4imprint Group Plc – Operating with Strong Liquidity Position

4imprint Group Plc (LON: FOUR) is a Media Company, which is engaged in the business of promoting products using direct marketing techniques in the region of Ireland, UK and North America.

Financial Highlights (H1 FY2020)


(Source: Company Website)

On 13 August 2020, the Group provided a half-year results for the period ended 27 June 2020, with a highly flexible business model. In the first half of 2020, the Group’s revenue decreased by 34.4% year-on-year to US$265.81 million (H1 FY19: US$405.06 million), reflecting a significant drop in demand. The underlying profit before tax decreased to US$0.25 million in H1 FY20 from almost US$20 million a year before, with reported profit before tax was down by almost 100% year-on-year. However, the order counts have recovered to a current run rate above 50% of the previous year. The Group witnessed a healthy financial position, with a cash balance at the half-year of US$37.49 million and US$20 million of undrawn bank facility. In total, just more than 470,000 orders were processed in H1 FY20, compared to over 778,000 in the corresponding period of the last year. The Board has not proposed an interim dividend for H1 FY20.

Share Price Performance

1-Year Chart as of 14 August 2020, after the market close (Source: Refinitiv, Thomson Reuters)
 

4imprint Group Plc’s shares were closed at GBX 2,285 on 14 August 2020, up by 0.66% against the last day closing price. Stock 52 week High and Low were GBX 3,540.00 and GBX 1,067.31, respectively.From the technical standpoint, shares were trading above the short-term support level of 100-day simple moving average price, which reflects an uptrend in the stock and carrying the potential to move up further.

Key Risks

The COVID-19 crisis has led to severe economic disruption and a massive decrease in overall demand in the promotional products industry.Also, the significant disruption in supply would lead to lost revenue. The uncertainty about the heightened trade tensions between the US and China might also impact the Group’s financial performance.

Valuation Methodology



Conclusion

The Group has reported a 99% decline in underlying profits before tax for the first half of 2020 as the COVID-19 pandemic wiped out demand. The Group remains in a decent financial position with good liquidity. The Board is confident of re?establishing the growth pattern by taking advantage of the opportunity presented by a recovering market. Further, it has continued to acquire new customers, and new-to-existing customer ratio has remained stable over this period. It also witnessed a strong average order value and is well-positioned to take market share as conditions improve.

Considering the uncertainties and market dynamics, we are currently maintaining the “Hold” stance on 4imprint Group at the closing market price of GBX 2,285.00 (as on 14 August 2020) and will recommend fresh buying at the right time.

Card Factory Plc – Delivered Strong Online Growth

Card Factory PLC (LON: CARD) is a FTSE All-Share listed retailing Company, which deals in gift dressings, gifts and greeting cards.

On 29 September 2020, the Group will announce the interim results for the six months to 31 July 2020.

Trading Update

On 28 July 2020, the Group provided an update on the trading performance and financial position. In this trading update, the sales from the stores have exceeded the initial anticipations, with like-for-like sales since 15 June 2020 dropped 21.6% (beating expectations of a 50% slump in the first month of reopening). Online sales from both gettingpersonal.co.uk and cardfactory.co.uk increased from the previous year's sales, with an increase in like-for-like sales of 68.9% (for the current financial year to 19 July 2020).During the period of store closures (from 23 March 2020 to 14 June 2020), the Group had delivered a growth of 120.7% inOnline like-for-like sales. Since stores started to re-open, online sales increased by 60.5% on a like-for-like basis. The greeting cards retailers is now operating 1,015 of the 1,018 stores across the UK, from an initial 89 stores re-opened in England on 15 June 2020. On 19 July 2020, the net debt stood at £144.2 million. It also launched a new website, new cardfactory.co.uk, on 2 July 2020.

Share Price Performance


1-Year Chart as of 14 August 2020, after the market close (Source: Refinitiv, Thomson Reuters)

Card Factory Plc’s shares were closed at GBX 43.05 on 14 August 2020, down by 2.16% against the last day closing price. Stock 52 week High and Low were GBX 179.39 and GBX 22.00, respectively.

From the technical standpoint, shares were trading slightly above the short-term support level of 100-day simple moving average price, which reflects an uptrend in the stock and carrying the potential to move up further.

Key Risks

The lockdown impacted key seasons such as Father’s Day and Easter, while there has been reduced demand for Thank You Teacher, Wedding and Children’s Party ranges. The ongoing Covid-19 pandemic may also impact the business growth trajectory in the near term. Moreover, market volatility can also impose significant liquidity risk.

Valuation Methodology



Conclusion
For the first half of 2021, the aggregate revenue is expected to be around £100 million, which will be down from the previous year (H1 FY20: £195.6 million). This decrease was driven by a 12-week period of store closures. Over the next five years from FY21 to FY25, the average capex will be approximately £16 million per annum, with capex of £12 million in FY25. The Board has shown good trading movement since stores have reopened. Overall, the Group remained highly cash generative, and it has taken significant actions to strengthen financial liquidity.

Considering the uncertainties and market dynamics, we are currently maintaining the “Hold” stance on Card Factory at the closing market price of GBX 43.05 (as on 14 August 2020) and will recommend fresh buying at the right time.
 
*Dividend Yield may vary as per the stock price movement.
*All forecasted figures and Peer/ Industry information have been taken from Refinitiv, Thomson Reuters.

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