Friday 27 April 2018

Brexit poser: Find a UK firm not relying on UK

'Click to enlarge'
'Click to enlarge'

John Lynch

Smart investors get excited by lots of things - even panic. The shock Brexit decision in June for instance, had people indulging in wholesale offloading of shares in medium and small companies and taking refuge in the mega corporations. But like all big sell-offs it was indiscriminate and left bargains available, including some UK-quoted Irish shares.

Spotting the bargain, especially in the aftermath of a panic, is no easy thing. However the company we are spotlighting this morning could come into that category.

It is a British corporation, but by no means focused on the British market or vulnerable to unhelpful currency trends. It is called 4 Imprint plc and is listed on the London Stock Exchange.

4 Imprint is a leading business-to-business company, selling an extensive range of promotional products like pens, bags, key rings, mugs and other business gifts to a broad range of customers in the USA, Canada, UK and Ireland.

The company works closely with its clients in the use of logos, designs, or messages to support their marketing and branding efforts.

It can trace its roots to a stationery shop in Derby, founded by William Bemrose in 1826 who made his pile by printing tickets and timetables for the emerging railway industry.

This was a precursor to the Bemrose Company which over time expanded into all types of printing including the development of a direct marketing operation with personalised calendars and diaries.

At the beginning of this millennium Bemrose began the process of breaking up the group, and offloaded the promotional division, 4 Imprint.

The company derives almost all of its revenue (97pc) from the US, which is the primary growth engine of the group. With dollar earnings all the fashion, this is a particularly attractive feature of the business.

Also impressive is the 20pc increase to its customer base, driven mainly by the US. To meet this demand the company has doubled its distribution centre in Wisconsin. The remainder of group sales comes from the UK and Ireland.

The company has also impressive growth potential in the US as its present revenues are only 2pc of the largely fragmented US market of $25bn. Another element of growth is its online and offline offerings.

Following the pattern of recent years, online marketing increased at a faster rate than offline and the company is now focused on evolving online techniques to increase sales.

However offline still remains an effective medium and last year its catalogue demand increased by 6pc. Interestingly two thirds of its revenues come from existing customers.

The company's performance over the last five years has been impressive. Sales have doubled to $500m (it reports in $) and operating profits have rocketed 16 times to $33m. Earnings per share have jumped from 14 cents to 81 cents in the same period. In tandem with its stellar sales and profit performance the share price has benefited.

Five years ago it traded at £3 per share today it is £17. It also has a punchy price earnings multiple of 25 and a dividend yield of 1.5.

4 Imprint business model has undoubted charms. Its strong dollar earnings are one. In addition the company is cash generative and can afford the investment in technology and marketing, so essential to the direct marketing model.

With a cash hoard of $20m, no borrowings, low capital demands, low stock levels and strong US growth; the company is under no financial pressure.

Investors seem quite happy that the company has recently sorted its legacy pension problem, reducing its contributions by half, and hope it will provide some scope for further returns to shareholders.

Given that 4 Imprint is achieving its objectives of maximising its revenue growth, stable operating margins and a policy of progressive dividends, its shares could be worth a punt.

Nothing in this section should be taken as a recommendation, either explicit or implicit to buy any of the shares mentioned.

Irish Independent

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