4imprint hikes up dividend after stellar six months

The chair of 4imprint (FOUR) said the FTSE 250 group had enjoyed a “very satisfactory” post-pandemic rebound. This rather undersells the strength of the merchandise company’s performance over the last couple of years, which has been dominated by surging sales, double-digit profit growth and strong returns. 

The first half of 2023 was no different. Revenue was up 23 per cent at $636mn (£499mn), while operating profit shot up by 45 per cent to $63.8mn on the back of higher margins. Management attributed this to “record levels of demand”, changes in product mix, less friction in the supply chain and good returns on marketing spend.

Over 1mn orders were received in the period, compared with 886,000 in the first half of 2022 and 778,000 in the first half of 2019. Meanwhile, 158,000 new customers were acquired. 4imprint flagged that the numbers should be read in the context of weak comparatives from the first quarter of 2022. However, by the end of June 2023 the year-to-date order count was still 18 per cent above the prior year.

Another major bull point is the fact that 4imprint is debt free and very cash generative: underlying operating cash flow conversion sat at 152 per cent in the period. This has given management the confidence to increase the dividend by 63 per cent year on year to 65ȼ. This follows a 200ȼ special dividend last year. 

Can 4imprint continue to defy economic gravity? A key driver of profits in recent years has been more effective advertising. Revenue per marketing dollar is still moving in the right direction, increasing from $8.19 in 2022 to $8.22 today. However, the rate of improvement does seem to be slowing. Meanwhile, management expects percentage increases in total order activity to moderate in the second half as a result of “more challenging prior year comparatives”.

We have underestimated 4imprint in the past, and its balance sheet is in excellent shape, but we stick with hold for now.

Last IC View: Hold, 4,555p, 15 Mar 2023