16/03/2022 - 4imprint Group plc: Final results for the period ended 1 January 2022

16 March 2022

4imprint Group plc

Final results for the period ended 1 January 2022

4imprint Group plc (the "Group"), a direct marketer of promotional products, today announces its final results for the 52 weeks ended 1 January 2022.

	2021	2020
Financial Overview	52 weeks	53 weeks
$m	$m	Change
Revenue	787.32	560.04	+41%
Operating profit	30.65	3.97	+672%
Profit before tax	30.23	3.84	+687%
Cash	41.59	39.77	+5%
Basic EPS (cents)	80.46	11.03	+629%
Total paid and proposed dividend per share (cents)	45.00	-
Total paid and proposed dividend per share (pence)	33.82	-

2021 is a 52 week period and 2020 is a 53 week period. See page 6.

Operational Overview

• Strong trading recovery in 2021 after pandemic-impacted performance in 2020
• 1,429,000 total orders processed in 2021 (2020: 960,000); 263,000 new customers acquired in the year (2020: 173,000)
• Evolving marketing mix, including significant acceleration of brand component
• Complex and disruptive supply chain issues in the second half of 2021 resulting in elevated order backlog at year end
• Commitment to $2m in capital expenditure in 2022 for clean energy solar project at Oshkosh distribution centre
• Strong financial position: cash balance of $41.59m; no debt
• Re-introductionof Shareholder dividends; Interim (paid): 15.00c; Final (proposed): 30.00c

Paul Moody, Chairman said:

The recovery in the Group's financial performance in 2021 has been very encouraging. Most importantly, it was driven by decisions and actions fully aligned with the Group's strategy, culture and focus on the sustainability of the longer-term health of the business.

Challenges continue with regard to the ongoing pandemic, supply chain disruption and inflationary pressures. However, the Group has a clear strategy and is financially strong. Our business model is flexible and resilient and our market opportunity remains attractive.

Trading results in the first few weeks of 2022 have been encouraging.

For further information, please contact:
4imprint Group plc	MHP Communications
Tel. + 44 (0) 20 3709 9680	Tel. + 44 (0) 7884 494 112
hq@4imprint.co.uk	4imprint@mhpc.com
Kevin Lyons-Tarr - CEO	Katie Hunt
David Seekings - CFO
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Chairman's Statement

Performance summary

Throughout 2021 we have been focused intently on the recovery of our business after the unprecedented trading environment seen in 2020. Although the true extent and impact of the pandemic is yet to be fully realised, the significant improvement in the demand profile and financial results during the year demonstrates the strength of the business model and gives continued confidence in the long-term prospects of the Group.

Given that the 2020 demand numbers suffered such material disruption from the effects of COVID-19, the most informative indicator to gauge the extent of the recovery in demand in 2021 is the 2019 comparative (the most recent 'normal' year'). Total order count in the first half of 2021 was 79% of 2019 levels, rising to 101% in the second half and producing 90% of 2019 for the year. New customer acquisition was 88% of 2019, evidence of a very encouraging recovery of demand in the business.

Consequently, the financial results for 2021 showed a sharp improvement over prior year. Group revenue for 2021 was $787.3m, an increase of $227.3m or 41% over 2020. Profit before tax for the year was $30.2m (2020: $3.8m), resulting in basic earnings per share of 80.46c, (2020: 11.03c). The Group ended 2021 in a strong financial position, with a cash balance of $41.6m (2020: $39.8m).

Strategic direction

The Board is very pleased with the nature and extent of the Group's recovery from the COVID-19 pandemic. Our team's clear and deliberate actions have been informed at all stages by a desire to protect the long-term prospects of the business by staying true to our culture and in so doing reinforcing our strategic objectives.

Our team members throughout the entire organisation are at the heart of our culture. It was therefore natural to pursue a people-led approach through the pandemic. This has resulted in direct benefits in employee retention in difficult labour markets, and will also be important as we look for new opportunities to enhance our culture and customer service capabilities based on the team's experience with remote working and flexible scheduling.

We have continued to work very closely with our supplier partners in the year. These long-standing and innovative relationships remain crucial in enabling us to navigate the complex and evolving supply chain issues resulting from the pandemic, and in facilitating the future development of our product range.

Our business model is founded on an effective and efficient marketing engine. We believe that our team has been able to take advantage of extremely difficult market conditions by making bold moves in re-shaping the marketing mix. It is clear that we have been able to accelerate change, particularly in building the prominence of the 4imprint brand, that might otherwise have occurred over a longer timeframe.

In combination, these decisions and actions taken in 2021 have contributed materially to the improving financial performance of the Group and remain fundamental to our strategy.

ESG

The team has made significant progress in 2021 in the further development and execution of the Group's ESG agenda. Highlights include our certification as a CarbonNeutral® company and the development of our recently introduced better choices™ sustainable product initiative.

Board

John Warren retired from the Board at the AGM in May 2021. He was succeeded as Chair of the Audit Committee by John Gibney, who had been appointed to the Board on 8 March 2021.

In addition, I am delighted that we were able to strengthen significantly the depth and diversity of the Board through the appointment, on 1 September 2021, of two new Non-Executive Directors. Jaz Rabadia MBE brings extensive experience in energy management and sustainability. Lindsay Beardsell brings a wealth of domestic and international commercial experience in combination with her public company background in legal and governance matters.

Dividend

We reintroduced dividend payments at the half year, when the Board declared an interim dividend of 15.00c per share (2020: nil). In view of the Group's financial 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 30.00c (2020: nil), giving a total paid and proposed 2021 dividend of 45.00c (2020: nil).

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Outlook

The recovery in the Group's financial performance in 2021 has been very encouraging. Most importantly, it was driven by decisions and actions fully aligned with the Group's strategy, culture and focus on the sustainability of the longer-term health of the business.

Challenges continue with regard to the ongoing pandemic, supply chain disruption and inflationary pressures. However, the Group has a clear strategy and is financially strong. Our business model is flexible and resilient and our market opportunity remains attractive.

Trading results in the first few weeks of 2022 have been encouraging.

Paul Moody

Chairman

15 March 2022

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Chief Executive's Review

	2021	2020
Revenue	52 weeks	53 weeks
$m	$m
North America	773.71	549.87	+41%
UK & Ireland	13.61	10.17	+34%
Total	787.32	560.04	+41%
	2021	2020
Operating profit	52 weeks	53 weeks
$m	$m
Direct Marketing operations	34.54	7.56	+357%
Head Office costs	(3.89)	(3.59)	+8%
Total	30.65	3.97	+672%

Performance overview

In the first half of 2021 we saw a continued recovery in demand for our products after the severe downturn in 2020 directly caused by the COVID-19 pandemic. Despite the complications caused by new virus variants, severe supply chain disruption in the fourth quarter and other lingering effects of the pandemic in the second half of 2021, significant further progress was made on the road to recovery.

Throughout the year our team members responded in typical fashion to meet the ongoing challenges resulting from the pandemic. Their 'can do' attitude, empathy and resilience has been essential in allowing us not only to deal with daily challenges but equally to look forward to future opportunities.

Due to heavily disrupted trading patterns in 2020, we have found that the most informative comparative against which to assess current year demand performance is the last 'normal' year, 2019. Demand activity in January and February was relatively quiet, with total orders received running at an average of 65% of 2019. By the half year orders were up 79% year to date against 2019, evidencing the beneficial effect of vaccine rollouts and the easing of restrictions in our primary US market. Total orders in the second half were 101% of 2019 levels, leaving counts for the full year at 90% of the same comparative.

In total 1,429,000 orders were received from both new and existing customers in 2021 (2019: 1,587,000; 2020: 960,000). It is encouraging that we have continued to acquire new customers at a relatively steady rate throughout the pandemic. In 2021 we acquired 263,000 new customers (2019: 297,000; 2020: 173,000). It is also a good sign that customers acquired during the pandemic have demonstrated typical retention rates, indicating that they are within our target profile. The average order value has remained higher than historical comparatives through 2021.

This improving trading environment during the year resulted in gains in year-on-year financial performance. Group revenue for 2021 was $787.32m, a gain of 41% over the prior year. Operating profit for 2021 of $30.65m (2020: $3.97m) is a clear demonstration of the progress made by the business in the year.

The Group has remained financially strong throughout the pandemic and had a cash balance of $41.59m at the 2021 year-end, demonstrating the flexibility of our direct marketing business model.

Operational highlights

In 2021 we made several key decisions and took various actions that have been central to the encouraging revival of the Group's fortunes. We are confident that these choices reflect 4imprint's culture and values and were made with an eye to securing the Group's long-term future.

• People. From the start of the pandemic we have pursued a people-led approach. The health and safety of our team members has remained paramount, and we have consistently observed best practice COVID-19 related protocols. Further, we are in no doubt that, in a business based on delivering excellent service, our team members are a crucial element of our success. As such, we have invested in the retention of our people as a top priority since the early days of the pandemic. Apart from being simply the right thing to do, this approach has delivered tangible benefits in recent months as we have retained the necessary resource to deal with the recovering demand levels as the year progressed, particularly at a time of serious labour constraints in our North American markets.

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• Flexible working. The vast majority of our office-based team members have been working from home from the early weeks of the pandemic. This has allowed us to make considerable progress in testing new working practices, rolling out the necessary computer solutions and considering future options in the context of our developing experience with remote working and flexible scheduling. Our aim is to learn from the lessons this experience has offered to enhance our culture and therefore our competitive position for the future.
• Supply. In 2021 we tested the strength and depth of the relationships with many of our key suppliers in a very challenging environment of supply chain disruptions. Early problems revolved around managing production difficulties caused by lockdowns, and a changing product mix. From around August 2021 onwards new challenges emerged around global logistics, freight costs, inventory availability and the difficulty and increased cost of finding production labour to keep up with recovering demand. This has placed severe strain on our operations, resulting in a significantly higher than usual order backlog at the year-end. Most recently, these factors have caused inflationary pressure on product cost to feed through from suppliers. We continue to work to help mitigate the resulting margin pressure, including careful pricing adjustments balancing near-term margin, customer retention, brand values and the market opportunity.
• Marketing. Prior to the pandemic we had already made great progress in our strategic initiative to significantly evolve our marketing portfolio through the introduction of a brand awareness pillar. From the start we believed that this represented an opportunity to strengthen the business for the long-term and also to provide more flexibility than was available in our previous marketing mix. The pandemic provided the opportunity to be bold; indeed we have aggressively re-calibrated the marketing portfolio through the crisis. At the start of the pandemic the flexibility of the new portfolio allowed us to dramatically reduce costs as order volumes plummeted by substantially reducing our print (direct mail) element, simultaneously taking full advantage of the reduced cost of brand marketing. Our increasing investment in brand awareness prior to, and during the pandemic has also helped us to take full advantage of the recovery by staying 'front of mind' with prospective and existing customers. As a result, in 2021 we took the opportunity to accelerate strategic changes in the marketing mix (primarily increasing the brand and decreasing the print components) that typically would have occurred over a longer timeframe. The results we have seen so far in the recovery phase give us confidence that these changes leave our marketing engine in good shape and ready to power the business in the years ahead.

ESG

We continued to make progress in our ESG initiatives in 2021, particularly with regard to environmental matters. Our Environmental Committee has met monthly to monitor and steer a number of exciting projects, including:

• Working to understand further and audit the Scope 1 and Scope 2 carbon footprint of our operations, as well as selected Scope 3 elements material to our business, most notably transportation.
• Progressing existing carbon reduction projects, for example completion of the rollout of LED lighting in all of our operational facilities.
• Achievement in October 2021, well ahead of schedule, of the 'CarbonNeutral®' company certification from our external consultant Natural Capital Partners.
• Our better choices™ initiative, a broad review of our product range and how it is presented on our website with the aim of providing our customers with easy access to as much information and product variety as possible to enable them to consider choices based on verified sustainability criteria.
• Our recently announced project to install a 1MW solar array at our Oshkosh distribution centre.

Looking ahead

Our view is that the many challenges introduced by the COVID-19 pandemic have presented an opportunity for 4imprint to become stronger and more focused than ever. We are realistic; the residual impacts of the pandemic will continue to be felt in various ways for some time to come. However, the encouraging trading momentum that was built over the course of 2021 validates that our strategy remains fully relevant, and that our markets are attractive and ready to be addressed via our agile and resilient business model.

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