4Imprint Company Research (FOUR)

4imprint is the leading distributor of promotional product in North America, a very large (c $26bn) and highly fragmented market. The group’s core expertise is in the management of its marketing mix, driving new customer recruitment and stimulating existing customers’ spend. The underlying market has been difficult of late, reflecting geopolitical uncertainty and the lack of business confidence. Despite this, 4imprint has held gross margins at 32% and expects to deliver an operating margin in ‘double figures’ for the full year. Our forecasts are finessed (less than 5%) post the recent trading update, with slightly lower revenue and slightly higher margin. The group is inherently highly cash generative and had cash and short-term deposits of $137m at end October, buoying dividend uplift prospects.