Shares I Love: 4imprint

Jonathan Brown, co-manager of Invesco Perpetual UK Smaller Companies Investment Trust (IPU), explains why he invests in promotional materials provider 4imprint (FOUR).

“4imprint sells promotional materials such as pens, bags and clothing which are printed with company logos. Orders are gathered through online and catalogue marketing, and routed to suppliers who print and dispatch the products to customers. Outsourcing the manufacturing means the business has a relatively low capital requirement, meaning it can focus on marketing and customer service.

“Continual reinvestment of revenue in marketing campaigns has enabled 4imprint to generate an enviable long-term growth record while maintaining margins. It continued to invest during the pandemic while competitors were slashing costs. As a result, 4imprint has emerged with a much larger market share. It is the clear market leader in the US but only has a 5.9 per cent market share, which suggests that it can continue to grow for many years.

“4imprint recently reported that the inflationary pressure on the cost of products has receded, and the supply chain issues that it had experienced since the pandemic have been resolved. Additional positives were a healthy increase in new customers and improved retention of customers, which point to a business that is well positioned to continue its growth over the long term.” 

4imprint was Invesco Perpetual UK Smaller Companies Investment Trust’s largest holding at the end of October, accounting for 4.9 per cent of its assets. Overall, the trust had 29.6 per cent of its assets in consumer discretionary companies, its second-largest sector exposure.

Investors Chronicle categorises 4imprint as a 'Hold', because although its revenue and operating profit increased strongly in the first half of this year, the company's managers expect percentage increases in total order activity to moderate in the second half as a result of “more challenging prior year comparatives”.