Half Year Results 2018 Highlights Kevin Lyons-Tarr, CEO 2018 Half - PDF document

Half Year Results 2018

Highlights Kevin Lyons-Tarr, CEO 2018 Half Year Results 1

Highlights Underlying* † profit Underlying* † Group revenue before tax basic EPS $ 348.33 m $ 16.30 m 46.03 c  17%  13% + 1% Net cash Total orders Interim dividend $ 26.51 m 20.80 c 683,000   15% ($) 17%  15% (£) *Underlying is before defined benefit pension charges and exceptional items. † Underlying has been restated to include share option charges. 2018 Half Year Results 2

Financial Review David Seekings, CFO 2018 Half Year Results 3

Group Income Statement H1 2017 FY 2017 H1 2018 $'000 $'000 • Revenue +17% $'000 % − US $337m; UK $11m Revenue 298,911 627,518 348,331 17% − Momentum from Q4 2017 − Brand marketing effect in H1 2018 Gross profit 99,071 205,219 112,867 14% Gross profit % 32.40% 33.14% 32.70% • Gross profit % lower than PY Marketing costs (56,703) (110,644) − Mix of factors; being addressed (68,003) 20% − Expected to stablise in H2 Selling costs (12,188) (24,995) (13,607) 12% Admin & central costs (13,653) (27,000) (14,677) 8% • Marketing investment driving growth Share option related charges (292) (551) − Investment in new component (317) − Proven techniques remain 16,235 42,029 Underlying operating profit 16,263 productive 0% Operating margin 5.43% 6.70% 4.67% • Operational gearing from selling and Interest (37) (122) 36 admin costs 16,198 41,907 Underlying profit before tax 16,299 1% • Central costs flat vs. PY Exceptional items (102) (454) - • Share option charge now included in Defined benefit pension admin costs (145) (291) (151) underlying; comparatives restated Pension finance charges (254) (503) (219) • Operating profit flat year on year, 15,697 40,659 Profit before tax 15,929 1% reflecting marketing investment Tax (4,709) (11,734) (3,345) • Effective tax rate 21% (H1 2017: 30%); benefit from US tax reform 10,988 28,925 Profit after tax 12,584 15% • Strong EPS growth driven primarily by US tax reform 40.60c 106.74c Underlying EPS 46.03c 13% 2018 Half Year Results 4

Cash Flow H1 2017 FY 2017 H1 2018 $'000 $'000 $'000 21,683 21,683 At start of period 30,767 • Depreciation and capex Underlying operating profit 16,235 42,029 profiles remain settled 16,263 Share option non-cash charges 288 545 314 • Working capital movement in Depreciation and amortisation 1,256 2,512 1,289 line with expectations Change in working capital 10,734 (457) 12,221 • Cash conversion consistent Capital expenditure (864) (2,359) (1,171) with prior H1 experience 27,649 42,270 Operating cash flow 28,916 • DB pension contributions now predictable and Contributions to defined benefit pension (1,663) (3,675) (1,897) manageable Interest (35) (122) 36 Net tax paid (3,305) (12,751) (1,927) • Lower tax paid due to US tax Own share transactions (734) (1,359) reform (1,410) Exceptional items - (57) - • Own share transactions is Exchange and other 347 623 (840) purchase of shares for EBT 22,259 24,929 Free cash flow 22,878 • Dividends paid includes supplementary dividend of Dividends to Shareholders (10,679) (15,845) (27,136) 60c per share paid in May 2018 ($16.3m) 11,580 9,084 Net cash (outflow)/inflow in the period (4,258) 33,263 30,767 At end of period 26,509 2018 Half Year Results 5

Balance Sheet H1 2017 FY 2017 H1 2018 • Stable fixed capital $'000 $'000 $'000 requirements Fixed assets 19,687 19,967 19,820 Deferred tax asset 5,143 5,912 • Implementation of IFRS15 5,599 causing reclassification 24,830 25,879 25,419 between captions in 2018 − No net cash implication − Negative working capital Inventories 4,432 5,356 9,603 overall as expected Receivables 44,619 46,309 40,518 Payables (56,226) (47,675) (59,634) • Pension deficit now stable and reducing (7,175) 3,990 (9,513) • Net cash $26.5m, after $27.1m in final and supplementary Current tax (1,107) 472 (375) dividends paid in May 2018 Deferred tax liability (1,640) (763) (777) Other liabilities (140) (146) (135) Net cash 33,263 30,767 26,509 Pension deficit (19,505) (18,106) (16,757) 10,871 12,224 8,465 Net assets 28,526 42,093 24,371 2018 Half Year Results 6

2018 Financial Guidance • Directly comparable accounting periods 2018 vs 2017 • IFRS2 ‘Share-based payments’ charge included in underlying operating profit from 2018 onwards; comparatives restated accordingly • 2018 capex c.$3.0m; depreciation charge c. $2.7m • 2018 effective tax rate c. 21% (2017: 29%) • Share-based payment (IFRS 2) charge $0.7m in 2018 • Average shares in issue FY 2018 c. 28.01m; fully diluted c. 28.08m • DB pension plan 2018:  No exceptional charge  Admin charge in P&L c. $0.3m  Contributions c.$3.7m • 2018 interim dividend cash cost $5.8m; paid September 2018 2018 Half Year Results 7

Operational Review Kevin Lyons-Tarr, CEO 2018 Half Year Results 8

Market Beating Growth Growth History - 4imprint v Market • North America revenue 650 50 627.5 4imprint US & Canada Revenue ($m) $337m, +16% 600 558.2 45 550 497.2 40 • Industry ~3-4% (US) 500 Market size $bn 415.8 35 450 400 • UK revenue £8m, +15% in 332.9 30 350 underlying currency 25 26.8 300 26.0 25.4 24.9 20 23.7 250 • 683k total orders received, 200 15 +17% 2013 2014 2015 2016 2017 • 138k new customers acquired; No. of orders received ('000) new customer orders +13%, well above recent historical 369 351 levels New 208 184 177 Existing 816 160 • Existing customer orders also 703 135 475 403 352 295 strong, +18% 242 2014 2015 2016 2017 2018 2016 2017 Half year Full year 2018 Half Year Results 9

Marketing Effectiveness US and Canada Acquired and Retention % 50% 80,000 • Total marketing spend +20% 45% 70,000 at $68m, includes $3m of $7m 40% planned annual spend on new 60,000 brand initiative (began in 35% March) 50,000 30% 25% 40,000 • Online spend increased 22% to 44% of the total 20% 30,000 15% • Catalogue circulation up mid- 20,000 10% single digits 10,000 5% • Revenue per marketing dollar 0% 0 lower, but above expectations 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 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 given investment in new Customers Acquired % Retained 12 months % Retained 24 months marketing initiative Revenue/Marketing $ 5.77 5.67 5.58 5.45 5.31 5.27 5.12 2014 2015 2016 2017 2018 2016 2017 Half year Full year 2018 Half Year Results 10

Brand Marketing Initiative Early days, but off to a promising start. Metric Timescale Progress • Increase in ‘direct’ web traffic Early indicator Confirmed • Increase in searches/interest in ‘4imprint’ Early indicator Confirmed • Increase in new customer orders ahead of forecast Mid-term indicator Confirmed • Increased unaided awareness of 4imprint brand by Mid-term indicator Measurement in H2 target customers  Next up: working through the optimisation process Which ads, what time, what properties? o Impact of consistency over time o Assess integration of brand initiative into overall marketing mix going forward o 2018 Half Year Results 11

Outlook The Group’s performance in the first half of 2018 has exceeded our expectations and shows excellent progress towards our strategic objectives. The encouraging initial results from our brand marketing investment and its positive effect on new customer acquisition are clearly very positive signals for the business. The Board expects that the second half of the year will show continued strong revenue growth with underlying operating profit moving ahead of prior year. 2018 Half Year Results 12

13 2018 Half Year Results Appendix

Results Summary Underlying* † profit before tax ($m) Revenue ($m) 627.5 41.91 558.2 37.92 348.33 298.9 270.2 231.0 16.20 16.30 14.12 193.1 12.05 9.24 2014 2015 2016 2017 2018 2016 2017 2014 2015 2016 2017 2018 2016 2017 Full year Half year Half year Full year Full year Half year Underlying* † EPS (cents) Ordinary dividend per share (cents) 58.10 108.02 52.50 99.01 46.03 20.80 40.60 36.74 18.10 16.32 30.85 25.00 10.51 12.09 2014 2015 2016 2017 2018 2016 2017 2014 2015 2016 2017 2018 2016 2017 Half year Full year Half year Full year Exchange rates: H1 2018: 1.38 (H1 2017: 1.26, FY 2017: 1.29, FY 2016: 1.35) *Underlying is before defined benefit pension charges and exceptional items. † Underlying has been restated to include share option charges. 2018 Half Year Results 14