TIDMFOUR
RNS Number : 7651E
4imprint Group PLC
03 March 2020
3 March 2020
4imprint Group plc
Final results for the period ended 28 December 2019
Continued strong organic revenue growth
4imprint Group plc (the "Group"), the leading direct marketer of
promotional products, today announces its final results for the 52
weeks ended 28 December 2019.
Highlights
2019 2018
Financial $m $m Change
-------- --------
Revenue 860.84 738.42 +17%
Underlying* profit before tax 54.68 45.59 +20%
Profit before tax 53.99 44.15 +22%
Cash 41.14 27.48 +50%
------------------------------------ -------- -------- ---------------
Underlying* basic EPS (cents)
Basic EPS (cents) 154.41 129.77 +19%
Proposed total dividend per share 152.42 125.61 +21%
(cents)
84.00 70.00 +20%
Proposed total dividend per share
(pence) 66.68 53.15 +25%
------------------------------------ -------- -------- ---------------
*All measures marked as underlying in the table above and
throughout this announcement are alternative performance measures.
The reasons for the Group's use of alternative performance measures
and definitions are provided in the section on alternative
performance measures at the end of this announcement.
Operational
* Organic revenue growth in 2019
* Revenue increase of $122.4m (+17%)
* 1,587,000 total orders processed (+14%)
* 297,000 new customers acquired in the year
* Customer retention remains healthy
* Investment in marketing in the year
* Marketing spend $154.3m (+18%)
* Evolving marketing mix; brand component increasing as
planned
* Capital investment
* $5m capital investment in Oshkosh distribution centre
completed in 2019
* 2020 capital plan includes $4.7m in apparel
decoration equipment
* Pension commitment
* $10m 'lump sum' legacy pension contribution in May
2020
Paul Moody, Chairman said:
"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 opportunity 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."
For further information, please contact:
4imprint Group plc MHP Communications
Tel. + 44 (0) 20 3709 9680 Tel. + 44 (0) 788 449 4112
Kevin Lyons-Tarr - CEO Katie Hunt
David Seekings - CFO Rachel Mann
Chairman's Statement
2019 was another successful year for 4imprint. The Board has a
clear strategy that delivered attractive revenue growth and met
profitability targets in the year whilst making significant
investments in the Group's future.
Financial performance
Group revenue for 2019 was $860.8m, an increase of $122.4m (17%)
over 2018. All of the revenue growth was organic, reflecting
increasing share in a large but still very fragmented market.
Underlying profit before tax was $54.7m, 20% ahead of the prior
year.
Profit before tax was $54.0m, an increase of 22% over 2018, and
profit after tax improved over prior year by 21%. Basic earnings
per share also rose 21% to 152.42c.
The 4imprint business model remains highly cash generative. The
2019 year end cash balance of $41.1m, (2018: $27.5m) leaves the
Group in a strong financial position.
The Company became a constituent of the FTSE 250 Index during
the year.
Strategic progress
The Board is delighted with the Group's progress over the past
year. At the annual strategic review, which took place in Oshkosh
in October 2019, the Board discussed and reaffirmed the Group's
strategic objectives, most specifically in respect of the expansion
and development of the brand component of the marketing mix.
The Group has achieved a compound average revenue growth rate of
16% over the last five years. Investment across the business has
supported this growth, notably in embroidery production capacity
and in operating facilities. The latest phase was completed in
August 2019 with the $5m expansion of the Oshkosh distribution
centre, completed on time and within budget.
Board and team members
We were pleased to welcome Tina Southall to the Board as a
Non-Executive Director in May 2019. Tina's experience and insight
have already proved to be valuable, particularly in her role as
designated NED for engagement with our team members.
Andrew Scull stepped down from the Board at the end of 2019. The
Board wishes to thank Andrew for the valuable contribution he has
made to the development of the Group over his 15-year tenure.
Unquestionably, the most important driver of 4imprint's success
is our people. Our highly professional team members go above and
beyond every day in order to deliver the exacting service levels
upon which our customers rely. The Board expresses its thanks to
all of our team members for their contribution to the Group's
success in 2019.
Dividend
At the half year the Board declared an interim dividend per
share of 25.00c, representing an increase of 20% over 2018. In view
of the Group's performance in the second half of the year and in
line with our balance sheet funding and capital allocation
guidelines, the Board is pleased to recommend a final dividend per
share of 59.00c, an increase of 20%, giving a total paid and
proposed 2019 regular dividend of 84.00c, up 20% over prior
year.
Pension update
Our capital allocation framework sets out our commitment to
funding our residual legacy defined benefit pension plan (the
"Plan"). Subsequent to the triennial revaluation of the Plan in
September 2019, a new, accelerated deficit recovery schedule has
been agreed with the Plan Trustee, including a 'lump sum'
contribution of around $10m to be paid in May 2020. This will serve
both (i) to strengthen the current Plan funding level, and (ii) to
progress our pension de-risking initiatives by positioning the Plan
for eventual buy-out within a five-year timeframe.
Coronavirus update
We are closely monitoring the situation with regard to COVID-19,
the novel coronavirus. Impact on the business has so far been
minimal, reflecting the timing of the inventory cycle of our
domestic suppliers. However, the situation is very fluid and if
production restrictions in China persist, the potential for
disruption of our supply chain increases. Should the virus become a
global pandemic, the potential effect on our business would expand
beyond the supply chain. More detail is provided in the Chief
Executive's Review on page 5.
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 opportunity 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.
Paul Moody
Chairman
3 March 2020
Chief Executive's Review
2019 2018
Revenue $m $m
------------------------------ ------- ------- -----
North America 839.28 714.55 +17%
UK and Ireland 21.56 23.87 -10%
Total 860.84 738.42 +17%
------------------------------ ------- ------- -----
2019 2018
Underlying* operating profit $m $m
------------------------------ ------- ------- -----
Direct Marketing operations 58.20 49.63 +17%
Head office (3.32) (3.45) -4%
Share option related charges (0.95) (0.82) +16%
------------------------------ ------- ------- -----
Total 53.93 45.36 +19%
------------------------------ ------- ------- -----
Operating profit 53.62 44.32 +21%
------------------------------ ------- ------- -----
Underlying profit is included because the Directors consider
this gives a measure of the underlying performance of the
business.
* Underlying is before defined benefit pension charges and
exceptional items.
Two years ago, we announced our intention to evolve our strategy
to include a new brand element to our marketing mix. In conjunction
with this initiative, we set a target of reaching $1bn in Group
revenue by 2022. The Group's trading momentum in 2019 continued to
demonstrate the benefit of this strategic evolution, leaving us in
a good position to achieve our stated revenue goal ahead of
schedule.
Financial highlights
The Group produced excellent financial results in 2019. Group
revenue of $860.8m was up 17% over 2018, underlying operating
profit of $53.9m was 19% higher than prior year, and operating
profit was up 21%.
Revenue in North America was up 17%, an increase of $124.7m over
prior year. 4imprint remains the largest distributor of promotional
products in North America. Revenue in the UK, which accounted for
2.5% of Group revenue, was less robust as the business faced
tougher trading conditions. Although order intake was essentially
flat year-over-year, revenue decreased by 6% in local currency, and
by 10% in the Group's reporting currency.
Several factors contributed to the Group's operating profit
performance in 2019. The aggregate gross margin percentage was
stable through the year and for the full year remained flat with
2018. Marketing expenses rose, as expected, by 18% over 2018 and
slightly above the year-on-year revenue increase of 17%. Selling
expenses were up 11% over 2018. Overheads, head office costs and
share option costs rose in aggregate by 14% over prior year. These
factors combined to generate an improvement in overall underlying
operating profit margin to 6.27% (2018: 6.14%).
Operational overview
297,000 new customers were acquired during 2019. This resulted
in orders from new customers rising by 9% over prior year. Orders
from existing customers rose by 17% compared to 2018, helped by the
powerful dynamic of incremental improvement in retention rates
combined with a consistently expanding customer file. In total, our
team members processed 1,587,000 individually customised
orders.
We have always had an operational mantra of 'test, read, react'
in respect of the deployment of our marketing dollars. This
approach continued to serve us well in 2019 as we carefully
reshaped the overall marketing portfolio. The brand component
(primarily TV but also including a radio element) was expanded
during the year in response to consistently encouraging performance
metrics. To accommodate this, other parts of the budget such as
search and print were managed accordingly. Revenue per marketing
dollar was $5.58 in 2019 compared to $5.63 in 2018. This result is
directly in line with our expectations, particularly given a
year-on-year increase in the overall marketing budget of
$23.1m.
Our North American operations are served by centralised office
and warehouse facilities located in Oshkosh, Wisconsin. In the
context of our consistent organic revenue growth in recent years,
in 2019 we added a further 85,000 sq. ft. to our distribution
centre, increasing the total footprint of that facility to over
300,000 sq. ft. The project was completed on time, within the
budget of $5m and is now fully operational. Our capital expenditure
plan for 2020 includes $4.7m to increase our embroidery/print
capacity for the rapidly growing apparel category. In addition, we
plan to invest $3.2m in infrastructure and equipment to support
growth at our Oshkosh office and distribution facilities. As we
noted at our interim results, the current Oshkosh office facility
is approaching capacity. We are in the process of evaluating our
options with a view to securing appropriate additional or
replacement office space.
We are very pleased, for the twelfth consecutive year, to have
been named one of the Great Place To Work: Best Workplaces - Small
& Medium Businesses. This reflects the strong and unique
workplace culture that sets 4imprint apart.
Coronavirus (COVID-19) update
We are closely monitoring the situation with regard to COVID-19,
the novel coronavirus. Our deepest concern is with the people who
have been directly affected by the virus, many of whom are
longstanding and highly valued partners in our supply chain.
Approximately 60% of the blank stock for the products that we
sell originates in China. These blank products are imported in bulk
by our domestic suppliers who keep them in their local inventory,
eventually to be imprinted with a logo and shipped to our customers
as orders are placed. The fact that the outbreak occurred around
the Lunar New Year means that most of our domestic suppliers were
at peak inventory levels when the outbreak began - they typically
place orders in preparation for the first half of the year to be
delivered, or to be in transit, before the Lunar New Year begins.
As a result, to date there has been almost no impact on 4imprint
from COVID-19.
However, the situation is still very fluid. The Chinese
manufacturers who effectively 'supply our suppliers' are spread
throughout China, typically specialising in a product category.
Each of these suppliers is different based on their geographical
location, workforce location and requirements, transit
restrictions, access to raw materials for the specific product they
produce and other factors. The level of any disruption for 4imprint
will be closely linked to how long factories are delayed in
resuming production. The reduced capacity seen in February, and
even into March, is unlikely to cause major disruption in the
short-term simply due to the inventory cycle of our domestic
suppliers. However, the longer that production restrictions
persist, it becomes more likely that the inventory held by our
domestic suppliers will be depleted and some element of disruption
to the supply chain becomes more likely.
Clearly, if the virus were to become a global pandemic, other
factors come into play and the potential for disruption to our
business expands beyond the supply chain.
We are actively working with all parties in the supply chain to
plan for, and where possible mitigate, adverse supply effects at
all levels. We are also monitoring closely the developing situation
and preparing to address other potential impacts caused by the
spread of the virus globally.
Looking ahead
We remain confident in our strategy, our business model and the
market opportunity. Our entire team is working hard to achieve and
surpass our $1bn revenue target and we look forward to setting new
strategic goals at that point.
Financial Review
2019 2018 2019 2018
Underlying* Underlying* Total Total
$m $m $m $m
------------------------------- ------------- ------------- ------- -------
Underlying operating profit 53.93 45.36 53.93 45.36
Exceptional items - (0.72)
Defined benefit pension admin
charges (0.31) (0.32)
Net finance income/(cost) 0.75 0.23 0.37 (0.17)
Profit before tax 54.68 45.59 53.99 44.15
------------------------------- ------------- ------------- ------- -------
* Underlying is before defined benefit pension charges and
exceptional items.
Operating result
Group revenue in 2019 of $860.84m was 17% up over prior year.
All of the revenue growth was organic. Underlying operating profit
increased over 2018 by 19% to $53.93m. These results are consistent
with the Group's strategy to deliver profitable organic revenue
growth through increasing investment in marketing.
The Group's operating result in the period, summarising expense
by function, was as follows:
2019 2018
$m $m
------------------------------ --------- ---------
Revenue 860.84 738.42
------------------------------ --------- ---------
Gross profit 275.32 236.19
Marketing costs (154.31) (131.23)
Selling costs (31.04) (27.85)
Admin & central costs (35.09) (30.93)
Share option related charges (0.95) (0.82)
------------------------------ --------- ---------
Underlying operating profit 53.93 45.36
------------------------------ --------- ---------
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 9.
Foreign exchange
The primary US dollar exchange rates relevant to the Group's
2019 results were as follows:
2019 2018
Period end Average Period end Average
Sterling 1.31 1.28 1.27 1.34
Canadian dollars 0.76 0.75 0.73 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:
-- 97% of the Group's revenue arises in US dollars, the Group's
reporting currency, hence translational risk in the income
statement is low. The net impact on the 2019 income statement from
trading currency movements 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 is the Sterling-based
defined benefit pension liability. Currency movements produced an
exchange loss on the pension liability in the year of $0.40m.
-- The Group's business model is characterised by strong cash
generation, mostly in US dollars. However, 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. By way of example, using actual exchange rates,
the movement of Sterling against the US dollar during 2019 meant
that every US$1m converted to Sterling was worth around GBP24,000
less at the 2019 closing rate compared to the 2018 closing
rate.
Share option charges
A total of $0.95m (2018: $0.82m) was charged in the year in
respect of IFRS 2 'Share-based Payments'. This was made up of
elements from executive awards made under the 2015 Incentive Plan
and charges relating to the UK SAYE and the US ESPP plans.
Current options and awards outstanding are 125,095 shares under
the UK SAYE and US ESPP plans and 70,739 shares under the 2015
Incentive Plan. Awards under the 2015 Incentive Plan in respect of
2019 are anticipated to be made in late March 2020.
Exceptional items
There was no exceptional charge in the year. During 2018 an
exceptional item of $0.72m was charged. This related to estimated
past service costs resulting from Guaranteed Minimum Pension
equalisation in our defined benefit pension scheme following the
Lloyds case.
Net finance income
Net finance income for the year before pension finance charge
was $0.75m (2018: $0.23m). This is comprised of net bank interest
income of $0.80m (2018: $0.23m) and lease interest charges of
$0.05m (2018: nil). The year-over-year positive swing of $0.56m on
bank interest primarily reflects higher cash deposits.
Taxation
The tax charge for the year was $11.28 (2018: $8.95m), giving an
effective tax rate of 21% (2018: 20%). The charge comprised current
tax of $10.32m, representing tax payable in the USA, and a deferred
tax charge of $0.96m.
The tax charge relating to underlying profit before tax was
$11.41m (2018: $9.23m), an effective tax rate of 21% (2018:
20%).
Earnings per share
Underlying basic earnings per share was 154.41c (2018: 129.77c),
an increase of 19%. This was slightly lower than the 20% increase
in underlying profit before tax due the higher effective tax rate
in 2019.
Basic earnings per share was 152.42c (2018: 125.61c), an
increase of 21%.
Dividends
Dividends are determined in US dollars and paid in Sterling,
converted at the exchange rate on the date that the dividend is
determined.
The Board has proposed a final dividend of 59.00c (2018: 49.20c)
which, together with the interim dividend of 25.00c, gives a total
paid and proposed regular dividend relating to 2019 of 84.00c, an
increase of 20% compared to prior year.
The final dividend has been converted to Sterling at an exchange
rate of GBP1.00/$1.2781 (2018: GBP1.00/$1.319). This results in a
final dividend payable to Shareholders of 46.16p (2018: 37.30p),
which, combined with the interim dividend paid of 20.52p, gives a
total dividend for the year of 66.68p, an increase of 25% compared
to prior year.
The final dividend will be paid on 15 May 2020 to Shareholders
on the register at the close of business on 14 April 2020.
Defined benefit pension plan
The Group sponsors a legacy defined benefit pension plan (Plan)
which has been closed to new members and future accruals for many
years. This Plan is the successor arrangement to the previous, much
larger defined benefit scheme which was successfully de-risked and
wound-up in December 2017. The new Plan has equivalent benefits to
the previous scheme, and currently has around 98 pensioners and 273
deferred members.
At 28 December 2019, the net deficit of the Plan on an IAS 19
basis was $12.31m, compared to $15.02m at 29 December 2018. At 28
December 2019 gross scheme liabilities under IAS 19 were $36.32m,
and assets were $24.01m.
The change in deficit is analysed as follows:
$m
------------------------------------------------------------------------ --------
IAS 19 deficit at 30 December 2018 (15.02)
Company contributions to the Plan 3.59
Pension administration costs (0.31)
Pension finance charge (0.38)
Re-measurement loss due to changes in assumptions and return on assets 0.21
Exchange loss (0.40)
------------------------------------------------------------------------ --------
IAS 19 deficit at 28 December 2019 (12.31)
------------------------------------------------------------------------ --------
The net liability reduced by $2.71m in the year, driven
primarily by employer's contributions of $3.59m offset by
administration, finance and exchange charges. In Sterling, the net
deficit decreased by GBP2.44m in the year to GBP9.40m.
A full actuarial valuation was performed in respect of the Plan
in September 2016. At that time, deficit recovery contributions of
GBP2.25m per annum were agreed with the Trustee. These
contributions commenced on 1 July 2017, rising by 3% per annum. The
agreed recovery timeframe was a period of 5 years 7 months until 31
January 2023, at which point the funding shortfall on a technical
provisions basis was expected to be eliminated. In addition, an
annual payment of GBP0.25m was agreed towards the costs of the
Plan's administration and management. The Company is also committed
to funding agreed transfer values out of the Plan, at a funding
rate of 50% of the transfer value. $0.28m was paid in 2019 in
respect of transfers out of the Plan.
A new triennial actuarial valuation of the Plan as at September
2019 has been prepared and this forms the basis of the 2019 IAS 19
valuation set out above.
Following the 2019 triennial valuation, and in consultation with
the Trustee, the Company has committed to a revised, accelerated
schedule of deficit recovery contributions going forward. This
reflects: (i) movements in actuarial assumptions, particularly bond
yields driving down the discount rate, and (ii) the desire of both
the Company and the Trustee to move beyond funding on a technical
provisions basis to funding geared towards further de-risking and
eventual Plan buy-out within a reasonable timeframe. The new
schedule of deficit contributions consists of a lump sum of
GBP7.50m (c.$10m) payable in May 2020, followed, from 1 July 2020
onwards, by annual contributions that remain at the existing agreed
level of GBP2.46m per annum, rising by 3% annually. The agreed new
recovery plan ends in July 2024. An allowance of GBP0.30m per year,
rising by 3% annually, will also be paid towards the cost of the
Plan's administration and management. The Company will remain
committed to funding agreed transfer values out of the Plan at a
funding rate of 50% of the transfer value.
Cash flow
The Group had net cash of $41.14m at 28 December 2019, an
increase of $13.66m over the 29 December 2018 balance of
$27.48m.
Cash flow in the period is summarised as follows:
2019 2018
$m $m
----------------------------------------- -------- --------
Underlying operating profit 53.93 45.36
Share option related charges 0.93 0.81
Depreciation and amortisation 2.78 2.65
Lease depreciation 1.50 -
Change in working capital 0.70 (3.19)
Capital expenditure (8.18) (2.86)
----------------------------------------- -------- --------
Underlying operating cash flow 51.66 42.77
Tax and interest (9.57) (7.62)
Defined benefit pension contributions (3.59) (3.93)
Own share transactions (2.56) (0.47)
Capital element of lease payments (1.69) -
Exceptional items - (0.05)
Exchange gain/(loss) 0.07 (1.01)
Free cash flow 34.32 29.69
Dividends to Shareholders (20.66) (32.98)
----------------------------------------- -------- --------
Net cash inflow/(outflow) in the period 13.66 (3.29)
----------------------------------------- -------- --------
The Group is typically very cash generative, and this remained
the case in 2019. The business model is efficient in working
capital usage and typically has low fixed capital requirements. The
operating cash conversion rate for the year was 96%. If the $5m of
capital spend on the Oshkosh distribution centre expansion is added
back, cash conversion would have been 105%.
In accordance with IFRS 16, lease depreciation and the capital
element of lease payments are included in the cash flow. There are
no comparatives since an opening equity adjustment was booked as
opposed to restating prior periods. In 2018 the full lease payments
of $2.0m were charged within operating profit. Overall, the
implementation of IFRS 16 has no net impact on free cash flow.
Dividends paid to Shareholders in 2018 includes the
supplementary dividend of 60.00c per share paid in May 2018.
Balance sheet and Shareholders' funds
Net assets at 28 December 2019 were $62.95m, compared to $43.27m
at 29 December 2018. The balance sheet is summarised as
follows:
28 December 29 December
2019 2018
$m $m
---------------------------------- ------------ ------------
Non-current assets 31.84 25.73
Working capital 5.15 5.85
Net cash 41.14 27.48
Pension deficit (12.31) (15.02)
Other assets/(liabilities) - net (2.87) (0.77)
Net assets 62.95 43.27
---------------------------------- ------------ ------------
Shareholders' funds increased by $19.68m, comprising: net profit
in the period of $42.72m; $(0.17)m of exchange losses; net $(0.37)m
of pension related movements; $0.92m of net share option related
movements; $(2.57)m relating to purchase of own shares, net of
option proceeds; $(20.66)m equity dividends paid to Shareholders;
and an adjustment to opening net equity of $(0.19)m arising from
the implementation of IFRS 16 (see note 9).
The Group had a characteristically low net negative working
capital balance of $5.15m at 28 December 2019, ($5.85m at 29
December 2018).
As a result of the adoption of IFRS 16, a 'right-of-use' asset
of $1.99m is included within Non-current assets. An associated
liability of $2.05m is included within Other
assets/(liabilities).
Balance sheet funding
The Board is committed to aligning the Group's funding with its
strategic priorities. This requires a stable, secure and flexible
balance sheet through the cycle. The Group will therefore typically
remain ungeared and hold a net cash position.
The Board's funding guidelines aim to provide operational and
financial flexibility:
-- To facilitate continued investment in marketing, people and
technology through different economic cycles recognising that an
economic downturn typically represents a market share opportunity
for the business.
-- To protect the ability of the business to act swiftly as
growth opportunities arise in accordance with the Group's capital
allocation guidelines.
-- To underpin a commitment to Shareholders through the
maintenance of regular interim and final dividend payments.
-- To meet our pension contribution commitments as they fall due.
The quantum of the cash target at each year end will be
influenced broadly by reference to the investment requirements of
the business, and the subsequent year's anticipated full year
ordinary dividend and pension payment obligations.
The Board will keep these guidelines under review and is
prepared to be flexible if circumstances warrant.
Capital allocation
The Board's capital allocation framework is designed to deliver
increasing Shareholder value, driven by the execution of the
Group's growth strategy. The Group's capital allocation priorities
are:
-- Organic growth investments
o Either capital projects or those expensed in the income
statement
o Market share opportunities in existing markets
-- Interim and final dividend payments
o Increasing broadly in line with earnings per share through the
cycle
o Aim to at least maintain dividend per share in a downturn
-- Residual legacy pension funding
o In line with agreed deficit recovery funding schedule
o Further de-risking initiatives, if viable
-- Mergers & acquisitions
o Not a near-term priority
o Opportunities that would support organic growth
-- Other Shareholder distributions
o Quantified by reference to cash over and above balance sheet
funding requirement
o Supplementary dividends most likely method; other methods may
be considered
Treasury policy
The financial requirements of the Group are managed through a
centralised treasury policy. The Group operates cash pooling
arrangements for its North American operations. Forward contracts
may be taken out to buy or sell currencies relating to specific
receivables and payables as well as remittances from overseas
subsidiaries. There were no forward contracts open at the period
end or prior period end, but forward contracts have been used
during the year. The Group holds the majority of its cash with its
principal US and UK bankers.
The Group has $20.0m of working capital facilities with its
principal US bank, JPMorgan Chase, N.A. The interest rate is US$
LIBOR plus 1.5%, and the facilities expire on 31 May 2021. In
addition, an overdraft facility of GBP1.0m, with an interest rate
of bank base rate plus 2.0%, 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 only critical accounting policies are in
respect of pensions and leases.
Brexit risk
Despite the fact that Brexit has now occurred significant
uncertainty remains, particularly over trading arrangements with
the EU. As rehearsed previously, however, we consider 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 residual negative effects. Consequently, we
do not consider that Brexit creates any real change in the Group's
principal risks and uncertainties, nor does it have any material
effect on our evaluation of going concern or viability analysis
elsewhere in this report.
Kevin Lyons-Tarr David Seekings
Chief Executive Officer Chief Financial Officer
3 March 2020
Group Income Statement for the 52 weeks ended 28 December
2019
2019 2018
Note $'000 $'000
--------------------------- ---- --------- ---------
Revenue 1 860,844 738,418
Operating expenses (807,224) (694,096)
--------------------------- ---- --------- ---------
Operating profit 1 53,620 44,322
Finance income 818 250
Finance costs (67) (23)
Pension finance charge (378) (403)
--------------------------- ---- --------- ---------
Net finance income/(cost) 373 (176)
Profit before tax 53,993 44,146
Taxation 3 (11,276) (8,952)
--------------------------- ---- --------- ---------
Profit for the period 42,717 35,194
--------------------------- ---- --------- ---------
Cents Cents
--------------------------- ---- --------- ---------
Earnings per share
Basic 4 152.42 125.61
Diluted 4 151.87 125.22
Underlying * basic 4 154.41 129.77
--------------------------- ---- --------- ---------
* Underlying is before defined benefit pension charges and
exceptional items.
Group S tatement of Comprehensive Income for the 52 weeks ended
28 December 2019
2019 2018
Note $'000 $'000
Profit for the period 42,717 35,194
--------------------------------------------------- ---- ------- -------
Other comprehensive (expense)/income
Items that may be reclassified subsequently
to the income statement:
Currency translation differences (173) (434)
Items that will not be reclassified subsequently
to the income statement:
Return on pension scheme assets (excluding
interest income) 6 2,372 (1,951)
Re-measurement (losses)/gains on post-employment
obligations 6 (2,164) 1,582
Tax relating to components of other comprehensive
income (570) 390
Effect of change in UK tax rate (9) (21)
Total other comprehensive expense net of tax (544) (434)
--------------------------------------------------- ---- ------- -------
Total comprehensive income for the period 42,173 34,760
--------------------------------------------------- ---- ------- -------
Group Balance Sheet at 28 December 2019
2019 2018
Note $'000 $'000
------------------------------- ---- -------- --------
Non-current assets
Property, plant and equipment 24,369 19,012
Intangible assets 1,152 1,084
Right-of-use assets 1,985 -
Deferred tax assets 4,338 5,636
31,844 25,732
------------------------------- ---- -------- --------
Current assets
Inventories 11,456 9,878
Trade and other receivables 52,899 46,228
Current tax debtor 140 644
Cash and cash equivalents 41,136 27,484
------------------------------- ---- -------- --------
105,631 84,234
------------------------------- ---- -------- --------
Current liabilities
Lease liabilities (1,630) -
Trade and other payables (59,209) (50,252)
Current tax creditor - (500)
------------------------------- ---- -------- --------
(60,839) (50,752)
------------------------------- ---- -------- --------
Net current assets 44,792 33,482
------------------------------- ---- -------- --------
Non-current liabilities
Lease liabilities (415) -
Retirement benefit obligations 6 (12,305) (15,016)
Deferred tax liabilities (968) (931)
(13,688) (15,947)
------------------------------- ---- -------- --------
Net assets 62,948 43,267
------------------------------- ---- -------- --------
Shareholders' equity
Share capital 18,842 18,842
Share premium reserve 68,451 68,451
Other reserves 5,254 5,427
Retained earnings (29,599) (49,453)
------------------------------- ---- -------- --------
Total Shareholders' equity 62,948 43,267
------------------------------- ---- -------- --------
Group Statement of Changes in Shareholders' Equity for the 52
weeks ended 28 December 2019
Retained earnings
-----------------------
Share
Share premium Other Profit Total
capital reserve reserves Own shares and loss equity
$'000 $'000 $'000 $'000 $'000 $'000
----------------------------------------- --------- -------- --------- ------------ --------- --------
Balance at 31 December 2017 18,842 68,451 5,861 (1,699) (50,373) 41,082
----------------------------------------- --------- -------- --------- ------------ --------- --------
Profit for the period 35,194 35,194
Other comprehensive income/(expense)
Currency translation differences (434) (434)
Re-measurement losses on post-employment
obligations (369) (369)
Deferred tax relating to post-employment
obligations 69 69
Deferred tax relating to losses
re post-employment obligations 321 321
Effect of change in tax rates (21) (21)
Total comprehensive income (434) 35,194 34,760
----------------------------------------- --------- -------- --------- ------------ --------- --------
Proceeds from options exercised 1,722 1,722
Own shares utilised 2,420 (2,420) -
Own shares purchased (2,187) (2,187)
Share-based payment charge 808 808
Deferred tax relating to share
options 6 6
Deferred tax relating to losses
re share options 60 60
Dividends (32,984) (32,984)
----------------------------------------- --------- -------- --------- ------------ --------- --------
Balance at 29 December 2018 18,842 68,451 5,427 (1,466) (47,987) 43,267
Adjustments arising from adoption
of IFRS 16 (note 9) - - - - (187) (187)
----------------------------------------- --------- -------- --------- ------------ --------- --------
Balance at 30 December 2018
after adjustments 18,842 68,451 5,427 (1,466) (48,174) 43,080
----------------------------------------- --------- -------- --------- ------------ --------- --------
Profit for the period 42,717 42,717
Other comprehensive income/(expense)
Currency translation differences (173) (173)
Re-measurement gains on post-employment
obligations 208 208
Deferred tax relating to post-employment
obligations (40) (40)
Deferred tax relating to losses
re post-employment obligations (530) (530)
Effect of change in tax rates (9) (9)
Total comprehensive income (173) 42,346 42,173
----------------------------------------- --------- -------- --------- ------------ --------- --------
Proceeds from options exercised 339 339
Own shares utilised 1,343 (1,343) -
Own shares purchased (2,906) (2,906)
Share-based payment charge 928 928
Deferred tax relating to share
options 94 94
Deferred tax relating to losses
re share options (101) (101)
Dividends (20,659) (20,659)
----------------------------------------- --------- -------- --------- ------------ --------- --------
Balance at 28 December 2019 18,842 68,451 5,254 (3,029) (26,570) 62,948
----------------------------------------- --------- -------- --------- ------------ --------- --------
Group Cash Flow Statement for the 52 weeks ended 28 December
2019
2019 2018
Note $'000 $'000
------------------------------------------------ ---- -------- --------
Cash flows from operating activities
Cash generated from operations 7 56,248 41,651
Tax paid (10,318) (7,844)
Finance income received 818 250
Finance costs paid (67) (23)
Net cash generated from operating activities 46,681 34,034
------------------------------------------------ ---- -------- --------
Cash flows from investing activities
Purchases of property, plant and equipment (7,673) (2,492)
Purchases of intangible assets (505) (395)
Proceeds from sale of property, plant and
equipment - 32
Net cash used in investing activities (8,178) (2,855)
------------------------------------------------ ---- -------- --------
Cash flows from financing activities
Capital element of lease payments (1,687) -
Proceeds from share options exercised 339 1,722
Purchase of own shares (2,906) (2,187)
Dividends paid to Shareholders 5 (20,659) (32,984)
------------------------------------------------ ---- -------- --------
Net cash used in financing activities (24,913) (33,449)
------------------------------------------------ ---- -------- --------
Net movement in cash and cash equivalents 13,590 (2,270)
Cash and cash equivalents at beginning of
the period 27,484 30,767
Exchange gains/(losses) on cash and cash
equivalents 62 (1,013)
------------------------------------------------ ---- -------- --------
Cash and cash equivalents at end of the period 41,136 27,484
------------------------------------------------ ---- -------- --------
Analysis of cash and cash equivalents
Cash at bank and in hand 41,136 23,648
Short-term deposits - 3,836
------------------------------------------------ ---- -------- --------
41,136 27,484
------------------------------------------------ ---- -------- --------
General information
4imprint Group plc, registered number 177991, is a public
limited company incorporated in England and Wales, domiciled in the
UK and listed on the London Stock Exchange. Its registered office
is 25 Southampton Buildings, London WC2A 1AL.
The Group presents the consolidated financial statements in US
dollars and numbers are shown in US dollars thousands. A
substantial portion of the Group's revenue and earnings are
denominated in US dollars and the Board is of the opinion that a US
dollar presentation gives a more meaningful view of the Group's
financial performance and position.
Accounting policies
The principal accounting policies adopted in the preparation of
these financial statements are those set out in the Group's Annual
Report and Accounts 2019. These policies have been consistently
applied to all the periods presented, apart from those affected by
the early adoption of IFRS 16 'Leases'. Under IFRS 16 there is no
distinction between finance and operating leases from a lessee's
perspective, with all leases, subject to options to exclude leases
with a duration of 12 months or less 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. On transition the Group decided to
take advantage of the modified retrospective 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 policy change are shown
in note 9.
Basis of preparation
This announcement was approved by the Board of Directors on 3
March 2020. The financial information in this announcement does not
constitute the Group's statutory accounts for the periods ended 28
December 2019 or 29 December 2018 but it is derived from those
accounts. Statutory accounts for 29 December 2018 have been
delivered to the Registrar of Companies, and those for 28 December
2019 will be delivered after the Annual General Meeting. The
auditors have reported on those accounts. Their reports were
unqualified, did not include a reference to any matters to which
the auditors drew attention by way of emphasis without qualifying
their report and did not contain a statement under section 498(2)
or (3) of the Companies Act 2006.
The audited consolidated financial statements from which these
results are extracted have been prepared under the historical cost
convention in accordance with IFRS (International Financial
Reporting Standards) as adopted by the EU, IFRS IC interpretations
and those parts of the Companies Act 2006 applicable to companies
reporting under IFRS. The standards used are those published by the
International Accounting Standards Board (IASB) and endorsed by the
EU that applied to the 2019 financial year, which started on 30
December 2018, except for the early adoption of IFRS 16 as noted
above.
After making enquiries, the Directors have reasonable
expectations that the Group has adequate resources to continue to
operate for a period of at least twelve months from the date these
financial statements were approved. Accordingly, they continue to
adopt the going concern basis in preparing the consolidated
financial statements.
Judgments, estimates and assumptions
Critical accounting judgments and key sources of estimation
uncertainty
The preparation of the consolidated financial statements
requires management to make judgments, estimates and assumptions
that affect the application of policies, the amounts reported for
assets and liabilities as at the balance sheet date and the amounts
reported for revenues and expenses during the year.
The estimates and associated assumptions are based on historical
experiences and various other factors that are believed to be
reasonable under the circumstances, the results of which form the
basis of making judgments about carrying values of assets and
liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates.
Critical accounting policies are those that require significant
judgments or estimates and potentially result in materially
different results under different assumptions or conditions.
Management considers the following to be the critical accounting
policies:
Pensions
As disclosed in note 6, the Group sponsors a defined benefit
pension scheme closed to new members and future accruals. Period
end recognition of the liabilities under this scheme and the return
on assets held to fund these liabilities require 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 expense recorded
in the income statement and on the pension liability in the balance
sheet.
Leases
An estimate of the residual term over which the Oshkosh office
lease will be rolled over has been necessary.
1 Segmental reporting
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 28 December 2019, the Group has two operating segments, North
America and UK & Eire. The costs of the Head office are
reported separately to the Board, but this is not an operating
segment.
2019 2018
Revenue $'000 $'000
--------------------- -------- --------
North America 839,284 714,554
UK and Eire 21,560 23,864
--------------------- -------- --------
Total Group revenue 860,844 738,418
--------------------- -------- --------
Profit 2019 2018
$'000 $'000
--------------------------------------------------- -------- --------
North America 57,446 48,496
UK and Eire (42) 465
--------------------------------------------------- -------- --------
Underlying* operating profit from 4imprint Direct
Marketing 57,404 48,961
Head office costs (3,472) (3,602)
--------------------------------------------------- -------- --------
Underlying operating profit 53,932 45,359
Defined benefit pension scheme administration
costs (note 6) (312) (316)
Exceptional items (note 2) - (721)
Operating profit 53,620 44,322
Net finance income 751 227
Pension finance charge (378) (403)
--------------------------------------------------- -------- --------
Profit before tax 53,993 44,146
--------------------------------------------------- -------- --------
* Underlying is before defined benefit pension charges and
exceptional items.
2 Exceptional items
2019 2018
$'000 $'000
----------------------------------------------- -------- -------
Past service costs re defined benefit pension
scheme pensioner GMP equalisation - 721
----------------------------------------------- -------- -------
The past service costs in 2018 result from the High Court
judgment in the Lloyds case on 26 October 2018, which confirmed
that the equalisation of benefits between male and female members
of the defined benefit plan at retirement extends to Guaranteed
Minimum Pensions ("GMP"). The charge is 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 these financial statements. The actual
result may differ from this estimate, which has not been updated
since first calculated.
3 Taxation
2019 2018
$'000 $'000
Current tax
UK tax - current - -
Overseas tax - current 10,845 8,212
Overseas tax - prior periods (523) (41)
--------------------------------------------------- ------- -------
Total current tax 10,322 8,171
--------------------------------------------------- ------- -------
Deferred tax
Origination and reversal of temporary differences 954 803
Adjustment in respect of prior periods - (22)
Total deferred tax 954 781
Taxation 11,276 8,952
--------------------------------------------------- ------- -------
The tax for the period is different to the standard rate of
corporation tax in the respective countries of operation. The
differences are explained below:
2019 2018
$'000 $'000
---------------------------------------------------------- -------- --------
Profit before tax 53,993 44,146
Profit before tax for each country of operation
multiplied by rate of corporation tax applicable
in the respective countries 12,927 10,452
Effects of:
Adjustments in respect of prior periods (523) (63)
Expenses not deductible for tax purposes and non-taxable
income 14 105
Other differences (91) (164)
Utilisation of tax losses not previously recognised (1,051) (1,378)
Taxation 11,276 8,952
---------------------------------------------------------- -------- --------
The net deferred tax asset at 28 December 2019 has been
calculated at a tax rate of 17% (2018: 19% for items reversing pre
April 2020 and 17% for all other items) in respect of UK deferred
tax items and 25% (2018: 21%) in respect of US deferred tax
items.
The amount of current tax recognised directly in Shareholders'
equity in 2019 was $nil (2018: $nil).
No current tax was recognised in other comprehensive income
(2018: $nil).
The lump sum funding to the defined benefit pension scheme
planned for 2020 may impact on future effective tax rates.
4 Earnings per share
Basic, diluted and underlying
The basic, diluted and underlying earnings per share are
calculated based on the following data:
2019 2018
$'000 $'000
------------------ ------- -------
Profit after tax 42,717 35,194
------------------ ------- -------
2019 2018
$'000 $'000
----------------------------------------------- --------- --------
Profit before tax 53,993 44,146
Adjustments:
Exceptional items (note 2) - 721
Defined benefit pension scheme administration
costs (note 6) 312 316
Pension finance charge (note 6) 378 403
----------------------------------------------- --------- --------
Underlying profit before tax 54,683 45,586
Taxation (note 3) (11,276) (8,952)
Tax relating to above adjustments (131) (274)
----------------------------------------------- --------- --------
Underlying profit after tax 43,276 36,360
----------------------------------------------- --------- --------
2019 2018
Number Number
'000 '000
--------------------------------------------- -------- --------
Basic weighted average number of shares 28,026 28,018
Adjustment for employee share options 102 88
--------------------------------------------- -------- --------
Diluted weighted average number of shares 28,128 28,106
--------------------------------------------- -------- --------
2019 2018
Cents Cents
--------------------------------------------- -------- --------
Basic earnings per share 152.42 125.61
--------------------------------------------- -------- --------
Diluted earnings per share 151.87 125.22
--------------------------------------------- -------- --------
Underlying basic earnings per share 154.41 129.77
--------------------------------------------- -------- --------
Underlying diluted basic earnings per share 153.85 129.37
--------------------------------------------- -------- --------
The basic weighted average number of shares excludes shares held
in the 4imprint Group plc employee share trusts. The effect of this
is to reduce the average by 59,908 (2018: 67,125).
The basic earnings per share is calculated based on the profit
for the financial period divided by the basic weighted average
number of shares.
For diluted earnings per share, the basic weighted average
number of ordinary shares in issue is adjusted to assume conversion
of all potential dilutive ordinary shares. The potential dilutive
ordinary shares relate to those share options granted to employees
where the exercise price is less than the average market price of
the Company's ordinary shares and are likely to vest at the balance
sheet date.
The underlying basic 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.
5 Dividends
2019 2018
Equity dividends - ordinary shares $'000 $'000
---------------------------------------- ------ ------
Interim paid: 25.00c (2018: 20.80c) 7,146 5,848
Supplementary paid: nil (2018: 60.00c) - 16,282
Final paid: 49.20c (2018: 40.00c) 13,513 10,854
---------------------------------------- ------ ------
20,659 32,984
---------------------------------------- ------ ------
6 Employee pension schemes
The Group operates defined contribution plans for its UK and US
employees. The regular contributions are charged to the income
statement as they are incurred. The charges recognised in the
income statement are:
2019 2018
$'000 $'000
------------------------------------------------------- ------- -------
Defined contribution plans - employers' contributions 1,580 1,356
------------------------------------------------------- ------- -------
The Group also sponsors a UK defined benefit pension scheme
which is closed to new members and future accrual.
The amounts recognised in the income statement are as
follows:
2019 2018
$'000 $'000
----------------------------------------------- ------- -------
Administration costs paid by the scheme 312 316
Pension finance charge 378 403
Exceptional items - past service costs re GMP
equalisation (note 2) - 721
Total defined benefit pension charge 690 1,440
----------------------------------------------- ------- -------
The amounts recognised in the balance sheet comprise:
2019 2018
$'000 $'000
----------------------------------------------- --------- ---------
Present value of funded obligations (36,322) (33,103)
Fair value of scheme assets 24,017 18,087
----------------------------------------------- --------- ---------
Net liability recognised in the balance sheet (12,305) (15,016)
----------------------------------------------- --------- ---------
The funds of the scheme are held in trust and administered by a
corporate Trustee to meet pension liabilities for around 371 past
employees of the Group. The level of retirement benefit is
principally based on salary earned in the best three consecutive
tax years in the ten years prior to leaving active service and is
linked to changes in inflation both pre and post retirement.
The scheme is subject to the funding legislation outlined in the
Pensions Act 2004 which came into force on 30 December 2005. This,
together with documents issued by the Pensions Regulator, and
Guidance Notes adopted by the Financial Reporting Council, set out
the framework for funding defined benefit occupational pension
plans in the UK.
The Trustee of the scheme is required to act in the best
interest of the scheme's beneficiaries. The appointment of trustees
is determined by the scheme's trust documentation.
The scheme typically exposes the Company to actuarial risks such
as investment risk, interest rate risk, mortality risk and
longevity risk. A decrease in corporate bond yields, a rise in
inflation or an increase in life expectancy would result in an
increase to scheme liabilities. This would detrimentally impact the
balance sheet position, potentially require an increase in future
cash contributions from the Company and may give rise to increased
charges in future income statements. Caps on inflationary increases
are in place to protect the scheme against extreme inflation.
Assets are held in a diversified growth fund, designed to give
lower volatility than equities, and in a liability-driven
investment fund, designed to provide some hedge against movement in
the liabilities due to interest rate fluctuation and inflation. The
funds use derivatives to reduce risk.
An actuarial valuation was undertaken as at 30 September 2019 in
accordance with the scheme funding requirements of the Pensions Act
2004. The draft actuarial valuation showed a deficit of GBP14.4m. A
recovery plan has been agreed with the Trustee under which the
Company commits to a revised schedule of contributions. The
recovery plan period is five years and under the plan a lump sum of
GBP7.5m is payable in May 2020 and ongoing contributions of
GBP2.46m per annum are payable by the Company. These contributions
commence on 1 July 2020 and increase by 3% annually. In addition,
an annual allowance of GBP0.30m, rising by 3% annually, is payable
towards costs of administration of the scheme.
For the purposes of IAS 19, numbers from the draft actuarial
valuation as at 30 September 2019, which was carried out by a
qualified independent actuary, have been updated on an approximate
basis to 28 December 2019. There have been no changes in the
valuation methodology adopted for this period's disclosures
compared to the previous period's disclosures.
Changes in the present value of the net defined benefit
obligation are as follows:
Present Fair value
value of of scheme
obligations assets Net obligation
$'000 $'000 $'000
------------ ---------- --------------
Balance at 31 December 2017 (36,739) 18,633 (18,106)
Administration costs paid by the scheme (316) - (316)
Exceptional items - buy-out costs paid
by the scheme (721) - (721)
Interest (expense)/income (889) 486 (403)
Return on scheme assets (excluding interest
income) - (1,951) (1,951)
Re-measurement gains due to changes in
financial assumptions 1,582 - 1,582
Contributions by employer - 3,932 3,932
Benefits paid 1,848 (1,848) -
Exchange gain/(loss) 2,132 (1,165) 967
-------------------------------------------- ------------ ---------- --------------
Balance at 29 December 2018 (33,103) 18,087 (15,016)
Administration costs paid by the scheme (312) - (312)
Interest (expense)/income (919) 541 (378)
Return on scheme assets (excluding interest
income) - 2,372 2,372
Re-measurement gains due to changes in
scheme experience 1,425 1,425
Re-measurement gains due to changes in
demographic assumptions 1,429 1,429
Re-measurement losses due to changes in
financial assumptions (5,018) - (5,018)
Contributions by employer - 3,593 3,593
Benefits paid 1,288 (1,288) -
Exchange (loss)/gain (1,112) 712 (400)
-------------------------------------------- ------------ ---------- --------------
Balance at 28 December 2019 (36,322) 24,017 (12,305)
-------------------------------------------- ------------ ---------- --------------
The principal assumptions applied by the actuaries, as
determined by the Directors, at each period end were:
2019 2018
----------------------------------------- ------ ------
Rate of increase in pensions in payment 2.90% 3.10%
Rate of increase in deferred pensions 2.15% 2.10%
Discount rate 1.95% 2.80%
Inflation assumption - RPI 2.95% 3.20%
- CPI 2.15% 2.10%
----------------------------------------- ------ ------
The mortality assumptions adopted at 28 December 2019 reflect
the most recent version of the tables used in the draft September
2019 triennial valuation. The assumptions imply the following life
expectancies at age 65:
2019 2018
------------------------ --------- ---------
Male currently age 40 22.3 yrs 23.4 yrs
Female currently age 40 24.1 yrs 25.3 yrs
Male currently age 65 21.3 yrs 21.9 yrs
Female currently age 65 23.0 yrs 23.8 yrs
------------------------ --------- ---------
7 Cash generated from operations
2019 2018
$'000 $'000
-------------------------------------------------- ------- -------
Operating profit 53,620 44,322
Adjustments for:
Depreciation charge 2,345 2,200
Amortisation of intangibles 440 445
Amortisation of right-of-use assets 1,499 -
Loss on disposal of property, plant and equipment - 7
Exceptional non-cash items - 721
Decrease in exceptional accrual - (52)
Share option charges 928 808
Defined benefit pension administration charge 312 316
Contributions to defined benefit pension scheme (3,593) (3,932)
Changes in working capital:
Increase in inventories (1,577) (2,266)
Increase in trade and other receivables (6,579) (2,422)
Increase in trade and other payables 8,853 1,504
Cash generated from operations 56,248 41,651
-------------------------------------------------- ------- -------
8 Related party transactions
The Group did not participate in any related party
transactions.
9 Impact of new accounting standards
On transition to IFRS 16 the modified retrospective option was
selected, with no restatement of prior periods so prior year
numbers are not directly comparable. In addition, the exemptions
for low value assets and leases with a duration of 12 months or
less 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 used 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
Opening 30 Dec
29 Dec 2018 IFRS 16 2018
Balance sheet As reported 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 year is as follows:
Balance sheet at 28 December IFRS 16 As reported
2019 Before adjustment adjustment
$'000 $'000 $'000
-------------------------------- ------------------ ------------ ------------
Non-current assets
Property, plant and equipment 24,369 - 24,369
Right-of-use assets - 1,985 1,985
Intangible assets 1,152 - 1,152
Deferred tax assets 4,338 - 4,338
-------------------------------- ------------------ ------------ ------------
29,859 1,985 31,844
Current assets
Inventories 11,456 - 11,456
Trade and other receivables 52,899 - 52,899
Current tax debtor 140 - 140
Cash and cash equivalents 41,136 - 41,136
-------------------------------- ------------------ ------------ ------------
105,631 - 105,631
-------------------------------- ------------------ ------------ ------------
Current liabilities
Lease liabilities - (1,630) (1,630)
Trade and other payables (59,209) - (59,209)
(59,209) (1,630) (60,839)
-------------------------------- ------------------ ------------ ------------
Net current assets 46,422 (1,630) 44,792
-------------------------------- ------------------ ------------ ------------
Non-current liabilities
Lease liabilities - (415) (415)
Retirement benefit obligations (12,305) - (12,305)
Deferred tax liability (983) 15 (968)
-------------------------------- ------------------ ------------ ------------
(13,288) (400) (13,688)
Net assets 62,993 (45) 62,948
-------------------------------- ------------------ ------------ ------------
Income statement for the 52 weeks IFRS 16 As reported
ended 28 December 2019 Before adjustment adjustment
$'000 $'000 $'000
----------------------------------- ------------------ ------------ ------------
Revenue 860,844 - 860,844
Operating expenses (807,456) 232 (807,224)
----------------------------------- ------------------ ------------ ------------
Operating profit 53,388 232 53,620
----------------------------------- ------------------ ------------ ------------
Finance income 818 - 818
Finance costs (22) (45) (67)
Pension finance charge (378) - (378)
----------------------------------- ------------------ ------------ ------------
Net finance income 418 (45) 373
----------------------------------- ------------------ ------------ ------------
Profit before tax 53,806 187 53,993
Taxation (11,229) (47) (11,276)
----------------------------------- ------------------ ------------ ------------
Profit for the period 42,577 140 42,717
----------------------------------- ------------------ ------------ ------------
Earnings per share
Basic 151.92 152.42
Diluted 151.37 151.87
----------------------------------- ------------------ ------------ ------------
Cash flow statement
There is no net impact upon the net movement of cash and cash
equivalent. However, in 2019, cash generated from operations
increased by $1,732,000, offset by an increase in outflow on
finance costs paid, within operating activities, of $45,000 and
capital elements of lease payments, within financing activities, of
$1,687,000.
10 Principal risks and uncertainties
The principal risks and uncertainties which the business faces
are: macroeconomic conditions; markets and 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 IT systems and infrastructure; failure to adapt to
new technological innovations; and cyber threats. A full
description of these risks and the mitigating actions taken by the
Group is available on the Company's corporate website
http://investors.4imprint.com.
Statement of Directors' responsibilities
Each of the Directors confirms that, to the best of their
knowledge:
-- The financial statements within the full Annual Report and
Accounts from which the financial information within this Final
Results Announcement has been extracted, have been prepared in
accordance with IFRSs as adopted by the EU, give a true and fair
view of the assets, liabilities, financial position and profit of
the Company and the undertakings included in the consolidation
taken as a whole.
-- The Chief Executive's Review and Financial Review, and
Principal risks and uncertainties include a fair review of the
development and performance of the business and the position of the
Company and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties that it faces.
Alternative performance measures
An Alternative Performance Measure ('APM') is a financial
measure of historical or future financial performance, financial
position, or cash flows, other than a financial measure defined or
specified within IFRS.
The Group uses APMs to supplement standard IFRS measures to
provide users with information on underlying trends and additional
financial measures, which the Group considers will aid the users'
understanding of the business.
Definitions
Underlying operating profit is profit before defined benefit
pension charges and exceptional items. The defined benefit pension
plan relates to employees and former employees of businesses sold
by the Group and not to employees of the ongoing business.
Exceptional items are defined below. Both these items may be
volatile in magnitude and distort the underlying performance
measures of the ongoing business. A reconciliation of underlying
operating profit to operating profit is shown in note 1 and the
calculation of underlying EPS is shown in note 4.
Underlying operating margin % is underlying operating profit
divided by total revenue.
Exceptional items are income or costs that are both material and
non-recurring.
Revenue per marketing dollar is the total revenue of the Group
divided by the total marketing expense of the Group. This provides
a measure of the productivity of the marketing expenditure, which
is a cornerstone of the Group's organic revenue growth
strategy.
Free cash flow is defined as the net movement in cash and cash
equivalents before distributions to Shareholders but including
exchange gains/(losses) on cash and cash equivalents. It is a
measure of cash available for allocation in line with the Group's
capital allocation policy (see page 10).
Cash conversion is defined as the percentage of Free Cash Flow
to Underlying Operating Profit and is provided as a measure of the
efficiency of the Group's business model to generate cash.
Return on average capital employed is defined as underlying
profit before tax divided by the simple average of opening and
closing non-current assets, excluding deferred tax, plus net
current assets and non-current lease liabilities. This is given to
show a relative measure of the Group's efficient use of its capital
resources.
Capital expenditure is defined as purchases of property, plant
and equipment and intangible assets net of proceeds from the sale
of property, plant and equipment. These numbers are extracted from
the cash flows from investing activities shown in the Group cash
flow statement.
Underlying operating cash flow is defined as cash generated from
operations, before pension contributions and defined benefit
pension administration charges, less capital expenditure. This
reflects the cash flow directly from the ongoing business
operations.
Underlying profit before tax is defined as profit before tax
excluding defined benefit pension scheme charges and exceptional
items.
Underlying profit after tax is defined as profit after tax
before defined benefit pension scheme charges and exceptional
items, net of any related tax charges.
Underlying earnings per share is defined as underlying profit
after tax divided by the weighted average number of shares in issue
during the financial year.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR UUOWRRWUORAR
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March 03, 2020 02:00 ET (07:00 GMT)
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