TIDMFOUR
RNS Number : 2699H
4imprint Group PLC
31 July 2019
31 July 2019
4imprint Group plc
Half year results for the period ended 29 June 2019
4imprint Group plc (the "Group" or the "Company"), the leading
direct marketer of promotional products, announces its half year
results for the period ended 29 June 2019.
Highlights
Financial Half year Half year
2019 2018
$m $m Change
---------- ----------
Revenue 405.06 348.33 +16%
Underlying* profit before tax 19.79 16.30 +21%
Profit before tax 19.45 15.93 +22%
-------------------------------------- ---------- ---------- ---------------
Underlying* basic EPS (cents) 55.81 46.03 +21%
Basic EPS (cents) 54.81 44.96 +22%
Interim dividend per share (cents) 25.00 20.80 +20%
Interim dividend per share (pence) 20.52 15.85 +29%
-------------------------------------- ---------- ---------- ---------------
* Underlying is before defined benefit pension charges and
exceptional items.
The results for the half year and prior half year are
unaudited.
Operational
* Organic revenue growth of 16% over H1 2018
* Brand marketing investment producing encouraging
results
* 778,000 total orders processed in H1
* 147,000 new customers acquired in H1
* Customer retention patterns remain healthy
* Strong financial position; cash balance of $42.7m at
half year
Paul Moody, Chairman said:
"The Group has a clear strategic direction, a proven business
model and an attractive market opportunity. An encouraging first
half performance gives the Board confidence that the full year
results will be slightly above current market consensus
forecasts."
For further information, please contact:
4imprint Group plc MHP Communications
Tel. + 44 (0) 20 3709 9680 Tel. + 44 (0) 20 3128 8794
Kevin Lyons-Tarr - CEO Katie Hunt
David Seekings - CFO Nessyah Hart
Chairman's Statement
Financial and operational
Group revenue in the first half of 2019 was $405.1m, an increase
of $56.7m or 16% over prior year. This represents continued
momentum towards our objective of reaching $1bn in Group revenue by
2022.
Investment in the awareness and strength of the 4imprint brand
continues to be an important factor in driving the business
forward. Whilst still a relatively new initiative for 4imprint,
excellent progress has been made in both the development of our
analytical skills and in the integration of the brand element into
the overall marketing portfolio. Strong results across both new and
existing customer order activity are indicative of the broad reach
of our marketing activities in markets that are still notably
fragmented.
Profit before tax in the period of $19.4m was 22% higher than
2018, driving a 22% rise in basic earnings per share to 54.81c.
Consistent with its guideline to increase regular dividend payments
broadly in line with earnings per share performance, the Board has
declared an interim dividend of 25.00c per share, an increase of
20% over prior year.
The Group's financial position is strong, with the half year
cash balance of $42.7m (2018: $26.5m) reflecting the cash
generative nature of our direct marketing business model. The first
call on our cash is investment in projects that will deliver future
organic revenue growth. In this context the $5m expansion of the
Oshkosh distribution facility is proceeding as planned and will be
operational in August 2019.
Changes to the Board of Directors
Tina Southall was appointed to the Board as a Non-Executive
Director in May 2019. We look forward to benefiting from Tina's
experience and insight. This strengthening of our Board is
particularly welcome given the recent promotion of 4imprint Group
plc to the FTSE 250 Index.
Andrew Scull has advised the Company that he intends to step
down from the Board at the end of the 2019 financial year. In order
to ensure a smooth transition of his responsibilities, including
those of Company Secretary, Andrew has kindly agreed to remain with
the Group until his retirement from 4imprint in mid-2020.
Outlook
The Group has a clear strategic direction, a proven business
model and an attractive market opportunity. An encouraging first
half performance gives the Board confidence that the full year
results will be slightly above current market consensus
forecasts.
Paul Moody
Chairman
31 July 2019
Operating and Financial Review
Operating Review
Half year Half year
2019 2018
Revenue $m $m Change
---------------- ---------- ---------- -------
North America 394.43 337.37 +17%
UK and Ireland 10.63 10.96 -3%
---------------- ---------- ---------- -------
Total 405.06 348.33 +16%
---------------- ---------- ---------- -------
Half year Half year
2019 2018
Underlying* operating profit $m $m Change
------------------------------ ---------- ---------- -------
Direct Marketing operations 21.59 18.21 19%
Head office (1.65) (1.63) 2%
Share option related charges (0.51) (0.32) 60%
------------------------------ ---------- ---------- -------
Total 19.43 16.26 19%
------------------------------ ---------- ---------- -------
* Underlying is before defined benefit pension charges and
exceptional items.
The results for the half year and prior half year are
unaudited.
The first half of 2019 was a period of continued momentum for
4imprint, leaving us ahead of schedule towards our milestone target
of $1bn in annual Group revenue by 2022.
Our primary strategic objective is to drive market leadership
through organic revenue growth. Over the last couple of years we
have been focused on broadening our market presence through the
addition of a significant new brand element to our marketing mix.
After a successful launch in the first half of 2018 the results
have been consistently encouraging, including increases in direct
website traffic, higher online interest in anything to do with
"4imprint", and ultimately strong new customer order activity. In
addition, we continue to see that the profile of customers acquired
is consistent with our expectations in terms of product, order
size, order value and, most importantly, retention characteristics.
This indicates that the brand initiative is resonating with our
target audience, allowing us to create a broader base of
diversified direct marketing techniques. We are working to take
advantage of the flexibility this offers us to target further
profitable organic growth.
The demand statistics in the first half of 2019 were strong and
showed a healthy balance between new and existing customer
activity. Across the Group total orders increased by 14%, with new
customer orders up 8% and existing customer orders up 16%. 147,000
new customers were acquired (2018: 138,000) and our dedicated team
members processed more than 778,000 individually customised orders
in the first half of the year.
The Group produced good financial results in the first half of
2019. Group revenue of $405.06m was up 16% over 2018. In North
America revenue was up by 17%, an increase of $57.06m over the
prior year comparative. The UK business faced tougher trading
conditions: revenue increased by 3% in local currency, but exchange
rate movements led to revenue 3% lower than prior year in reporting
currency.
Underlying operating profit of $19.43m was up over prior year by
19%. The aggregate gross margin percentage in the first half of
2019 was slightly improved over the same period in the prior year.
Overall yield on marketing investment was essentially flat, despite
a year-over-year increase in spend of more than $11m. This is a
very satisfactory result in the context of an increasing investment
in brand marketing at a time when the team is still in the early
phases of actively testing and understanding the brand effect and
the required adjustments to the overall marketing mix. Selling
expenses continued to provide some element of operational leverage,
whilst administrative costs were higher than usual as a percentage
of revenue, reflecting an investment in additional senior
management talent to support our growth plus relevant share option
and incentive compensation accruals. In aggregate, these factors
combined to produce an improvement in underlying operating profit
margin to 4.8% (2018: 4.7%).
In March 2019 we announced that we would be adding a further
85,000 sq. ft. to the footprint of our Oshkosh distribution centre.
This project is proceeding as planned and is expected to be
completed on time in August 2019 within the original budget of $5m.
In addition, our Oshkosh office facility is approaching capacity
and we are reviewing our options for future expansion.
Financial Review
Half year Half year
2019 2018 Half year Half year
underlying* underlying* 2019 2018
$m $m $m $m
-------------------------------- ------------- ------------- ---------- ----------
Underlying* operating profit 19.43 16.26 19.43 16.26
Defined benefit pension scheme
administration costs (0.14) (0.15)
Net finance income 0.36 0.04 0.36 0.04
Pension finance charge (0.20) (0.22)
Profit before tax 19.79 16.30 19.45 15.93
-------------------------------- ------------- ------------- ---------- ----------
* Underlying is before defined benefit pension charges and
exceptional items.
The results for the half year and prior half year are
unaudited.
Operating result
Group revenue in the first half of 2019 was $405.06m (2018:
$348.33), an increase for the period of 16%. Underlying operating
profit before tax was $19.79m (2018: $16.30m), representing an
increase of 21% over 2018.
The Group's operating result in the period, summarising expense
by function, was as follows:
Half year Half year
2019 2018
$m $m
------------------------------ ---------- ----------
Revenue 405.06 348.33
------------------------------ ---------- ----------
Gross profit 131.67 112.87
Marketing costs (79.18) (68.00)
Selling costs (15.31) (13.61)
Admin & central costs (17.24) (14.68)
Share option related charges (0.51) (0.32)
------------------------------ ---------- ----------
Underlying operating profit 19.43 16.26
------------------------------ ---------- ----------
Consistent with its strategy, the Group continued to deliver
further profitable organic revenue growth driven by increasing
marketing investment.
Accounting standards
IFRS 16 'Leases', was implemented from the start of the
accounting period. In summary, this standard brings most
contractual arrangements previously defined as operating leases on
to the balance sheet, establishing 'right of use' assets and
associated lease liabilities. In the income statement the previous
operating lease charge is replaced by amortisation and interest
charges. The resulting adjustments had an immaterial impact on the
Group's results since the number and contract lengths of former
operating leases are minimal. In this context the decision was
taken not to restate prior periods, instead booking an opening
adjustment to net equity. Further detail is set out in note 15.
Foreign exchange
The Group reports in its primary trading currency, US dollars.
Sterling/US dollar is the exchange rate most relevant to the
Group's financial performance.
The average Sterling/US dollar rate for the first half of 2019
was $1.29 (H1 2018: $1.38; FY 2018: $1.34). The closing Sterling/US
dollar rate as at 29 June 2019 was $1.27 (30 June 2018: $1.32; 29
December 2018: $1.27).
The primary foreign exchange factors relevant to the Group's
operations are as follows:
-- Translational risk in the income statement remains low. In
the first half of 2019 97% of the Group's revenue was in US
dollars, the Group's reporting currency. The net impact from
currency movements on the 2019 half year income statement was not
material to the Group's results.
-- Most of the constituent elements of the Group balance sheet
are US dollar-based. The main exception to this is the
Sterling-based defined benefit pension liability. Currency
movements produced an exchange loss on the pension liability of
$0.05m for the first half of 2019.
-- The Group is highly cash-generative, mostly in US dollars,
but its primary applications of post-tax cash are Shareholder
dividends, pension contributions and some Head Office costs, 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 $0.51m (2018: $0.32m) was charged in the period in
respect of IFRS 2 'Share-based payments'. This charge was made up
of two elements: (i) executive awards under the 2015 Incentive Plan
and (ii) charges in respect of the 2016 UK SAYE Scheme and the 2018
US Employee Stock Purchase Plan.
Current options outstanding are: 130,493 share options under the
UK SAYE and US ESPP schemes; and 70,739 share options and awards
under the 2015 Incentive Plan.
Exceptional items
There were no exceptional items charged in the first half of
2019 (2018: $nil). The full year charge for 2018 of $0.72m related
to an accrual for estimated past service costs resulting from
Guaranteed Minimum Pension equalisation in the Group's defined
benefit pension plan.
Net finance income
Net finance income in the period was $0.36m (2018: $0.04m). This
is made up of external interest received on deposits, offset by
non-utilisation fees on borrowing facilities and lease interest
charges under IFRS 16. The year-over-year improvement in external
interest received is due to lower non-utilisation fees on committed
lines of credit and better yields on deposits.
Taxation
The tax charge for the half year was $4.08m (2018: $3.35m). The
composite tax rate of 21% (2018: 21%) reflects the expected tax
rate for the Group for the full year in 2019. The charge relates
principally to taxation payable on profits earned in the USA.
Earnings per share
Underlying basic earnings per share was 55.81c (2018: 46.03c),
an increase of 21%. This reflects the increase of 21% in underlying
profit after tax, and a weighted average number of shares in issue
similar to prior year.
Basic earnings per share was 54.81c (2018: 44.96c), an increase
of 22% over prior year.
Dividends
Dividends are determined in US dollars and paid in Sterling at
the exchange rate on the date that the dividend is determined.
The Board has declared an interim dividend per share of 25.00c
(2018: 20.80c), an increase of 20%. In Sterling, the interim
dividend per share will be 20.52p (2018: 15.85p), an increase of
29% over prior period. The dividend will be paid on 17 September
2019 to Shareholders on the register at the close of business on 9
August 2019.
Defined benefit pension scheme
The Group sponsors a legacy UK defined benefit scheme which has
been closed to new members and future accruals for several years.
The scheme has 97 pensioners and 277 deferred members.
At 29 June 2019, the deficit of the scheme on an IAS 19 basis
was $15.05m, compared to $15.02m at 29 December 2018. Gross scheme
liabilities under IAS19 were $36.60m and assets were $21.55m.
The change in deficit is analysed as follows:
$m
------------------------------------------------------------- -------
IAS 19 deficit at 29 December 2018 15.02
Pension administration costs paid by the scheme 0.14
Pension finance charge 0.20
Contributions by employer (1.66)
Re-measurement losses on post-employment obligations 3.19
Return on pension scheme assets (excluding interest income) (1.89)
Exchange loss 0.05
-------------------------------------------------------------- -------
IAS 19 deficit at 29 June 2019 15.05
-------------------------------------------------------------- -------
The net liability increased by $0.03m in the period, driven
primarily by reduction in the discount rate offset by employer's
contributions of $1.7m and return on assets of $1.9m.
Cash flow
Net cash was $42.66m at 29 June 2019 (30 June 2018: $26.51m; 29
December 2018: $27.48m).
Cash flow in the period is summarised as follows:
Half year Half year
2019 2018
$m $m
----------------------------------------- ---------- ----------
Underlying operating profit 19.43 16.26
Share option non-cash charges 0.50 0.31
Depreciation and amortisation 1.35 1.29
Amortisation of right of use assets 0.75 -
Change in working capital 17.58 12.22
Capital expenditure (4.18) (1.17)
----------------------------------------- ---------- ----------
Underlying operating cash flow 35.43 28.91
Tax (3.26) (1.93)
Interest 0.36 0.04
Defined benefit pension contributions (1.66) (1.90)
Purchase of own shares (1.28) (1.42)
Capital element of lease payments (0.82) -
Exchange loss (0.08) (0.82)
----------------------------------------- ---------- ----------
Free cash flow 28.69 22.88
Dividends to Shareholders (13.51) (27.14)
----------------------------------------- ---------- ----------
Net cash inflow/(outflow) in the period 15.18 (4.26)
----------------------------------------- ---------- ----------
The Group generated $28.69m of free cash flow in the period
(2018: $22.88m), further emphasising the efficient and cash
generative qualities of the Group's business model.
Working capital inflow in the first half of 2019 was $17.58m,
reflecting normal seasonal fluctuations.
Capital expenditure was $3.01m higher than the same period in
2018 primarily due to the expansion project at the Oshkosh
distribution centre.
Dividends to Shareholders in 2018 includes the supplementary
dividend of $0.60 per share paid in May 2018.
$1.28m of cash was paid in the period to the Employee Benefit
Trust ('EBT'). These funds were used to purchase 4imprint Group plc
shares in order to cover the requirements of the UK SAYE scheme,
which matures in July 2019, and future US ESPP and 2015 Incentive
Plan maturities.
Balance sheet and Shareholders' funds
Net assets at 29 June 2019 were $42.98m, compared to $43.27m at
29 December 2018. The balance sheet is summarised as follows:
29 June 29 December
2019 2018
$m $m
-------------------- -------- ------------
Non-current assets 29.69 25.73
Working capital (11.73) 5.85
Net cash 42.66 27.48
Pension deficit (15.05) (15.02)
Other liabilities (2.59) (0.77)
Net assets 42.98 43.27
-------------------- -------- ------------
Shareholders' funds reduced by $0.29m since the 2018 year end.
Constituent elements of the movement were net profit in the period
of $15.36m and $0.50m of share option related movements, net of
$0.12m exchange, $1.05m of net pension movements, own share
transactions of $1.28m, IFRS 16 'Leases' opening adjustment $0.19m
and dividends of $13.51m.
The Group had a net negative working capital balance of
$(11.73)m at 29 June 2019, ($(9.51)m at 30 June 2018). This is a
typical half year working capital profile reflecting the low
capital requirements of the Group.
As a result of the adoption of IFRS 16, a 'right of use' asset
of $1.11m is included within Non-current assets and an associated
lease liability of $1.29m is included within Other liabilities.
Balance sheet funding and capital allocation
Full details of the Board's balance sheet funding guidelines and
capital allocation priorities were set out on page 18 of the
Group's 2018 Annual Report & Accounts. The Board retains the
same guidelines in both of these areas.
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 currency relating to specific
receivables and payables as well as remittances from overseas
subsidiaries. The Group holds the majority of its cash with its
principal US and UK bankers.
The Group has a $20.0m working capital facility with its
principal US bank, JPMorgan Chase, N.A. The interest rate is US$
LIBOR plus 1.5%, and the facility expires on 31 May 2021. In
addition, an overdraft facility of GBP1.0m, with an interest rate
of bank base rate plus 2.00%, is available from the Group's
principal UK bank, Lloyds Bank plc.
Critical accounting policies
Critical accounting policies are those that require significant
judgments or estimates and potentially result in materially
different results under different assumptions or conditions. It is
considered that the Group's only critical accounting policy is in
respect of pensions.
Risks
The Group may be affected by a number of risks. These risks have
been reviewed at the half year and have not changed since the year
end. The risks are detailed on pages 20 to 25 of the Group's Annual
Report 2018, a copy of which is available on the Group's website:
https://investors.4imprint.com. These risks comprise: macroeconomic
conditions; competition; currency exchange; business facility
disruption; disruption to the product supply chain or delivery
service; disturbance in established marketing techniques; reliance
on key personnel; failure or interruption of information technology
systems and infrastructure; failure to adapt to new technological
innovations; and security of customer data.
Brexit
The uncertainty surrounding the Brexit process continues.
Overall, however, it is still considered that the nature and
geography of the Group's operations, with 97% of the Group's
revenue originating in North America, leave it in a strong position
to absorb any negative effects and the uncertainty does not impact
our evaluation of going concern.
Kevin Lyons-Tarr David Seekings
Chief Executive Officer Chief Financial Officer
31 July 2019
Condensed Consolidated Income Statement (unaudited)
Half Half Full
year year year
2019 2018 2018
Note $'000 $'000 $'000
------------------------------------- ------ ---------- ---------- ----------
Revenue 6 405,057 348,331 738,418
Operating expenses (385,773) (332,219) (694,096)
------------------------------------- ------ ---------- ---------- ----------
Operating profit before exceptional
items 19,284 16,112 45,043
Exceptional items 7 - - (721)
------------------------------------- ------ ---------- ---------- ----------
Operating profit 6 19,284 16,112 44,322
------------------------------------- ------ ---------- ---------- ----------
Finance income 402 60 250
Finance costs (6) (24) (23)
Interest on lease liabilities (32) - -
Pension finance charge (203) (219) (403)
------------------------------------- ------ ---------- ---------- ----------
Net finance income/(cost) 161 (183) (176)
Profit before tax 19,445 15,929 44,146
Taxation 8 (4,083) (3,345) (8,952)
------------------------------------- ------ ---------- ---------- ----------
Profit for the period 15,362 12,584 35,194
------------------------------------- ------ ---------- ---------- ----------
Cents Cents Cents
------------------------------------- ------ ---------- ---------- ----------
Earnings per share
Basic 9 54.81 44.96 125.61
Diluted 9 54.60 44.81 125.22
Underlying 9 55.81 46.03 129.77
------------------------------------- ------ ---------- ---------- ----------
Condensed Consolidated Statement of Comprehensive Income
(unaudited)
Half Half Full
year year year
2019 2018 2018
Note $'000 $'000 $'000
-------------------------------------------------- ------ -------- -------- --------
Profit for the period 15,362 12,584 35,194
---------------------------------------------------------- -------- -------- --------
Other comprehensive (expense)/income
Items that may be reclassified subsequently
to the income statement:
Currency translation differences (117) (618) (434)
Items that will not be reclassified
subsequently to the income statement:
Re-measurement (losses)/gains on post-employment
obligations (3,187) 1,142 1,582
Return on pension scheme assets (excluding
interest income) 1,888 (1,692) (1,951)
Tax relating to components of other
comprehensive (expense)/income 247 105 390
Effect of change in UK tax rate - - (21)
---------------------------------------------------------- -------- -------- --------
Total other comprehensive expense (1,169) (1,063) (434)
---------------------------------------------------------- -------- -------- --------
Total comprehensive income for the
period 14,193 11,521 34,760
---------------------------------------------------------- -------- -------- --------
Condensed Consolidated Balance Sheet (unaudited)
At At At
29 June 30 June 29 Dec
2019 2018 2018
Note $'000 $'000 $'000
-------------------------------- ----- --------- --------- ---------
Non-current assets
Property, plant and equipment 21,854 18,718 19,012
Right of use assets 1,108 - -
Intangible assets 1,075 1,102 1,084
Deferred tax assets 5,651 5,599 5,636
-------------------------------- ----- --------- --------- ---------
29,688 25,419 25,732
-------------------------------- ----- --------- --------- ---------
Current assets
Inventories 11,572 9,603 9,878
Trade and other receivables 48,212 40,518 46,228
Current tax - - 644
Cash and cash equivalents 42,660 26,509 27,484
-------------------------------- ----- --------- --------- ---------
102,444 76,630 84,234
-------------------------------- ----- --------- --------- ---------
Current liabilities
Lease liabilities (1,285) - -
Trade and other payables (71,517) (59,634) (50,252)
Current tax (183) (375) (500)
Provisions - (135) -
(72,985) (60,144) (50,752)
-------------------------------- ----- --------- --------- ---------
Net current assets 29,459 16,486 33,482
-------------------------------- ----- --------- --------- ---------
Non-current liabilities
Retirement benefit obligations 11 (15,046) (16,757) (15,016)
Deferred tax liability (1,120) (777) (931)
(16,166) (17,534) (15,947)
-------------------------------- ----- --------- --------- ---------
Net assets 42,981 24,371 43,267
-------------------------------- ----- --------- --------- ---------
Shareholders' equity
Share capital 18,842 18,842 18,842
Share premium reserve 68,451 68,451 68,451
Other reserves 5,310 5,243 5,427
Retained earnings (49,622) (68,165) (49,453)
-------------------------------- ----- --------- --------- ---------
Total Shareholders' equity 42,981 24,371 43,267
-------------------------------- ----- --------- --------- ---------
Condensed Consolidated Statement of Changes in Shareholders'
Equity (unaudited)
Retained earnings
Share
Share premium Other Own Profit Total
capital reserve reserves shares and loss equity
$'000 $'000 $'000 $'000 $'000 $'000
-------------------------------------- --------- --------- ---------- -------- ---------- ---------
At 31 December 2017 18,842 68,451 5,861 (1,699) (50,373) 41,082
Profit for the period 12,584 12,584
Other comprehensive expense (618) (445) (1,063)
-------------------------------------- --------- --------- ---------- -------- ---------- ---------
Total comprehensive (expense)/income (618) 12,139 11,521
-------------------------------------- --------- --------- ---------- -------- ---------- ---------
Share-based payment charge 314 314
Proceeds from options
exercised 10 10
Own shares purchased (1,420) (1,420)
Own shares utilised 16 (16) -
Dividends (27,136) (27,136)
-------------------------------------- --------- --------- ---------- -------- ---------- ---------
At 30 June 2018 18,842 68,451 5,243 (3,103) (65,062) 24,371
Profit for the period 22,610 22,610
Other comprehensive income 184 445 629
Total comprehensive income 184 23,055 23,239
-------------------------------------- --------- --------- ---------- -------- ---------- ---------
Share-based payment charge 494 494
Proceeds from options
exercised 1,712 1,712
Own shares purchased (767) (767)
Own shares utilised 2,404 (2,404) -
Deferred tax relating
to share options 6 6
Deferred tax relating
to losses 60 60
Dividends (5,848) (5,848)
-------------------------------------- --------- --------- ---------- -------- ---------- ---------
Balance at 29 December
2018 18,842 68,451 5,427 (1,466) (47,987) 43,267
Adjustments for changes
in accounting policy (note
3 and 15) (187) (187)
-------------------------------------- --------- --------- ---------- -------- ---------- ---------
Balance at 30 December
2018 after adjustment 18,842 68,451 5,427 (1,466) (48,174) 43,080
-------------------------------------- --------- --------- ---------- -------- ---------- ---------
Profit for the period 15,362 15,362
Other comprehensive expense (117) (1,052) (1,169)
-------------------------------------- --------- --------- ---------- -------- ---------- ---------
Total comprehensive income (117) 14,310 14,193
-------------------------------------- --------- --------- ---------- -------- ---------- ---------
Share-based payment charge 502 502
Own shares purchased (1,281) (1,281)
Own shares utilised 617 (617) -
Dividends (13,513) (13,513)
-------------------------------------- --------- --------- ---------- -------- ---------- ---------
Balance at 29 June 2019 18,842 68,451 5,310 (2,130) (47,492) 42,981
-------------------------------------- --------- --------- ---------- -------- ---------- ---------
Condensed Consolidated Cash Flow Statement (unaudited)
Half Half Full
year year year
2019 2018 2018
Note $'000 $'000 $'000
---------------------------------------------- ----- --------- --------- ---------
Cash flows from operating activities
Cash generated from operations 12 37,943 28,166 41,651
Tax paid (3,255) (1,927) (7,844)
Finance income received 402 60 250
Finance costs paid (including interest
on lease liabilities) (38) (24) (23)
---------------------------------------------- ----- --------- --------- ---------
Net cash generated from operating activities 35,052 26,275 34,034
---------------------------------------------- ----- --------- --------- ---------
Cash flows from investing activities
Purchases of property, plant and equipment (3,964) (1,201) (2,492)
Purchases of intangible assets (212) - (395)
Net proceeds from sale of property,
plant and equipment - 30 32
Net cash utilised in investing activities (4,176) (1,171) (2,855)
---------------------------------------------- ----- --------- --------- ---------
Cash flows from financing activities
Capital element of lease payments (821) - -
Proceeds from options exercised - 10 1,722
Purchase of own shares by EBT (1,281) (1,420) (2,187)
Dividends paid to Shareholders 10 (13,513) (27,136) (32,984)
---------------------------------------------- ----- --------- --------- ---------
Net cash used in financing activities (15,615) (28,546) (33,449)
---------------------------------------------- ----- --------- --------- ---------
Net movement in cash and cash equivalents 15,261 (3,442) (2,270)
Cash and cash equivalents at beginning
of the period 27,484 30,767 30,767
Exchange losses on cash and cash equivalents (85) (816) (1,013)
---------------------------------------------- ----- --------- --------- ---------
Cash and cash equivalents at end of
the period 42,660 26,509 27,484
---------------------------------------------- ----- --------- --------- ---------
Analysis of cash and cash equivalents
Cash at bank and in hand 39,766 26,509 23,648
Short-term deposits 2,894 - 3,836
---------------------------------------------- ----- --------- --------- ---------
42,660 26,509 27,484
---------------------------------------------- ----- --------- --------- ---------
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 condensed consolidated interim financial statements, which
were authorised for issue in accordance with a resolution of the
Directors on 31 July 2019, do not comprise statutory accounts
within the meaning of Section 434 of the Companies Act 2006.
Statutory accounts for the period ended 29 December 2018 were
approved by the Board of Directors on 5 March 2019 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 condensed consolidated interim financial statements for
the half year ended 29 June 2019 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 European Union, and should be read in
conjunction with the Group's financial statements for the period
ended 29 December 2018, which were prepared in accordance with
International Financial Reporting Standards as adopted by the
European Union.
After making enquiries about a number of factors, including
current trading and borrowing facilities, the Directors have a
reasonable expectation that the Company and the Group have adequate
resources to continue to operate for a period of at least twelve
months from the date these interim financial statements were
approved. Accordingly, they continue to adopt the going concern
basis in preparing the Interim Report and 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 condensed consolidated
interim financial statements are consistent with those of the
annual financial statements for the period ended 29 December 2018,
as described in those annual financial statements, apart from those
affected by the implementation of IFRS 16 'Leases'. Under IFRS 16
there is no distinction between finance and operating leases, with
all leases, subject to options to exclude leases with a duration of
less than 12 months and leases of low value assets, included on the
balance sheet by recognition of a right of use asset and a lease
liability. This impacts the accounting policy for leases and the
new policy is shown below. On transition the Group decided to take
advantage of the option not to restate prior periods, but to
recognise a lease liability at the date of initial application,
based on discounted future cash flows, along with a right of use
asset at a carrying amount as if the Standard had been applied
since the commencement date of the lease, but discounted at the
incremental borrowing rate at the date of initial application. The
financial impacts of this are shown in note 15. Other new
accounting standards applicable for the first time in this
reporting period have no impact on the Group's results.
Leases
A lease is defined as a contract that conveys the right to
control the use of an identified asset for a period of time in
exchange for consideration. At the commencement date of a lease a
right of use asset and a lease liability are recognised in the
financial statements.
The lease liability is initially measured at the present value
of expected future lease payments discounted at the interest rate
implicit in the lease or, if that rate cannot be determined, the
lessee's incremental borrowing rate. Subsequently the lease
liability decreases by the lease payments made, offset by interest
on the liability, and may be remeasured to reflect any reassessment
of expected payments or to reflect any lease modifications.
The right of use asset is initially measured at the amount of
the initial lease liability plus: any lease payments made on or
before the commencement date less incentives received; any
incremental costs of obtaining the lease; and, if any, the costs of
decommissioning the asset and any restoration work to return the
asset to the condition required under the terms of the lease.
Subsequently the right of use asset is valued using the cost
model. The asset is amortised on a straight-line basis over the
expected term of the lease, adjusted for any remeasurement of the
lease liability, and is shown net of the accumulated depreciation
and any impairment provisions.
Leases for low value assets and short-term leases are expensed
to operating profit on a straight-line basis over the term of the
lease.
4 Use of assumptions and estimates
The preparation of the interim financial statements requires
management to make judgments, estimates and assumptions that affect
the application of policies and reported amounts of assets and
liabilities, income and expenses. The estimates and associated
assumptions are based on historical experience and various other
factors that are believed to be reasonable under the circumstances,
the results of which form the basis of making estimates about
carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these
estimates. There have been no changes in the key areas involving
management estimates since the year end.
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 condensed consolidated interim 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 financial
statements as at 29 December 2018. There have been no changes in
any risk management policies since that date.
6 Segmental analysis
The chief operating decision maker has been identified as the
Board. The operations of the Group are reported in one primary
operating segment.
Half Half Full
year year year
2019 2018 2018
Revenue $'000 $'000 $'000
North America 394,433 337,367 714,554
UK and Ireland 10,624 10,964 23,864
-------------------------------------------- -------- -------- --------
Total revenue from the sale of promotional
products 405,057 348,331 738,418
-------------------------------------------- -------- -------- --------
Profit Underlying Total
Half Half Full Half Half Full
year year year year year year
2019 2018 2018 2019 2018 2018
$'000 $'000 $'000 $'000 $'000 $000
4imprint Direct Marketing 21,588 18,206 49,632 21,588 18,206 49,632
Head Office (1,653) (1,626) (3,454) (1,653) (1,626) (3,454)
Share option related
charges (507) (317) (819) (507) (317) (819)
--------------------------- -------- -------- -------- -------- -------- --------
Underlying operating
profit 19,428 16,263 45,359 19,428 16,263 45,359
Exceptional items (note
7) - - (721)
Defined benefit pension
scheme administration
costs (144) (151) (316)
--------------------------- -------- -------- -------- -------- -------- --------
Operating profit 19,428 16,263 45,359 19,284 16,112 44,322
Net finance income 364 36 227 364 36 227
Pension finance charge (203) (219) (403)
--------------------------- -------- -------- -------- -------- -------- --------
Profit before tax 19,792 16,299 45,586 19,445 15,929 44,146
Taxation (4,149) (3,415) (9,226) (4,083) (3,345) (8,952)
--------------------------- -------- -------- -------- -------- -------- --------
Profit after tax 15,643 12,884 36,360 15,362 12,584 35,194
--------------------------- -------- -------- -------- -------- -------- --------
7 Exceptional items
Half Half Full
year year year
2019 2018 2018
$'000 $'000 $'000
-------------------- ------- ------- ------
Past service costs - - 721
-------------------- ------- ------- ------
The prior year past service costs, resulting from the Guaranteed
Minimum Pension equalisation charge, was an estimate calculated by
the Company's actuaries, based on key high-level data from the
Plan's last full actuarial valuation and the legal position as
understood at the date of the 2018 full year financial statements.
The actual result may differ from this estimate.
8 Taxation
The taxation rate was 21%, based on the estimated rate for the
full year (H1 2018: 21%; FY 2018: 20%). Tax paid in the period was
$3.26m (H1 2018: $1.93m; FY 2018: $7.84m).
9 Earnings per share
Basic, underlying and diluted
The basic, underlying and diluted earnings per share are
calculated based on the following data:
Half Half Full
year year year
2019 2018 2018
$'000 $'000 $'000
-------------------------------------- ------- ------- -------
Profit after tax 15,362 12,584 35,194
-------------------------------------- ------- ------- -------
Underlying profit after tax (note 6) 15,643 12,884 36,360
-------------------------------------- ------- ------- -------
Half Half Full
year year year
2019 2018 2018
Number Number Number
000's 000's 000's
--------------------------------------------- ------- ------- --------
Basic weighted average number of shares 28,029 27,989 28,018
Adjustment for employee share options 107 96 88
--------------------------------------------- ------- ------- --------
Diluted weighted average number of shares 28,136 28,085 28,106
--------------------------------------------- ------- ------- --------
Basic earnings per share 54.81c 44.96c 125.61c
--------------------------------------------- ------- ------- --------
Diluted earnings per share 54.60c 44.81c 125.22c
--------------------------------------------- ------- ------- --------
Underlying basic earnings per share 55.81c 46.03c 129.77c
--------------------------------------------- ------- ------- --------
Underlying diluted basic earnings per share 55.60c 45.88c 129.37c
--------------------------------------------- ------- ------- --------
The basic weighted average number of shares excludes shares held
in the employee share trust. The effect of this is to reduce the
average by 56,566 (H1 2018: 96,095; FY 2018: 67,125).
The underlying earnings per share is calculated before the
after-tax effect of exceptional items and defined benefit pension
charges and is included because the Directors consider this gives a
measure of the underlying performance of the ongoing business.
10 Dividends Half Half Full
year year year
2019 2018 2018
$'000 $'000 $'000
---------------------------------- ------- ------- -------
Dividends paid in the period 13,513 27,136 32,984
---------------------------------- ------- ------- -------
Cents Cents Cents
---------------------------------- ------- ------- -------
Dividends per share
declared - Interim 25.00 20.80 20.80
- Final - - 49.20
--------------------------------- ------- ------- -------
The interim dividend for 2019 of 25.00c per ordinary share
(interim 2018: 20.80c; final 2018: 49.20c) will be paid on 17
September 2019 to Shareholders on the register at the close of
business on 9 August 2019.
11 Employee pension schemes
The Group operates defined contribution pension plans for the
majority of its UK and US employees. The regular contributions are
charged to the income statement as they are incurred.
The Group also sponsors a legacy UK defined benefit pension
scheme which is closed to new members and future accruals. The
funds of the scheme are administered by a trustee company and are
independent of the Group's finances.
The last full actuarial valuation was carried out by a qualified
independent actuary as at 30 September 2016 and this has been
updated on an approximate basis to 29 June 2019 in accordance with
IAS 19. There have been no changes in the valuation methodology
adopted for this period's disclosures compared to previous periods'
disclosure.
The principal assumptions applied by the actuaries at 29 June
2019 were:
Half Half Full
year year year
2019 2018 2018
-------------------------------------------------------- ----- ------ ------ ------
Rate of increase in pensions
in payment 3.05% 3.00% 3.10%
Rate of increase in deferred pensions 2.05% 1.95% 2.10%
Discount rate 2.25% 2.65% 2.80%
Inflation
assumption - RPI 3.15% 3.05% 3.20%
- CPI 2.05% 1.95% 2.10%
------------------------------------ ------------------------ ------ ------ ------
The mortality assumptions adopted at 29 June 2019 imply the
following life expectancies at age 65:
Half Half Full
year year year
2019 2018 2018
Years Years Years
Male currently aged 40 23.4 23.4 23.4
Female currently aged 40 25.4 25.3 25.3
Male currently aged 65 22.0 21.9 21.9
Female currently aged 65 23.9 23.8 23.8
-------------------------- ------- ------- -------
The movement on the net pension obligation is shown in the
Financial Review.
12 Cash generated from operations
Half year Half year Full year
2019 2018 2018
$'000 $'000 $'000
--------------------------------------------------- --------- --------- ---------
Operating profit 19,284 16,113 44,322
Adjustments for:
Depreciation charge 1,126 1,065 2,200
Amortisation of intangibles 221 224 445
Amortisation of right of use assets 750 - -
(Profit)/loss on sale of property, plant and
equipment - (7) 7
Exceptional non-cash items - 8 721
Decrease in provisions - (26) (52)
Share option non-cash charges 502 314 808
Defined benefit scheme administration costs
- non-cash charge 144 151 316
Contributions to defined benefit pension scheme (1,661) (1,897) (3,932)
Changes in working capital:
Increase in inventories (1,693) (1,989) (2,266)
(Increase)/decrease in trade and other receivables (1,988) 5,134 (2,422)
Increase in trade and other payables 21,258 9,076 1,504
Cash generated from operations 37,943 28,166 41,651
--------------------------------------------------- --------- --------- ---------
13 Capital commitments
The Group had capital commitments contracted but not provided
for in these financial statements of $1.56m
(30 June 2018: $nil; 29 December 2018: $nil).
14 Related party transactions
The Group did not participate in any related party transactions
that require disclosure.
15 Impact of new accounting standards
On transition to IFRS 16 the modified retrospective option was
selected, with no restatement of prior periods. The exemptions for
low value assets and leases of less than 12 months duration were
taken. It was not possible to ascertain the interest rates implicit
in the existing leases, therefore the lease liabilities were
discounted at the lessees' incremental borrowing rates. The
weighted average rate use was 3.778%.
As the option to not restate prior periods was selected, the
implementation of IFRS 16 'Leases' has resulted in a revision to
the opening equity of the Group. This results in an opening
adjustment to reduce net equity by $187,000 as follows:
Opening
29 Dec Opening 30 Dec
2018 IFRS 2018
Balance sheet As reported 16 adjustment Revised
$'000 $'000 $'000
-------------------------------- ------------- --------------- ---------
Non-current assets
Property, plant and equipment 19,012 - 19,012
Right of use assets - 1,856 1,856
Intangible assets 1,084 - 1,084
Deferred tax assets 5,636 - 5,636
-------------------------------- ------------- --------------- ---------
25,732 1,856 27,588
Current assets
Inventories 9,878 - 9,878
Trade and other receivables 46,228 - 46,228
Current tax 644 - 644
Cash and cash equivalents 27,484 - 27,484
-------------------------------- ------------- --------------- ---------
84,234 - 84,234
-------------------------------- ------------- --------------- ---------
Current liabilities
Lease liabilities - (1,701) (1,701)
Trade and other payables (50,252) - (50,252)
Current tax (500) - (500)
(50,752) (1,701) (52,453)
-------------------------------- ------------- --------------- ---------
Net current assets 33,482 (1,701) 31,781
-------------------------------- ------------- --------------- ---------
Non-current liabilities
Lease liabilities - (404) (404)
Retirement benefit obligations (15,016) - (15,016)
Deferred tax liability (931) 62 (869)
-------------------------------- ------------- --------------- ---------
(15,947) (342) (16,289)
Net assets 43,267 (187) 43,080
-------------------------------- ------------- --------------- ---------
The reconciliation between the commitment under non-cancellable
operating leases at 29 December 2018 and the lease liability
adjustment above is as follows:
$'000
Operating lease obligations at 29 December 2018 2,201
Maintenance element (9)
Less leases of low value assets (40)
Discounting (47)
------------------------------------------------- ------
Lease liabilities 2,105
------------------------------------------------- ------
The impact on the current half year is as follows:
Before IFRS 16 As reported
Balance sheet at 29 June 2019 adjustment adjustment
$'000 $'000 $'000
-------------------------------- ------------ ------------ ------------
Non-current assets
Property, plant and equipment 21,854 - 21,854
Right of use assets - 1,108 1,108
Intangible assets 1,075 - 1,075
Deferred tax assets 5,651 - 5,651
-------------------------------- ------------ ------------ ------------
28,580 1,108 29,688
Current assets
Inventories 11,572 - 11,572
Trade and other receivables 48,212 - 48,212
Cash and cash equivalents 42,660 - 42,660
-------------------------------- ------------ ------------ ------------
102,444 - 102,444
-------------------------------- ------------ ------------ ------------
Current liabilities
Lease liabilities - (1,285) (1,285)
Trade and other payables (71,517) - (71,517)
Current tax (183) - (183)
(71,700) (1,285) (72,985)
-------------------------------- ------------ ------------ ------------
Net current assets 30,744 (1,285) 29,459
-------------------------------- ------------ ------------ ------------
Non-current liabilities
Retirement benefit obligations (15,046) - (15,046)
Deferred tax liability (1,164) 44 (1,120)
-------------------------------- ------------ ------------ ------------
(16,210) 44 (16,166)
Net assets 43,114 (133) 42,981
-------------------------------- ------------ ------------ ------------
Income statement for the 26 weeks ended 29 Before IFRS As reported
June 2019 adjustment 16 adjustment
$'000 $'000 $'000
-------------------------------------------- ------------ --------------- ------------
Revenue 405,057 - 405,057
Operating expenses (385,877) 104 (385,773)
-------------------------------------------- ------------ --------------- ------------
Operating profit 19,180 104 19,284
-------------------------------------------- ------------ --------------- ------------
Finance income 402 - 402
Finance costs (6) (32) (38)
Pension finance charge (203) - (203)
-------------------------------------------- ------------ --------------- ------------
Net finance income 193 (32) 161
-------------------------------------------- ------------ --------------- ------------
Profit before tax 19,373 72 19,445
Taxation (4,065) (18) (4,083)
-------------------------------------------- ------------ --------------- ------------
Profit for the period 15,308 54 15,362
-------------------------------------------- ------------ --------------- ------------
Earnings per share
Basic 54.61c 54.81c
Diluted 54.41c 54.60c
-------------------------------------------- ------------ --------------- ------------
Statement of Directors' Responsibilities
The Directors confirm that, to the best of their knowledge,
these condensed consolidated interim financial statements have been
prepared in accordance with IAS 34 as adopted by the European Union
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 year and their impact on the condensed
consolidated interim 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 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 for 29 December 2018, except for the appointment of
Christina (Tina) Southall as an Independent Non-Executive Director
on 8 May 2019. A list of current Directors of 4imprint Group plc is
maintained on the Group website:
https://investors.4imprint.com.
By order of the Board
Kevin Lyons-Tarr David Seekings
Chief Executive Chief Financial
Officer Officer
31 July 2019
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IR LLFSRDFIIVIA
(END) Dow Jones Newswires
July 31, 2019 02:00 ET (06:00 GMT)
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