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4Imprint: Double-Digit Annual Growth Across The Cycle

Mar. 06, 2020 10:05 AM ET4imprint Group plc (FRRFF) Stock13 Comments
Librarian Capital profile picture
Librarian Capital


  • 4Imprint is a U.K.-listed but U.S.-focused distributor of branded promotional merchandise, with a $1bn market capitalization.
  • It has been growing revenues and earnings at double-digits annually, doubling in 5 years, and recently re-accelerating under a new ad strategy.
  • It is #1 in a fragmented market that is growing at 5% p.a., where its less-than-3% market share means it still has plenty of room to grow.
  • Its role as a "many-to-many" platform between customers and suppliers means strong pricing power, low CapEx needs and high Return on Capital.
  • Earnings can double again in 5 years and, at 3,030p, so can the shares. With a 2.2% Dividend Yield, this gives a high teens annual return. Buy.

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4Imprint (OTCPK:FRRFF) has been a longstanding holding in our portfolio since 2015, and the share price has tripled from 1,056p at our initial entry to around 3,000p at present. However, the share price has been volatile in 2020 year-to-date, going as high as 3,500p and as low as 2,720p:

4Imprint Share Prices vs. FTSE All-Share (Last 6 Months)

Source: Yahoo Finance (05-Mar-20).

Following 2019 results this Tuesday, we review our investment case here.

Company Overview

4Imprint is a U.K.-listed but primarily U.S.-focused business, founded in 1985 and now has a $1bn market capitalization.

The company is a distributor of branded promotional merchandise used by businesses in their marketing activities. 97% of its revenues are in North America (the rest in the U.K. and Ireland), and are primarily from Small and Medium Enterprises ("SMEs"). It sells a variety of merchandise including bags, apparel, writing materials, drinkware, stationery, etc.:

4Imprint Direct Marketing Revenue by Product Category

Source: 4Imprint Direct Marketing Presentation (Apr-15).

Approx. two thirds of 4Imprint's revenues are generated by direct marketing, the other one third by long-term contracts. 4Imprint sources the products from suppliers after customer have placed their orders, and facilitates their deliveries to the customers (often direct from suppliers). It has just over 1,000 employees (2018), with 45% of them working in Sales & Marketing.

Strong Double-Digit Growth Record

4Imprint has a strong growth record, having doubled its underlying EPS since 2014, with revenue and EPS each growing by 10% or more each year:

4Imprint EPS & Year-on-Year Growth Rates (2015-19)

Source: 4Imprint company filings.

EPS growth was partly

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Librarian Capital profile picture
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Comments (13)

Librarian Capital profile picture
4Imprint Covid-19 update this morning. Orders +13% y/y 9-Mar YTD but "significant reduction" since, -60% last 3 days. "Will impact revenue & profitability". $51m cash (2019 OpEx ex marketing $67m). Back in 2009, PBT & EPS fell 40% but more than caught up in 2010. Shares 53% off high.
@Librarian Capital are you adding to your position at this price point?
Librarian Capital profile picture

Actually I sold last my position in October:


It's still an attractive stock long-term, but I see better opportunities elsewhere.
Michael Orwin profile picture
"Most orders are directly shipped from suppliers to customers"
So usually, 4Imprint doesn't put the logo on the blank?

I'm wondering how strong the moat is, as i don't see any downside to a supplier also supplying a competitor. Maybe, because each of 4imprint's orders is generally quite small for the customer, many customers just assume it's safest to use the biggest and best known company in the industry.
Librarian Capital profile picture
@Michael Orwin

Correct on the first point - 4Imprint is not doing the manufacturing.

The moat comes from being a platform. There is no claim that the suppliers are exclusive to 4Imprint; not do they have to be. The qualitative reasoning behind this is not unlike any other e-commerce platform like Amazon.
Michael Orwin profile picture
@Librarian Capital

"The moat comes from being a platform. ... The qualitative reasoning behind this is not unlike any other e-commerce platform like Amazon."

I'm not convinced that being a platform necessarily provides a big competitive advantage. I just found Everything Branded, a UK company offering promotional products, that launched in the US (in 2016 I think). From their site "Starting from a one-man operation in 2010 the printing group has grown in to a multi-million-dollar business which operates fully staffed offices in multiple locations.". The US operation now claims "access to over 900,000 products in the American supply chain". I don't think any one-man UK operation would have had much chance competing directly against Amazon. From a google search, "Everything Branded USA has 5 stars! Check out what 4631 people have written so far, and share your own experience.". I suppose it's not that hard to line up enough suppliers to get a wide enough range to get started, while that would be near impossible against Amazon, except for a few giants (e.g. Facebook Marketplace). (BTW I don't know if Everything Branded have the same business model as 4imprint.) If I'm right, then I don't see a strong competitive advantage for 4imprint, but I can't say if or when that would impact the financials. I'm hoping you can show I'm wrong so I can buy "Double-Digit Annual Growth Across The Cycle" with a moat, at a reasonable valuation.

Thanks for replying, and for writing a piece that got me thinking.
Librarian Capital profile picture
@Michael Orwin

Thank you. The Everything Branded example would be in line with what I wrote about how there are "approx. 23,000 distributors in the U.S., of which more than 90% have less than $2.5m in sales".

Because 4Imprint's market share is still relatively small (less than 3%), the success of smaller players does not mean they are winning against 4Imprint - it's more likely that the smaller players are taking share off each other. 4Imprint itself is still growing consistently and reporting good retention numbers, as described in the article.

There are plenty of industries where the market leaders have real competitive advantages that allow them to consolidate the market slowly but surely, but where for now it is still easy for people to found new businesses. The difference is while everyone can operate in the sector, only the scaled players will have good margins.

4Imprint's scale (now approaching $900m in sales) means it's probably not unreasonable to think it is 10% more efficient than a small player like Everything Branded. Since even 4Imprint is producing only a 6-7% margin, this means Everything Branded will not be able to make a profit on the same pricing. They will have to charge less competitive prices.

As mentioned in the article I don't think customers are that price-driven, but that's where things like brand awareness, product ranges and existing customer relationships come in - these are things that 4Imprint have a real, tangible advantage in.

A better known example of this dynamic would be McDonald's and Quick Service Restaurants. It's relatively easy to start your own burger place with a limited menu, but that has not stopped MCD from achieving good growth (including like-for-like growth) and good margins.
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