4Imprint Group Plc (LON:FOUR) interim results show that its recently-adopted strategy of additional investment in brand awareness is recruiting new customers even better than initial trials had indicated. The investment is holding back FY18e operating margin (already built into forecasts), but underpins our market-beating growth expectations. The ambition to reach US$1bn of revenue by FY22 looks increasingly achievable. Our FY18e and FY19e revenue numbers rise by 2%, with consequent uplift to operating profit. A lower anticipated tax charge further lifts projected EPS. The group is highly cash generative, funding growth and a progressive dividend.
Traditional media campaign boost
Having built reach online and via catalogues, with marketing spend directed by the use of data and predicated on product, the use of traditional media (TV and radio) to boost brand awareness announced with the finals in March initially looked incongruous. This campaign ($7m of additional spend) has reached a broader audience, more quickly and more efficiently, than expected. 138k new customers were recruited in H118 (H117: 125k), placing 13% more orders year-on-year. Orders from existing customers were up by 18%, with an average order size across the group of around $510. Fulfilling these additional orders led to some short-term operational inefficiency, with a slight increase in cost of sales, but we anticipate that this will be mitigated as lessons learned are put into practice.
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