In a Nutshell
*Top 40 distributor 4imprint (asi/197045) increased year-over-year sales to $348.33 million during the first six months of the year.
*Profit before tax inched up 1.5%, but favorable taxation changes helped propel an after-tax profit increase of 14.5%.
The largest distributor by revenue in the promotional products industry announced Tuesday that its worldwide year-over-year sales in the first half of 2018 soared 17% to $348.33 million. 4imprint Group (asi/197045) also revealed that its profit before tax for the six months ended June 30 tallied $15.93 million, a 1.5% uptick from the same period in 2017. Still, U.S. tax reform resulted in after-tax profit of $12.58 million, up 14.5% from the prior year’s nearly $10.99 million. Diluted earnings per share rose from 39 cents last year to 44.81 cents this year.
The disparity in the percentage increases between total revenue and profit before tax is attributable to 4imprint’s initiative focused on building brand awareness, analysts said. “We knew this (initiative) would entail an investment period (and attendant costs), hence the lack of growth in reported profits over the first half, though there wasn't a commensurate impact on earnings because of favourable U.S. tax reforms – 97% of 4imprint’s sales stem from North America,” said Harriet Clarfelt in writing for Investors Chronicle.
4imprint Chairman Paul Moody was buoyant following the first half performance. “We have made excellent progress towards our goal of achieving $1 billion in Group revenue by 2022,” Moody said in a statement. “The initial results from our brand marketing investment have exceeded our expectations. The board expects that the second half of the year will show continued strong revenue growth with underlying operating profit moving ahead of prior year.”
4imprint executed the strong first half even though the implementation of IFRS15 – accounting rules pertaining to how revenue is recognized – necessitated the moving of $4 million in revenue and $1.4 million in operating profit from the year’s first six months to its second half.
Headquartered in Wisconsin with another office in Manchester, U.K., 4imprint said it processed 683,000 orders during H1 2018. That’s up 17% over 2017. Meanwhile, the company acquired 138,000 new customers, which helped drive a 13% increase in new customer orders. Also encouraging for the distributor: existing customer orders jumped 18% over 2017. 4imprint’s cash balance at the end of June 30 was $26.5 million.
For the full year, broker FinnCap forecasts that 4imprint’s adjusted pre-tax profits will tally $44.7 million, with EPS of $1.26, according to Investors Chronicle. That would be up from $42.5 million and $1.08 in 2017.
With reported 2017 North American promotional product revenue of $608 million, 4imprint ranked number one on Counselor’s 2018 list of the largest distributors in the industry.