[PPT] - Full Year Results 2019 Highlights Kevin Lyons Tarr, CEO Full Year PowerPoint Presentation

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Full Year Results 2019

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Full Year Results 2019

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Kevin Lyons‐Tarr, CEO

Highlights

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Highlights

Group revenue Underlying* profit before tax

2

Underlying* basic EPS Legacy pension commitments Net cash

$860.84m

17%

$54.68m

20%

154.41c

 19%

£7.5m (c.$10m)



$41.14m

*Underlying is before defined benefit pension charges and exceptional items

Proposed total dividend

84.00c

20% ($) 25% (£)



Full Year Results 2019

‘lump sum’ deficit reduction contribution May 2020

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Coronavirus (COVID‐19) update

Full Year Results 2019

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4imprint’s Supply Chain – Reminder

Around 60% of blank products originate in China
Many factories in different provinces in China, each typically specialising in a product category
Chinese product factories effectively ‘supply our suppliers’; blanks imported in bulk by our domestic suppliers,

who keep inventory

4imprint customer orders imprinted by domestic suppliers and drop‐shipped

Supply Chain Impact

Most domestic suppliers at peak inventory due to timing of Lunar New Year, therefore minimal impact so

far

Potential supply disruption primarily linked to length of delay in resumption of production to allow for

inventory replenishment as the year progresses

Production is resuming, but situation still very fluid, depending on:
Geographical location
Workforce profile and requirements
Raw material availability
Transit restrictions (returning after New Year)

We are actively working with all parties in the supply chain to plan for, and where possible to mitigate, adverse supply effects at all levels. We are also closely monitoring the developing situation to prepare for other potential impacts caused by the spread of the virus globally.

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Full Year Results 2019

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David Seekings, CFO

Financial Review

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Group Income Statement

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Revenue +17%

̶ US $839.3m; UK $21.5m ̶ H1 +16%; H2 +17% ̶ Growth all organic

Gross profit % stable as expected
Marketing +18%

̶ Integration and expansion of brand component ̶ Marketing mix evolving ̶ Strong overall yield on marketing

Operational gearing from:

− Selling costs (mainly payroll) − Admin (includes investment in management/other resource)

Central costs: $3.5m (2018: $3.6m)
Operating margin % stable and firmly

within target range

2018 exceptional item pension‐related
Effective tax rate 21% (2018: 20%)
EPS increase mainly driven by operating

performance

Full Year Results 2019

2019 2018

$'000 $'000

Revenue 860,844 738,418

17%

Gross profit 275,320 236,188

17% Gross profit % 31.98% 31.99%

Marketing costs (154,310) (131,232)

18%

Selling costs (31,037) (27,850)

11%

Admin & central costs (35,092) (30,928)

13%

Share option related charges (949) (819)

16%

Underlying operating profit 53,932 45,359

19% Operating margin 6.27% 6.14%

Interest 751 227 Underlying profit before tax 54,683 45,586

20%

Exceptional items

(721)

Defined benefit pension admin costs (312) (316) Pension finance charges (378) (403) Profit before tax 53,993 44,146

22%

Tax (11,276) (8,952) Profit after tax 42,717 35,194

21%

Underlying basic EPS 154.41c 129.77c

19%

Basic EPS 152.42c 125.61c

21%

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Cash Flow

Full Year Results 2019

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96% operating cash conversion
IFRS 16 adopted; no cash implication
Capital expenditure includes $5m for

Oshkosh DC expansion

Working capital requirements remain

modest

DB pension contributions in line with

current agreement

Tax paid is US Federal and State
Own share transactions relate to EBT

share purchases net of proceeds from

ptions exercised
Supplementary dividend of 60c per

share ($16.3m) paid May 2018

Dividend cover 1.84x

2019 2018

$'000 $'000

At start of period 27,484 30,767 Underlying operating profit 53,932 45,359 Share option non-cash charges 928 808 Depreciation and amortisation 2,785 2,645 Amortisation of right-of-use assets 1,499

Change in working capital

697 (3,184) Capital expenditure (8,178) (2,855) Operating cash flow 51,663 42,773 Contributions to defined benefit pension (3,593) (3,932) Interest 751 227 Net tax paid (10,318) (7,844) Own share transactions (2,567) (465) Capital element of lease payments (1,687)

Exchange and other

62 (1,058) Free cash flow 34,311 29,701 Dividends to Shareholders (20,659) (32,984) Net cash inflow/(outflow) in the period 13,652 (3,283) At end of period 41,136 27,484

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Balance Sheet

Full Year Results 2019

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Cash $41.14m; no debt
DC expansion cost of $5m in fixed

assets

Working capital profile flat as expected
IFRS 16 ‘Leases’ implemented
Modified retrospective approach

applied

Minimal effect; ‘grossing‐up’
ROCE 87% (2018: 84%)
Pension update
Legacy defined benefit scheme;

closed to new members and future accruals for many years

66% funded on IAS 19 basis
Significant developments in

regulatory environment

Buy‐out objective agreed ‐ 5 year

timeframe

New schedule of deficit recovery

contributions agreed with Trustee including £7.5m (c.$10.0m) ‘lump sum’ contribution in May 2020

2019 2018

$'000 $'000

Fixed assets 25,521 20,096 Right-of-use assets 1,985

Deferred tax assets

4,338 5,636 31,844 25,732 Inventories 11,456 9,878 Receivables 52,899 46,228 Payables (59,209) (50,252) 5,146 5,854 Current tax 140 144 Deferred tax liabilities (968) (931) Cash 41,136 27,484 Lease liabilities (2,045)

Pension deficit

(12,305) (15,016) 25,958 11,681 Net assets 62,948 43,267

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Kevin Lyons‐Tarr, CEO

Full Year Results 2019

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Operational Review

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Market Beating Growth

Full Year Results 2019

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North America revenue $839.3m,

+17%

UK revenue £16.9m, ‐6%; orders

flat

Industry ~+5% (US)
1,587k total orders received, +14%
New customer orders +9%, (2018:

+14%), more than 297k new customers acquired

Existing customer orders +17%

613 703 816 969 1,130 332 351 369 420 457 2015 2016 2017 2018 2019

No. of orders received ('000)

New Existing

497.2 558.2 627.5 738.4 860.8 25.4 26.0 26.8 28.1 28.8

15 20 25 30 35 40 45 50 200 250 300 350 400 450 500 550 600 650 700 750 800 850 900

2015 2016 2017 2018 2019

Market size $bn 4imprint US & Canada Revenue ($m)

Growth History - 4imprint v Market

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5.92 5.77 5.67 5.63 5.58 2015 2016 2017 2018 2019

Revenue/Marketing $

Marketing Effectiveness

Full Year Results 2019

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Total marketing spend +18% at

$154.3m, (2018: $131.2m)

Overall marketing mix evolving;

brand component growing rapidly,

nline and print adjusted as a

result

Retention improvement driven by:
Blue Box™ programme: >2.5

million pieces mailed in 2019

Quality of customers acquired

as a result of shift in marketing channels

Revenue per marketing dollar in

line with our expectations

10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 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 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

US and Canada Acquired and Retention %

Comb % Retained 12 months % Retained 24 months

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Investment in the business

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Full Year Results 2019

DC expansion completed in August 2019, on time and within

$5m budget

Entire facility now > 300,000 sq. ft.
Continued capital investment in apparel decorating capability:
Apparel growth still outpacing other product categories
More than 100,000 embroidery orders in 2019; 4.7m units

in total

Apparel decoration investment will be extended in 2020 to

include direct to garment (DTG) printing capability

Oshkosh office space requirements under review
Aim to confirm long‐term solution at half year
Existing facility available on ‘holdover’ lease; enough capacity

to absorb growth until early 2021

2020 capex budget includes:
$4.7m for further embroidery/DTG equipment
$3.2m in infrastructure and equipment to support growth at

Oshkosh office and distribution facilities

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Private Label Products

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Full Year Results 2019

‘Outdoors’ brand
>$20m sales in 2019
Cross‐category expansion from outerwear to:
Blankets
Coolers
Drinkware
Backpacks
Accessories
Further products in 2020, including chairs, bags, garments
Brand began in drinkware – colourful,

affordable

c. $4m sales in 2019
Expansion plans, including:
Metal drinkware (within category)
Cooler bags (cross‐category)

Good progress with private label brands Planned launch of two more private label brands later in 2020

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Outlook

Trading results in the first two months of 2020 have been in line with the Board’s expectations. We have a clear strategy and a focused business model geared towards a market

pportunity that remains highly attractive.

We will continue to invest in the business to underpin further organic revenue growth towards and beyond our target of $1bn by 2022. Notwithstanding the fluid situation regarding COVID‐19, the outlook for 4imprint is positive.

Full Year Results 2019

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Full Year Results 2019

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Appendices

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2020 Financial Guidance

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2020 revenue split (approximate): H1 47%; H2 53%
2020 capex c.$9.0m; includes c.$5m further investment in apparel decorating capacity
Depreciation charge c. $3.5m (pre ‐ IFRS 16)
2020 effective tax rate c. 22% (2019: 21%)
Share‐based payment (IFRS 2) charge $1.0m in 2020
EBT share purchases $2.2m in 2020 (cash)
Average shares in issue FY 2020 c. 28.00m; fully diluted c. 28.10m
DB pension plan 2020:
No exceptional charge anticipated
Admin charge in P&L c. $0.4m
Contributions c.$13.5m, including c.$10.0m ‘lump sum’ contribution
Proposed dividends:
2019 final dividend 59.00c per share
Payable May 2020, cash cost $16.5m
IFRS 16 (current lease arrangements)
Balance sheet (December 2020)
Right‐of‐use assets: $0.4m
Lease liability: $0.4m
Income statement (FY 2020)
Amortisation: $1.6m
Interest: $0.04m

Full Year Results 2019

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497.2 558.2 627.5 738.4 860.8

2015 2016 2017 2018 2019

Revenue ($m)

Results Summary

16 Exchange rate FY 2019: 1.28 (FY 2017: 1.34) *Underlying is before defined benefit pension charges and exceptional items

Full Year Results 2019

33.25 37.92 41.91 45.59 54.68

2015 2016 2017 2018 2019

Underlying* profit before tax ($m)

18.38 21.68 30.77 27.48 41.14 2015 2016 2017 2018 2019

Net cash - year end ($m)

87.22 98.03 106.74 129.77 154.41 38.89 52.50 58.10 70.00 84.00 60.00

2015 2016 2017 2018 2019

EPS Divi per share Supplementary divi per share

Underlying* EPS and dividend per share