Companies that want to promote themselves, including by selling or giving away pens, key rings or shoulder bags at conferences and exhibitions, may well turn to 4imprint as a supplier: particularly if they’re based in America.
This FTSE 250 company provides all manner of marketing materials, from branded T-shirts and golf umbrellas to mugs, notebooks and balloons; anything in fact that might raise the profile of the company whose name is on the proverbial tin. 4imprint was founded in Indiana in 1985 as Nelson Marketing and although it is listed on the London Stock Exchange, about 97 per cent of its business is in the US. It also operates in Canada, the UK and Ireland.
Its main aim is to grow organically as opposed to through acquisitions and in the six months to the end of June it made a pre-tax profit of $19.45 million on turnover of $405.1 million.
4imprint doesn’t make the goods it supplies, but instead prides itself on being able to offer customers an extremely wide array of promotional materials, more than 40,000 in fact, at attractive prices and delivered in good time, particularly useful for a corporate event.
Being in the business of promoting companies naturally means that it is exposed to the cycles of commercial life, although its recent growth has been impressive despite worries about a looming global slowdown.
Its revenues for the first half were 16 per cent up on the previous year and its growth rate suggests it should comfortably be able to meet its target of $1 billion turnover by 2022. As part of its expansion drive 4imprint is investing heavily in marketing and is ploughing about $5 million into expanding its delivery centre in Oshkosh, Wisconsin. It is also exploring options for further distribution centres in the US.
At the moment, everything about this company seems to be motoring. It is growing more rapidly than the wider promotional market in North America, and doing so by taking share from rivals. It has become the clear market leader, ahead of competitors including Staples, Halo and Cimpress.
The highly cash-generative nature of its business means there is scope for special returns to shareholders, which it most recently made last year. However, there are several potential setbacks to consider. The nature of its business model, buying products from manufacturers and selling them to its customers, means that its operating profit margin is thin, 4.8 per cent at the half-year.
The level of its exposure to the US means that it is inevitably at risk if the economy starts to go into a downturn, although it does have the flexibility to cut back on its marketing and other expenses if it finds that its belt has to be tightened.
Furthermore, about 25 per cent of the products that 4imprint distributes are subject to the tariffs that have been introduced as part of the escalating trade war between Washington and Beijing.
Although the group has so far said that the impact of the spat has been negligible, any increases in prices could also have the effect of slowing down sales momentum. Such is the range of its goods that its customers could also choose to trade down, of course.
None of this seems to have got in the way of the shares, however, up more than 56 per cent in the past two years, propelled forward by the pace of 4imprint’s growth. They carry a premium rating of about 24.4 times Liberum’s forecast earnings for a dividend yield of a satisfactory 2.2 per cent.
Up 30p, or 1 per cent, to £29.50 yesterday, the shares look like quite a find.
ADVICE Buy on weakness
WHY Market leader and growing in the US, with the added prospect of special dividend payments
Biffa
Biffa and the stock market have not found themselves the best of friends over the years. Founded by Richard Henry Biffa in Wembley, London in 1912, the waste management and recycling company was bought in 1991 by Severn Trent, which floated it to considerable fanfare in 2006, only for the company to be taken private two years later by the private equity investors Avenue Capital, Angelo Gordon and Bain Capital.
Back it came to the market in 2016, but Biffa’s owners had to cut the price they were asking from an initial range of between 220p and 270p to 180p, amid resistance among investors.
The shares, though volatile, have traded higher since then. They were off 2p yesterday at 239½p, giving the group a market value of £599 million.
The modern Biffa operates in every conceivable area of the world of waste. More than half of its roughly £1.1 billion in annual revenue comes from removing and processing waste for industry and commerce, including Greggs, the baker, and Mitchells & Butlers, the operator of restaurants and pubs. To a far lesser extent, it carries out waste removal for local authorities.
Two other growing parts of the business are waste recycling and treatment and the conversion of what is effectively unrecyclable rubbish into energy, in the case of the latter also involving a joint venture with Covanta, a peer, on two conversion plants. Biffa is also increasingly at the centre of plastics recycling and is a leading consolidator in a fragmented nationwide waste-management market.
Trading is mixed. Biffa’s industrial and commercial unit is growing, boosted by customer wins and small acquisitions, but its municipal arm has been underperforming, mainly due to a lost contract, although recently trading has stabilised.
In recycling, profits were held back last year because of China’s ban on imported recycling paper, which hit prices in Europe, and the energy business was flat due to lower levels of gas gleaned from landfill sites.
There is potential for it to grow, with new private sector contracts, acquisitions and in plastics recycling. The shares trade for 10.9 times Numis’s forecast earnings for a yield of 3.2 per cent. Hold for better times.
ADVICE Hold
WHY Plenty of growth potential but shares are volatile
