TIDMFOUR
RNS Number : 8953E
4imprint Group PLC
16 March 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
52 weeks 53 weeks
Financial Overview $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)
Total paid and proposed dividend per 80.46 11.03
share (cents)
45.00 -
Total paid and proposed dividend per
share (pence) 33.82 - +629%
--------------------------------------- ---------- --------- ---------------
2021 is a 52 week period and 2020 is a 53 week period. See
Financial Review.
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-introduction of 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
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 (R) company and the
development of our recently introduced better choices (TM)
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).
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
Chief Executive's Review
2021 2020
52 weeks 53 weeks
Revenue $m $m
----------------------------- ----------- ----------- ------
North America 773.71 549.87 +41%
UK & Ireland 13.61 10.17 +34%
Total 787.32 560.04 +41%
----------------------------- ----------- ----------- ------
2021 2020
52 weeks 53 weeks
Operating profit $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.
-- 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 (R) ' company certification from our external
consultant Natural Capital Partners.
-- Our better choices (TM) 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.
Financial Review
2021 2020
52 weeks 53 weeks
$m $m
----------------------- ---------- ----------
Operating profit 30.65 3.97
Net finance cost (0.42) (0.13)
----------------------- ---------- ----------
Profit before tax 30.23 3.84
Taxation (7.64) (0.75)
Profit for the period 22.59 3.09
----------------------- ---------- ----------
The Group's operating result in the period, summarising expense
by function, was as follows:
2021 2020
52 weeks 53 weeks
$m $m
--------------------------------------------------- ---------- ----------
Revenue 787.32 560.04
--------------------------------------------------- ---------- ----------
Gross profit 226.02 157.94
Marketing costs (127.53) (92.88)
Selling costs (32.16) (30.78)
Admin and central costs (34.73) (29.26)
Share option related charges (0.61) (0.63)
Defined benefit pension scheme administration and
past service costs (0.34) (0.42)
--------------------------------------------------- ---------- ----------
Operating profit 30.65 3.97
--------------------------------------------------- ---------- ----------
Revision to the definition of underlying profit measures
In previous Annual Reports and Accounts, defined benefit pension
charges were not included in the definition of underlying operating
profit. These charges have now become relatively stable and are not
material, therefore are now included in underlying, which is
defined as before exceptional items. As there are no exceptional
items in 2021 or 2020, the term underlying is not used in relation
to any measurements of profit in the 2021 Annual Report and
Accounts.
Operating result
The recovery of the business from the effects of the COVID-19
pandemic has been very encouraging.
Demand returned steadily through the early part of the year,
helped by the rollout of vaccines and easing of restrictions in our
primary US market. This momentum continued to build, with aggregate
order counts exceeding 2019 levels (the most recent 'normal' year)
in the second half of the year. Group revenue for 2021 of $787.32m
increased 40.6% compared to 2020 of $560.04m, recovering to 91.5%
of reported 2019 revenue of $860.84m.
The gross profit percentage stabilised year-over-year at 28.7%
(2020: 28.2%). Product cost inflation resulting from
pandemic-related global and local supply chain issues has been
partially mitigated using price adjustments. Factors including a
shift in product mix towards apparel and higher average order
values mean that margin percentages remain below pre-pandemic
levels.
Marketing costs were 16.2% of revenue (2020:16.6%), leading to
an improvement in our Revenue per Marketing Dollar KPI to $6.17
(2020: $6.03). Strategic investment in a changing marketing mix has
been made through the year to capitalise on market share
opportunities in recovering markets.
Selling, administration and central costs increased 11.4% to
$66.89m (2020: $60.04m). The year-on-year change is due principally
to a credit of $4.1m in 2020 relating to COVID-19 assistance under
the US CARES Act and UK Coronavirus Job Retention Scheme. No
similar assistance was accessed in 2021.
As a result of the above factors, operating profit increased by
$26.68m to $30.65m (2020: $3.97m).
2021 returned to the usual 52 week accounting period for the
Group, compared to the 53 week period in 2020. The effect of the
extra week in 2020 on Group revenue was an increase of around $5m
and the impact on operating profit was negligible due to a full
week of payroll and overheads offsetting the gross margin arising
from a quiet trading week during the holiday period.
Foreign exchange
The primary US dollar exchange rates relevant to the Group's
2021 results were as follows:
2021 2020
Period end Average Period end Average
Sterling 1.35 1.38 1.36 1.28
Canadian dollars 0.79 0.80 0.79 0.75
------------------ ----------- -------- ----------- --------
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:
-- Translational risk in the income statement remains low with
98% of the Group's revenue arising in US dollars, the Group's
reporting currency. The net impact on the 2021 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. Exceptions are the Sterling-based defined
benefit pension asset, which produced an exchange loss in the year
of $0.06m, and the UK cash balance with an exchange loss of $0.14m
in the year.
-- The Group generates cash mostly in US dollars, but its
primary applications of post-tax cash are Shareholder dividends,
pension contributions and some Head Office costs, all of which are
paid in Sterling. As such, the Group's cash position is sensitive
to Sterling/US dollar exchange movements. By way of example, using
actual exchange rates, the movement of Sterling against the US
dollar during 2021 meant that every US$1m converted to Sterling was
worth around GBP9,000 more at the 2021 closing rate compared to the
2020 closing rate.
Share option charges
A total of $0.61m (2020: $0.63m) was charged in the year in
respect of IFRS 2 'Share-based Payments'. This was made up of two
elements: (i) executive awards under the 2015 Incentive Plan, now
replaced by the Deferred Bonus Plan ("DBP"); and (ii) charges in
respect of the 2019 UK SAYE and the 2021 US Employee Stock Purchase
Plan.
No awards of conditional shares under the DBP will be made in
respect of 2021. There were no awards made in 2020, resulting in
the consistent IFRS 2 charge year-over-year.
Current options and awards outstanding are 13,880 shares under
the UK SAYE, 97,624 shares under the 2021 US Employee Stock
Purchase Plan, and 51,925 shares under the 2015 Incentive Plan.
Net finance cost
Net finance cost for the year was $0.42m (2020: $0.13m). The
increase in cost on 2020 is attributable to lower interest rates
earned on deposits, and higher IFRS 16 lease interest charges
following the extension to the Oshkosh office lease in the prior
year which resulted in a higher lease liability being recognised on
the balance sheet.
Taxation
The tax charge for the year was $7.64m (2020: $0.75m), giving an
effective tax rate of 25% (2020: 20%). The charge comprises a
current tax charge of $5.92m, representing net tax payable on US
taxable profits, and a deferred tax charge of $1.72m.
The increase in the effective tax rate is principally due to the
significant increase in profitability of the North American
business that is subject to a higher rate of corporation tax than
the UK, and the derecognition of a deferred tax asset in respect of
UK tax losses following a review of updated forecasts of UK taxable
profits.
Earnings per share
Basic earnings per share was 80.46c (2020: 11.03c), an increase
of 629%. This reflects the increase of 631% in profit after tax,
and a weighted average number of shares in issue similar to prior
year.
Dividends
Dividends are determined in US dollars and paid in Sterling,
converted at the exchange rate on the date that the dividend is
declared.
Due to significant uncertainty as to how quickly markets might
recover from the COVID-19 pandemic, and in the interests of
financial prudence, the Board cancelled the payment of the 2019
final dividend and did not propose 2020 interim or 2020 final
dividends.
Underpinned by a strong net cash position and an improving
commercial outlook for the Group, the Board re-introduced biannual
dividend payments with an interim dividend of 15.00c per share
declared at the 2021 half year.
The Board has proposed a final dividend of 30.00c per share
(2020: nil) which, together with the interim dividend of 15.00c per
share, gives a total paid and proposed regular dividend relating to
2021 of 45.00c per share (2020: nil).
The final dividend has been converted to Sterling at an exchange
rate of GBP1.00/$1.30515. This results in a final dividend per
share payable to Shareholders of 22.99p (2020: nil), which,
combined with the interim dividend paid of 10.83p per share, gives
a total dividend per share for the year of 33.82p (2020: nil).
The final dividend will be paid on 31 May 2022 to Shareholders
on the register at the close of business on 29 April 2022.
Defined benefit pension plan
The Group sponsors a legacy UK defined benefit pension plan (the
"Plan") which has been closed to new members and future accruals
for several years. The Plan has 110 pensioners and 231 deferred
members.
At 1 January 2022, the surplus of the Plan on an IAS 19 basis
was $1.97m, compared to a deficit of $3.31m at 2 January 2021.
Gross Plan assets under IAS 19 were $39.80m, and liabilities were
$37.83m.
The change in the net IAS 19 Plan position is analysed as
follows:
$m
----------------------------------------------------- -------
IAS 19 deficit at 2 January 2021 (3.31)
Company contributions to the Plan 4.59
Defined benefit pension scheme administration costs (0.34)
Pension finance charge (0.02)
Re-measurement gain due to changes in assumptions 2.50
Return on scheme assets (excluding interest income) (1.39)
Exchange loss (0.06)
----------------------------------------------------- -------
IAS 19 surplus at 1 January 2022 1.97
----------------------------------------------------- -------
The net IAS 19 position improved by $5.28m in the year, driven
primarily by employer's contributions of $4.59m and re-measurement
gains of $2.50m, partially offset by a negative return on assets of
$1.39m. In Sterling, the net IAS 19 position improved by GBP3.89m
in the year to a surplus of GBP1.46m.
The Company continues to pay regular monthly contributions into
the Plan as part of a recovery plan agreed by the Company and the
Trustee that aims towards funding on a buyout basis by mid-2024. A
milestone was passed in the year as the net balance sheet position
in respect of the Plan turned from a net deficit to a net surplus
as measured on an IAS 19 valuation basis.
A triennial actuarial valuation of the Plan was completed in
September 2019 and this forms the basis of the 2021 IAS 19
valuation set out above. The next triennial Plan valuation is
scheduled for September 2022.
Cash flow
The Group had net cash of $41.59m at 1 January 2022, an increase
of $1.82m against the 2 January 2021 balance of $39.77m.
Cash flow in the period is summarised as follows:
2021 2020
$m $m
--------------------------------------------------- -------- --------
Operating profit 30.65 3.97
Share option related charges 0.60 0.63
Defined benefit pension scheme administration and
past service costs 0.34 0.42
Depreciation and amortisation 3.67 3.43
Lease depreciation 1.34 1.50
Change in working capital (13.76) 6.59
Capital expenditure (3.47) (3.82)
--------------------------------------------------- -------- --------
Underlying operating cash flow 19.37 12.72
Tax and interest (6.82) (0.52)
Defined benefit pension contributions (4.59) (13.28)
Own share transactions (0.84) 0.94
Capital element of lease payments (1.12) (1.42)
Exchange and other (0.05) 0.19
Free cash flow 5.95 (1.37)
Dividends to Shareholders (4.13) -
--------------------------------------------------- -------- --------
Net cash inflow/(outflow) in the period 1.82 (1.37)
--------------------------------------------------- -------- --------
The Group generated underlying operating cash flow of $19.37m
($12.72m), a conversion rate of 63% (2020: 320%). Working capital
usage at the end of 2021 was unusually high, driven by the global
and local supply chain issues that have resulted in material
increases in accrued revenue and inventory balances on orders in
process at year-end. This position is expected to unwind in 2022 as
the supply chain situation improves and orders are completed.
Free cash flow improved by $7.32m to $5.95m in 2021 (2020:
$(1.37)m). This is largely attributable to the recovery in
operating profit in 2021 and the special contribution to the
defined benefit pension plan of $9.14m paid in 2020.
Dividends resumed in 2021 with the payment of an interim
dividend to Shareholders announced at the half year.
Balance sheet and Shareholders' funds
Net assets at 1 January 2022 were $82.97m, compared to $65.37m
at 2 January 2021. The balance sheet is summarised as follows:
1 January 2 January
2022 2021
$m $m
------------------------- ---------- ----------
Non-current assets 38.04 43.27
Working capital 12.27 (1.50)
Net cash 41.59 39.77
Lease liabilities (12.09) (13.21)
Pension asset/(deficit) 1.97 (3.31)
Other assets - net 1.19 0.35
Net assets 82.97 65.37
------------------------- ---------- ----------
Shareholders' funds increased by $17.60m since the 2020
year-end. Constituent elements of the movement were net profit in
the period of $22.59m and share option related movements of $0.38m,
net of equity dividends paid to Shareholders $(4.13)m, own share
transactions of $(0.84)m, the after tax impact of returns on
pension scheme assets and re-measurement gains on pension
obligations of $(0.30)m, and exchange losses of $(0.10)m.
The Group had a net positive working capital balance of $12.27m
at 1 January 2022 (net negative balance of $1.5m at 2 January
2021). This reflects the build-up of accrued revenue and inventory
on orders in process at year-end, impacted by global and local
supply chain issues.
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 are unchanged, and 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.
As a result of this approach, the Group has maintained a
substantial cash balance and no debt throughout the COVID-19
pandemic and resulting supply chain issues. The Group remained in a
strong financial position at the 2021 year-end, enabling management
to make decisions that look to the longer-term health of the Group
and which support 4imprint's distinctive culture.
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 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. The Group holds most of its cash with its
principal US and UK bankers.
The Group has a $20.0m working capital facility with its
principal US bank, JPMorgan Chase, N.A. The facility has a minimum
EBITDA test and standard debt service coverage ratio and debt to
EBITDA covenants. The interest rate is US$ LIBOR plus 2.0%, and the
facility expires on 31 May 2023. 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 judgments are in
respect of revenue, leases and the retirement benefit asset.
Key sources of estimation uncertainty
Determining the carrying amount of some assets and liabilities
requires estimation of the effects of uncertain future events. The
key sources of estimation uncertainty are considered to be in
relation to the valuation of the defined benefit Plan liabilities
and assets.
A review of internal and external indications of impairment was
undertaken in accordance with IAS 36 for both the North American
and UK cash generating units ("CGU"), leading to an impairment
review being undertaken for the UK CGU only. This review did not
result in any material charges to the consolidated Group income
statement. The Company has recognised an expected credit loss
charge of GBP223k on a loan to a subsidiary undertaking in its
individual financial statements.
Viability statement
In accordance with Provision 31 of the UK Corporate Governance
Code 2018, the Board has assessed the prospects and viability of
the Group.
Assessment of prospects
In making their assessment of the Group's prospects, the
Directors have carefully considered:
-- The Group's strategy, market position and business model.
-- The principal risks and uncertainties facing the Group as outlined in this Financial Review.
-- Information contained in this Financial Review concerning the
Group's financial position, cash flows and liquidity position.
-- Regular management reporting and updates from the Executive Directors.
-- Recent detailed financial forecasts and analysis for the
three-year period to 28 December 2024.
Whilst the lingering effect of the COVID-19 pandemic continues
to present challenges, including on the supply chain and
inflationary pressures, the Board considers that the Group's
strategy, competitive position, and business model remain entirely
relevant and, indeed, have proved to be resilient and flexible
under stress.
Business operations have adapted successfully to the challenging
and rapidly changing external conditions in a timely manner. The
marketing portfolio was reconfigured during 2020 and 2021,
providing flexibility over expenditure and the agility to invest in
opportunities for growth in recovering markets. Discretionary
overhead and capital spend continues to be tightly controlled,
demonstrating the essentially minimal fixed cost base of the direct
marketing model.
These actions, coupled with the strong financial position of the
Group that has been maintained throughout this global pandemic,
give the Board confidence that despite residual uncertainty as to
future market conditions, the Group will be in a good position both
to withstand further economic stress and to take market share
opportunities as demand continues to recover.
Environmental risks
As a primary strategic objective of the Group and as noted above
in the assessment of prospects, environment-related risks and
opportunities are specifically considered by the Board in their
assessment of viability and going concern.
The Group has established an appropriate governance structure,
in the form of the Group Environmental Committee and Business Risk
Management Committee, to identify new and emerging risks related to
climate change and the environment.
As detailed more fully in the Principal Risks &
Uncertainties, environmental risks have the potential to impact the
Group's ability to achieve its strategic objectives through damage
to our reputation, our operational facilities and those of our
supplier partners, and the failure to respond to trends and shifts
in consumer product preferences.
The Group has proactively responded to these risks with several
initiatives. These include the achievement of CarbonNeutral(R)
company status in October 2021, committed plans to build a solar
panel array at our distribution centre in Oshkosh, plans to review
ESG-linked executive remuneration with the inclusion of
climate-related metrics, and the launch of our better choices (TM)
programme to make it easier for our customers to find products with
the characteristics that are most important to them. The flexible
nature of our 'drop-ship' model and close relationships maintained
with key and alternative suppliers allows for relatively rapid
adjustment to episodes of extreme weather.
Whilst governmental and societal responses to climate change
risks are still developing, and therefore all possible future
outcomes are not known, the Group has embedded environmental
matters into our strategic objectives and sees climate change and
other aspects of environmental stewardship as a fundamental part of
our commitment to build a commercially and environmentally
sustainable business that delivers value to all stakeholders.
The cash flow impact of our environmental initiatives are
incorporated into the financial forecasts used to assess viability
and going concern.
Viability assessment period
In their assessment of viability, the Directors have reviewed
the assessment period and have determined that a three-year period
to 28 December 2024, in line with the Group's rolling strategic
planning process, continues to be most appropriate.
In the context of the fast-moving nature of the business, its
markets, and the relatively short-term nature of the order book,
the Directors consider that the robustness of the strategic plan is
higher in the first three years and recognises that forecast
information beyond this period is significantly less
meaningful.
The Group's business model does not rely heavily on fixed
capital, long-term contracts, or fixed external financing
arrangements.
Assessment of viability
The Board considers that the key factor that would prejudice the
ongoing viability and liquidity of the Group would be a severe
downturn in demand, which negatively impacts new customer
acquisition and existing customer retention.
The 'base case' three-year plan, developed for the purposes of
the Group's strategic planning process, provides the basis for the
financial modelling used to assess viability. The commercial
underpin to this 'base case' is the Board's view that whilst the
promotional products market contracted in 2020, for example due to
the cancellation of trade shows and physical events, our recent
experience is that market demand is resilient across the product
range and customer base, as evidenced in the rapid recovery in
demand during 2021. The base case started with the total order
count at 90% of pre-pandemic 2019 levels, as achieved in 2021, with
consistent and sustained top-line growth throughout the three-year
period. Marketing costs were modelled to increase in line with
revenue with the Group's revenue per marketing dollar KPI remaining
stable at historic levels. This 'base case' shows improving
financial results, an accumulating cash balance and no liquidity
concerns.
Severe, but plausible, downside demand assumptions were then
determined and used to adjust the 'base case' forecast to model the
effects on the Group's liquidity. This 'downside' scenario assumes
a significant deterioration in demand patterns during 2022, similar
to those experienced in 2020 when the pandemic started, with order
volumes for the full year dropping back to around 70% of 2019
levels, before gradually recovering back to 2019 order levels by
2024. Marketing and direct costs were flexed in line with revenue,
but other payroll and overhead costs remained at 2021 levels with
some allowance for inflationary increases. This 'downside' scenario
was intended to simulate a severe shock to demand, similar to the
experience from COVID-19, that results in sustained diminished
corporate demand in a downsized promotional products market.
Even under the severe stress built into the 'downside' model,
the Group retains sufficient liquidity throughout the assessment
period. This liquidity is in the form of cash balances. In
addition, there are further mitigating actions that the Group could
take, including further cutting marketing costs and reducing
headcount, that are not reflected in the distressed forecast but
would, if required, be fully under the Group's control.
Given the scalability of the Group's business model, as
demonstrated over the past few years, the absence of external
financing, and low fixed or working capital requirements, a reverse
stress testing scenario has not been undertaken. The Group has
proven during 2020 its ability to flex its marketing and other
costs to mitigate the impact of falls in revenue driven by COVID-19
and retains flexibility to further reduce other costs should the
need arise.
Though the Group maintains a $20m line of credit with its US
bankers, that expires on 31 May 2023, and a small overdraft
facility with its UK bankers, that expires on 31 December 2022, the
modelling in both the 'base case' and 'downside' scenarios shows
the maintenance of positive cash balances throughout the assessment
period and, as such, there is no current requirement to utilise the
facilities or intention to secure any additional facilities.
The assumptions used in the 'base case' and 'downside' scenarios
and resulting financial forecasts have been reviewed and approved
by the Board. The conclusion of this review is that the Group has
significant flexibility in its variable costs, a very low fixed
cost base, and enters the 2022 financial year with a strong net
cash position of $41.6m, enabling it to remain cash positive even
under severe economic stress.
Confirmation of viability
Based on this review of the Group's prospects and viability, the
Directors confirm that they have a reasonable expectation that the
Group will continue to operate and to meet its liabilities as they
fall due, for the next three years to 28 December 2024.
Going concern
Based on the assessment outlined in the viability statement
above, the Directors have reasonable expectations that the Group
and Company will have adequate resources to continue to operate
from the date these financial statements were approved until at
least 1 July 2023. Accordingly, they continue to adopt the going
concern basis in preparing the Group's and Company's financial
statements.
Principal Risks & Uncertainties
The UK Corporate Governance Code 2018 requires the Board to
carry out a robust assessment of the Group's principal and emerging
risks. Risk appetite, the risk management process, and associated
mitigating activities are all essential elements of the Group's
strategic and operational planning processes.
Risk appetite
4imprint's business model means that it may be affected by a
number of risks, not all of which are within its control. The Board
seeks to take a balanced approach to the risks and uncertainties
that it faces, encouraging an appetite for measured risk-taking
that contributes to both the operational agility and innovative
culture that it believes is necessary to meet the Group's strategic
objectives. That risk appetite is, however, tempered by risk
identification, evaluation and management.
Risk management process
The Board has ultimate responsibility for the Group's risk
management process, although responsibility for reviewing specific
risks and controls is delegated to the Audit Committee. The
Executive Directors and operational management teams are
responsible for the identification and evaluation of risks and the
subsequent implementation of specific risk mitigation activities. A
formal risk review is conducted by the Board at least annually.
During 2021 further progress has been made in developing the
Group's risk management process, including assessing and scoring of
specific risks, delineation of 'principal' versus 'other' risks,
and implementation of revised risk categories (see below) that we
consider to be more in line with the development of the Group in
recent years and its strategic priorities. The Business Risk
Management Committee, chaired by the Group Financial Controller,
has driven much of the progress made in 2021. The lingering effects
of the pandemic and some unavoidable internal resource constraints
have
limited the Committee's formal meetings in the year; our aim is
for the Committee to meet quarterly in 2022.
Categorisation of risks
During 2021 the Business Risk Management Committee has developed
a revised risk categorisation process that has been reviewed and
approved by the Board. The new risk categories are briefly
summarised below:
-- Strategic risks. These are risks often caused by external
events that typically might affect broad economic or market
conditions. Strategic risks will generally be managed through
mitigations undertaken at a strategic level.
-- Operational risks. These are risks and uncertainties faced in
the course of conducting normal business activities via established
procedures and systems. Operational risks will typically be driven
by internal events and will be managed and mitigated through
control activities.
-- Reputational risks. These are risks that some kind of
negative circumstance could impact the brand reputation and/or
image of the Group or its businesses in the wider marketplace.
Mitigations are often specific controls or procedures aimed at
ensuring compliance with regulations or expectations.
-- Environmental risks. This risk category recognises the
obligation of the Group to protect and positively impact the
external environment. Risk management might typically be in the
form of longer-term mitigation projects such as carbon footprint
reduction or product range initiatives.
Emerging risks
Business operations are conducted from centralised facilities in
Oshkosh and Manchester, with short reporting lines. As a result,
the Executive Directors are close to day-to-day matters,
facilitating early identification of, and response to, shifting
risk patterns. Emerging risks are a standing agenda item of the
Business Risk Management Committee. Urgent issues arising will
continue to be escalated as appropriate and discussed at regular
Board meetings.
Outlined in Appendix 1 are the current principal risks and
uncertainties that would impact the successful delivery of the
Group's strategic goals. The list is not exhaustive and other, as
yet unidentified, factors may have an adverse effect.
Kevin Lyons-Tarr David Seekings
Chief Executive Officer Chief Financial Officer
15 March 2022
Group Income Statement for the 52 weeks ended 1 January 2022
2021 2020
52 weeks 53 weeks
Note $'000 $'000
----------------------- ---- --------- ---------
Revenue 1 787,322 560,040
Operating expenses (756,676) (556,068)
----------------------- ---- --------- ---------
Operating profit 1 30,646 3,972
Finance income 33 168
Finance costs (435) (193)
Pension finance charge (15) (104)
----------------------- ---- --------- ---------
Net finance cost (417) (129)
Profit before tax 30,229 3,843
Taxation 2 (7,643) (753)
----------------------- ---- --------- ---------
Profit for the period 22,586 3,090
----------------------- ---- --------- ---------
Cents Cents
----------------------- ---- --------- ---------
Earnings per share
Basic 3 80.46 11.03
Diluted 3 80.26 11.00
----------------------- ---- --------- ---------
Group S tatement of Comprehensive Income for the 52 weeks ended
1 January 2022
2021 2020
52 weeks 53 weeks
Note $'000 $'000
Profit for the period 22,586 3,090
--------------------------------------------------------- --------- ---------
Other comprehensive (expense)/income
Items that may be reclassified subsequently
to the income statement:
Currency translation differences (97) 863
Items that will not be reclassified subsequently
to the income statement:
Return on pension scheme assets (excluding
interest income) (1,391) 1,261
Re-measurement gains/(losses) on post-employment
obligations 2,506 (5,550)
Tax relating to components of other comprehensive
income (1,411) 1,241
Total other comprehensive expense net of tax (393) (2,185)
--------------------------------------------------------- --------- ---------
Total comprehensive income for the period 22,193 905
--------------------------------------------------------- --------- ---------
Group Balance Sheet at 1 January 2022
2021 2020
Note $'000 $'000
------------------------------ ---- -------- --------
Non-current assets
Property, plant and equipment 24,667 24,832
Intangible assets 1,045 1,100
Right-of-use assets 11,725 13,065
Deferred tax assets 600 4,272
Retirement benefit asset 5 1,974 -
40,011 43,269
------------------------------ ---- -------- --------
Current assets
Inventories 20,559 11,271
Trade and other receivables 63,589 36,799
Current tax debtor 2,034 1,976
Cash and cash equivalents 41,589 39,766
------------------------------ ---- -------- --------
127,771 89,812
------------------------------ ---- -------- --------
Current liabilities
Lease liabilities (1,150) (1,117)
Trade and other payables (71,877) (49,569)
Current tax creditor - (432)
(73,027) (51,118)
------------------------------ ---- -------- --------
Net current assets 54,744 38,694
------------------------------ ---- -------- --------
Non-current liabilities
Lease liabilities (10,939) (12,089)
Retirement benefit obligation 5 - (3,310)
Deferred tax liabilities (850) (1,193)
(11,789) (16,592)
------------------------------ ---- -------- --------
Net assets 82,966 65,371
------------------------------ ---- -------- --------
Shareholders' equity
Share capital 18,842 18,842
Share premium reserve 68,451 68,451
Other reserves 6,020 6,117
Retained earnings (10,347) (28,039)
------------------------------ ---- -------- --------
Total Shareholders' equity 82,966 65,371
------------------------------ ---- -------- --------
Group Statement of Changes in Shareholders' Equity for the 52
weeks ended 1 January 2022
Retained earnings
-----------------------
Share
Share premium Other Profit Total
capital reserve reserves Own shares and loss equity
$'000 $'000 $'000 $'000 $'000 $'000
----------------------------------------- --------- -------- --------- ------------ --------- -------
Balance at 29 December 2019 18,842 68,451 5,254 (3,029) (26,570) 62,948
----------------------------------------- --------- -------- --------- ------------ --------- -------
Profit for the period 3,090 3,090
Other comprehensive income/(expense)
Currency translation differences 863 863
Re-measurement losses on post-employment
obligations (4,289) (4,289)
Deferred tax relating to components
of other comprehensive income 1,241 1,241
Total comprehensive income 863 42 905
----------------------------------------- --------- -------- --------- ------------ --------- -------
Proceeds from options exercised 2,170 2,170
Own shares utilised 3,677 (3,677) -
Own shares purchased (1,229) (1,229)
Share-based payment charge 625 625
Deferred tax relating to share
options (83) (83)
Deferred tax relating to losses
attributable to share options 35 35
Balance at 2 January 2021 18,842 68,451 6,117 (581) (27,458) 65,371
----------------------------------------- --------- -------- --------- ------------ --------- -------
Profit for the period 22,586 22,586
Other comprehensive income/(expense)
Currency translation differences (97) (97)
Re-measurement gains on post-employment
obligations 1,115 1,115
Deferred tax relating to components
of other comprehensive income (1,411) (1,411)
----------------------------------------- --------- -------- --------- ------------ --------- -------
Total comprehensive income (97) 22,290 22,193
Own shares utilised 573 (573) -
Own shares purchased (843) (843)
Share-based payment charge 602 602
Deferred tax relating to share
options 5 5
Deferred tax relating to losses
attributable to share options (228) (228)
Dividends (4,134) (4,134)
Balance at 1 January 2022 18,842 68,451 6,020 (851) (9,496) 82,966
----------------------------------------- --------- -------- --------- ------------ --------- -------
Group Cash Flow Statement for the 52 weeks ended 1 January
2022
2021 2020
52 weeks 53 weeks
Note $'000 $'000
--------------------------------------------- ---- --------- ---------
Cash flows from operating activities
Cash generated from operations 6 18,257 3,184
Tax paid (6,414) (507)
Finance income received 33 168
Finance costs paid (65) (49)
Lease interest (377) (132)
Net cash generated from operating activities 11,434 2,664
--------------------------------------------- ---- --------- ---------
Cash flows from investing activities
Purchases of property, plant and equipment (3,083) (3,427)
Purchases of intangible assets (382) (390)
Proceeds from sale of property, plant and
equipment - 93
Net cash used in investing activities (3,465) (3,724)
--------------------------------------------- ---- --------- ---------
Cash flows from financing activities
Capital element of lease payments (1,117) (1,418)
Proceeds from share options exercised - 2,170
Purchases of own shares (843) (1,229)
Dividends paid to Shareholders 4 (4,134) -
--------------------------------------------- ---- --------- ---------
Net cash used in financing activities (6,094) (477)
--------------------------------------------- ---- --------- ---------
Net movement in cash and cash equivalents 1,875 (1,537)
Cash and cash equivalents at beginning of
the period 39,766 41,136
Exchange (losses)/gains on cash and cash
equivalents (52) 167
--------------------------------------------- ---- --------- ---------
Cash and cash equivalents at end of the
period 41,589 39,766
--------------------------------------------- ---- --------- ---------
Notes to the Financial Statements
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 accounting policies applied in these financial statements
are consistent with those of the annual financial statements for
the period ended 2 January 2021, as described in those annual
financial statements.
Basis of preparation
This announcement was approved by the Board of Directors on 15
March 2022. The financial information in this announcement does not
constitute the Group's statutory accounts for the periods ended 1
January 2022 or 2 January 2021 but it is derived from those
accounts. Statutory accounts for 2 January 2021 have been delivered
to the Registrar of Companies, and those for 1 January 2022 will be
delivered after the Annual General Meeting. The auditor has
reported on those accounts. Their reports were unqualified, did not
include a reference to any matters to which the auditor 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 UK-adopted International Accounting
Standards. 2020 was a 53 week period which started on 29 December
2019. Please refer to the Financial Review for a discussion of the
impact on the Group's key metrics of a 53 week period versus a 52
week comparative period.
New accounting standards applicable for the first time in this
reporting period have no impact on the Group's results or balance
sheet.
Environmental risks
In preparing the financial statements, management has considered
the impact of environmental risks. Whilst the impact of
environmental risks are still developing and therefore all possible
future outcomes are uncertain, risks known to the Group have been
considered in judgments, estimates and assumptions and in assessing
viability and going concern. These considerations did not have a
material impact on the financial statements.
Going concern
In making their assessment of going concern from the date of
approval of these financial statements until 1 July 2023, the
Directors have carefully considered the Group's prospects:
-- The Group's strategy, market position and business model.
-- The principal risks and uncertainties facing the Group, as outlined in the Financial Review.
-- Information contained in the Financial Review concerning the
Group's financial position, cash flows and liquidity position.
-- Regular management reporting and updates from the Executive Directors.
-- Recent detailed financial forecasts and analysis.
Whilst the lingering effect of the COVID-19 pandemic continues
to present challenges, including on the supply chain and
inflationary pressures, the Board considers that the Group's
strategy, competitive position, and business model remain entirely
relevant and, indeed, have proved to be resilient and flexible
under stress.
Business operations have adapted successfully to the challenging
and rapidly changing external conditions in a timely manner. The
marketing portfolio was reconfigured during 2020 and 2021,
providing flexibility over expenditure and the agility to invest in
opportunities for growth in recovering markets. Discretionary
overhead and capital spend continues to be tightly controlled,
demonstrating the essentially minimal fixed cost base of the direct
marketing model.
These actions, coupled with the strong financial position of the
Group that has been maintained throughout this global pandemic,
give the Board confidence that despite residual uncertainty as to
future market conditions, the Group will be in a good position both
to withstand further economic stress and to take market share
opportunities as demand continues to recover.
As a primary strategic objective of the Group and as noted in
the assessment of prospects in the Financial Review,
environment-related risks and opportunities are specifically
considered by the Board in their assessment of viability and going
concern.
The Group has established an appropriate governance structure,
in the form of the Group Environmental Committee and Business Risk
Management Committee, to identify new and emerging risks related to
climate change and the environment.
As detailed more fully in the Principal Risks &
Uncertainties in Appendix 1, environmental risks have the potential
to impact the Group's ability to achieve its strategic objectives
through damage to our reputation, our operational facilities and
those of our supplier partners, and the failure to respond to
trends and shifts in consumer product preferences.
The Group has proactively responded to these risks with several
initiatives. These include the achievement of CarbonNeutral(R)
company status in October 2021, committed plans to build a solar
panel array at our distribution centre in Oshkosh, plans to review
ESG-linked executive remuneration with the inclusion of
climate-related metrics, and the launch of our better choices(TM)
programme to make it easier for our customers to find products with
the characteristics that are most important to them. The flexible
nature of our 'drop-ship' model and close relationships maintained
with key and alternative suppliers allows for relatively rapid
adjustment to episodes of extreme weather.
Whilst governmental and societal responses to climate change
risks are still developing, and therefore all possible future
outcomes are not known, the Group has embedded environmental
matters into our strategic objectives and sees climate change and
other aspects of environmental stewardship as a fundamental part of
our commitment to build a commercially and environmentally
sustainable business that delivers value to all stakeholders.
The cash flow impact of our environmental initiatives are
incorporated into the financial forecasts used to assess viability
and going concern.
The Board considers that the key factor that would prejudice the
ongoing viability and liquidity of the Group would be a severe
downturn in demand, which negatively impacts new customer
acquisition and existing customer retention.
The 'base case' three-year plan, developed for the purposes of
the Group's strategic planning process, provides the basis for the
financial modelling used to assess viability. The commercial
underpin to this 'base case' is the Board's view that whilst the
promotional products market contracted in 2020, for example due to
the cancellation of trade shows and physical events, our recent
experience is that market demand is resilient across the product
range and customer base, as evidenced in the rapid recovery in
demand during 2021. The base case started with the total order
count at 90% of pre-pandemic 2019 levels, as achieved in 2021, with
consistent and sustained top-line growth throughout the three-year
period. Marketing costs were modelled to increase in line with
revenue with the Group's revenue per marketing dollar KPI remaining
stable at historic levels. This 'base case' shows improving
financial results, an accumulating cash balance and no liquidity
concerns.
Severe, but plausible, downside demand assumptions were then
determined and used to adjust the 'base case' forecast to model the
effects on the Group's liquidity. This 'downside' scenario assumes
a significant deterioration in demand patterns during 2022, similar
to those experienced in 2020 when the pandemic started, with order
volumes for the full year dropping back to around 70% of 2019
levels, before gradually recovering back to 2019 order levels by
2024. Marketing and direct costs were flexed in line with revenue,
but other payroll and overhead costs remained at 2021 levels with
some allowance for inflationary increases. This 'downside' scenario
was intended to simulate a severe shock to demand, similar to the
experience from COVID-19, that results in sustained diminished
corporate demand in a downsized promotional products market.
Even under the severe stress built into the 'downside' model,
the Group retains sufficient liquidity throughout the assessment
period. This liquidity is in the form of cash balances. In
addition, there are further mitigating actions that the Group could
take, including further cutting marketing costs and reducing
headcount, that are not reflected in the distressed forecast but
would, if required, be fully under the Group's control.
Given the scalability of the Group's business model, as
demonstrated over the past few years, the absence of external
financing, and low fixed or working capital requirements, a reverse
stress testing scenario has not been undertaken. The Group has
proven during 2020 its ability to flex its marketing and other
costs to mitigate the impact of falls in revenue driven by COVID-19
and retains flexibility to further reduce other costs should the
need arise.
Though the Group maintains a $20m line of credit with its US
bankers, that expires on 31 May 2023, and a small overdraft
facility with its UK bankers, that expires on 31 December 2022, the
modelling in both the 'base case' and 'downside' scenarios shows
the maintenance of positive cash balances throughout the assessment
period and, as such, there is no current requirement to utilise the
facilities or intention to secure any additional facilities.
The assumptions used in the 'base case' and 'downside' scenarios
and resulting financial forecasts have been reviewed and approved
by the Board. The conclusion of this review is that the Group has
significant flexibility in its variable costs, a very low fixed
cost base, and enters the 2022 financial year with a strong net
cash position of $41.6m, enabling it to remain cash positive even
under severe economic stress.
Based on the assessment outlined above, the Directors have
reasonable expectations that the Group and Company will have
adequate resources to continue to operate from the date the
financial statements were approved until at least 1 July 2023.
Accordingly, they continue to adopt the going concern basis in
preparing the Group's and Company's financial statements.
Judgments, estimates and assumptions
Impact of COVID-19 on estimates
The impact of COVID-19 and subsequent disruptions to the supply
chain on the consolidated financial statements has been considered
in determining the estimates required for credits and impairment
provisions in relation to trade and other receivables, inventory
provisioning, impairment of property, plant and equipment, and
intangibles, and the recoverability of deferred tax assets.
Whilst the uncertainty surrounding the ultimate impact of the
COVID-19 pandemic has resulted in significant estimation in respect
to the future cash flows of subsidiary companies and in determining
appropriate discount rates, growth rates, and probability of
default rates necessary for undertaking impairment reviews and
assessing the recoverability of assets and levels of provisions
required, these are not considered to represent critical accounting
judgments or key sources of estimation uncertainty in the
preparation of the financial statements.
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:
Critical accounting judgments
Revenue
For most of its product line, the Group operates a 'drop-ship'
business model whereby suppliers hold blank inventory, imprint the
product and ship directly to customers. In order to determine the
amount of revenue to recognise, it is necessary for the Group to
make a judgment to assess if it is acting as principal or an agent
in fulfilling the performance obligations and promises to customers
for these transactions.
The Group has full discretion to accept orders, agrees artwork
with the customer, sets the transaction price, selects the
suppliers used to fulfil orders, and considers its customer
satisfaction promises ('on-time or free', price and quality
guarantees) to be integral to meeting its performance
obligations.
Accordingly, the Group is of the opinion that it acts as
principal in providing goods to customers and recognises the gross
amount of consideration as revenue.
Leases
The Group signed an extension to its Oshkosh office lease
commencing on 1 October 2020 for a five-year period with an option
to renew for a further five years from 2025 to 2030. In accordance
with the requirements of IFRS 16, the Group has made a judgment on
the likelihood of exercising the new option to extend in
determining the lease term.
Retirement benefit asset
At the balance sheet date, the fair value of the defined benefit
assets exceeded the present value of the defined benefit
obligations of the 4imprint 2016 Pension Plan. Although the Group
anticipates that the surplus will be utilised during the life of
the plan to address members' liabilities, the Group recognises the
surplus in full on the basis that it is managements' judgment that
there are no restrictions on the return of residual plan assets in
the event of a winding up of the plan after all member obligations
have been met.
Key sources of estimation uncertainty
Pensions
As detailed in note 5, the Group sponsors a defined benefit
pension scheme closed to new members and future accruals.
Period-end recognition of the liabilities under this scheme
requires 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 amounts
recorded in other comprehensive income and on the pension
liabilities in the balance sheet. In addition, the assets held by
the scheme include funds that may contain gilt repos and reverse
gilt repos, the valuations of which are complex.
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 1 January 2022, the Group has two operating segments, North
America and UK & Ireland. The costs of the Head Office are
reported separately to the Board, but this is not an operating
segment.
2021 2020
Revenue $'000 $'000
--------------------- -------- --------
North America 773,710 549,873
UK & Ireland 13,612 10,167
--------------------- -------- --------
Total Group revenue 787,322 560,040
--------------------- -------- --------
Profit 2021 2020
$'000 $'000
--------------------------------------------------- -------- --------
North America 36,006 9,170
UK & Ireland (1,464) (1,605)
--------------------------------------------------- -------- --------
Operating profit from Direct Marketing operations 34,542 7,565
Head Office costs (3,896) (3,593)
--------------------------------------------------- -------- --------
Operating profit 30,646 3,972
Net finance cost (417) (129)
Profit before tax 30,229 3,843
--------------------------------------------------- -------- --------
2 Taxation
2021 2020
$'000 $'000
Current tax
UK tax - current - -
Overseas tax - current 5,910 (845)
Overseas tax - prior periods 15 (53)
--------------------------------------------------- ------- -------
Total current tax 5,925 (898)
--------------------------------------------------- ------- -------
Deferred tax
Origination and reversal of temporary differences 1,718 1,575
Adjustment in respect of prior periods - 76
Total deferred tax 1,718 1,651
Taxation 7,643 753
--------------------------------------------------- ------- -------
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:
2021 2020
$'000 $'000
---------------------------------------------------------- ------- -------
Profit before tax 30,229 3,843
Profit before tax for each country of operation
multiplied by rate of corporation tax applicable
in the respective countries 7,087 523
Effects of:
Adjustments in respect of prior periods 15 23
Expenses not deductible for tax purposes and non-taxable
income 4 20
Other differences 62 101
Adjustments in respect of tax losses (274) (806)
De-recognition of deferred tax asset for UK losses 749 -
US BEAT liability - 892
Taxation 7,643 753
---------------------------------------------------------- ------- -------
The net deferred tax asset at 1 January 2022 has been calculated
at a tax rate of 19% in respect of deferred tax items that are
expected to reverse before 1 April 2023 (2020: 19%) and 25% in
respect of deferred tax items expected to reverse after 1 April
2023 (2020: 19%); and 25% (2020: 25%) in respect of US deferred tax
items.
Management does not consider that there are any material
uncertain tax positions.
'Other differences' comprises adjustments in respect of share
options and US leases.
'Adjustments in respect of tax losses' includes the tax effect
of brought forward UK tax losses utilised in the year and in 2020
includes the tax effect of US tax losses incurred in 2020 and
carried back to prior years.
Following a review of forecast UK taxable profits, the deferred
tax asset for UK tax losses has been de-recognised in the
period.
US BEAT is an additional US federal tax imposed on US
corporations that make certain types of payment to foreign related
parties. The US Group had no BEAT liability for 2021.
3 Earnings per share
Basic and diluted
The basic and diluted earnings per share are calculated based on
the following data:
2021 2020
$'000 $'000
------------------ ------- -------
Profit after tax 22,586 3,090
------------------ ------- -------
2021 2020
Number Number
'000 '000
------------------------------------------- -------- --------
Basic weighted average number of shares 28,072 28,003
Adjustment for employee share options 68 95
------------------------------------------- -------- --------
Diluted weighted average number of shares 28,140 28,098
------------------------------------------- -------- --------
2021 2020
Cents Cents
------------------------------------------- -------- --------
Basic earnings per share 80.46 11.03
------------------------------------------- -------- --------
Diluted earnings per share 80.26 11.00
------------------------------------------- -------- --------
The basic weighted average number of shares excludes shares held
in the 4imprint Group plc employee benefit trust. The effect of
this is to reduce the average by 13,888 (2020: 82,090).
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 which are likely to vest at the
balance sheet date.
4 Dividends
2021 2020
Equity dividends - ordinary shares $'000 $'000
------------------------------------ ------- -------
Interim paid: 15.00c (2020: 00.00c) 4,134 -
Final paid: 00.00c (2020: 00.00c) - -
------------------------------------ ------- -------
4,134 -
------------------------------------ ------- -------
The Directors are proposing a final dividend in respect of the
period ended 1 January 2022 of 30.00c. Subject to Shareholder
approval at the AGM, these dividends are payable on 31 May 2022
to Shareholders on the register of members at close of business
on 29 April 2022. These financial statements do not reflect this
proposed dividend.
5 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:
2021 2020
$'000 $'000
------------------------------------------------------- ------- -------
Defined contribution plans - employers' contributions 2,117 2,023
------------------------------------------------------- ------- -------
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:
2021 2020
$'000 $'000
---------------------------------------------------- ------- -------
Administration costs paid by the scheme 340 343
Past service costs - GMP equalisation on transfers - 77
Pension finance charge 15 104
Total defined benefit pension charge 355 524
---------------------------------------------------- ------- -------
The past service cost in 2020 relates to an estimate of the
Guaranteed Minimum Pension ("GMP") equalisation provision on
transfers out of the scheme following the High Court ruling in the
Lloyds case in November 2020. The charge is an estimate calculated
by the Company's actuaries and the actual result may differ from
this estimate.
The amounts recognised in the balance sheet comprise:
2021 2020
$'000 $'000
-------------------------------------------------- --------- ---------
Present value of funded obligations (37,826) (42,627)
Fair value of scheme assets 39,800 39,317
-------------------------------------------------- --------- ---------
Net asset/(obligation) recognised on the balance
sheet 1,974 (3,310)
-------------------------------------------------- --------- ---------
The principal assumptions applied by the actuaries, as
determined by the Directors, at each period end were:
2021 2020
% %
----------------------------------------- ----- -----
Rate of increase in pensions in payment 3.25 2.85
Rate of increase in deferred pensions 2.75 2.30
Discount rate 1.80 1.25
Inflation assumption - RPI 3.35 2.90
- CPI 2.75 2.30
----------------------------------------- ----- -----
The mortality assumptions adopted at 1 January 2022 reflect the
most recent version of the tables used in the September 2019
triennial valuation. The assumptions imply the following life
expectancies at age 65:
2021 2020
Years Years
-------------------------- ------ ------
Male currently aged 40 22.3 22.3
Female currently aged 40 24.2 24.2
Male currently aged 65 21.3 21.3
Female currently aged 65 23.0 23.0
-------------------------- ------ ------
6 Cash generated from operations
2021 2020
$'000 $'000
---------------------------------------------------- --------- ---------
Profit before tax 30,229 3,843
Adjustments for:
Depreciation of property, plant and equipment 3,237 2,992
Amortisation of intangible assets 437 443
Amortisation of right-of-use assets 1,340 1,498
Gain on disposal of property, plant and equipment - (80)
Share option charges 602 625
Net finance cost 417 129
Defined benefit pension administration charge and
past service costs 340 420
Contributions to defined benefit pension scheme* (4,589) (13,278)
Changes in working capital:
(Increase)/decrease in inventories (9,288) 186
(Increase)/decrease in trade and other receivables (26,831) 16,119
Increase/(decrease) in trade and other payables 22,363 (9,713)
Cash generated from operations 18,257 3,184
---------------------------------------------------- --------- ---------
*Includes a special pension contribution in 2020 of $9.14m.
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 UK-adopted International Accounting Standards, 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 & 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
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 the Financial Review):
2021 2020
$m $m
------------------------------------------------------------ ------- -------
Net movement in cash and cash equivalents 1.87 (1.54)
Add back: Dividends paid to Shareholders 4.13 -
Less: Exchange (losses)/gains on cash and cash equivalents (0.05) 0.17
------------------------------------------------------------ ------- -------
Free cash flow 5.95 (1.37)
------------------------------------------------------------ ------- -------
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, less capital expenditure.
This reflects the cash flow directly from the ongoing business
operations. This is reconciled to IFRS measures as follows:
2021 2020
$m $m
---------------------------------------------------- ------- -------
Cash generated from operations 18.25 3.18
Add back: Contributions to defined benefit pension
scheme 4.59 13.28
Less: Purchases of property, plant and equipment
and intangible assets (3.47) (3.82)
Add back: Gain on disposal of property, plant and
equipment - 0.08
---------------------------------------------------- ------- -------
Underlying operating cash flow 19.37 12.72
---------------------------------------------------- ------- -------
Appendix 1
STRATEGIC RISKS
Macroeconomic conditions
Risk and description
The Group conducts most of its operations in North America and
would be affected by a downturn in general economic conditions
in this region or negative effects from tension in international
trade. In previous economic downturns the promotional products
market has typically softened broadly in line with the general
economy. Most recently, the economic downturn associated with
the COVID-19 pandemic had a significant negative effect on demand
for our products.
Strategic relevance Mitigation Direction
------------------------------------------------------------- ------------------------------------------------------------
* Customer acquisition and retention could fall, * Management monitors economic and market conditions to * Concerns remain with respect to virus variants and
impacting revenue in current and future periods. ensure that appropriate and timely adjustments are resulting restrictions in our markets, however our
made to marketing and other budgets. business model has proved to be resilient and
continues to resonate with our target customers as
* The growth and profitability levels called for in the demonstrated by the continued recovery of the
Group's strategic plan may not be achieved. * The customer proposition in terms of promotions, business from the significant negative effects of the
price, value, and product range can be adjusted to COVID-19 pandemic.
resonate with customer requirements and budgets in
* Cash generation could be reduced broadly changing economic climates.
corresponding to a reduction in profitability. * Global supply chain issues and international trade
tensions continue to cause volatility in our North
* The Group's balance sheet funding policy provides American and UK markets.
operational and financial flexibility to facilitate
continued investment in the business through
different economic cycles. * Brexit uncertainty remains in the Group's UK market,
leading to a lack of business confidence.
* Recent inflationary pressures could drive up labour,
product and transportation costs, affecting customer
demand for our products.
Unchanged
------------------------------------------------------------- ------------------------------------------------------------
Markets & competition
Risk and description
The promotional products markets in which the business operates
are intensely competitive. New or disruptive business models
looking to break down our industry's prevailing distributor/supplier
structure may become a threat. Buying groups and online marketplaces
may allow smaller competitors access to improved pricing and
services from suppliers. Private equity interest in the promotional
products industry has increased in recent years, offering potential
funding for existing competitors or new entrants.
Strategic relevance Mitigation Direction
----------------------------------------------------------------------------- ------------------------------------------------------------
* Aggressive competitive activity or a disruptive new * Service level, price and satisfaction guarantees are * The competitive landscape to date has been relatively
model could result in pressure on prices, margin an integral part of the customer proposition. consistent on the distributor side in our main
erosion and loss of market share, impacting the Negative or changing customer feedback is markets.
Group's financial results. investigated and addressed rapidly. Customers are
surveyed regularly to monitor changing customer
interests and perceptions.
* The Group's strategy based on achieving organic Unchanged
revenue growth in fragmented markets may need to be
reassessed. * Merchandising and supply chain teams have extensive
experience in rapidly adapting the product range to
meet evolving consumer demand.
* Customer acquisition and retention could fall,
impacting revenue in current and future periods.
* Our aim is to position the business at the forefront
of innovation in the industry, driven by an
open-minded culture that is customer focused,
embraces collaborative supplier relationships, and
has an appetite for technology.
* Management closely monitors competitive activity in
the marketplace including periodic market research
studies.
----------------------------------------------------------------------------- ------------------------------------------------------------
Effectiveness of key marketing techniques and brand development
Risk and description
The success of the business relies on its ability to attract
new and retain existing customers through a variety of marketing
techniques. These methods may become less effective as follows:
* TV/Video/Brand: Fluctuations in available inventory
may cause the price of this technique to increase
beyond our acceptable thresholds. The evolving nature
of how consumers access this type of content can
change our ability to effectively access our
audience.
* Online: Search engines are an important source for
channelling customer activity to 4imprint's websites.
The efficiency of search engine marketing could be
adversely affected if the search engines were to
modify their algorithms or otherwise make substantial
changes to their practices.
* Offline: The flow of print catalogues and sample
packages would be disrupted by the incapacity of the
US Postal Service to make deliveries, for example due
to natural disasters or labour activism. Pandemic
conditions that lead to increased levels of people
working from remote locations may diminish the
effectiveness of this technique.
The evolving landscape around consumer data privacy preferences
and data privacy legislation potentially affects all marketing
techniques if it compromises our ability to access and analyse
customer information or results in any adverse impacts to our
brand image and reputation.
Strategic relevance Mitigation Direction
------------------------------------------------------------- -----------------------------------------------------------
* If sustained over anything more than a short time * TV/Video/Brand: Given that this is the newest element * Marketing diversification continues via the
period, an externally driven decrease in the of our marketing portfolio, our utilisation of this successful integration of a brand component to the
effectiveness of key marketing techniques would cause technique is still at a relatively early stage of its marketing portfolio.
damage to the customer file as customer acquisition development, allowing for a high degree of
and retention fall. This would affect order flow and flexibility.
revenue in the short-term and the productivity of the * The COVID-19 pandemic, in particular the trend
customer file over a longer period, impacting growth towards 'work-from-home' has negatively impacted
prospects in future years. * Online: Management stays very close to new response rates for print catalogues. This has
developments and emerging platforms in the online resulted in a successful redeployment of
space. Efforts are focused on anticipating changes offline/print budget towards further investment in
* Restrictive data privacy legislation or changes in and ensuring compliance with both the requirements of brand and online marketing.
consumer demands around data privacy could decrease providers and applicable laws.
the yield on our marketing activities and might
increase compliance costs and the possibility of * The business has significantly reduced the amount of
lawsuits. * Offline: Developments in the US Postal Service are data it shares, increasingly relying on first party
closely monitored through industry associations and data.
lobbying groups. Alternative parcel carriers are
continuously evaluated.
Unchanged
* Data privacy requirements and consumer data
preferences are monitored closely and assessed.
------------------------------------------------------------- -----------------------------------------------------------
OPERATIONAL RISKS
Business facility disruption
Risk and description
The 4imprint business model means that operations are concentrated
in centralised office, distribution and production facilities.
The performance of the business could be adversely affected if
activities at one of these facilities were to be disrupted, for
example, by pandemic, fire, flood, loss of power or internet
/telecommunication failure.
Strategic relevance Mitigation Direction
------------------------------------------------------------ ----------------------------------------------------------
* The inability to service customer orders over any * Back-up and business continuity infrastructure is in * The COVID-19 pandemic raised the risk of potential
extended period would result in significant revenue place to ensure the risk of customer service shutdown of one or all of our facilities, however
loss, deterioration of customer acquisition and disruption is minimised. the
retention metrics and diminished return on marketing risk of a return to 'lockdown' type restrictions
investment. appears to be diminishing.
* Websites are cloud-based, and data is backed up
continuously to off-site servers.
* A significant portion of our apparel orders are
embroidered in-house at our distribution centre, Unchanged
therefore disruption at this facility would impact * Relationships are maintained with third party
our ability to fulfil these orders. embroidery contractors to provide an element of
back-up in the event of facility unavailability.
* The Group's reputation for excellent service and
reliability may be damaged. * A significant proportion of our office and customer
service staff can work from home, mitigating some
risk should offices become unavailable.
------------------------------------------------------------ ----------------------------------------------------------
Domestic supply and delivery
Risk and description
As a consequence of the Group's 'drop-ship' distribution model,
trading operations could be interrupted if: (i) the activities
of a key supplier were disrupted and it was not possible to source
an alternative supplier in the short-term; (ii) a key supplier's
own supply chain is compromised by 'force majeure' events in
the country of original product manufacture, for example natural
disasters, social/political unrest or pandemic; or (iii) the
primary parcel delivery partner used by the business suffered
significantly degraded service levels. As the Group continues
to grow, the volume of orders placed with individual suppliers
becomes significant.
Strategic relevance Mitigation Direction
------------------------------------------------------------- -------------------------------------------------------------
* Inability to fulfil customer orders would lead to * A rigorous selection process is in place for key * Risk is inherent in increasing supplier concentration,
lost revenue and a negative impact on customer suppliers, with evaluation and monitoring of quality, and the COVID-19 pandemic has increased this risk.
acquisition and retention statistics. production capability and capacity, ethical standards
,
financial stability and business continuity planning. * The supply chain problems seen in the second half of
* The Group's reputation for excellent service and 2021 have significantly heightened risk in this area
reliability may be damaged, leading to potential and are still ongoing.
erosion of the value built up in the 4imprint brand. * Very close relationships are maintained with key
suppliers, including a detailed shared knowledge of
the supply end of the value chain, allowing swift
understanding of and appropriate reaction to events. Increased
* Wherever possible, relationships are maintained with
suitable alternative suppliers for each product
category.
* Secondary relationships are in place with alternative
parcel carriers.
------------------------------------------------------------- -------------------------------------------------------------
Failure or interruption of information technology systems and
infrastructure
Risk and description
The business is highly dependent on the efficient functioning
of its IT infrastructure. An interruption or degradation of services
at any 4imprint operational facility would affect critical order
processing systems and thereby compromise the ability of the
business to deliver on its customer service proposition.
Strategic relevance Mitigation Direction
------------------------------------------------------------- -----------------------------------------------------------
* In the short-term, orders would be lost and deliv * There is continuous investment in both the IT team * The IT platform is mature, and performance has been
ery supporting the business and the hardware and software efficient and resilient, including through the
deadlines missed, decreasing the efficiency of system requirements for a stable and secure operating COVID-19 pandemic with high levels of staff working
marketing investment and impacting customer platform. from home.
acquisition and retention.
* Back-up and recovery processes are in place,
* Revenue and profitability are directly related to including immediate replication of data to an Unchanged
order flow and would be adversely affected as a alternative site, to minimise the impact of
consequence of a major IT failure. information technology interruption.
* Depending on the severity of the incident, * Cloud-based hosting for eCommerce and elements of
longer-term reputational damage could result. back office functionality.
------------------------------------------------------------- -----------------------------------------------------------
REPUTATIONAL RISKS
Cyber threats
Risk and description
Malware, ransomware and other malicious cyber threats can lead
to system failure and/or unauthorised access to and misappropriation
of customer data, potentially leading to reputational damage
and loss of customer confidence. This is a rapidly changing environment,
with new threats emerging on an almost daily basis.
Strategic relevance Mitigation Direction
------------------------------------------------------------- -------------------------------------------------
* Revenue and profitability are directly related to * The business employs experienced IT staff whose focus * The general incidence and publicity around
order flow and would be adversely affected as a is to identify and mitigate IT security cyber-crime continues to increase.
consequence of system compromise. vulnerabilities.
* A significant security breach could lead to * Investment in software and other resources in this Increased
litigation and losses, with a costly rectification area continues to be a high priority.
process. In addition, it might be damaging to the
Group's reputation and brand.
* Technical and physical controls are in place to
mitigate unauthorised access to customer data and
* An event of this nature might result in significant there is an ongoing investment process to maintain
expense, impacting the Group's ability to meet its and enhance the integrity and efficiency of the IT
strategic objectives. infrastructure and its security.
* Due to the ever-evolving nature of the threat,
emerging cyber risks are addressed by the IT security
team on a case-by-case basis.
* Third party cyber security consultants are employed
as and when appropriate.
------------------------------------------------------------- -------------------------------------------------
Supply chain compliance & ethics
Risk and description
Our business model relies on direct (tier 1) and indirect (tier
2 & 3) relationships with suppliers located both within our primary
markets and at overseas locations. 4imprint has for many years
had very high ethical expectations for supply chain compliance,
but there is always a risk that our wider supply chain partners
may, from time to time, not comply with our standards or applicable
local laws.
Strategic relevance Mitigation Direction
------------------------------------------------------------- ---------------------------------------------------------
* Significant or continuing non-compliance with such * Key tier 1 suppliers must commit to cascading our * Our supplier compliance programme is well
standards and laws could result in serious damage to ethical sourcing expectations down to their tier 2 established.
our reputation and brand image. and tier 3 supply chain partners.
* The COVID-19 pandemic has restricted opportunities
* This could have an adverse effect on our ability to * Specifically, we require our suppliers to comply with for visits to and audits of both domestic and
acquire and retain customers and therefore our our supplier compliance documentation, including the overseas supplier locations.
longer-term revenue prospects and financial '4imprint Supply Chain Code of Conduct' and the
condition. '4imprint Factory & Product Compliance Expectations'
document.
Increased
* We are active in promoting audit coverage of our
supply chain at many levels, and in ensuring that
product safety and testing protocols are adequate and
up to date.
------------------------------------------------------------- ---------------------------------------------------------
Legal, regulatory and compliance
Risk and description
We are subject to, and must comply with, extensive laws and regulations,
particularly in our primary US market. An example is data privacy
legislation.
Strategic relevance Mitigation Direction
-------------------------------------------------------- ---------------------------------------------------
* If we or our employees, suppliers and other partners * Consultation with consultants, subject matter exp * Obligations continue to be complied with and
fail to comply with any of these laws or regulations, erts, monitored.
such failure could subject us to fines, sanctions or specialist external legal advisers and Government
other penalties that could negatively affect our agencies as appropriate.
brand, reputation and financial condition.
Unchanged
-------------------------------------------------------- ---------------------------------------------------
ENVIRONMENTAL RISKS
Climate change
Risk and description
Climate change potentially affects our operations, facilities,
supply chain, team members, communities and our customers in
a variety of ways. As such, it presents a multitude of risks
to the business and threatens our ability to achieve our strategic
objectives.
Strategic relevance Mitigation Direction
----------------------------------------------------------- --------------------------------------------------------
* Extreme weather-related events that impact our * The flexible nature of our 'drop-ship' model allows * There is an increasing sense of urgency globally,
customers and/or our suppliers can have 'episodic' for relatively rapid adjustment to episodes of and
negative impact on revenue, customer acquisition an extreme weather. The business has very low customer as such, the risks in this area will increase as
d concentration which helps mitigate an element of the well.
retention, and they can also cause increases to our risk as well.
product and distribution costs. Some of our supplie
rs
are located in geographic areas that are subject to * The business became 'carbon neutral' in 2021 in Increased
increased risk for these events. respect of Scopes 1 and 2 and meaningful elements of
Scope 3, a year earlier than originally targeted.
* Further, if the business is not seen to be taking
deliberate and tangible actions to reduce its GHG * Management is actively monitoring and measuring
emissions, the Group's reputation and brand may be progress towards further environmental goals, most
damaged. notably further GHG reductions in Scopes 1 and 2 and
meaningful elements of Scope 3.
----------------------------------------------------------- --------------------------------------------------------
Products and market trends
Risk and description
The transition to a low carbon economy may lead to changing product
trends or consumer preferences that render certain products undesirable
or obsolete whilst increasing demand for others.
Strategic relevance Mitigation Direction
------------------------------------------------------------- ----------------------------------------------------------
* Failure to anticipate accurately and respond to * Our merchandising teams actively collaborate with our * The transition to a low carbon economy is driving
trends and shifts in consumer preferences by suppliers to continuously curate our range of changes in consumer preferences towards sustainable
adjusting the mix of existing product offers may lead products to adapt and meet the needs and tastes of products.
to lower demand for our products, impacting our our customers.
market position and ability to generate revenue
growth. * However, most of the products in our broad range ar
* Our better choices (TM) initiative has been launched e
to highlight promotional products that have also sold unbranded in the retail setting, with the
sustainable attributes, giving our customers the pace of the transition towards sustainable choices
ability to research product attributes and supplier likely to remain quite manageable.
standards and certifications related to
sustainability, environmental impact, workplace
culture and more.
Unchanged
------------------------------------------------------------- ----------------------------------------------------------
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FR UVSRRUBUOAUR
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March 16, 2022 03:00 ET (07:00 GMT)
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