Full Year Results 2017 Highlights Kevin Lyons-Tarr, CEO Full Year - PDF document

Full Year Results 2017

Highlights Kevin Lyons-Tarr, CEO Full Year Results 2017 1

Highlights Underlying* profit Underlying* Group revenue before tax basic EPS $ 627.52 m $ 42.46 m 108.02 c  12%  9%  11% Proposed total regular Proposed supplementary Net cash dividend dividend $ 30.77 m 58.10 c 60.00 c  11% ($)  2% (£) *Underlying is before share option related charges, defined benefit pension charges and exceptional items Full Year Results 2017 2

Financial Review David Seekings, CFO Full Year Results 2017 3

Group Income Statement (Underlying) 2016 2017 $'000 $'000 % • Revenue +12% Revenue 627,518 558,223 12% • H1 +10.6%; H2 +14.1% • US $608.0m; UK $19.52m Gross profit 184,095 11% 205,219 32.70% Gross profit % 32.98% • Gross profit % remains within a tight range Marketing costs (96,703) 14% (110,644) Selling costs (23,166) 8% (24,995) • Marketing investment Admin & central costs (27,000) (25,849) 4% continues to drive growth 38,377 11% Underlying operating profit 42,580 • Admin & central includes UK 6.79% Operating margin 6.87% Head Office costs: $3.1m Interest (24) (122) (2016:$3.9m) Underlying profit before tax 42,458 38,353 11% • Operating margin % remains within target range Underlying EPS 108.02c 99.01c 9% Full Year Results 2017 4

Group Income Statement (non-operating) 2017 2016 • Share option charge relates to $'000 2015 Incentive plan and 2016 $'000 US & UK SAYE schemes Underlying profit before tax 38,353 42,458 • Exceptional charge is pension Share option related charges (551) (430) related. 2018 expected to be Exceptional items (2,940) (454) nil Defined benefit pension admin costs (311) (291) Pension finance charges (521) (503) • DB pension admin costs paid by the scheme 34,151 Profit before tax 40,659 • Effective tax rate (ETR) 29%, Tax (11,734) (9,672) (2016: 28%) 24,479 Profit after tax 28,925 • ETR % expected to drop to low 20s in 2018 Basic EPS 103.15c 87.27c • Basic EPS +18% ; much lower exceptional charge Full Year Results 2017 5

Cash Flow 2016 2017 $'000 $'000 At start of period 21,683 18,381 • Settled depreciation and Underlying operating profit 38,377 42,580 capex profiles Depreciation and amortisation 2,512 2,389 Change in working capital 6,282 (457) • Tight control over working Capital expenditure (3,267) (2,359) capital. 2016 inflow caused by 43,781 Operating cash flow 42,276 timing around 2015 year end Contributions to defined benefit pension (3,674) (17,354) • 99% cash conversion Interest (23) (122) Net tax paid (9,423) (12,751) • Pensioner buy-out completed Own share transactions (1,359) (270) Exceptional items (57) (172) • Purchase of own shares by Exchange and other (1,096) 616 EBT in 2017 15,443 Free cash flow 24,929 • DPS +11% Dividends to Shareholders (12,141) (15,845) • Dividend cover 1.86x 3,302 Net cash inflow in the period 9,084 (excluding supplementary) At end of period 30,767 21,683 Full Year Results 2017 6

Balance Sheet 2016 2017 $'000 $'000 • Low fixed capital requirements Fixed assets 19,967 20,020 Deferred tax asset 5,912 5,030 • Efficient working capital profile 25,050 25,879 • Pension deficit now stable and Inventories 4,179 5,356 reducing Receivables 39,766 46,309 • De-risking exercise Payables (40,363) (47,675) complete • Agreed contribution 3,990 3,582 schedule Current tax 34 472 • ROCE 85% (2016: 82%) Deferred tax liability (1,601) (763) Other liabilities (133) (146) Net cash 21,683 30,767 Pension deficit (19,290) (18,106) 12,224 693 Net assets 29,325 42,093 Full Year Results 2017 7

Operational Review Kevin Lyons-Tarr, CEO Full Year Results 2017 8

Market Beating Growth Growth History - 4imprint v Market • North America revenue 650 50 627.5 4imprint US & Canada Revenue ($m) 558.2 $608m, +12% 600 45 550 497.2 40 500 • Industry ~3% (US) Market size $bn 415.8 35 450 400 332.9 • UK revenue £15m, +16% 30 350 25 26.8 26.0 300 25.4 • 1,185k total orders received, 24.9 20 23.7 250 +12% 200 15 2013 2014 2015 2016 2017 • New customer orders +5%; more than 250k new customers acquired No. of orders recieved ('000) • Existing customer orders 369 351 +16% 332 New 282 816 227 703 Existing 613 506 410 2013 2014 2015 2016 2017 Full Year Results 2017 9

Marketing Effectiveness US and Canada Acquired and Retention % 50% 70,000 • Total marketing spend +14% at $110.6m, (2016 $96.7m) 45% 60,000 40% • Marketing mix continues to 50,000 35% evolve 30% 40,000 25% • Online now 45% of total 30,000 20% marketing cost; 29% increase 15% 20,000 in spend over 2016 10% 10,000 • Catalogue circulation +4% 5% 0% 0 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 • Blue Box™ programme 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 remains effective: >2 million Customers Acquired % Retained 12 months % Retained 24 months pieces mailed in 2017 Revenue/Marketing $ • Testing of radio advertising began H2 2017 2017 5.67 2016 5.77 • Revenue per marketing dollar 2015 5.92 consistent with strategy 2014 6.01 2013 6.08 Full Year Results 2017 10

Evolution of Strategy Kevin Lyons-Tarr, CEO David Seekings, CFO Full Year Results 2017 11

Strategic Framework 2012 to 2017 • Focus on Direct Marketing as the Group’s core business  Attractive market opportunity; substantial, highly fragmented markets  Effective business model; organic revenue growth driven by innovative, disciplined marketing  Target set to double revenue from 2012-2016; achieved  Commitment to organic revenue growth reaffirmed in 2017 • Capital Allocation  Pension de-risking first priority  Use of proceeds of sale of non-core businesses and increasing free cash flow from operations  Culminated in full pensioner buy-out at the end of 2016  Regular dividends growing in line with increasing profitability  Unencumbered financial base for the future Full Year Results 2017 12

Strategic Framework 2018-2022 • Continued focus on organic revenue growth and market leadership  Existing markets remain fragmented and attractive  Direct marketing model remains relevant and effective  $1bn revenue target by 2022 • Evolution and diversification of our marketing portfolio  Addition of a 4imprint brand awareness component  Includes traditional broadcast media and expansion of advertising presence in digital media  Investment measured over longer time horizon, using familiar ‘test, read, adjust’ approach  Opportunity to increase ‘top of mind’ awareness in our target market • Investing for growth  Initial P&L investment is incremental; not a reallocation of funds away from proven marketing activities  2018 project cost around $7m set in context of $120m+ overall marketing budget  Investment phase likely to result in 2018 operating profit flat against 2017 ; profit growth resumes as branding initiative integrated into marketing portfolio  Business remains highly cash-generative throughout Full Year Results 2017 13

Balance Sheet & Funding • Strong financial foundation  Cash balance $30.8m  Pension demands now predictable and small  Robust and reliable free cash flow from operations • Align funding with strategic objectives  Stable, secure and flexible balance sheet through cycle  Retain a net cash position; no intention to leverage the balance sheet • Financial and operational flexibility  Continued investment in the business through different economic cycles  Act swiftly as other growth opportunities arise  Meet dividend and pension commitments Full Year Results 2017 14

Capital Allocation Guidelines • Cash utilisation 2011-2017 → Net debt 1 Jan 2011: ($0.37m) Post-tax free cash Disposal of non- Pension de-risking Regular dividend Other (own share flow core businesses & contributions payments transactions & FX) + $132.12m + $48.95m - $82.11m - $64.23m - $3.59m → Net cash 30 Dec 2017 $30.77m • Future capital allocation principles Organic growth Regular dividend Residual legacy Mergers & Other Shareholder initiatives payments pension funding acquisitions distributions - Capital or P&L - Increase broadly - 5 year cash - Not a near term - Subject to net - Market share in line with EPS commitment priority cash balance opportunities - Regular semi- - Further de-risking - Opportunities requirement - Existing markets annual payments possible supporting - Supplementary organic growth dividend most likely Full Year Results 2017 15

Outlook Our business operations are firmly established in attractive markets. The Group is financially strong, and we have exciting plans for the future. Trading activity in the first few weeks of 2018 has been encouraging. Full Year Results 2017 16

Appendices Full Year Results 2017 17