAS 19. There have been no changes in the valuation
methodology adopted for this period's disclosures compared to previous
periods' disclosures.
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 (c.$4m)
paid by the Group after the date of these interim financial statements in
early 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.
The principal assumptions applied by the actuaries at 1 July 2023 were:
Half year Half year Full year
2023 2022 2022
Rate of increase in pensions in payment 3.12% 3.10% 3.08%
Rate of increase in deferred pensions 2.71% 2.60% 2.66%
Discount rate 5.26% 3.55% 4.82%
Inflation assumption - RPI 3.21% 3.20% 3.16%
Inflation assumption - CPI 2.71% 2.60% 2.66%
The mortality assumptions adopted at 1 July 2023 imply the following life
expectancies at age 65:
Half year Half year Full year
2023 2022 2022
Years Years Years
Male currently aged 45 22.4 22.3 22.3
Female currently aged 45 24.3 24.3 24.2
Male currently aged 65 21.4 21.3 21.3
Female currently aged 65 23.1 23.1 23.1
The movement on the net retirement benefit asset, and the value of the gross
scheme assets and liabilities, are shown in the Financial Review.
The sensitivities on key actuarial assumptions at the end of the period were:
Change in assumption Change in defined benefit obligation
Discount rate Decrease of 1.00% +12.9%
Rate of inflation Increase of 1.00% +4.5%
Rate of mortality Increase in life expectancy of one year +2.8%
11 Leases
The Group leases office and industrial space in Oshkosh and Appleton,
Wisconsin. The movement in lease liabilities in the period is shown below:
Half year 2023 Half year 2022 Full year 2022
$'000 $'000 $'000
At start of period 13,750 12,089 12,089
Additions - 111 2,886
Interest charge 225 176 398
Lease interest payments - operating cash flow (225) (176) (398)
Lease capital payments - financing cash flow (717) (584) (1,225)
At end of period 13,033 11,616 13,750
12 Cash generated from operations
Half year Half year Full year
2023 2022 2022
$'000 $'000 $'000
Profit before tax 65,951 43,913 103,706
Adjustments for:
Depreciation of property, plant and equipment 2,081 1,757 3,594
Amortisation of intangible assets 189 216 424
Amortisation of right-of-use assets 847 683 1,508
(Profit)/loss on disposal of property, plant and equipment (118) 3 84
Share option charges 486 442 815
Net finance (income)/cost (2,150) 70 (804)
Defined benefit pension administration charge 470 175 521
Contributions to defined benefit pension scheme (2,121) (2,202) (4,367)
Changes in working capital:
(Increase)/decrease in inventories (277) (2,167) 2,469
Decrease/(increase) in trade and other receivables 3,803 (18,587) (24,164)
Increase in trade and other payables 29,220 25,336 13,254
Cash generated from operations 98,381 49,639 97,040
13 Capital commitments
The Group had capital commitments contracted but not provided for in these
financial statements for property, plant and equipment of $1.6m (2 July 2022:
$4.1m; 31 December 2022: $2.7m).
14 Related party transactions
Transactions and balances between the Company and its subsidiaries have been
eliminated on consolidation. The Group did not participate in any related
party transactions with parties outside of the Group.
15 Post balance sheet events
On 25 July 2023, the Company issued 87,000 ordinary shares for a consideration
of £1.9m to satisfy option exercises under the 2021 US Employee Stock
Purchase Plan. Full details of the Company's share option schemes are given in
notes 22 and 23 of the Company's Annual Report and Accounts 2022.
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 users' understanding of the business.
Definitions of the Group's APMs can be found on pages 142 and 143 of the 2022
Annual Report.
Reconciliations of the free cash flow, capital expenditure, underlying
operating cash flow, and cash and bank deposits APMs to their closest IFRS
measures are provided below:
Half year 2023 Half year 2022
$m $m
Net movement in cash and cash equivalents 22.5 26.6
Less: Decrease in current asset investments - bank deposits (36.1) -
Less: Exchange gain on decrease in current asset investments - bank deposits 1.2 -
Add back: Dividends paid to Shareholders 93.0 8.1
Add back: Exchange gains on cash and cash equivalents 0.2 (1.1)
Free cash flow 80.8 33.6
Half year 2023 Half year 2022
$m $m
Purchase of property, plant and equipment (3.6) (2.2)
Purchase of intangible assets - (0.2)
Proceeds from sale of property, plant and equipment 0.1 -
Capital expenditure (3.5) (2.4)
Half year 2023 Half year 2022
$m $m
Cash generated from operations 98.4 49.6
Add back: Contributions to defined benefit pension scheme 2.1 2.2
Add back: Profit on disposal of property, plant and equipment 0.2 -
Less: Purchases of property, plant and equipment and intangible assets (3.6) (2.4)
Add back: Proceeds from sale of property, plant and equipment 0.1 -
Underlying operating cash flow 97.2 49.4
1 July 2 July 31 Dec
2023 2022 2022
$m $m $m
Cash and cash equivalents 74.5 67.1 51.9
Other financial assets - bank deposits - - 34.9
Cash and bank deposits 74.5 67.1 86.8
Statement of Directors' Responsibilities
The Directors confirm that, to the best of their knowledge, these interim
condensed consolidated financial statements have been prepared in accordance
with IAS 34 as adopted by the United Kingdom and that the interim management
report includes a fair review of the information required by DTR 4.2.7 and
4.2.8, namely:
· An indication of the important events that have occurred during
the first half of the year and their impact on the interim condensed
consolidated financial statements, and a description of the principal risks
and uncertainties for the remaining six months of the financial year; and
· Material related party transactions in the first half of the year
and any material changes in the related party transactions described in the
last annual report.
The Directors of 4imprint Group plc are as listed in the Group's Annual Report
and Accounts 2022.
By order of the Board
Kevin Lyons-Tarr David Seekings
Chief Executive Officer Chief Financial Officer
9 August 2023
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