2015 Full Year Results
2015 Full Year Results Background Kevin Lyons-Tarr, CEO 1
2015 Full Year Results Background 4imprint is the leading direct marketer of promotional products in the USA, Canada, the UK and Ireland 96% of revenue is generated in the USA & Canada from its headquarters in Wisconsin, USA UK & Irish customers are served out of its base in Manchester, England 4imprint’s strategy is to maximise organic revenue growth at broadly stable operating profit margin The Group reports in US dollars 2
2015 Full Year Results Highlights Kevin Lyons-Tarr, CEO 3
2015 Full Year Results Highlights Underlying* profit Underlying* Group revenue † before tax † basic EPS † 88.04 c $ 497.22 m $ 33.55 m 20% 20% 20% US infrastructure Proposed total dividend Net cash investment $ 18.38 m $ 9 m 38.89 c 20% † Continuing operations * Underlying is before share option related charges, defined benefit pension charges and exceptional items 4
2015 Full Year Results Financial Review David Seekings, CFO 5
2015 Full Year Results Results Summary † Revenue ($m) Underlying profit before tax ($m) 497.2 33.55 415.8 27.86 332.9 290.8 19.55 254.7 14.57 13.20 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Net cash – year end ($000) Underlying* EPS and dividend per share (cents) 25,990 EPS Divi per share 88.04 73.48 18,381 18,301 17,251 55.55 39.67 38.89 8,490 32.94 32.41 27.56 23.55 23.26 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Exchange rate 2015: 1.53 (2014: 1.65) *Underlying is before share option related charges, defined benefit pension charges and exceptional items 6 † Continuing operations
2015 Full Year Results Group Income Statement (Underlying) Continuing operations 2015 2014 Change • Revenue up 20% $'000 $'000 % o US $479m, UK $18m o 53 week accounting Revenue 497,219 415,773 20% period Gross profit 162,598 137,210 19% • Gross profit % stable Gross profit % 32.7% 33.0% • 21% increase in Marketing costs (83,996) (69,186) 21% marketing spend driving Selling costs (21,188) (18,172) 17% growth Admin & central costs (23,895) (22,093) 8% • Admin & central costs Underlying operating profit 33,519 27,759 21% includes UK Head Office Operating margin 6.7% 6.7% cost of $3.5m (2014: $4.2m) Net finance income 30 100 Underlying profit before tax 33,549 27,859 20% • Operating margin % remains stable Underlying EPS 88.04c 73.48c 20% 7
2015 Full Year Results Group Income Statement (non-operating) Continuing operations 2015 2014 • 2015 Incentive Plan $'000 $'000 implemented Underlying profit before tax 33,549 27,859 • Exceptional charges relate to DB pension Share option related charges (304) (666) scheme Exceptional items (858) (2,407) Defined benefit pension admin costs (394) (544) Pension finance charges (836) (903) • DB pension admin costs paid by the Scheme Profit before tax 31,157 23,339 • Effective tax rate 27% Tax (8,462) (6,982) (2014: 30%) Proft after tax 22,695 16,357 • Underlying effective tax rate 27% (2014: 28%) Basic EPS - Continuing operations 81.26c 59.73c Profit from discontinued operation - 1,381 • Discontinued in 2014 is SPS disposal Profit for the period 22,695 17,738 8
2015 Full Year Results Cash Flow Continuing operations 2015 2014 • 2015 working capital $'000 $'000 movement not typical At start of period 18,301 25,990 Underlying operating profit 33,519 27,759 • $9m capex investment in Depreciation and amortisation 1,878 1,705 Oshkosh facilities Change in working capital (4,463) 222 Capital expenditure (10,912) (2,085) • Exceptional charges Operating cash flow 20,022 27,601 relate to the DB pension scheme Contributions to defined benefit pension (825) (26,544) Net proceeds from sale of business - 9,717 • FY 2014 includes: Tax and interest (8,700) (6,067) Own share transactions - (1,316) o $9.7m proceeds from sale of SPS Exceptional items (310) (883) Social security on share option exercises - (1,368) o $26.5m pension Exchange and other (503) (905) contributions Dividends to Shareholders (9,604) (7,924) principally buy-in Net cash inflow/(outflow) in the period 80 (7,689) • Dividend cover 2.26x At end of period 18,381 18,301 9
2015 Full Year Results Balance Sheet 2015 2014 • Net assets $28.5m, increase of $14.4m $'000 $'000 Fixed assets 19,365 10,403 • US Distribution Centre Deferred tax asset 4,794 capex $9m 4,388 23,753 15,197 • Working capital increase: o Timing effects Inventories 4,460 4,353 o Rebates receivable Receivables 43,194 36,810 Payables (37,254) (36,038) • Net cash $18.38m, after 10,400 5,125 $9m capex Other liabilities (968) (538) • Pension deficit expected Net cash 18,381 18,301 to reduce by around half Pension deficit (23,114) (24,015) in 2016 after buy-out (5,701) (6,252) • R.O.C.E. 82% 14,070 Net assets 28,452 10
2015 Full Year Results Pension Deficit • 1,115 pensioners (including 2015 2015 2014 938 with insured benefits); Total Uninsured liability liability 508 deferred pensioners $'000 $'000 $'000 • 78% of total liability insured Liability (139,248) (30,838) (33,066) • Flexible Retirement Option Assets 116,134 7,724 9,051 (FRO) cash cost $545k Deficit (23,114) (23,114) (24,015) • Buy-in to buy-out project Deferred Tax 4,391 4,391 4,801 targeted to complete in H1 Net Deficit at 2 Jan 2016 (18,723) (18,723) (19,214) 2016: The change in deficit is analysed as follows: o £10m one-off deficit reduction contribution IAS 19 deficit at start of period 24,015 27,398 o Net deficit expected to Pension administration costs 394 544 reduce by around half Exceptional items 610 1,078 o New schedule of Pension finance costs 836 903 Actuarial (gain)/loss (765) 22,175 recovery contributions Contributions from employer (825) (26,544) • Old scheme to be wound Exchange gain (1,151) (1,539) up; new plan in place for remaining members IAS 19 deficit at end of period 23,114 24,015 11
2015 Full Year Results 2016 Guidance • Strategy is to continue to drive organic revenue growth through investment in marketing • 52 week accounting period in 2016 vs. 53 weeks in 2015 o c.$4m revenue benefit in 2015 o Adjust 2016 revenue forecasts down by $4m • 2016 capex c.$3.1m; depreciation charge c.$2.5m • Tax rate c.30% (2015: 27%); underlying c.28% (2015: 27%) • Share-based payment (IFRS2) charge $0.4m in 2016 • Average shares in issue FY 2016 c.28.05m; fully diluted c.28.10m • DB pension scheme: o £10m one-off deficit reduction contribution in H1 2016 o Ongoing recovery contributions $1.5m in H2 2016, then $3m/yr for next 4.5 years o Exceptional P&L charge $3.8m H1 2016 ($0.6m cash cost) • 2015 proposed final dividend cash cost $7.5m; due May 2016 12
2015 Full Year Results Operational Review Kevin Lyons-Tarr, CEO 13
2015 Full Year Results Direct Marketing Strategy Growth History - 4imprint v Market 497.2 50 500 4imprint US & Canada Revenue ($m) 45 450 415.8 40 Market size $bn 400 35 332.9 350 30 290.8 300 254.7 25 25.4 24.9 23.7 250 20 22.5 21.5 200 15 2011 2012 2013 2014 2015 • Our strategy is to maximise organic revenue growth at broadly stable operating margin • Market share growth driven by investment in marketing, people and technology • Target was to double revenue in 5 years (2011-2016); CAGR of 15% Nearly achieved a year early: 2011 $255m → 2015 $497m o o Actual 5 year CAGR 2010-2015 was 18.1% • Opportunity remains substantial in large and fragmented markets 14
2015 Full Year Results Revenue & Order Intake • Continued strong Revenue ($m) organic growth 18.0 16.8 • North America revenue 12.9 $479m, +20% Direct Marketing UK 11.6 10.2 479.2 399.0 Direct Marketing NA 320.0 279.2 • 244.5 Industry +3-4% 2011 2012 2013 2014 2015 • UK revenue £11.8m, +16% No. of orders received ('000) • 945k total orders received, +20% 332 • New customer orders 282 New +18%; more than 220k 227 Existing new customers 209 613 189 506 acquired 410 344 284 • Existing customer orders +21% 2011 2012 2013 2014 2015 15
2015 Full Year Results Marketing Effectiveness US and Canada Acquired and Retention % • Total marketing spend 50% 70,000 +21% at $84.0m, (2014: 45% 60,000 $69.2m) 40% 50,000 35% • Online spend growing at a 30% 40,000 faster rate: +64%; now 34% 25% 30,000 of total 20% 15% 20,000 • Catalogue circulation still 10% 10,000 5% growing, + 6% 0% 0 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 • Blue Box™ program 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Customers Acquired % Retained 12 months % Retained 24 months expanded: 1.75m pieces in 2015 Revenue/Marketing $ • 6.08 Revenue per marketing 6.03 6.01 dollar KPI within acceptable 5.92 5.83 bandwidth 2011 2012 2013 2014 2015 16
2015 Full Year Results Operational Highlights • $9m capital investment in Oshkosh facilities to support next 5 years of growth • 2.3 million units embroidered in 2015 • Major update of proprietary order processing software • 8 th consecutive year on Top 25 Medium Sized Best Places To Work in USA list • Product range increased by 6,000 products • Top 5 product categories: 17
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