Group plc
2019 ANNUAL REPORT AND ACCOUNTS
D E L I V E R I N G
PROFITABLE
GROWTH
GROWTH W E A R E T H E
LEADING
DIRECT MARKETER
O F P R O M O T I O N A L P R O D U C T S I N T H E U S A ,
C A N A DA , T H E U K A N D I R E L A N D
WHAT WE DO
Most of our revenue is generated in North America, serviced from
the principal office in Oshkosh, Wisconsin. Customers in the UK and
Irish markets are serviced from an office in Manchester, UK.
Operations are focused around a highly developed direct marketing
business model which provides millions of potential customers with
access to tens of thousands of customised products.
Organic growth is delivered by using a wide range of data-driven, offline
and online direct marketing techniques to capture market share in the
large and fragmented promotional product markets that we serve.
OVERVIEW
FINANCIAL STATEMENTS
01 Highlights
02 4imprint at a Glance
04 Chairman’s Statement
05 Purpose, Principles & Values
STRATEGIC REPORT
06 Chief Executive’s Review
08 Strategic Objectives
12 Market Opportunity
16 Business Model
18 Financial Review
22 Principal Risks & Uncertainties
27 Stakeholder Engagement
30 Responsibility
GOVERNANCE
Introduction to Governance
37
38 Board of Directors
40 Statement on Corporate Governance
44 Nomination Committee Report
46 Audit Committee Report
49 Annual Statement by the Chairman of
the Remuneration Committee
51 Remuneration Report
56 Directors’ Report
58 Statement of Directors’ Responsibilities
Independent Auditor’s Report
59
65 Group Income Statement
66 Group Statement of Comprehensive
Income
67 Group Balance Sheet
68 Group Statement of Changes in
Shareholders’ Equity
69 Group Cash Flow Statement
70 Notes to the Group Financial
Statements
98 Company Balance Sheet
99 Statement of Changes in Company
Shareholders’ Equity
100 Company Cash Flow Statement
101 Notes to the Company’s Financial
Statements
ADDITIONAL INFORMATION
109 Alternative Performance Measures
110 Five Year Financial Record
111 Registered Office and
Company Advisers
LEADING 01
4imprint Group plc Annual Report 2019
Highlights
OPERATIONAL HIGHLIGHTS
O R G A N I C R E V E N U E
G R O W T H I N 2 0 1 9
I N V E S T M E N T I N
M A R K E T I N G I N T H E Y E A R
Revenue increase of
$122.4m (+17%)
Marketing spend
$154.3m (+18%)
1,587,000 total orders
Evolving marketing
C A P I TA L I N V E S T M E N T
P E N S I O N C O M M I T M E N T
$5m capital
investment in Oshkosh
distribution centre
completed in 2019
$10m ‘lump sum’
legacy pension
contribution in
May 2020
processed (+14%)
297,000 new
customers acquired in
the year
Customer retention
remains healthy
mix; brand component
increasing as planned
2020 capital plan
includes $4.7m in
apparel decoration
equipment
FINANCIAL HIGHLIGHTS
REVENUE
UNDERLYING* PROFIT BEFORE TAX
PROFIT BEFORE TAX
$860.84m
+17%
$54.68m
+20%
2018: $738.42m
2018: $45.59m
$53.99m
+22%
2018: $44.15m
CASH
UNDERLYING* BASIC EPS
(CENTS)
BASIC EPS
(CENTS)
$41.14m
+50%
2018: $27.48m
154.41¢
+19%
2018: 129.77¢
152.42¢
+21%
2018: 125.61¢
PROPOSED TOTAL DIVIDEND PER SHARE
(CENTS)
PROPOSED TOTAL DIVIDEND PER SHARE
(PENCE)
* Underlying is before defined benefit pension
charges and exceptional items.
84.00¢
+20%
2018: 70.00¢
66.68p
+25%
2018: 53.15p
Find out more online:
investors.4imprint.com
CORPORATEGOVERNANCEFINANCIALSTATEMENTSADDITIONAL INFORMATIONOVERVIEWSTRATEGIC REPORT
02
4imprint Group plc Annual Report 2019
4imprint at a Glance
F O C U S E D O N
DELIVERI NG
GROWTH
We are the leading direct marketer of promotional
products in North America, the UK and Ireland.
We have consistently delivered market-beating
organic revenue growth.
WHAT WE DO
We make it easy for our customers to promote their
service, product or event. Our customers know that
promotional products from 4imprint’s extensive range
along with personal, expert service on every order will
ensure that their name – and brand – looks great in
front of their target audience.
We operate the same business model in two primary geographical markets:
WHERE WE DO IT
NORTH AMERICA
Most of our revenue
is generated in
North America, serviced
from the operation in
Oshkosh, Wisconsin
REVENUE
$839.28m
97%
EMPLOYEES
1,166
December 2019
UK AND IRELAND
Customers in the UK and
Irish markets are serviced
from an office in
Manchester, UK
REVENUE
$21.56m
3%
EMPLOYEES
43
December 2019
DELIVERINGDELIVERING
03
4imprint Group plc Annual Report 2019
DELIVERI NG
HOW WE DO IT
Our business operations are focused around a highly
developed direct marketing business model.
Reaching our customers
Innovative marketing allows us to
introduce millions of potential customers
to tens of thousands of customised
products.
Looking after our customers
We have an exceptional culture revolving
around the delivery of remarkable
customer service, and an industry-leading
customer guarantee.
Our product range
Our merchandisers work closely with our
suppliers to continuously update and
curate our extensive product range.
Application of technology
Our appetite for technology delivers an
efficient order processing platform and
sophisticated data-driven analytics.
OUR OBJECTIVE
Our aim is to drive further organic revenue growth by
expanding our market leadership and share in the
fragmented markets in which we operate. Our target
is to achieve $1bn in Group revenue by 2022.
FIVE YEAR GROWTH
REVENUE ($m)
UNDERLYING PROFIT BEFORE TAX ($m)
UNDERLYING EARNINGS PER SHARE (¢)
$860.84m
+17%
$54.68m
+20%
154.41¢
+19%
19
18
17
16
15
0.00
860.84
738.42
627.52
19
18
17
16
15
0.00
860.84
558.22
497.22
54.68
45.59
41.91
19
18
17
16
15
0.00
54.68
37.92
33.25
154.41
129.77
106.74
98.03
87.22
154.41
DELIVERINGCORPORATEGOVERNANCEFINANCIALSTATEMENTSADDITIONAL INFORMATIONOVERVIEWSTRATEGIC REPORTDELIVERING 04
4imprint Group plc Annual Report 2019
Chairman’s Statement
F O C U S E D O N
ACHIEVI NG
OUR TARGETS
PAUL MOODY
2019 was another successful year for 4imprint. The Board
has a clear strategy that delivered attractive revenue
growth and met profitability targets in the year whilst
making significant investments in the Group’s future.
FINANCIAL PERFORMANCE
Group revenue for 2019 was $860.8m, an
increase of $122.4m (17%) over 2018. All of
the revenue growth was organic, reflecting
increasing share in a large but still very
fragmented market. Underlying profit before
tax was $54.7m, 20% ahead of the prior year.
Profit before tax was $54.0m, an increase of
22% over 2018, and profit after tax
improved over prior year by 21%. Basic
earnings per share also rose 21% to 152.42c.
The 4imprint business model remains highly
cash generative. The 2019 year end cash
balance of $41.1m (2018: $27.5m) leaves the
Group in a strong financial position.
The Company became a constituent of the
FTSE 250 Index during the year.
STRATEGIC PROGRESS
The Board is delighted with the Group’s
progress over the past year. At the annual
strategic review, which took place in Oshkosh
in October 2019, the Board discussed and
reaffirmed the Group’s strategic objectives,
most specifically in respect of the expansion
and development of the brand component of
the marketing mix.
The Group has achieved a compound
average revenue growth rate of 16% over
the last five years. Investment across the
business has supported this growth, notably
in embroidery production capacity and in
operating facilities. The latest phase was
completed in August 2019 with the $5m
expansion of the Oshkosh distribution
centre, completed on time and within
budget.
BOARD AND TEAM MEMBERS
We were pleased to welcome Tina Southall
to the Board as a Non-Executive Director in
May 2019. Tina’s experience and insight
have already proved to be valuable,
particularly in her role as designated NED for
engagement with our team members.
Andrew Scull stepped down from the Board
at the end of 2019. The Board wishes to
thank Andrew for the valuable contribution
he has made to the development of the
Group over his 15-year tenure.
Unquestionably, the most important driver
of 4imprint’s success is our people. Our
highly professional team members go above
and beyond every day in order to deliver the
exacting service levels upon which our
customers rely.
The Board expresses its thanks to all of our
team members for their contribution to the
Group’s success in 2019.
DIVIDEND
At the half year the Board declared an
interim dividend per share of 25.00c,
representing an increase of 20% over 2018.
In view of the Group’s performance in the
second half of the year and in line with our
balance sheet funding and capital allocation
guidelines, the Board is pleased to
recommend a final dividend per share of
59.00c, an increase of 20%, giving a total
paid and proposed 2019 regular dividend of
84.00c, up 20% over prior year.
PENSION UPDATE
Our capital allocation framework sets out
our commitment to funding our residual
legacy defined benefit pension plan (the
“Plan”). Subsequent to the triennial
revaluation of the Plan in September 2019,
a new, accelerated deficit recovery schedule
has been agreed with the Plan Trustee,
including a ‘lump sum’ contribution of
around $10m to be paid in May 2020.
This will serve both (i) to strengthen the
current Plan funding level, and (ii) to
progress our pension de-risking initiatives by
positioning the Plan for eventual buy-out
within a five-year timeframe.
ACHIEVINGACHIEVING 05
4imprint Group plc Annual Report 2019
Purpose, Principles & Values
PURPOSE
Our purpose is to harness the enduring
appeal of promotional products to help
our customers build their brand, promote
their initiatives, achieve their marketing
goals and make lasting connections with
those who are important to them. With
every order we are trusted to carry a
distinctive logo or message on our
products, so we understand clearly that
our primary aim is to be certain to make
our customers and their organisations
shine.
We deliver on this trust by nurturing an
authentic environment where our people
are valued and empowered to do their
best work. By placing a particular
emphasis on personal fulfilment, we
believe that we can attract and retain
like-minded teammates who are
committed to providing the truly
remarkable service that our customers
require and deserve. Our people go
above and beyond to look after our
customers, to help each other, to ensure
productive outcomes for our supplier
partners, and to have concern for and
give back to their communities.
We consider that as long as we prioritise
these mutually beneficial outcomes, the
long-term interests of the Company, our
Shareholders and our wider stakeholders
will naturally be protected.
PRINCIPLES & VALUES
We believe that a strong and principled
approach to doing business is
fundamentally important to our present
and future success. Our culture
encourages responsible practice at all
levels of the organisation and presents
clear guiding principles that drive ethical
interactions with, and outcomes for, our
key stakeholders.
Our guiding principles are further
expressed via “The Golden Rule” –
treat others as you would wish to be
treated yourself. This mindset is evident
across the business: in our customer
service proposition and guarantees; in
our product sourcing initiatives; in the
way that our team members interact with
our customers, our supplier partners and
with each other; in the way that we
engage in our communities; and in our
respect for the environment.
Our values are firmly grounded in the
broad principles set out in our purpose
and are more specifically articulated, on a
daily basis, by reference to the 4imprint
Compass.
ACHIEVI NG
CORONAVIRUS UPDATE
We are closely monitoring the situation with
regard to COVID-19, the novel coronavirus.
Impact on the business has so far been
minimal, reflecting the timing of the
inventory cycle of our domestic suppliers.
However, the situation is very fluid and if
production restrictions in China persist, the
potential for disruption of our supply chain
increases. Should the virus become a global
pandemic, the potential effect on the
business would expand beyond the supply
chain. More detail is provided in the Chief
Executive’s Review on page 7.
OUTLOOK
Trading results in the first two months of
2020 have been in line with the Board’s
expectations. We have a clear strategy and a
focused business model geared towards a
market opportunity that remains highly
attractive. We will continue to invest in the
business to underpin further organic revenue
growth towards and beyond our target of
$1bn by 2022. Notwithstanding the fluid
situation regarding COVID-19, the outlook
for 4imprint is positive.
PAUL MOODY
CHAIRMAN
3 March 2020
ACHIEVINGCORPORATEGOVERNANCEFINANCIALSTATEMENTSADDITIONAL INFORMATIONOVERVIEWSTRATEGIC REPORTACHIEVING 06
4imprint Group plc Annual Report 2019
Chief Executive’s Review
F O C U S E D O N
DELIVER ING
OUR STRATEGY
KEVIN LYONS-TARR
Two years ago, we announced our intention to evolve our strategy to include a new
brand element to our marketing mix. In conjunction with this initiative, we set a target of
reaching $1bn in Group revenue by 2022. The Group’s trading momentum in 2019
continued to demonstrate the benefit of this strategic evolution, leaving us in a good
position to achieve our stated revenue goal ahead of schedule.
Revenue
North America
UK and Ireland
Total
Underlying* operating profit
Direct Marketing operations
Head office
Share option related charges
Total
Operating profit
Underlying profit is included because the Directors consider this gives a measure of the
underlying performance of the business.
* Underlying is before defined benefit pension charges and exceptional items.
2019
$m
2018
$m
839.28
21.56
714.55
23.87
860.84
738.42
+17%
–10%
+17%
FINANCIAL HIGHLIGHTS
The Group produced excellent financial
results in 2019. Group revenue of $860.8m
was up 17% over 2018, underlying operating
profit of $53.9m was 19% higher than prior
year, and operating profit was up 21%.
2019
$m
58.20
(3.32)
(0.95)
53.93
2018
$m
49.63
(3.45)
(0.82)
45.36
+17%
–4%
+16%
+19%
53.62
44.32
+21%
Revenue in North America was up 17%,
an increase of $124.7m over prior year.
4imprint remains the largest distributor of
promotional products in North America.
Revenue in the UK, which accounted for
2.5% of Group revenue, was less robust as
the business faced tougher trading
conditions. Although order intake was
essentially flat year-over-year, revenue
decreased by 6% in local currency, and by
10% in the Group’s reporting currency.
Several factors contributed to the Group’s
operating profit performance in 2019. The
aggregate gross margin percentage was
stable through the year and for the full year
remained flat with 2018. Marketing
expenses rose, as expected, by 18% over
2018 and slightly above the year-on-year
revenue increase of 17%. Selling expenses
were up 11% over 2018. Overheads, head
office costs and share option costs rose
in aggregate by 14% over prior year.
DELIVERINGDELIVERING 07
4imprint Group plc Annual Report 2019
DELIVER ING
These factors combined to generate an
improvement in overall underlying operating
profit margin to 6.27% (2018: 6.14%).
OPERATIONAL OVERVIEW
297,000 new customers were acquired
during 2019. This resulted in orders from
new customers rising by 9% over prior year.
Orders from existing customers rose by 17%
compared to 2018, helped by the powerful
dynamic of incremental improvement in
retention rates combined with a consistently
expanding customer file. In total, our team
members processed 1,587,000 individually
customised orders.
We have always had an operational mantra
of ‘test, read, react’ in respect of the
deployment of our marketing dollars. This
approach continued to serve us well in 2019
as we carefully reshaped the overall
marketing portfolio. The brand component
(primarily TV but also including a radio
element) was expanded during the year in
response to consistently encouraging
performance metrics. To accommodate this,
other parts of the budget such as search and
print were managed accordingly. Revenue
per marketing dollar was $5.58 in 2019
compared to $5.63 in 2018. This result is
directly in line with our expectations,
particularly given a year-on-year increase in
the overall marketing budget of $23.1m.
Our North American operations are served
by centralised office and warehouse facilities
located in Oshkosh, Wisconsin. In the
context of our consistent organic revenue
growth in recent years, in 2019 we added a
further 85,000 sq. ft. to our distribution
centre, increasing the total footprint of that
facility to over 300,000 sq. ft. The project
was completed on time, within the budget
of $5m and is now fully operational. Our
capital expenditure plan for 2020 includes
$4.7m to increase our embroidery/print
capacity for the rapidly growing apparel
category. In addition, we plan to invest
$3.2m in infrastructure and equipment to
support growth at our Oshkosh office and
distribution facilities. As we noted at our
interim results, the current Oshkosh office
facility is approaching capacity. We are in the
process of evaluating our options with a
view to securing appropriate additional or
replacement office space.
We are very pleased, for the twelfth
consecutive year, to have been named one
of the Great Place To Work: Best Workplaces
– Small & Medium Businesses. This reflects
the strong and unique workplace culture
that sets 4imprint apart.
CORONAVIRUS (COVID-19) UPDATE
We are closely monitoring the situation with
regard to COVID-19, the novel coronavirus.
Our deepest concern is with the people who
have been directly affected by the virus,
many of whom are longstanding and highly
valued partners in our supply chain.
Approximately 60% of the blank stock for
the products that we sell originates in China.
These blank products are imported in bulk
by our domestic suppliers who keep them in
their local inventory, eventually to be
imprinted with a logo and shipped to our
customers as orders are placed. The fact that
the outbreak occurred around the Lunar
New Year means that most of our domestic
suppliers were at peak inventory levels when
the outbreak began – they typically place
orders in preparation for the first half of the
year to be delivered, or to be in transit,
before the Lunar New Year begins. As a
result, to date there has been almost no
impact on 4imprint from COVID-19.
However, the situation is still very fluid. The
Chinese manufacturers who effectively
‘supply our suppliers’ are spread throughout
China, typically specialising in a product
category. Each of these suppliers is different
based on their geographical location,
workforce location and requirements, transit
restrictions, access to raw materials for the
specific product they produce and other
factors. The level of any disruption for
4imprint will be closely linked to how long
factories are delayed in resuming
production. The reduced capacity seen in
February, and even into March, is unlikely to
cause major disruption in the short-term
simply due to the inventory cycle of our
domestic suppliers. However, the longer that
production restrictions persist, it becomes
more likely that the inventory held by our
domestic suppliers will be depleted and
some element of disruption to the supply
chain becomes more likely.
Clearly, if the virus were to become a global
pandemic, other factors come into play and
the potential for disruption to our business
expands beyond the supply chain.
We are actively working with all parties in
the supply chain to plan for, and where
possible mitigate, adverse supply effects at
all levels. We are also monitoring closely the
developing situation and preparing to
address other potential impacts caused by
the spread of the virus globally.
LOOKING AHEAD
We remain confident in our strategy, our
business model and the market opportunity.
Our entire team is working hard to achieve
and surpass our $1bn revenue target and we
look forward to setting new strategic goals
at that point.
DELIVERINGSTRATEGIC REPORTCORPORATEGOVERNANCEOVERVIEWFINANCIALSTATEMENTSADDITIONAL INFORMATIONDELIVERING 08
4imprint Group plc Annual Report 2019
Strategic Objectives
OBJECTIVES
Market leadership driving
organic revenue growth
To be the leading direct marketer of promotional
products in the markets in which we operate
To establish 4imprint as the recognised brand for
promotional products within our target audience
To expand share in fragmented markets through
To achieve $1bn in Group revenue by 2022
investment in organic growth
KEY ENABLERS
RISKS
• Competitive advantage through continuous development
of and sustained investment in:
— Marketing
— People
— Technology
• Differentiation through operational excellence:
— Customer service
— Merchandising and supply
— Efficient processing of individually customised, time-sensitive
orders at scale
• Macroeconomic conditions
• Competition
• Business facility disruption
• Disruption to product supply chain or delivery service
• Disturbance in established marketing techniques
• Reliance on key personnel
•
IT failure/interruption
• Failure to adapt to new technology
• Cyber threats
KPIs
REVENUE GROWTH ($m)
NUMBER OF ORDERS RECEIVED (000s)
24-MONTH CUSTOMER RETENTION (%)
$860.84m +17%
1,587 +14%
43.4%
19
18
17
16
15
0.00
860.84
738.42
627.52
558.22
497.22
860.84
Organic revenue growth is the cornerstone
of our strategic framework. Year-over-year
revenue growth gives the clearest measure
of progress towards our target of $1bn in
Group revenue by 2022.
19
18
17
16
15
0
457
420
369
351
332
1,130
969
19
18
17
16
15
816
703
613
New
Existing
1587
0.0
43.4
42.6
42.5
42.9
42.9
43.4
Orders received statistics are collated on a
daily, weekly and monthly basis to evaluate
performance against the targets in our
operational plan for both new and existing
customers. Analysis of order patterns offers
a clear and immediate measure of
operational performance, particularly in a
business characterised by relatively stable
average order size and gross margins.
The 24-month retention rate offers visibility
as to the broad stability and strength of a
growing customer file. It will vary year-to-
year to some degree based on a variety of
factors (e.g. timing of when a new customer
is acquired in their first year, and timing of
retention marketing), and as such
performance should be viewed relative to an
acceptable bandwidth.
For more information See pages 22-26 09
4imprint Group plc Annual Report 2019
OBJECTIVES
Cash generation
and profitability
To deliver reliable and increasing free cash flow over
the medium to longer term
To balance short-term profitability with marketing
investment opportunities leading to sustainable
long-term free cash flow and EPS growth
KEY ENABLERS
RISKS
• Reinvestment of cash generated from operations into
organic growth initiatives based on multi-year revenue/
return projections
• Disciplined approach to investment:
— Marketing investment based on our assessment of both
prevailing market conditions and a combination of current and
future customer-centric metrics, including prospecting yield
curves, retention patterns and lifetime revenue profiles
— Capital investment evaluated based on cash payback and
discounted cash flow parameters
• Direct marketing ‘drop-ship’ business model, facilitating
efficient working capital management
• Low capital intensity of the business
• Macroeconomic conditions
• Competition
• Currency exchange
• Business facility disruption
• Disruption to product supply chain or delivery service
• Disturbance in established marketing techniques
• Reliance on key personnel
•
IT failure/interruption
• Cyber threats
KPIs
REVENUE PER MARKETING DOLLAR ($)
UNDERLYING OPERATING MARGIN (%)
CASH CONVERSION (%)
$5.58
6.27%
96%
19
18
17
16
15
0.00
5.58
5.63
5.67
5.77
5.92
19
18
17
16
15
5.92
0.0
6.27
6.14
6.70
6.80
6.68
6.8
19
18
17
16
15
0
96
94
101
115
115
60
Revenue per marketing dollar provides a
measure of the productivity of our marketing
investment. We measure performance
relative to in-year targets as opposed to
historical trend in accordance with our
strategic objectives for organic growth,
profitability and cash generation. A gentle
reduction in this KPI is to be expected and is
in keeping with the nature of marketing
yield curves.
This KPI shows the profitability of the
Group’s trading operations. In recent years
our strategy has been to maintain a broadly
constant operating margin. It is possible,
however, that specific immediate marketing
opportunities may arise, impacting operating
margin in the near term but strengthening
our position in the market with recovery in
operating margin in subsequent years.
Cash conversion measures the efficiency of
the 4imprint business model in the
conversion of operating profits into
underlying operating cash flow. A high
percentage reflects good working capital
management and disciplined capital
investment. The 2019 numbers include the
$5m capital investment in the Oshkosh
Distribution Centre.
STRATEGIC REPORTCORPORATEGOVERNANCEOVERVIEWFINANCIALSTATEMENTSADDITIONAL INFORMATIONFor more information See pages 22-26 10
4imprint Group plc Annual Report 2019
Strategic Objectives continued
OBJECTIVES
Effective
capital structure
To maintain a stable and secure balance sheet
aligned with the Group’s growth objectives
To maintain commitment to making regular dividend
payments through an economic downturn
To have the flexibility to be able to continue investing
To meet pension contributions as they become due
in the business through different economic cycles
To enable the Group to act swiftly when investment
opportunities arise
KEY ENABLERS
RISKS
• Conservative balance sheet funding approach
• Capital allocation priorities in line with strategic objectives
• Macroeconomic conditions
• Currency exchange
• Ultimately all other risks noted in previous objectives
relating to revenue, profitability and cash generation
KPIs
CASH BALANCE ($m)
$41.14m
19
18
17
16
15
0.00
41.14
27.48
30.77
21.68
18.38
41.14
RETURN ON AVERAGE CAPITAL EMPLOYED
(“ROACE”) (%)
PENSION DEFICIT/MARKET
CAPITALISATION (%)
87%
19
18
17
16
15
0
1.0%
1.0
87
84
85
82
82
19
18
17
16
15
87
0.0
2.3
2.5
3.1
4.4
4.4
Our balance sheet funding guidelines call for
the business to aim for a target cash balance
at the end of each financial year. The net
cash balance KPI shows the Group’s
performance in managing its cash resources
relative to its capital allocation priorities. The
2019 closing net cash balance remains
healthy.
This provides a measure of the Group’s
efficiency in the use of its capital resources.
We aim to maintain or improve this KPI via
increased profitability, strong working capital
management and productive capital
investment, along with disciplined adherence
to clear capital allocation principles. Our
definition of ROACE excludes the net
pension deficit from the calculation.
This KPI quantifies the substantial efforts
made so far in de-risking the Group’s legacy
defined benefit pension liability and will
chart future progress in moving towards our
eventual aim of full buy-out.
For more information See pages 22-26 11
4imprint Group plc Annual Report 2019
OBJECTIVES
Shareholder
value
To deliver increasing Shareholder value through
execution of the Group’s growth strategy
KEY ENABLERS
RISKS
• Financial discipline in evaluation of investment
opportunities
• Clear priorities in capital allocation:
— Organic growth initiatives
— Regular dividend payments
— Residual legacy pension funding
— M&A opportunities
— Other Shareholder distributions
• Macroeconomic conditions
• Currency exchange
• Reliance on key personnel
• Cyber threats
• Ultimately all other risks noted in previous objectives
relating to revenue, profitability and cash generation
KPIs
UNDERLYING EARNINGS PER SHARE (¢)
DIVIDENDS PER SHARE (¢)
154.41¢
Regular – 84.00¢
TOTAL SHAREHOLDER RETURN (“TSR”)
(% IN YEAR)
61%
19
18
17
16
15
0.00
154.41
129.77
106.74
98.03
87.22
19
18
17
16
15
84.00
00
19
70.00
60.00
18
2
58.10
60.00
52.50
00
38.89
00
10
17
16
15
0
154.41
0.0
Regular
Supplementary
118.1
61
61
61
43
Underlying earnings per share growth over
time gives a clear indication of the health of
the business and is a key component in the
delivery of Shareholder value. The 19%
increase in EPS in 2019 is primarily driven by
the year’s strong trading performance.
The DPS number provides a tangible
measure of the delivery of Shareholder
value. The 2019 regular dividend is in line
with the Board’s commitment to increasing
the dividend payment broadly in line with
EPS growth.
Our aim is to deliver consistent performance
and attractive TSR. This KPI reflects the
strong performance of 4imprint shares in
2019.
STRATEGIC REPORTCORPORATEGOVERNANCEOVERVIEWFINANCIALSTATEMENTSADDITIONAL INFORMATIONFor more information See pages 22-26 12
4imprint Group plc Annual Report 2019
Market Opportunity
Market leadership driving organic revenue growth is the
cornerstone of our strategic framework. We aim to establish
4imprint as the recognised brand for promotional products,
driving our continued ability to grow at a rate significantly
higher than the overall growth rate of the industry.
In 2019, 4imprint retained its position as the largest distributor
in the US promotional products industry according to the rankings of both
PPAI and ASI, the leading industry trade bodies.
Our product range comprises tens of
thousands of individual products ranging
from basic giveaways such as pens, bags and
drinkware to higher value items such as
embroidered apparel, business gifts and full
size trade show displays, enabling our
customers to find the perfect product for
their promotion and their brand. This range
is carefully curated by an experienced
merchandising team.
WHERE WE DO BUSINESS
OUR PRODUCTS
We operate in two primary geographical
markets:
• North America: The US and Canadian
promotional products markets together
are estimated to total around $27.3bn in
annual revenue. We serve this market
from a centralised base in Oshkosh,
Wisconsin.
• UK and Ireland: The UK and Irish
promotional products market size is
estimated at around $1.5bn per year. Our
office serving these markets is in
Manchester, UK.
The marketplace for promotional products is
fragmented. Our largest market, the USA, is
served by an estimated 24,000 distributors,
of whom more than 20,500 have annual
revenue of less than $2.5m. The distribution
structure is similar in the Canadian and UK/
Irish markets. 4imprint is the largest direct
marketer of promotional products in each
market.
OUR CUSTOMERS
Promotional products are purchased by a
wide range of individuals within all types of
businesses and organisations. These
products have many uses: as an integral part
of sales and marketing campaigns; for
recruitment or recognition activities; to
promote health and safety initiatives; and for
any other method of making a connection
between our customer’s organisation and
the recipient of the item.
We define our customer as the individual
placing the order, rather than the business or
organisation for which the individual works
or with which he/she is associated. Our
customer base is widely dispersed
geographically, by size of business/
organisation and across commercial,
governmental, educational, charitable,
religious and other segments.
Our target customer will typically be working
at an organisation of 25 or more employees.
No single customer comprises a material part
of 4imprint’s overall revenue.
We sell an extensive range of promotional
products – merchandise that is custom
printed with the logo or name of an
organisation with the aim of promoting a
brand, service, product or event.
TOP PRODUCT CATEGORIES
1. APPAREL
2. BAGS
3. DRINKWARE
4. WRITING
5. STATIONERY
6. TECHNOLOGY
7. OUTDOOR & LEISURE
8. TRADE SHOW & SIGNAGE
9. AUTO, HOME & TOOLS
10. WELLNESS & SAFETY
13
4imprint Group plc Annual Report 2019
Retail brands are important to many
customers as they stand for the quality, style
and function of their products. Extra value is
added when our customers add their name
and logo to an already popular branded
product. The addition of established retail
brands such as The North Face®, Spyder®
and New Era® has been important in
expanding the 4imprint range.
Reusability has been a focus for product
development. Attention to the environment
is a key consideration for many of our
customers. For example, as people move
away from disposable drinking straws, a
replacement is often the reusable straw that
can be washed and used repeatedly without
entering the waste stream. Reusable bags
and drinkware are also good examples of
the power of reusability.
PRODUCT TRENDS
Our merchandisers track market trends to
identify the products that our customers are
looking for:
Technology is a fast-moving category as we
become more and more dependent on tech
in our daily lives. Wireless charging pads are
popular in retail, leading to promotional
product designs incorporating wireless
chargers into other useful office items.
Webcam covers are another example of a
tech product growing in popularity along
with increasing online privacy and safety
concerns.
Apparel remains our largest category,
making a significant contribution to overall
revenue growth in 2019. An expanding
product range and a simplified and
persuasive customer offering are supported
by our substantial in-house embroidery
capability.
Vacuum travel mugs are increasingly
popular, again following developments in
retail. The durable nature of these items in
conjunction with the wide variety of sizes
and designs mean that our customer’s name
and logo feature prominently as the mugs
are used time and time again.
STRATEGIC REPORTCORPORATEGOVERNANCEOVERVIEWFINANCIALSTATEMENTSADDITIONAL INFORMATION 14
4imprint Group plc Annual Report 2019
Market Opportunity continued
OUR PROPOSITION
Our customers can be certain that our team and our products
will meet their expectations, every time.
Whether raising awareness, sponsoring events, acquiring customers,
recruiting new employees or supporting causes, our customers know
that promotional products from 4imprint will ensure that their name
– and brand – looks great in front of their target audience.
Our 360° Guarantee® and personal, expert service on every order
take away the worry, making 4imprint the trusted right hand
minding the details every step of the way.
• reFresh®. The exclusive reFresh® brand
was launched in 2017 as a line of
affordable water bottles in a variety of
designs and colours. Through 2019, the
brand has evolved to include
competitively priced, brightly coloured
tumblers and travel mugs. 2020 will bring
further expansion of the brand, including
coolers from lunchbox size to 28 can
capacity.
• SuperKid™. The SuperKid™
brand is another 4imprint
exclusive, cross-category
initiative targeted at the
young and the young at
heart. Currently consisting
of stickers and temporary
tattoos with positive
messages, along with
pencils and tote bags, this
brand will grow in 2020 to
include additional products.
COMPETITIVE ADVANTAGE
Speed and rapid production time are
increasingly important in the promotional
products industry. 4imprint has an expansive
24-hour product offering, with nearly 7,000
items available to order today, ship tomorrow.
Value is always an important merchandising
consideration. Our Valuebuy$ range of
products focuses on essential products,
highlighting items featuring not only a
competitive price but also quality, fast lead
times and great colour selection.
Exclusive products. Nearly 600 products
are available only to 4imprint customers,
including items in exclusive colours or
designs. The ‘Only at 4imprint’ tag provides
an effective marketing tool, and also reflects
the deep relationships that 4imprint has
developed with trusted supplier partners.
4imprint ‘own label’ brands. Over the last
few years 4imprint has developed and
continues to evolve its own exclusive brands
to fill a gap in certain product categories.
• Crossland®. The Crossland® brand began
as an ‘outdoor’ apparel brand, primarily
in fleece jackets. In 2018 the brand was
successfully expanded into other product
categories, including ‘beanie’ hats,
blankets and vacuum mugs. 2019 saw
additional apparel lines, as well as
vacuum drinkware, backpacks and
coolers, added under the Crossland®
brand. In 2020 the brand will continue to
grow across categories, to include duffel
bags and portable chairs, in conjunction
with an integrated brand marketing plan.
15
4imprint Group plc Annual Report 2019
CASE STUDY
Crossland® is a ‘Private Label’ brand
exclusive to 4imprint.
The initial brand launch in 2014 featured a small range
of fleece jackets, positioning the brand with an active,
‘outdoors’ image and an emotional appeal that
immediately resonated with our customers.
Since then the Crossland® brand has seen
significant growth and product range
expansion in line with a clear brand
development plan.
In 2018 we began to add further
Crossland® branded products to
complement the core fleece/outerwear
offering. Items such as blankets, ‘beanie’
hats, and vacuum mugs were added to
the range, with our merchandising team
taking care to align the products with the
brand’s lifestyle promise. 2019 saw further
cross-category product expansion under
the Crossland® brand, with key, well
positioned new products such as can
holders, coolers, backpacks, duffels
and fold-up chairs finding their place
as top sellers in their category.
The success of the Crossland® brand
provides a template for further Private
Label brands. Our reFresh® brand began
with a line of colourful and affordable
water bottles with exclusive designs.
That brand is now being extended
cross-category into cooler bags and other
products. The launch of two more Private
Label brands is planned for later in 2020.
4imprint’s Private Label products are
developed in conjunction with our valued
suppliers, demonstrating the innovative
capabilities embedded in our end-to-end
supply chain.
STRATEGIC REPORTCORPORATEGOVERNANCEOVERVIEWFINANCIALSTATEMENTSADDITIONAL INFORMATION 16
4imprint Group plc Annual Report 2019
Business Model
Our business is the sale and distribution of promotional products.
Our commercial operations are built around a direct marketing
business model designed to introduce millions of potential customers
to tens of thousands of customised promotional products.
OUR PEOPLE
• Strong company culture
• Highly trained, long-tenured team members
• Empowered to ‘do the right thing’
KEY STRENGTHS
OUR PLATFORM
• Proprietary, scalable IT system
• Reliable and resilient supplier network
REACHING OUR CUSTOMERS
FINANCIAL STRENGTH
• Expanding and productive customer file
• Marketing ‘engine’ able to attract new and retain existing
customers
• Strong balance sheet
•
• Highly cash generative model driving self-financed
Investment in the business
• Long tradition of excellence in customer service
growth
WHAT WE DO
O u r Values
CUSTOMER PROPOSITION
• Fast, easy and convenient
• Expansive and relevant product range
Industry-leading customer guarantee
•
— Online or over the phone
— Free samples and artwork
— Remarkable customer service
— Certain delivery. It’s on time or it’s on us
— Certain value. Or we’ll refund double the difference
— Certain happiness. If you’re not 100% satisfied,
we’ll refund or rerun your order
APPLICATION OF TECHNOLOGY
• Websites, mobile, customer-facing
• Proprietary order processing platform
• Sophisticated database analytics
— Mature, scalable systems
— Efficient order processing
— Supplier integration
— Data-driven marketing
— Innovative web and back office technology
17
4imprint Group plc Annual Report 2019
WHAT WE DO
STAKEHOLDER OUTCOMES
‘DROP-SHIP’ FROM SUPPLIERS
• Unrestricted access to tens of thousands of products
• Efficient delivery of orders to short lead times
• Minimal investment in inventory
— Supplier holds the inventory
— Supplier prints the product
— Order shipped direct to customer
— Close relationships with suppliers
— Merchandisers ensure the product range is continually
updated and curated
INNOVATIVE MARKETING
• Data-driven heritage and discipline
• Multi-faceted, evolving marketing portfolio
• Brand, search, catalogue
— New customer acquisition
— Growing customer file
— Existing customer retention
— Blue Box™
SHAREHOLDERS
Strong cash generation permits us to reinvest in the continued growth of the
business, and to reward our Shareholders through dividend payments and
share price appreciation.
CUSTOMERS
Promotional products work: they help our customers achieve their marketing
goals, promote their safety initiatives and recognise their employees, amongst
many other uses.
TEAM MEMBERS
We are committed to a culture that encourages the training, development,
wellbeing and personal fulfilment of every team member.
SUPPLIERS
We have productive relationships with our trusted supplier partners. Our
suppliers can expect to be treated in accordance with the 4imprint “Golden
Rule” and to be paid on time.
COMMUNITY
Our team members are actively engaged in our communities, including
charitable giving and volunteering activities.
PENSION TRUSTEE
We stand firmly behind our legacy defined benefit pension scheme obligations.
See page 19 for further details.
Details of engagement with stakeholders is on pages 27 to 29,
covering the Directors’ duties under section 172 (1) Companies
Act 2006.
STRATEGIC REPORTCORPORATEGOVERNANCEOVERVIEWFINANCIALSTATEMENTSADDITIONAL INFORMATIONFor more information see page 11For more information see page 12For more information see pages 31-32For more information see page 33For more information see page 36 18
4imprint Group plc Annual Report 2019
Financial Review
F O C U S E D O N
FINANCIAL
DISCIPLINE
DAVID SEEKINGS
2019
Underlying*
$m
2018
Underlying*
$m
2019
Total
$m
2018
Total
$m
53.93
45.36
53.93
–
45.36
(0.72)
(0.31)
(0.32)
0.75
54.68
0.23
45.59
0.37
53.99
(0.17)
44.15
Underlying operating
profit
Exceptional items
Defined benefit
pension admin
charges
Net finance income/
(cost)
Profit before tax
* Underlying is before defined benefit pension charges and exceptional items.
OPERATING RESULT
Group revenue in 2019 of $860.84m was 17% up over prior year.
All of the revenue growth was organic. Underlying operating profit
increased over 2018 by 19% to $53.93m. These results are consistent
with the Group’s strategy to deliver profitable organic revenue
growth through increasing investment in marketing.
The Group’s operating result in the period, summarising expense by
function, was as follows:
Revenue
Gross profit
Marketing costs
Selling costs
Admin & central costs
Share option related charges
2019
$m
2018
$m
860.84
738.42
275.32
(154.31)
(31.04)
(35.09)
(0.95)
236.19
(131.23)
(27.85)
(30.93)
(0.82)
Underlying operating profit
53.93
45.36
ACCOUNTING STANDARDS
IFRS 16 ‘Leases’ was implemented from the start of the accounting
period. In summary, this standard brings most contractual
arrangements previously defined as operating leases on to the
balance sheet, establishing ‘right-of-use’ assets and associated lease
liabilities. In the income statement the previous operating lease
charge is replaced by amortisation and interest charges. The resulting
adjustments had an immaterial impact on the Group’s results since
the number and contract lengths of former operating leases are
minimal. In this context the decision was taken not to restate prior
periods, instead booking an opening adjustment to net equity.
Further detail is set out in note 30.
FOREIGN EXCHANGE
The primary US dollar exchange rates relevant to the Group’s 2019
results were as follows:
2019
2018
Period end
Average
Period end
Average
Sterling
Canadian dollars
1.31
0.76
1.28
0.75
1.27
0.73
1.34
0.77
The Group reports in US dollars, its primary trading currency. It also
transacts business in Canadian dollars, Sterling and Euros. Sterling/US
dollar is the exchange rate most likely to impact the Group’s financial
performance.
The primary foreign exchange considerations relevant to the Group’s
operations are as follows:
• 97% of the Group’s revenue arises in US dollars, the Group’s
reporting currency, hence translational risk in the income
statement is low. The net impact on the 2019 income statement
from trading currency movements was not material to the Group’s
results (note 21).
• Most of the constituent elements of the Group balance sheet are
US dollar-based. The main exception is the Sterling-based defined
benefit pension liability. Currency movements produced an
exchange loss on the pension liability in the year of $0.40m.
FINANCIALFINANCIAL 19
4imprint Group plc Annual Report 2019
• The Group’s business model is characterised by strong cash
generation, mostly in US dollars. However, its primary applications
of post-tax cash are Shareholder dividends, pension contributions
and some head office costs, all of which are paid in Sterling. As
such, the Group’s cash position is sensitive to Sterling/US dollar
exchange movements. By way of example, using actual exchange
rates, the movement of Sterling against the US dollar during 2019
meant that every US$1m converted to Sterling was worth around
£24,000 less at the 2019 closing rate compared to the 2018
closing rate.
SHARE OPTION CHARGES
A total of $0.95m (2018: $0.82m) was charged in the year in respect
of IFRS 2 ‘Share-based Payments’. This was made up of elements
from executive awards made under the 2015 Incentive Plan and
charges relating to the UK SAYE and the US ESPP plans.
Current options and awards outstanding are 125,095 shares under
the UK SAYE and US ESPP plans and 70,739 shares under the 2015
Incentive Plan. Awards under the 2015 Incentive Plan in respect of
2019 are anticipated to be made in late March 2020.
EXCEPTIONAL ITEMS
There was no exceptional charge in the year. During 2018 an
exceptional item of $0.72m was charged. This related to estimated
past service costs resulting from Guaranteed Minimum Pension
equalisation in our defined benefit pension scheme following the
Lloyds case.
NET FINANCE INCOME
Net finance income for the year, before pension finance charge,
was $0.75m (2018: $0.23m). This is comprised of net bank interest
income of $0.80m (2018: $0.23m) and lease interest charges of
$0.05m (2018: nil). The year-over-year positive swing of $0.56m on
bank interest primarily reflects higher cash deposits.
TAXATION
The tax charge for the year was $11.28m (2018: $8.95m), giving an
effective tax rate of 21% (2018: 20%). The charge comprised current
tax of $10.32m, representing tax payable in the USA, and a deferred
tax charge of $0.96m.
The tax charge relating to underlying profit before tax was $11.41m
(2018: $9.23m), an effective tax rate of 21% (2018: 20%).
EARNINGS PER SHARE
Underlying basic earnings per share was 154.41c (2018: 129.77c), an
increase of 19%. This was slightly lower than the 20% increase in
underlying profit before tax due to the higher effective tax rate
in 2019.
Basic earnings per share was 152.42c (2018: 125.61c), an increase
of 21%.
DIVIDENDS
Dividends are determined in US dollars and paid in Sterling,
converted at the exchange rate on the date that the dividend is
determined.
The Board has proposed a final dividend of 59.00c (2018: 49.20c)
which, together with the interim dividend of 25.00c, gives a total
paid and proposed regular dividend relating to 2019 of 84.00c, an
increase of 20% compared to prior year.
The final dividend has been converted to Sterling at an exchange rate
of £1.00/$1.2781 (2018: £1.00/$1.319). This results in a final dividend
payable to Shareholders of 46.16p (2018: 37.30p), which, combined
with the interim dividend paid of 20.52p, gives a total dividend for
the year of 66.68p, an increase of 25% compared to prior year.
The final dividend will be paid on 15 May 2020 to Shareholders on
the register at the close of business on 14 April 2020.
DEFINED BENEFIT PENSION PLAN
The Group sponsors a legacy defined benefit pension plan (the
“Plan”) which has been closed to new members and future accruals
for many years. This Plan is the successor arrangement to the
previous, much larger defined benefit scheme which was successfully
de-risked and wound up in December 2017. The new Plan has
equivalent benefits to the previous scheme, and currently has around
98 pensioners and 273 deferred members.
At 28 December 2019, the net deficit of the Plan on an IAS 19 basis
was $12.31m, compared to $15.02m at 29 December 2018. At
28 December 2019 gross scheme liabilities under IAS 19 were
$36.32m, and assets were $24.01m.
The change in deficit is analysed as follows:
IAS 19 deficit at 30 December 2018
Company contributions to the Plan
Pension administration costs
Pension finance charge
Re-measurement loss due to changes in assumptions and
return on assets
Exchange loss
IAS 19 deficit at 28 December 2019
$m
(15.02)
3.59
(0.31)
(0.38)
0.21
(0.40)
(12.31)
The net liability reduced by $2.71m in the year, driven primarily by
employer’s contributions of $3.59m offset by administration, finance
and exchange charges. In Sterling, the net deficit decreased by
£2.44m in the year to £9.40m.
A full actuarial valuation was performed in respect of the Plan in
September 2016. At that time, deficit recovery contributions of
£2.25m per annum were agreed with the Trustee. These
contributions commenced on 1 July 2017, rising by 3% per annum.
The agreed recovery timeframe was a period of five years seven
months until 31 January 2023, at which point the funding shortfall
on a technical provisions basis was expected to be eliminated. In
addition, an annual payment of £0.25m was agreed towards the
costs of the Plan’s administration and management. The Company is
also committed to funding agreed transfer values out of the Plan, at
a funding rate of 50% of the transfer value. $0.28m was paid in
2019 in respect of transfers out of the Plan.
A new triennial actuarial valuation of the Plan as at September 2019
has been prepared and this forms the basis of the 2019 IAS 19
valuation set out above.
Following the 2019 triennial valuation, and in consultation with the
Trustee, the Company has committed to a revised, accelerated,
schedule of deficit recovery contributions going forward. This
reflects: (i) movements in actuarial assumptions, particularly bond
yields driving down the discount rate, and (ii) the desire of both the
Company and the Trustee to move beyond funding on a technical
provisions basis to funding geared towards further de-risking and
eventual Plan buy-out within a reasonable timeframe. The new
schedule of deficit contributions consists of a lump sum of £7.50m
(c.$10m) payable in May 2020, followed, from 1 July 2020 onwards,
by annual contributions that remain at the existing agreed level of
£2.46m per annum, rising by 3% annually. The agreed new recovery
plan ends in July 2024. An allowance of £0.30m per year, rising by
3% annually, will also be paid towards the cost of the Plan’s
administration and management. The Company will remain
committed to funding agreed transfer values out of the Plan at a
funding rate of 50% of the transfer value.
CASH FLOW
The Group had net cash of $41.14m at 28 December 2019, an
increase of $13.66m over the 29 December 2018 balance of
$27.48m.
STRATEGIC REPORTCORPORATEGOVERNANCEOVERVIEWFINANCIALSTATEMENTSADDITIONAL INFORMATION 20
4imprint Group plc Annual Report 2019
Financial Review continued
Cash flow in the period is summarised as follows:
Underlying operating profit
Share option related charges
Depreciation and amortisation
Lease depreciation
Change in working capital
Capital expenditure
Underlying operating cash flow
Tax and interest
Defined benefit pension contributions
Own share transactions
Capital element of lease payments
Exceptional items
Exchange gain/(loss)
2019
$m
53.93
0.93
2.78
1.50
0.70
(8.18)
51.66
(9.57)
(3.59)
(2.56)
(1.69)
–
0.07
2018
$m
45.36
0.81
2.65
–
(3.19)
(2.86)
42.77
(7.62)
(3.93)
(0.47)
–
(0.05)
(1.01)
Free cash flow
Dividends to Shareholders
34.32
(20.66)
29.69
(32.98)
Net cash inflow/(outflow) in the period
13.66
(3.29)
The Group is typically very cash generative, and this remained the
case in 2019. The business model is efficient in working capital usage
and typically has low fixed capital requirements. The operating cash
conversion rate for the year was 96%. If the $5m of capital spend on
the Oshkosh distribution centre expansion is added back, cash
conversion would have been 105%.
In accordance with IFRS 16, lease depreciation and the capital
element of lease payments are included in the cash flow. There are
no comparatives since an opening equity adjustment was booked as
opposed to restating prior periods. In 2018 the full lease payments of
$2.0m were charged within operating profit. Overall, the
implementation of IFRS 16 has no net impact on free cash flow.
Dividends paid to Shareholders in 2018 includes the supplementary
dividend of 60.00c per share paid in May 2018.
BALANCE SHEET AND SHAREHOLDERS’ FUNDS
Net assets at 28 December 2019 were $62.95m, compared to $43.27m
at 29 December 2018. The balance sheet is summarised as follows:
Non-current assets
Working capital
Net cash
Pension deficit
Other assets/(liabilities) – net
Net assets
28 December
2019
$m
29 December
2018
$m
31.84
5.15
41.14
(12.31)
(2.87)
25.73
5.85
27.48
(15.02)
(0.77)
62.95
43.27
Shareholders’ funds increased by $19.68m, comprising: net profit in
the period of $42.72m; $(0.17)m of exchange losses; net $(0.37)m of
pension related movements; $0.92m of net share option related
movements; $(2.57)m relating to purchase of own shares, net of
option proceeds; $(20.66)m equity dividends paid to Shareholders;
and an adjustment to opening net equity of $(0.19)m arising from
the implementation of IFRS 16 (see note 30).
The Group had a characteristically low net negative working capital
balance of $5.15m at 28 December 2019 ($5.85m at 29 December
2018).
As a result of the adoption of IFRS 16, a ‘right-of-use’ asset of $1.99m
is included within Non-current assets. An associated liability of
$2.05m is included within Other assets/(liabilities).
BALANCE SHEET FUNDING
The Board is committed to aligning the Group’s funding with its
strategic priorities. This requires a stable, secure and flexible balance
sheet through the cycle. The Group will therefore typically remain
ungeared and hold a net cash position.
The Board’s funding guidelines aim to provide operational and
financial flexibility:
• To facilitate continued investment in marketing, people and
technology through different economic cycles, recognising that an
economic downturn typically represents a market share
opportunity for the business.
• To protect the ability of the business to act swiftly as growth
opportunities arise in accordance with the Group’s capital
allocation guidelines.
• To underpin a commitment to Shareholders through the
maintenance of regular interim and final dividend payments.
• To meet our pension contribution commitments as they fall due.
The quantum of the cash target at each year end will be influenced
broadly by reference to the investment requirements of the business,
and the subsequent year’s anticipated full year ordinary dividend and
pension payment obligations.
The Board will keep these guidelines under review and is prepared to
be flexible if circumstances warrant.
CAPITAL ALLOCATION
The Board’s capital allocation framework is designed to deliver
increasing Shareholder value, driven by the execution of the Group’s
growth strategy. The Group’s capital allocation priorities are:
• Organic growth investments
— Either capital projects or those expensed in the income
statement
•
— Market share opportunities in existing markets
Interim and final dividend payments
— Increasing broadly in line with earnings per share through the
cycle
— Aim to at least maintain dividend per share in a downturn
• Residual legacy pension funding
— In line with agreed deficit recovery funding schedule
— Further de-risking initiatives, if viable
• Mergers & acquisitions
— Not a near-term priority
— Opportunities that would support organic growth
• Other Shareholder distributions
— Quantified by reference to cash over and above balance sheet
funding requirement
— Supplementary dividends most likely method; other methods
may be considered
TREASURY POLICY
The financial requirements of the Group are managed through a
centralised treasury policy. The Group operates cash pooling
arrangements for its North American operations. Forward contracts
may be taken out to buy or sell currencies relating to specific
receivables and payables as well as remittances from overseas
subsidiaries. There were no forward contracts open at the period end
or prior period end, but forward contracts have been used during the
year. The Group holds the majority of its cash with its principal US
and UK bankers.
The Group has $20.0m of working capital facilities with its principal
US bank, JPMorgan Chase, N.A. The interest rate is US$ LIBOR plus
1.5%, and the facilities expire on 31 May 2021. In addition, an
overdraft facility of £1.0m, with an interest rate of bank base rate
plus 2.0%, is available from the Group’s principal UK bank, Lloyds
Bank plc.
21
4imprint Group plc Annual Report 2019
CRITICAL ACCOUNTING POLICIES
Critical accounting policies are those that require significant
judgments or estimates and potentially result in materially different
results under different assumptions or conditions. It is considered
that the only critical accounting policies are in respect of pensions
and leases.
BREXIT RISK
Despite the fact that Brexit has now occurred significant uncertainty
remains, particularly over trading arrangements with the EU. As
rehearsed previously, however, we consider that the nature and
geography of the Group’s operations, with 97% of the Group’s
revenue originating in North America, leave it in a strong position to
absorb any residual negative effects. Consequently, we do not
consider that Brexit creates any real change in the Group’s principal
risks and uncertainties, nor does it have any material effect on our
evaluation of going concern or viability analysis elsewhere in this
report.
GOING CONCERN
The Board reviews several factors when considering whether the
financial statements should be prepared on a going concern basis:
• The Group’s business activities, together with management’s
current view of circumstances likely to affect its future
development, performance and financial position (summarised in
the Strategic Report on pages 6 to 36).
• The financial position of the Group, its principal risks and
uncertainties, its cash flows, net cash position, borrowing facilities
and policies for managing financial risk, which are described in
this Financial Review and the Principal Risks & Uncertainties on
pages 18 to 26.
As a result of this review, the Board has a reasonable expectation
that the Group has adequate resources to continue to operate for a
period of at least twelve months from the date this report was
approved. Accordingly, the Board continues to adopt the going
concern basis in preparing the financial statements.
LONG-TERM PROSPECTS AND VIABILITY
In accordance with Provision C.2.2 of the UK Corporate Governance
Code 2016, and Provision 31 of the UK Corporate Governance Code
2018, the Board has assessed the prospects and viability of the
Group.
ASSESSMENT OF PROSPECTS
The Group’s strategy, market position and business model, as set out
on pages 8 to 17 of the Strategic Report, are central to an
understanding of its prospects. These factors provide a framework
for the rolling three year plan which is developed as part of the
annual budget process and reviewed by the Board to assess the
Group’s prospects. Established and reliable demand forecasting
models are driven by customer acquisition and retention
assumptions, which are flexed to account for known initiatives and
anticipated market developments over the three year forecast period.
The three year timeframe for assessing both prospects and viability is
considered to be appropriate due to the following factors:
•
It is consistent with the Group’s rolling three year strategic
planning process.
It reflects reasonable expectations in terms of the reliability and
accuracy of operational forecasting models.
It acknowledges that the Group’s business model does not rely
heavily on fixed capital, long-term contracts or fixed external
financing arrangements.
It recognises that projections looking out further than three years
become significantly less meaningful in the context of the
fast-moving nature of the business and its markets.
•
•
•
CONFIRMATION OF VIABILITY
The Board’s assessment of the Group’s prospects, as described
above, has been made with reference to current market conditions
and known risk factors. The principal risks and uncertainties facing
the Group are outlined on pages 22 to 26. In the light of the Group’s
financial performance over recent years, the Board considers that the
key factor which would prejudice the delivery of the Group’s stated
financial objectives is a significant decline in demand, leading to
lower or negative revenue growth and a lower return on marketing
spend. Using the current three year rolling forecasts as a base case,
alternative forecasts have been produced to model the effects on the
Group’s liquidity and solvency of very severe but plausible
combinations of the principal risks and uncertainties on demand
levels in the business.
The basis for the key assumptions used in the viability model was an
overall effect similar to, but more severe than, that experienced
during the 2008/9 financial crisis. New customer acquisition and
existing customer retention metrics were significantly degraded in
the model, resulting in a 6.25% year-on-year drop in revenue
compared to an actual revenue decline of 3.05% from 2008 to 2009.
However, expenditure in the areas of marketing, payroll and
technology were maintained at 2019 levels or higher. Revenue and
profitability are clearly affected in this scenario, but the business
retains a robust financial position with the Group able to maintain its
external dividend payments at current rates.
The assumptions used in the viability model and the resultant
sensitised financial forecasts have been reviewed and approved by
the Board. The conclusion of this review is that the Group has
significant financial flexibility, starting with a net cash position, but
remaining cash positive even under severe economic stress and able
to continue investing in marketing, people and technology, which are
key differentiators in its strategy.
Based on this review of the Group’s prospects and viability, the
Directors confirm that they have a reasonable expectation that the
Group will continue to operate and to meet its liabilities as they fall
due, for the next three years.
NON-FINANCIAL REPORTING REGULATIONS
The table below sets out where stakeholders can find information in
our Strategic Report relating to non-financial matters, as required by
sections 414CA and 414CB of the Companies Act 2006. The
information found in the below pages form our non-financial
statement.
Reporting requirement
Section of the Annual Report
Environmental matters
Employees
Social matters
Human rights
Anti-corruption and
anti-bribery
Business model
Non-financial KPIs
Principal risks
Responsibility
Responsibility
Responsibility
Responsibility
Responsibility
Business Model
Strategic Objectives
Principal Risks & Uncertainties
Page(s)
34-35
31-32
36
34
34
16-17
8-11
22-26
MANAGEMENT REPORT
The Strategic Report is considered to form the management report
for the purpose of DTR4.1.8R.
STRATEGIC REPORTCORPORATEGOVERNANCEOVERVIEWFINANCIALSTATEMENTSADDITIONAL INFORMATION 22
4imprint Group plc Annual Report 2019
Principal Risks & Uncertainties
4imprint seeks to take a
balanced approach to the risks
and uncertainties that it faces.
RISK APPETITE
4imprint’s strategic objectives (see pages 8 to 11) revolve around
market leadership and organic revenue growth ahead of the industry
as a whole. The Board encourages an appetite for measured
risk-taking that contributes to both the operational agility and
innovative culture that it believes is necessary to meet the Group’s
strategic objectives. That appetite is, however, tempered by risk
identification, evaluation and management.
RISK MANAGEMENT PROCESS
The Board has ultimate responsibility for the Group’s risk
management process, although responsibility for reviewing specific
risk controls may be delegated to the Audit Committee. The
Executive Directors and operational management teams are
responsible for the identification and evaluation of risks and the
subsequent implementation of specific risk mitigation activities. A risk
review is conducted by the Board at least annually, and evolving or
urgent issues are discussed at regular Board meetings.
EMERGING RISKS
It is important to note that business operations are conducted from
centralised facilities in Oshkosh and Manchester, with short reporting
lines. The Executive Directors are close to day-to-day matters,
facilitating early identification of, and response to, evolving risks.
Risk appetite, the risk management process, and associated
mitigating activities are all essential elements of the Group’s strategic
and operational planning processes.
4imprint’s business model means that it may be affected by a
number of risks, not all of which are within its control. Outlined
below are the current principal potential risks and uncertainties to
the successful delivery of the Group’s strategic goals. The list is not
exhaustive and other, as yet unidentified, factors may have an
adverse effect.
Economic and market risks
A MACROECONOMIC CONDITIONS
DESCRIPTION OF RISK
The business conducts most of
its operations in North America
and would be affected by a
downturn in general economic
conditions in this region or
negative effects from tension in
international trade. In previous
economic downturns, the
promotional products market
has typically softened broadly in
line with the general economy.
POTENTIAL IMPACT
• Customer acquisition and
retention could fall, impacting
revenue in current and future
periods.
• The growth and profitability
levels called for in the Group
strategic plan may not be
achieved.
• Cash generation could be
reduced broadly
corresponding to a reduction
in profitability.
MITIGATING ACTIVITIES
• Management monitors
economic and market
conditions to ensure that
appropriate and timely
adjustments are made to
marketing and other budgets.
• The customer proposition in
terms of promotions, price,
value and quality of product
can be adjusted to resonate
with customer requirements
and budgets in changing
economic climates.
• The Group’s balance sheet
funding policy (see page 20)
aims to provide operational
and financial flexibility to
facilitate continued
investment in the business
through different economic
cycles.
LINK TO STRATEGY
Organic revenue growth
Cash generation and profitability
DIRECTION
International trade tensions and
political instability have increased
economic volatility in the US
Brexit uncertainty in the UK has
led to lack of business confidence
Potential development of
COVID-19 virus into a pandemic
Increased
23
4imprint Group plc Annual Report 2019
B MARKETS & COMPETITION
DESCRIPTION OF RISK
The promotional products
markets in which the business
operates are intensely
competitive. The development of
buying groups and online
marketplaces may allow
competitors to reach a broader
audience. New or disruptive
business models looking to
break down the prevailing
distributor/supplier structure may
become a threat. Private equity
interest in the promotional
products industry has increased
in recent years, offering potential
funding for existing competitors
or new entrants.
POTENTIAL IMPACT
• Aggressive competitive
activity or a disruptive new
model could result in pressure
on prices, margin erosion and
loss of market share,
impacting the financial
results.
• The Group’s strategy based
on achieving organic revenue
growth in fragmented
markets may need to be
reassessed.
MITIGATING ACTIVITIES
• An open-minded culture and
an appetite for technology
are encouraged, with the aim
of positioning the business at
the forefront of innovation in
the industry.
• Management closely
monitors competitive activity
in the marketplace.
• Price, satisfaction and service
level guarantees are an
integral part of the customer
proposition. Customer
surveys and market research
are used to gauge customer
satisfaction and perception,
and the causes of any
negative indications are
investigated and addressed
rapidly.
LINK TO STRATEGY
Market leadership
Organic revenue growth
Cash generation and profitability
DIRECTION
The competitive landscape to
date has been relatively consistent
in our main markets
No disruptive model has yet
gained much traction in the
industry
Unchanged
C CURRENCY EXCHANGE
DESCRIPTION OF RISK
There is some exposure to
currency exchange risk.
Although the business trades
predominantly in US dollars, it
also transacts business in
Canadian dollars, Sterling and
Euros, leading to some currency
risk on trading. In addition, head
office costs, pension scheme
commitments and dividends are
payable in Sterling, consequently
the business may be adversely
impacted by movements in the
Sterling/US dollar exchange rate
when it repatriates cash to the
UK.
POTENTIAL IMPACT
• The financial results of
trading operations, and
therefore overall profitability,
may be negatively affected.
• The financial condition and
cash position of the Group
may differ materially from
expectations. In an extreme
scenario, the Group’s
strategic objectives around
capital structure and core
dividend commitments could
be disrupted.
MITIGATING ACTIVITIES
• The Group reports its results
in US dollars, minimising
currency impact on reported
revenue, operating profit and
net assets since trading
operations are concentrated
mainly in North America.
• The Group can use forward
contracts to hedge
anticipated cash receipts from
its overseas operations, giving
some certainty of amounts
receivable in Sterling.
LINK TO STRATEGY
Cash generation and profitability
Capital structure
Shareholder value
DIRECTION
Political instability, interest rate
policy and trade tensions (US) and
Brexit concerns (UK) may lead to
increased volatility in currency
markets
Increased
STRATEGIC REPORTCORPORATEGOVERNANCEOVERVIEWFINANCIALSTATEMENTSADDITIONAL INFORMATION 24
4imprint Group plc Annual Report 2019
Principal Risks & Uncertainties continued
Operational risks
D BUSINESS FACILITY DISRUPTION
DESCRIPTION OF RISK
The 4imprint business model
means that operations are
concentrated in centralised office
and distribution facilities. The
performance of the business
could be adversely affected if
activities at one of these facilities
were to be disrupted, for
example, by fire, flood, loss of
power or internet/
telecommunication failure.
POTENTIAL IMPACT
• The inability to service
customer orders over any
extended period would result
in significant revenue loss,
deterioration of customer
acquisition and retention
metrics and diminished return
on marketing investment.
• The Group’s reputation for
excellent service and reliability
may be damaged.
MITIGATING ACTIVITIES
• Back-up and business
LINK TO STRATEGY
Market leadership
Organic revenue growth
Cash generation and profitability
DIRECTION
No significant change in the
nature or likelihood of these risks
Unchanged
continuity procedures are in
place to ensure that customer
service disruption is
minimised. This includes
customer service resource
based at a separate location
and team members working
from home.
• Websites are cloud-based,
and data is backed up
immediately to off-site
servers.
• Relationships are maintained
with third party embroidery
contractors to provide
back-up in the event of
facility unavailability.
E DISRUPTION TO THE PRODUCT SUPPLY CHAIN OR DELIVERY SERVICE
POTENTIAL IMPACT
•
Inability to fulfil customer
orders would lead to lost
revenue and a negative
impact on customer
acquisition and retention
statistics.
• The Group’s reputation for
excellent service and reliability
may be damaged.
DESCRIPTION OF RISK
As a consequence of the Group’s
‘drop-ship’ distribution model,
trading operations could be
interrupted if (i) the activities of a
key supplier were disrupted and
it was not possible to source an
alternative supplier in the short
term; (ii) a key supplier’s own
supply chain is compromised by
‘force majeure’ events in the
country of original product
manufacture, for example
natural disasters, social/political
unrest or pandemic; or (iii) the
primary parcel delivery partner
used by the business suffered
significantly degraded service
levels. As the Group continues to
grow, the volume of orders
placed with individual suppliers
becomes significant.
LINK TO STRATEGY
Market leadership
Organic revenue growth
Cash generation and profitability
DIRECTION
Risk inherent in increasing
supplier concentration
Spread of Coronavirus has
increased risk
Increased
MITIGATING ACTIVITIES
• A rigorous selection process
is in place for key suppliers,
with evaluation and
monitoring of quality,
production capability and
capacity, ethical standards,
financial stability and business
continuity planning.
• Very close relationships are
maintained with key
suppliers, including a detailed
shared knowledge of factory
locations, operations and
capabilities in the country of
original product manufacture,
allowing swift understanding
of and appropriate reaction
to events.
• Wherever possible,
relationships are maintained
with suitable alternative
suppliers for each product
category.
• Secondary relationships are in
place with alternative parcel
carriers.
25
4imprint Group plc Annual Report 2019
F DISTURBANCE IN ESTABLISHED MARKETING TECHNIQUES
DESCRIPTION OF RISK
The success of the business relies
on its ability to attract new and
retain existing customers
through a variety of marketing
techniques. These methods may
become less effective as follows:
Offline: The flow of print
catalogues and sample packages
would be disrupted by the
incapacity of the US Postal
Service to make deliveries, for
example due to natural disasters
or labour activism.
Online: Search engines are an
important source for channelling
customer activity to 4imprint’s
websites. The efficiency of
search engine marketing could
be adversely affected if the
search engines were to modify
their algorithms or otherwise
make substantial changes to
their practices.
In addition, the evolving
landscape around data privacy
legislation potentially affects our
ability, both online and offline,
to access and analyse customer
data information.
POTENTIAL IMPACT
•
If sustained over anything
more than a short time
period, an externally driven
decrease in the effectiveness
of key marketing techniques
would cause damage to the
customer file as customer
acquisition and retention fall.
This would affect order flow
and revenue in the short term
and the productivity of the
customer file over a longer
period, impacting growth
prospects.
• Restrictive data privacy
legislation could significantly
decrease the yield on our
marketing activities.
MITIGATING ACTIVITIES
• Offline: Developments in the
US Postal Service are closely
monitored through industry
associations and lobbying
groups. Alternative parcel
carriers are continuously
evaluated.
• Online: Management stays
very close to new
developments and emerging
platforms in the online space.
Efforts are focused on
anticipating changes and
ensuring compliance with
both the requirements of
providers and applicable laws.
• The Marketing team
constantly tests and evaluates
new marketing techniques
and opportunities in order to
broaden the overall marketing
portfolio and to reduce the
dominance of any one
constituent element. An
example is the brand
marketing campaign
launched during 2018.
• Data privacy requirements are
monitored closely and
assessed.
G RELIANCE ON KEY PERSONNEL
DESCRIPTION OF RISK
Performance depends on the
ability of the business to
continue to attract, motivate and
retain key staff. These individuals
possess sales and marketing,
merchandising, supply chain, IT,
financial and general
management skills that are key
to the continued successful
operation of the business.
POTENTIAL IMPACT
• The loss of key employees or
inability to attract appropriate
talent could adversely affect
the Group’s ability to meet its
strategic objectives, with a
consequent negative impact
on future results.
MITIGATING ACTIVITIES
• The business is proactive in
aiming to deliver a first class
working environment. In
addition, competitive
employment terms and
incentive plans are designed
with a view to attracting and
retaining key personnel.
• Succession planning.
LINK TO STRATEGY
Market leadership
Organic revenue growth
Cash generation and profitability
DIRECTION
Successful marketing
diversification continues via the
successful integration of a brand
component to the marketing
portfolio
Decreased
LINK TO STRATEGY
Market leadership/revenue
growth
Cash generation and profitability
Shareholder value
DIRECTION
The business has been able to
attract and retain appropriate
talent
Unchanged
STRATEGIC REPORTCORPORATEGOVERNANCEOVERVIEWFINANCIALSTATEMENTSADDITIONAL INFORMATION 26
4imprint Group plc Annual Report 2019
Principal Risks & Uncertainties continued
Technological risks
H FAILURE OR INTERRUPTION OF INFORMATION TECHNOLOGY SYSTEMS AND INFRASTRUCTURE
DESCRIPTION OF RISK
The business is highly dependent
on the efficient functioning of its
IT infrastructure. An interruption
or degradation of services at any
4imprint operational facility
would affect critical order
processing systems and thereby
compromise the ability of the
business to deliver on its
customer service proposition.
POTENTIAL IMPACT
•
In the short-term, orders
would be lost and delivery
deadlines missed, decreasing
the efficiency of marketing
investment and impacting
customer acquisition and
retention.
• Revenue and profitability are
directly related to order flow
and would be adversely
affected as a consequence of
a major IT failure.
• Depending on the severity of
the incident, longer term
reputational damage could
result.
MITIGATING ACTIVITIES
• There is significant ongoing
investment in both the IT
team supporting the business
and the hardware and
software system
requirements for a stable and
secure operating platform.
• Back-up and recovery
processes are in place,
including immediate
replication of data to an
alternative site, to minimise
the impact of information
technology interruption.
• Cloud-based hosting for
eCommerce and other back
end functionality.
LINK TO STRATEGY
Market leadership
Organic revenue growth
Cash generation and profitability
DIRECTION
The IT platform is mature, and
performance has been efficient
and resilient
Unchanged
I FAILURE TO ADAPT TO NEW TECHNOLOGICAL INNOVATIONS
DESCRIPTION OF RISK
The operating platforms of the
business may not be able to
respond and adapt to rapid
changes in technology. If the
development of websites and
customer-facing applications for
alternative devices and platforms
are slow or ineffective the
business could lose competitive
edge. In addition, the
development of order
processing, supplier-facing and
data analytics technologies could
fail to deliver the improvements
in speed, ease and efficiency
necessary to attract and retain a
productive customer base.
J CYBER THREATS
DESCRIPTION OF RISK
Malware, ransomware and other
malicious cyber threats can lead
to system failure and/or
unauthorised access to and
misappropriation of customer
data, potentially leading to
reputational damage and loss of
customer confidence. This is a
rapidly changing environment,
with new threats emerging on
an almost daily basis.
POTENTIAL IMPACT
•
If the business fails to adapt
to new technologies and
therefore falls behind in the
marketplace, it may fail to
capture the number of new
customers and retain existing
customers at the rate
required to deliver the
growth rates called for in the
Group’s strategic plan.
MITIGATING ACTIVITIES
• Management has a keen
awareness of the need to
keep pace with the rapidly
changing and continuously
evolving technological
landscape.
• An appetite for technological
innovation is encouraged in
the business. Sustained
investment is made in the
development of both
outward-facing and back
office systems.
LINK TO STRATEGY
Market leadership
Organic revenue growth
DIRECTION
Innovation remains a priority
Unchanged
POTENTIAL IMPACT
• Revenue and profitability are
directly related to order flow
and would be adversely
affected as a consequence of
system compromise.
• A significant security breach
could lead to litigation and
losses, with a costly
rectification process. In
addition, it might be
damaging to the Group’s
reputation and brand.
• An event of this nature might
result in significant expense,
impacting the Group’s ability
to meet its strategic
objectives.
MITIGATING ACTIVITIES
• The business employs
LINK TO STRATEGY
Cash generation and profitability
Shareholder value
DIRECTION
The general incidence and
publicity around cyber-crime
continue to increase
Increased
experienced IT staff whose
focus is to mitigate IT security
violations. Investment in
software and other resources
in this area continues to be a
high priority.
• Due to the ever-evolving
nature of the threat,
emerging cyber risks are
addressed by the IT security
team on a case-by-case basis.
• Technical and physical
controls are in place to
mitigate unauthorised access
to customer data and there is
an ongoing investment
process in place to maintain
and enhance the integrity and
efficiency of the IT
infrastructure and its security.
27
4imprint Group plc Annual Report 2019
Stakeholder Engagement
4imprint understands and embraces
the responsibility of balancing the interests
of a wide stakeholder base.
SECTION 172 STATEMENT
The following disclosure describes how the Directors have had regard
to the matters set out in section 172 (1) (a) to (f) and forms the
Directors’ statement required under 414C2A of the Companies Act
2016.
A strong and distinctive culture encouraging responsible practice has
been deeply embedded at all levels of our business for many years.
Our team members observe clear guiding principles that drive ethical
interactions with, and positive outcomes for, our key stakeholders
(see Business Model on page 17 and Responsibility on pages 30 to 36).
Our statement of corporate purpose (see page 5) reflects and
reinforces these important principles.
and a business model conducted from centralised facilities. The
Non-Executive Board members receive regular written and verbal
business updates from the Executive Directors via monthly
reports, face-to-face at regular Board meetings or between Board
meetings as required.
(ii) Direct engagement of Board members. Directors are
expected, where appropriate, to engage directly with, or on
behalf of, stakeholders. In particular, the Chairman, Senior
Independent Director, Board Committee Chairs and ‘Employee
Voice’ Director seek to understand the needs and priorities of
each stakeholder group and are encouraged to engage
independently with stakeholders depending on the issue in
question.
The Board of 4imprint sets the tone by nurturing, monitoring and
re-affirming these principles, and demonstrating through its
discussions and actions that the interests of stakeholders are central
to its decision-making. Within this framework, the Directors
discharge their duties by monitoring and assessing stakeholder
interests in two primary ways:
(i) Regular information flow from the Executive Directors.
The Executive Directors are directly involved in day-to-day
business operations as a result of a flat organisational structure
The Directors consider the interests of each of our key stakeholder
groups when considering their duties under S172 and take into
account the information gathered through engagement with these
stakeholders when determining the Group’s strategies and key
decisions.
A summary of our stakeholder engagement activities, together with
the issues and factors the Directors have considered in respect of our
stakeholders in complying with section 172 (1) (a) to (f) is set out in
the tables below.
SHAREHOLDERS
WHY WE ENGAGE
We aim to attract Shareholders
whose requirements are aligned
with our strategic objectives, and
who are interested in a long-
term holding in our Company.
This involves a good
understanding of our strategic
objectives, our business model
and our culture.
HOW WE ENGAGE
Our key Shareholder
engagement activities are:
• Annual Report & Accounts
Investor Relations website
•
• Annual General Meeting
• Results announcements
•
Investor roadshows
• Meetings and calls
throughout the year with
existing and potential
investors, including
Environmental, Social and
Governance (ESG)/
Compliance departments
• Meetings with Chair, NEDs
and Company Secretary as
required
KEY TOPICS
• Growth strategy and
evolution of marketing
portfolio, particularly the
integration of the brand
marketing initiative
• Market dynamics and
opportunity for further
organic revenue growth
• Capital allocation priorities
• ESG
• Culture, ethics and
sustainability in the business
• Board composition
OUTCOME & ACTIONS
• Effective communication of
investment case
• Shareholder register and
investor relations activity
regularly reviewed by the
Board
• Strong organic revenue
growth, increase in share
price, progressive dividends
and increase in TSR
• Several investor visits to the
Group’s primary operating
facilities in Oshkosh, USA
• Appointment of Tina Southall
to the Board in May 2019,
improving diversity and ability
to address ‘Employee Voice’
Involvement of Company
Secretary and Chairman in
ESG discussions with
Shareholders and compliance
agencies
•
STRATEGIC REPORTCORPORATEGOVERNANCEOVERVIEWFINANCIALSTATEMENTSADDITIONAL INFORMATION 28
4imprint Group plc Annual Report 2019
Stakeholder Engagement continued
CUSTOMERS
WHY WE ENGAGE
Our purpose (see page 5)
revolves around providing
relevant, quality promotional
products to our customers to
help them convey their message.
Our customers rely on us to
make them and their
organisations look good.
HOW WE ENGAGE
• Clear focus on new customer
acquisition and existing
customer retention KPIs and
trends in management and
Board information packs
KEY TOPICS
• Ability to find the ‘perfect
product’ for each customer
• Quality and effectiveness of
customer service
• Product quality, price and
• Emphasis on providing
range development
remarkable customer service
within a culture of continuous
improvement
• Regular customer surveys,
• Product safety, environmental
considerations and
sustainability in general
• Responsible use of personal
data
including statistics such as net
promoter score, and periodic
extensive customer research
projects
• Team members empowered
to make decisions in the
customer’s interest, and
managers (up to and
including CEO) available to
address customer concerns
TEAM MEMBERS
WHY WE ENGAGE
Investment in our people is a key
driver of our competitive
advantage. We can only deliver
an exceptional customer
experience if we have
exceptional team members who
subscribe to our principles and
values. We engage with our
team members to ensure that
we are fostering an environment
that they are happy to work in
and a culture that they identify
with. See pages 31 and 32 for
further discussion on people and
culture.
KEY TOPICS
• Continuous development and
cultivation of 4imprint culture
and working environment
• Personal development and
career progression
• Fair, merit-based pay
structures complemented by
attractive and innovative
benefits package
• Ability to participate in the
Group’s success through
bonus plans and share
ownership
• Health and safety at work
HOW WE ENGAGE
• The Executive Directors are
based at the Oshkosh site,
and have day-to-day
interaction with team
members
• Team members attend
quarterly ‘all-company’
briefings, with the CEO in the
US and the General Manager
in the UK, that provide
updates on business
performance and other
relevant topics
• Site visits by Chairman and
NEDs, including an annual
two day visit and Board
meeting in Oshkosh
• Competitive base
compensation, excellent
benefits package and
opportunity for results-based
bonus
• Wide range of training and
development opportunities
available for team members
(see Responsibility on pages
31 and 32)
OUTCOME & ACTIONS
• Ongoing development of
curated, easy to access range
of products allowing
customers to make informed
decisions over what they
purchase
• Continuous monitoring and
measurement of service
quality
• Monitoring of product trends
and developments in the retail
sector
• Development of ‘own brand’
product lines (see pages 14
and 15)
• Continued focus on ethical
sourcing and product safety/
compliance
• TV and radio brand campaigns
highlighting our ‘Certainty’
message to our customers
OUTCOME & ACTIONS
• Single digit staff turnover rates
• More than half of new
•
positions filled resulted from
referral from current team
members
In 2019 4imprint was included,
for the twelfth consecutive
year, on the Great Place to
Work list of the Best Medium
Sized Workplaces in the USA.
In the UK our business is
Investors in People accredited
•
• High participation rates in
employee share ownership
plans – SAYE in UK and ESPP
in US
In October 2019 the Board
appointed Tina Southall as the
NED with responsibility for
championing the interests of
team members (‘Employee
Voice’)
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4imprint Group plc Annual Report 2019
HOW WE ENGAGE
• Regular meetings,
information sharing, and visits
KEY TOPICS
• Product range development
• Exclusive and ‘own-brand’
• Supplier agreements and
products
OUTCOME & ACTIONS
• 4imprint’s Social & Ethical
Policy was updated and
reissued in 2019
• All suppliers sign an annual
vendor agreement with
4imprint, including a Supply
Chain Code of Conduct
• Production efficiency, service
levels and capacity planning
• Product safety/compliance
• Payment and rebate
arrangements
• All suppliers are paid promptly
to terms
• Suppliers have been able to
benefit from our mutual ability
to grow
• Development and broadening
of our range of ‘own-brand’
products, such as Crossland®
and reFresh®
KEY TOPICS
• Charitable donations
• Time available for
volunteering
• Environmental impact
(see page 34 and 35)
• Use of the power of
promotional products to
spread the message
OUTCOME & ACTIONS
• 1,011 ‘one by one®’ charitable
grants made in 2019
• 4imprint profile and
reputation in the local
community enhanced
• Ability to attract and retain
high-quality team members in
tight labour markets
expectation setting
• 4imprint ‘Supply Chain Code
of Conduct’
• Visits, in conjunction with
suppliers, to off-shore
factories where the base
product is manufactured
• Cooperation with suppliers in
marketing campaigns
HOW WE ENGAGE
• Paid time off work for our
team members to volunteer
for a local charity or non-
profit organisation
• Support and sponsor many
local organisations, events
and good causes
• Donations of promotional
•
•
products for events
Involvement in environmental
initiatives
‘one by one®’ charitable
giving programme in the
US/’Helping Hand’ charitable
initiative in the UK
HOW WE ENGAGE
• Regular interaction with the
Trustee of the Plan
• Regular advice from our own
pension consultants
• Periodic evaluation of Plan
funding
KEY TOPICS
• Plan funding level
• Developments in the pension
industry, including increasing
powers of the pension
regulator
OUTCOME & ACTIONS
• Regular Board updates on
pension matters
• Contributions paid in to the
Plan at the agreed level in
2019
• Eventual ‘endgame’ for the
• Latest triennial Plan
Plan
revaluation was in 2019;
discussions with Trustee
resulting in a new funding
schedule, including a lump
sum payment of £7.5m in
May 2020
SUPPLIERS
WHY WE ENGAGE
Our suppliers are integral to the
‘drop-ship’ pillar of our business
model. Effective supplier
partnerships are fundamental to
providing the remarkable
customer service and efficient,
on-time delivery of great
products that meet functional,
safety and environmental
requirements that are essential
to the success of the business.
Our supplier relationships are
discussed in more detail on
page 33.
COMMUNITY
WHY WE ENGAGE
Most of our team members live
locally, so it is clearly in our
interests to have a positive
influence in our local
communities. This begins with
stable and competitively
remunerated employment,
extending to involvement in
many community activities.
Our community involvement
initiatives are described more
fully on page 36.
PENSION TRUSTEE
WHY WE ENGAGE
The Group sponsors a legacy
defined benefit pension scheme
(the “Plan”). We are fully
committed to satisfying our
pension obligations in full, with
the ultimate aim of full funding
and complete de-risking of the
remaining liability.
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4imprint Group plc Annual Report 2019
Responsibility
F O C U S E D O N O U R
PEOPLE
AND CULTURE
Principles and values
The 4imprint Board believes that a strong and principled
approach to corporate responsibility is fundamentally
important to our present and future success.
Our values are firmly grounded in the broad
principles set out in our statement of
corporate purpose (see page 5).
Our culture encourages responsible practice
at all levels of the organisation and presents
clear guiding principles that drive ethical
interactions with, and outcomes for, our key
stakeholders.
Our guiding principles are further
expressed via “The Golden Rule” –
treat others as you would wish to
be treated yourself. This mindset is
evident across the business: in our
customer service proposition and
guarantees; in our product
sourcing initiatives; in the way that
our team members interact with
our customers, our supplier
partners and with each other; in the
way that we engage in our communities
and in our respect for the environment.
We are pleased to remain a constituent
company in the FTSE4Good Index Series,
the global responsible investment index
designed to identify companies that
demonstrate strong environmental,
social and governance (“ESG”)
practices, measured against globally
recognised standards.
PEOPLEPEOPLE 31
4imprint Group plc Annual Report 2019
OUR PEOPLE AND CULTURE
Our primary strategic objective (see page 8)
specifically identifies investment in our people
as a key driver of competitive advantage. We
are committed to a culture that encourages
the training, development, wellbeing and
participation of every team member.
Business objectives and performance
updates are shared with team members via
quarterly ‘all-company’ briefings with the
CEO, and everyone participates in a quarterly
‘gain share’ bonus plan that is based on the
achievement of tangible, clearly
communicated performance targets.
2019 was the twelfth consecutive year that
the North American operation has been
included on the prestigious Great Place To
Work list of the Best Medium Sized
Workplaces in the USA. Our UK-based
business maintains its Investors in People
accreditation. We are very proud of these
accolades, which are indicative of team
members who go above and beyond every
day to help each other, to provide our
customers with remarkable service and to give
back to their communities because they know
and believe that it is the right thing to do.
TRAINING
We strongly support a lifetime of learning.
Throughout the year we offer a wide variety
of training classes, courses and
opportunities.
Training of new team members covers
essential job-specific skills. For example,
newly hired Customer Service
Representatives undertake an intensive
six-week induction programme. New recruit
training also covers other soft skills and a
grounding in the 4imprint philosophy.
On an ongoing basis, team members are
offered more than 100 in-person training
classes across diverse subject matter, including
business skills, professional and personal
development, world cultures, and financial/
legal topics. Many of these classes are taught
by faculty members from local universities and
technical colleges. In addition, in 2019 we
launched an online learning management
system that allows team members to take
online courses from the convenience of their
desks or tablet/smartphone. Around 100
online courses cover a number of professional
and personal development topics, for example
cyber-security updates.
We encourage our team members to take a
holistic approach to their personal
development. We offer classes on
understanding personality types, stress
management and relaxation techniques,
cultural diversity, emotional intelligence and
other related topics. Furthermore, we
address questions of personal financial
planning and wellbeing through classes and
face-to-face meetings with specialists
covering personal budgeting, tax matters,
and planning for retirement.
Professional development is a priority. A
leadership programme includes roundtables,
book discussions and development of
management techniques. Also, the pursuit
of external educational opportunities and
professional qualifications is supported
through our popular tuition reimbursement
programme.
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4imprint Group plc Annual Report 2019
Responsibility continued
LEAN LEADERSHIP
During 2019 we offered Lean Leadership
(process management improvement) classes
to team members in conjunction with the
local Technical College. Each participant took
on a different lean project of their choice as
part of the course. A good example was a
receiving line automation project that led to
a $70k investment in automation delivering
productivity gains and a cleaner and simpler
receiving process. We plan to hold additional
Lean sessions in 2020.
WELFARE
The welfare of our team members is further
addressed through a competitive benefits
package, including strong medical, dental
and retirement offerings. In addition, many
workplace perks are available, and our team
members organise fun events based around
themes such as Customer Service Week,
celebration of our position on the Great
Place To Work list, and an extensive range of
organised events for team members both
inside the office and at external events such
as concerts, minor league basketball and
baseball games, and family day at a local
farm.
DIVERSITY
We understand the importance and
beneficial effect of diversity within our
Company, and we aim to foster a culture
that recruits, develops and promotes team
members regardless of background. We are
committed to the principle of equal
opportunity in employment, and no
applicant or employee receives less
favourable treatment on the grounds of
nationality, age, gender, sexual orientation,
religion, race, ethnicity or disability. We
recognise our responsibility to disabled
persons and endeavour to assist them to
make their full contribution at work. Where
team members become disabled, every
practical effort is made to allow them to
retrain for suitable alternative work.
The Group employs around 1,200 people,
70% of whom are female. One third of the
North American executive team and two
thirds of the UK senior team are female. As
at 28 December 2019 the Board had one
female member.
HEALTH AND SAFETY
A proactive approach to health and safety is
an important aspect of the 4imprint
workplace. Desk-based ergonomics and best
practice protocols in the office environment
along with the operation of machinery and
material handling at our distribution centre
are key areas of emphasis in promoting a
safety culture. Incidents or near misses are
closely tracked, and a Safety Committee
meets on a regular basis to consider future
improvements based on experience and
analysis of the data, or to ensure that we are
fully compliant with changing regulatory
requirements. In addition, we benefit from a
fresh, external perspective through working
closely with risk managers and loss control
specialists from our property and casualty
insurance carriers.
Workplace safety remains a high priority. It is
an important topic at daily morning
management meetings at the Oshkosh
Distribution Centre, ensuring that issues or
incidents are addressed immediately.
Periodic business update meetings for all
team members also place safety front of
mind by beginning with updates, injury and
near miss statistics and related discussion. All
employees attend training at least annually
covering plant evacuation procedures, severe
weather shelter, blood-borne pathogens, fire
extinguisher use and Material Safety Data
Sheets. 2019 saw an emphasis on specific
safety training for team members involved in
operating lift equipment at the Oshkosh
distribution centre.
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4imprint Group plc Annual Report 2019
At the operational level, this means that
4imprint’s goal is to work with tier 1
suppliers who are diligent in managing their
sourcing practices and selecting tier 2
manufacturing facilities, who commit to
ensuring safe working environments where
employees are adequately compensated and
who are able to develop the necessary
manufacturing, design and quality
capabilities. These ethical sourcing
expectations are communicated and
reviewed through our document “4imprint’s
Expectations of Supplier Factory & Product
Compliance”, signature of which reaffirms
the supplier’s commitment to these
principles within their own organisation and
supply base. In addition, 4imprint
representatives are actively involved in our
US trade association, Promotional Products
Association International, in particular with
its leadership and training programme in
supply chain management.
In support of our supply chain expectations,
our product sourcing professionals schedule
regular visits to both domestic tier 1 supplier
facilities and to offshore tier 2 factories,
where the base product is manufactured. In
addition, we conduct a programme of
independent audits of offshore
manufacturing facilities in conjunction with
our key suppliers. Our preference is to work
with suppliers and manufacturers on areas
of concern and to develop a corrective
action plan, although ultimately business
would be re-sourced if compliance is not
achieved.
Underpinning all of our product supply
efforts is our aim to match remarkable
customer service with great products that
meet functional, environmental and safety
standards in each market of distribution. Our
internal supply chain compliance team works
to stay abreast of current and developing
standards as set by the regulatory bodies
and liaises with our supplier partners to
manage and validate product testing and
other quality assurance procedures.
On-site medical clinic in Oshkosh.
In 2019 we made significant upgrades to the
security systems at our two Oshkosh sites, as
well as launching an emergency alert system
enabling team members to receive updates
remotely in respect of severe weather,
security breaches and other threatening
events. In addition, a targeted awareness
campaign was run to educate and inform
team members on prevention techniques to
avoid slips and falls in inclement weather.
We have an extensive employee wellness
programme, including an on-site medical
clinic at both sites in the US operation. As
well as increasing productivity and being
cost-effective for the Company, the clinic
offers great convenience and has proved
very popular with employees: basic medical
services such as flu shots, blood draws or
consultation with a nurse or nurse
practitioner on minor conditions can take
15 minutes compared to hours spent
travelling to and from attending an external
medical facility. Other extensively used
on-site offerings include physical therapy,
nutritional/dietary advice and smoking
cessation support.
PRODUCT AND SUPPLY
Our direct tier 1 suppliers are based in the
USA and Canada for the North American
business, and in the UK and EU for the UK/
Ireland business. Therefore, our supply base
is essentially domestic, with our suppliers
taking care of the importing/manufacture,
inventory management and printing
capabilities required to ship thousands of
orders on a daily basis.
We are acutely aware, however, that our
end-to-end supply chain is a long and
complex one that extends far beyond our
domestic supply partners across the globe to
the tier 2 manufacturers of the base product
and ultimately to tier 3 suppliers of raw
materials or components. As such, our
business activities can have a significant
impact at many levels. Our intention is to
make that impact positive from a social,
economic and environmental perspective.
To set the tone, the Board has developed,
approved and issued a Social & Ethical Policy
Statement. This policy statement was
updated and reissued in 2019, reinforcing its
purpose to set broad guidelines within
which the Group should conduct its business
operations in accordance with best practice
and in compliance with relevant legislation
and to embed human rights and ethical
practices throughout our value chain.
These broad principles are reinforced in our
‘4imprint Supply Chain Code of Conduct’.
This is based on the International Labour
Organisation’s ‘Declaration on Fundamental
Principles and Rights at Work’ and the Fair
Labor Association’s (“FLA”) ‘Principles of Fair
Labor and Responsible Sourcing’. The
4imprint Supply Chain Code of Conduct is
fully aligned with the FLA’s Workplace Code
of Conduct. 4imprint team members are
actively involved in the FLA’s activities.
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4imprint Group plc Annual Report 2019
Responsibility continued
ETHICAL PRACTICES
We do not tolerate discrimination,
harassment, bullying or abuse; we comply
with wage and working condition and time
laws; we do not tolerate forced labour or
child labour; and (subject to the legislation
applicable in the country of operation) it is
our policy that all workers shall have the
right to form or join a trade union and
bargain collectively.
Our Modern Slavery Statement describes the
activities we are undertaking to prevent
slavery and human trafficking in our business
operations and supply chain, in line with
section 54 of the UK Modern Slavery Act
2015. Our Modern Slavery Statement and
further details of our social and ethical and
corporate responsibility policies are available
on https://investors.4imprint.com/.
Bribery and corruption are not tolerated in
our business operations or in our supply
chain. Our “Anti-bribery, financial crime and
sanctions policy” sets out our high standards
of ethics and compliance across all aspects
of our business and provides detailed
guidance on facilitation payments, gifts and
hospitality and relationships with third
parties, as well as on money-laundering, tax
evasion, fraud and sanctions regimes. The
policy applies to all relevant employees and
workers of 4imprint regardless of the
jurisdiction in which they operate. That
policy, together with our employee
handbooks, establish clear systems and
controls to ensure effective implementation.
We encourage an open and transparent
culture and have a whistleblowing policy
that is communicated to all employees.
During 2019 we undertook a detailed review
of all of our ethical policies and guidelines at
the Group level. In the first half of 2020 we
intend to ensure that these policies are
cascaded and embedded appropriately in
our operational businesses.
ENVIRONMENTAL MATTERS
The Board recognises its obligations to
protect the environment and is committed
both to achieving required environmental
standards across all the activities of the
Group and to minimising its environmental
impact. In 2019 a new Environmental Policy
Statement was issued. The management
teams in both the North American and UK
businesses assess and monitor the potential
impact of operations on the environment.
Sustainability, energy consumption and
waste management are key areas of focus.
OUR OPERATIONS
Over the last few years environmental and
sustainability initiatives have become much
more important in our day-to-day business
operations. Our physical operations cover
office, warehouse and postal activities.
Internally, we have a committee on
sustainability in the Oshkosh business under
the acronym SMART – (Sustainability.
Making A Renewable Tomorrow). This
initiative has been supported enthusiastically
throughout the business. Many projects and
ideas have come to fruition, varying in scope
and nature, but all with an emphasis on
sustainability. Some examples are:
• Use of our in-house social media platform
to engage our team members in SMART
initiatives and discussions. This has
proved to be the ideal forum for our
SMART team to initiate engagement on
what 4imprint has done and can do in
the future to improve sustainability.
• Full roll-out of a major upgrade in the
recycling of waste materials across the
business, taking advantage of advanced
single stream recycling capability. This has
had a beneficial effect in terms of
diversion of waste from landfill: trash
pickups from the distribution centre have
been halved and landfill waste per
employee at the main office significantly
reduced. We estimate that in less than a
year our initiatives have kept 768 cubic
yards of waste from going to landfill.
• Attention to the small details. Small
changes implemented across our facilities
can together produce a positive
environmental impact. For example,
condiment packets, such as ketchup,
have been replaced with larger bottles;
plastic drinking straws and stirrers have
been replaced with reusable or recyclable
versions, and lights and water faucets
have been attached to motion sensors.
•
•
Installation of LED lighting at the
distribution centre, with the LED fixtures
using around 50% less energy than the
fluorescent bulbs that they replaced. We
estimate that our energy usage has
reduced by 480,000 kWh, even with
more equipment and more burn time.
LED fixtures are essentially maintenance-
free, last around five times longer and
have a much smaller environmental
impact than fluorescent bulbs.
In 2018 we launched a recycling project
to turn embroidery backing waste
product into fuel pellets. This initiative
gains momentum as the scale of our
embroidery operation grows. We
currently estimate that this initiative
diverts around 30 metric tons of waste
from landfill on an annualised basis.
• We remain involved in several other
initiatives, including the ‘Adopt a
Highway’ programme, (clean-up of waste
along an ‘adopted’ stretch of highway),
and celebration of Earth Day/Arbor Day
by giving our team members a choice of
a seed packet or a tree seedling.
Some of our Oshkosh-based team members
are engaged with the Green Masters
Program promoted by the Wisconsin
Sustainable Business Council (“WSBC”), and
in 2019 our SMART leaders presented details
of 4imprint’s sustainability journey at a
WSBC event. We are pleased to have
achieved the ‘Green Professional’
designation under the WSBC’s Green
Masters Program Certification.
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4imprint Group plc Annual Report 2019
In North America, printed marketing
materials such as catalogues use paper
sourced from sustainable forests,
conforming to Forestry Stewardship Council
requirements. In the UK, our catalogue
mailings meet the Royal Mail’s Responsible
Mail criteria, based on sourcing paper from
recycled/sustainable sources, elimination of
poly wrap and robust suppression
procedures.
OUR PRODUCTS
Our product range is very diverse, covering
many different materials, substrates,
manufacturing processes and imprinting
techniques. We are aware that some of the
products that we sell are produced using
plastics and other potentially non-recyclable
materials. However, sustainability
considerations feature at several levels in the
product decisions of our supply chain and
merchandising teams.
Consistent with our corporate purpose, our
products are designed to promote our
customers’ messages time after time
through repeated usage and impressions. In
other words, products should be lasting
rather than throwaway. Multi-use products
such as reusable shopping tote bags are a
good example. Only 1.5% of our revenue is
from products such as sweets, chocolate
and catering supplies that would be
considered disposable. We are, however,
aware that there are many opportunities to
make sustainability improvements across all
product categories. From ‘scrap’
management in apparel through to
elimination of poly-bag usage across many
categories and replacement with more
sustainable packaging options, our priority is
to identify and deliver a number of projects
each year that are realistic, measurable and
will make a difference. These initiatives are
driven with reference to one or both of the
following themes:
• Curate and educate: We aim to provide
our customers with a curated, easy to
access range of products with sustainable
characteristics, allowing them to make
informed decisions over the items they
purchase. This will include:
— Partnering with our suppliers on
‘Green’ initiatives in the supply chain
— Publicising products or brands with
strong sustainability credentials
— Working with our suppliers to increase
the availability of ‘Eco-friendly’ options
and highlighting those products to our
customers
— Being vigilant and disciplined in
rejecting products with false ‘Eco’
claims
— Educating our customers through
placing emphasis on items that will be
used many times over during a long
product lifetime
‘Adopt a Highway’ programme volunteers.
• The 3 R’s: We will be guided by these
environmentally friendly principles as we
assess and evolve our product range:
— Reduce: Less raw material, packaging,
waste, scrap and pollution
— Reuse: Find ways for products not
utilised or at the end of their useful
life to be repurposed or returned into
the product stream to avoid landfill
— Recycle: Inclusion, where possible, of
recyclable products and products
manufactured from recycled content,
along with information on what and
how to recycle
The importance of sustainability factors
varies from customer to customer,
depending on their product or marketing
requirements but also on local recycling
facilities and regulations. We aspire to make
it easy for customers to segment products
from a sustainability or ‘eco’ perspective –
for example, website search functionality by
recycling code, ability to be recycled,
produced from organic materials,
biodegradability, or manufactured using
recycled materials. By way of example:
• Our largest product category, apparel, is
potentially the most harmful to the
environment from a downstream
manufacturing perspective due to water
consumption and the possibility of poor
effluent management. More than 60%
of 4imprint’s apparel revenue is sourced
from suppliers and brands who are
actively involved in the Sustainable
Apparel Coalition and committed to
products with a high sustainability rating.
• The plastic water bottle category is a
large and important category. Around
60% of revenue for these products is in
the most widely accepted #1 or #2
recycling categories. This includes our
own-label reFresh® brand.
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4imprint Group plc Annual Report 2019
Responsibility continued
one by one®: Wheelchairs 4 Kids.
SOCIAL MATTERS
COMMUNITY INVOLVEMENT
AND VOLUNTEERING
Team members are given paid time off to be
used specifically for volunteering for a local
charity or non-profit organisation of their
choice. In 2019 our team members gave
nearly 1,500 hours of their paid time and
countless hours of their own time to more
than 150 charities, schools and religious
organisations. Some volunteering examples
are:
• Our team provided help to the Oshkosh
Celebration of Lights. This event, one of
the largest of its kind in the Midwest,
spreads the joy of the festive season
through more than a million twinkling
lights over a 1.2 mile exhibit, with
proceeds benefiting area food pantries.
• A popular volunteering opportunity is the
‘Give Back Bus’. Team members travel on
a bus to a destination that is only
revealed on arrival – such as an area
non-profit, Rebuilding Together Fox
Valley, an organisation that provides
home repairs to low-income
homeowners, mostly elderly, veterans or
people with disabilities. Our team helped
prepare supplies for National Rebuilding
Day, an annual event where volunteers
repair and remodel local homes.
4imprint is actively involved in its local
communities in many other ways, for
example in team sponsorships, student
scholarships at local colleges, product
donations for events such as fun runs, 5Ks
and marathons, and encouragement of team
members to participate on volunteer boards
and committees.
CHARITABLE GIVING
Our North American business operates its
“one by one®” charitable giving programme
which reflects our culture and principles.
Each business day we donate at least three
$500 grants to non-profit organisations.
These grants are to be used on promotional
products to help spread the word, recruit
volunteers or thank donors. In 2019, there
were 4,838 applicants, with 1,011 grants
awarded. Since we began the programme in
2006 we have awarded more than 7,400
grants to deserving non-profits in the US
and Canada – $3.7m of promotional
products being used to help organisations
make a difference.
Our UK business has its own charitable
giving initiative, ‘Helping Hand’, which also
aims to use the power of promotional
products in the support of good causes.
The Strategic Report was approved by the Board on 3 March 2020.
KEVIN LYONS-TARR
CHIEF EXECUTIVE OFFICER
DAVID SEEKINGS
CHIEF FINANCIAL OFFICER
37
4imprint Group plc Annual Report 2019
Introduction to Governance
F O C U S E D O N O U R
IDENTITY
AND VALUES
PAUL MOODY
On behalf of the Board of 4imprint Group plc,
I am pleased to introduce the
2019 Corporate Governance Report.
CHAIRMAN’S INTRODUCTION
The Board continues to be committed to high standards of corporate
governance. I am pleased to confirm that in the 2019 financial year
from 30 December 2018 to 28 December 2019 4imprint has
operated in compliance with the provisions of the 2016 Corporate
Governance Code. In addition, 4imprint has implemented changes
aimed towards complying with the 2018 Corporate Governance
Code in the 2020 financial year.
In this Governance Report are set out:
• Details of the Board of Directors
• The Statement on Corporate Governance, which sets out the role
of the Board, its operation and an assessment of the Board’s
effectiveness
•
• The Report of the Audit Committee
• The Report of the Nomination Committee
• The Report of the Remuneration Committee
• The Directors’ Report
During 2019, alongside routine operating matters and performance
management, significant areas of focus have been Board
composition and Board effectiveness:
•
In May 2019 Tina Southall was appointed as an Independent
Non-Executive Director and in December 2019 Emma Taylor was
appointed as Company Secretary, to replace Andrew Scull who
has stepped down from the Board and as Company Secretary.
These appointments have improved the gender diversity of the
Directors and Officers of the Company and have strengthened the
input to the Board from Independent Non-Executive Directors.
In October 2019, the Board appointed external consultants to
conduct a review of Board effectiveness. More detailed
information about this review can be found in the Corporate
Governance Statement on pages 42 and 43.
I would like to thank my fellow Directors for their continued support
and commitment to 4imprint. I am confident that 4imprint can
maintain and further develop a strong and effective governance
system to enable the business to deliver its strategy, generate
Shareholders value and safeguard the interests of all stakeholders.
PAUL MOODY
CHAIRMAN
3 March 2020
IDENTITYSTRATEGIC REPORTCORPORATEGOVERNANCEFINANCIALSTATEMENTSADDITIONAL INFORMATIONOVERVIEWIDENTITY 38
4imprint Group plc Annual Report 2019
Board of Directors
Paul Moody
NON-EXECUTIVE
CHAIRMAN
Kevin Lyons-Tarr
David Seekings
John Warren
Charles Brady
Christina (Tina) Southall
CHIEF EXECUTIVE
OFFICER
CHIEF FINANCIAL
OFFICER
SENIOR INDEPENDENT
NON-EXECUTIVE DIRECTOR
INDEPENDENT
INDEPENDENT
NON-EXECUTIVE DIRECTOR
NON-EXECUTIVE DIRECTOR
Appointed as Non-Executive Director in
February 2016 and became Non-
Executive Chairman in December 2016.
Appointed as Executive Director in June
2012 and became Chief Executive
Officer in March 2015.
Appointed as Chief Financial Officer in
March 2015.
Appointed as Non-Executive Director in
Appointed as Non-Executive Director in
Appointed as Non-Executive Director in
June 2012.
June 2015.
May 2019.
Paul is currently Non-Executive Chairman of
Card Factory plc and is also a Non-Executive
Director of Pets at Home Group plc. He was
previously Non-Executive Chairman of
Johnson Service Group plc and has extensive
public company experience, spending 17
years at Britvic plc, including the last eight of
these years as Chief Executive. Prior to that,
he held a number of senior appointments in
sales and HR, with companies including
Grand Metropolitan plc and Mars.
Based in Oshkosh, Wisconsin, Kevin has
been with the business since 1991, serving in
several capacities, including Chief
Information Officer and Chief Operating
Officer. He was appointed President of the
Direct Marketing business in 2004 and has
led its substantial growth since then.
David is a chartered accountant, having
trained and qualified with KPMG. David has
been with the 4imprint Group since 1996,
initially as Group Financial Controller, moving
to the USA in 2000 to become Chief
Financial Officer of 4imprint Direct
Marketing, based in Oshkosh, Wisconsin.
A chartered accountant, John was Group
Charles is a solicitor and was the founder
Finance Director of United Biscuits (Holdings)
and Managing Director of Central Law
Tina is Director of People at gaming operator
and developer Gamesys, which she joined in
Plc and WH Smith PLC before embarking on
Training Limited which, during his leadership
2014 and which operates some of the
a career as a Non-Executive Director. He is
between 1987 and 2002, became the
currently a Non-Executive Director and
largest provider of post-qualification legal
world’s biggest gaming and sports media
sites. It has more than 35 million customers
Chairman of the Audit Committee at Welsh
training in the UK. Wilmington plc, a
Water, Greencore Group plc and Bloomsbury
company listed on the London Stock
Publishing Plc. He has previously served on
Exchange, acquired Central Law Training in
and 1,300 employees. Prior to joining
Gamesys, Tina held significant sales and
marketing roles at Vodafone Group Plc,
the Boards of Bovis Homes Group PLC,
1999. Charles remained with the business
culminating in her appointment as Regional
Spectris plc, Rank Group Plc, Rexam Plc, RAC
becoming Chief Executive of Wilmington plc
Director, Northern Europe for Vodafone
Plc and BPP Holdings Plc, and chaired the
in 2002, a post which he held until his
Board at Uniq Plc through the resolution of
retirement in 2014. Charles has also served
Global Enterprise, as well as being a Trustee
of The Vodafone Foundation. Prior to joining
its major pension issues.
as a Non-Executive Director of both Hatton
Vodafone, Tina held senior positions as
Blue Limited, a start-up IT company, and the
Director of Customer Experience at Avis
PPA (Professional Publishers Association).
Europe and also at RAC Plc.
COMMITTEES
Audit Committee (Chairman)
Nomination Committee
Remuneration Committee
COMMITTEES
Audit Committee
Nomination Committee (Chairman)
Remuneration Committee (Chairman)
COMMITTEES
Audit Committee*
Nomination Committee*
Remuneration Committee*
39
4imprint Group plc Annual Report 2019
Paul Moody
NON-EXECUTIVE
CHAIRMAN
Kevin Lyons-Tarr
David Seekings
John Warren
Charles Brady
Christina (Tina) Southall
CHIEF EXECUTIVE
OFFICER
CHIEF FINANCIAL
OFFICER
SENIOR INDEPENDENT
NON-EXECUTIVE DIRECTOR
INDEPENDENT
NON-EXECUTIVE DIRECTOR
INDEPENDENT
NON-EXECUTIVE DIRECTOR
Appointed as Non-Executive Director in
Appointed as Executive Director in June
Appointed as Chief Financial Officer in
February 2016 and became Non-
2012 and became Chief Executive
March 2015.
Appointed as Non-Executive Director in
June 2012.
Appointed as Non-Executive Director in
June 2015.
Appointed as Non-Executive Director in
May 2019.
Executive Chairman in December 2016.
Officer in March 2015.
Paul is currently Non-Executive Chairman of
Based in Oshkosh, Wisconsin, Kevin has
trained and qualified with KPMG. David has
Card Factory plc and is also a Non-Executive
been with the business since 1991, serving in
been with the 4imprint Group since 1996,
Director of Pets at Home Group plc. He was
several capacities, including Chief
initially as Group Financial Controller, moving
previously Non-Executive Chairman of
Information Officer and Chief Operating
to the USA in 2000 to become Chief
Johnson Service Group plc and has extensive
Officer. He was appointed President of the
Financial Officer of 4imprint Direct
public company experience, spending 17
Direct Marketing business in 2004 and has
Marketing, based in Oshkosh, Wisconsin.
years at Britvic plc, including the last eight of
led its substantial growth since then.
David is a chartered accountant, having
these years as Chief Executive. Prior to that,
he held a number of senior appointments in
sales and HR, with companies including
Grand Metropolitan plc and Mars.
A chartered accountant, John was Group
Finance Director of United Biscuits (Holdings)
Plc and WH Smith PLC before embarking on
a career as a Non-Executive Director. He is
currently a Non-Executive Director and
Chairman of the Audit Committee at Welsh
Water, Greencore Group plc and Bloomsbury
Publishing Plc. He has previously served on
the Boards of Bovis Homes Group PLC,
Spectris plc, Rank Group Plc, Rexam Plc, RAC
Plc and BPP Holdings Plc, and chaired the
Board at Uniq Plc through the resolution of
its major pension issues.
Charles is a solicitor and was the founder
and Managing Director of Central Law
Training Limited which, during his leadership
between 1987 and 2002, became the
largest provider of post-qualification legal
training in the UK. Wilmington plc, a
company listed on the London Stock
Exchange, acquired Central Law Training in
1999. Charles remained with the business
becoming Chief Executive of Wilmington plc
in 2002, a post which he held until his
retirement in 2014. Charles has also served
as a Non-Executive Director of both Hatton
Blue Limited, a start-up IT company, and the
PPA (Professional Publishers Association).
Tina is Director of People at gaming operator
and developer Gamesys, which she joined in
2014 and which operates some of the
world’s biggest gaming and sports media
sites. It has more than 35 million customers
and 1,300 employees. Prior to joining
Gamesys, Tina held significant sales and
marketing roles at Vodafone Group Plc,
culminating in her appointment as Regional
Director, Northern Europe for Vodafone
Global Enterprise, as well as being a Trustee
of The Vodafone Foundation. Prior to joining
Vodafone, Tina held senior positions as
Director of Customer Experience at Avis
Europe and also at RAC Plc.
COMMITTEES
Audit Committee (Chairman)
Nomination Committee
Remuneration Committee
COMMITTEES
Audit Committee
Nomination Committee (Chairman)
Remuneration Committee (Chairman)
COMMITTEES
Audit Committee*
Nomination Committee*
Remuneration Committee*
Andrew Scull was also a Director during the period and stepped down from the Board on 27 December 2019.
* Tina Southall was appointed to the Audit Committee, Remuneration Committee and Nomination Committee on 30 July 2019.
STRATEGIC REPORTCORPORATEGOVERNANCEFINANCIALSTATEMENTSADDITIONAL INFORMATIONOVERVIEW 40
4imprint Group plc Annual Report 2019
Statement on Corporate Governance
Statement of compliance with
the UK Corporate Governance Code
For the year ended 28 December 2019, the Board considers that the
Company has complied with the provisions of the UK Corporate
Governance Code 2016 (the “2016 Code”), being the UK Corporate
Governance Code which applied to the Company during that
financial year. The 2016 Code sets out guidance in the form of
principles and provisions on how companies should be directed and
controlled to follow good governance practice. Companies listed in
the UK are required to disclose how they have applied the main
principles and whether they have complied with its provisions
throughout the financial year. Where the provisions have not been
complied with, companies must provide an explanation. As the Board
considers that the Company has complied with the 2016 Code, we
have no exceptions to report in that respect.
As mentioned in our 2018 Annual Report and Accounts, the Board
noted the publication by the Financial Reporting Council (“FRC”) of a
new corporate governance code on 16 July 2018 (the “2018 Code”)
and supports the focus that the 2018 Code places on relationships
with employees, Shareholders and other stakeholders. Although the
2018 Code applies to accounting periods beginning on or after
1 January 2019 (and so will only begin to apply to the Company for
the 2020 financial year), the Board has given significant attention to
the changes which are introduced by the 2018 Code, and has (across
the 2019 financial year) monitored the implementation by the
Company of the changes required to support its compliance with the
principles and the spirit of the 2018 Code.
Therefore (and in addition to complying with the 2016 Code), the
Board has already implemented important changes to enable
compliance with the 2018 Code in its 2020 financial year. For
example:
• An improved balance of Independent Non-Executive Directors
(excluding the Non-Executive Chairman) (“NEDs”) to Executive
Directors (“EDs”) of 3:2 has been achieved following the
appointment of Tina Southall as a NED in May 2019 and the
resignation of Andrew Scull as Corporate Services Director and
Company Secretary in December 2019.
• The appointment in October 2019 of Tina Southall as designated
NED for engagement with our team members provides an
additional route for employees’ comments and concerns to be
heard by the Board. This role will be developed in 2020.
• Emma Taylor was appointed as Company Secretary in December
2019, which together with the appointment of Tina Southall in
May 2019, improves the gender diversity of the Directors and
Officers of the Company. Further information about the
Company’s Diversity Policy is set out in the Nomination
Committee Report, found on page 44.
• The Board has continued its engagement with key stakeholders
throughout 2019 and this is reported on in more detail in the s172
statement on pages 27 to 29.
• The Board has also sought to take a more active role in assessing
and monitoring culture to ensure that the Company’s behaviour
and practices are aligned with its purpose, values and strategy,
and has put in place plans for increased reporting to the Board
during 2020 on matters relating to workplace culture. The Board
is supported in this goal by the Nomination Committee, which
encourages the meritocratic recruitment and promotion of a
diverse workforce at all levels.
• The Board has continued to engage with and invest in its
workforce, and its practices in this respect are reported on in
more detail in the Responsibility section of the Strategic Report,
found at pages 30 to 32.
The 2016 Code and 2018 Code are both publicly available on the FRC
website.
ROLE OF THE BOARD
The primary responsibility of the Board is to promote the long-term
success of the Company and to sustainably grow Shareholders value.
The Board has responsibility for the management, direction and
performance of the Group and is committed to delivering the
Group’s strategy through meaningful engagement with all
stakeholder groups.
The Board is also responsible for ensuring that management
maintains a system of control that provides assurance of effective
and efficient operations, internal financial control and compliance
with laws and regulations. To that end, the Board has created an
ongoing system of internal control, the effectiveness of which it
reviews on a regular basis. The Group’s business operations complete
an annual internal control questionnaire, the results of which are
reported back to the Board, highlighting any major changes or
weaknesses identified. The aim of this system is to manage and
mitigate the risk of any failures to meet business targets and can only
provide reasonable and not complete assurance against such failures.
The Board is the decision-making body for all matters material to the
Group’s finances, strategy and reputation. The powers of the
Company’s Directors, as well as the rules relating to the appointment
and removal of Directors, are set out in the Company’s Articles of
Association.
The Chairman is responsible for leadership of the Board and ensuring
its effectiveness. The Chairman promotes a culture of openness and
debate and ensures that each Board member is given opportunity to
contribute their views to each topic under discussion.
BOARD COMPOSITION AND STRUCTURE
As at the date of this report, the Board comprises six members,
namely the Independent Non-Executive Chairman, three
Independent Non-Executive Directors and two Executive Directors,
being the Group Chief Executive Officer and the Group Chief
Financial Officer. The biographies of the Directors can be found on
pages 38 and 39.
Board composition has been a focus during the year. On 8 May 2019
the Board appointed Tina Southall as a Non-Executive Director. On
27 December 2019 Andrew Scull stepped down as Corporate
Services Director and Company Secretary. Emma Taylor was
appointed Company Secretary with effect from 27 December 2019.
These changes have improved the gender diversity of the Directors
and Officers of the Company.
The Board is satisfied that there is a sufficient balance between
Executive and Non-Executive Directors on the Board to ensure that
no one individual has unfettered decision-making powers and that
the Board has the appropriate balance of skills, experience,
41
4imprint Group plc Annual Report 2019
independence and knowledge of the Group to enable it to discharge
its duties and responsibilities effectively. Having undertaken a review
of the Non-Executive Directors’ outside commitments, the Board is
satisfied that all Non-Executive Directors have sufficient time
available to allocate to the Company in order to discharge their duties
effectively.
The role of the Non-Executive Directors includes assisting in the
development of strategy; monitoring the integrity of financial
information and systems of risk management; reviewing the
performance of management including the alignment of
performance with Company culture and values; assisting the
Company in engaging effectively with all its stakeholders; and
determining the appointment, removal and remuneration of
Executive Directors.
The current Non-Executive Directors have letters of appointment for
three years from 11 June 2018 for John Warren, 11 June 2018 for
Charles Brady, 1 February 2019 for Paul Moody and 8 May 2019 for
Tina Southall. These letters are available for inspection by any person
at the Company’s registered office during normal business hours and
also at the AGM.
OPERATION OF THE BOARD
The Board has a formal schedule of matters reserved for its decision
and the schedule was reconsidered and approved by the Board at its
meeting on 17 December 2019. The schedule of matters reserved for
the Board includes the consideration and approval of:
• The Group’s strategic aims, objectives and commercial strategy
• The annual business plan and the review of performance relative
to that plan
• Financial statements and Group dividend policy, including
recommendations on the interim and final dividends
• Major capital expenditure
• Financing and treasury policies
• Major changes to the Group’s corporate structure including
acquisitions and disposals
• Changes to accounting policies or practices
• Appointment and removal of Directors and the Company
Secretary
The Board has delegated other specific responsibilities to its principal
sub-committees: the Audit Committee, the Nomination Committee
and the Remuneration Committee. The details of the Board
Committees and their activities are set out on pages 44 to 55. The
Board delegates day-to-day management of the Group to the
Executive Directors.
The Board has at least six scheduled meetings per year and additional
Board meetings are convened as and when required. A table setting
out the number of Board and Committee meetings held during the
period and attendance by Directors at those meetings is set out
below:
P. Moody
K. Lyons-Tarr
A. Scull
D. Seekings
C. Brady
C. Southall (ii)
J. Warren
Board
meetings
Audit
Committee
meetings
Remuneration
Committee
meetings(i)
Nomination
Committee
meetings
7
7
7
7
7
4
7
2*
2*
2*
2*
2
1*
2
2*
2*
2*
2*
2
1
2
1*
1*
1*
1*
1
0
1
* By invitation.
(i) None of the Executive Directors were present at the time at which the
Remuneration Committee considered and made decisions regarding the
remuneration of the Executive Directors.
(ii) Tina Southall was appointed to the Board on 8 May 2019 and was appointed to
the Audit Committee, Remuneration Committee and Nomination Committee on
30 July 2019.
All Board and Committee meetings are minuted by the Company
Secretary and these minutes are formally approved at the following
Board meeting. Board minutes contain details of the Directors’
decision-making processes and any concerns raised by Directors.
BOARD COMMITTEES
The Board has three permanent Committees being the Audit
Committee, the Nomination Committee and the Remuneration
Committee. Other than the Committee members, further
participants may attend by invitation of the Committee. Each
Committee’s roles and responsibilities are set out in the formal terms
of reference which are determined by the Board and which were
reviewed and reaffirmed by the Board at its meeting on 17 December
2019. Reports from each of these committees are provided on pages
44 to 55.
BOARD INFORMATION AND SUPPORT
The Chairman, in conjunction with the Company Secretary, ensures
that the Board receives accurate, timely and clear information. In
advance of each meeting, the Board receives an agenda for the
meeting, minutes of the previous meeting, detailed financial
information on the performance of the business and items for
discussion. This enables the Directors to make informed decisions on
the corporate and business issues under consideration. Additionally,
all Directors have access to senior management should they require
additional information on the items to be discussed.
Once a year the Board visits the 4imprint site in Oshkosh, Wisconsin
for the annual strategy review day and a Board meeting. This
provides a good opportunity for the Non-Executive Directors to
discuss issues with senior management and meet team members
working in different parts of the business. The visit also includes a
tour of the Distribution Centre and an opportunity to view the
investment that has been made and talk to team members working
there. In addition, the Chairman and other Non-Executive Directors
have made separate visits to the Oshkosh site during the year.
The Company provides resources, as appropriate, to enable Directors
to update their skills and knowledge, including an induction
programme for new Directors joining the Board. Tina Southall joined
the Board in May 2019 and her induction process included meetings
and discussions with other Board members and the Company
Secretary; a review of Board procedures and documentation; a visit
to the Oshkosh site; training from external advisors; and ongoing
mentorship from the Chairman. Independent professional advice is
available to all Directors as required, at the Company’s expense. All
Directors have access to the advice and services of the Company
Secretary and may address issues to the Senior Independent
Non-Executive Director, if required. The Non-Executive Directors
meet from time to time without the Executive Directors being
present.
DIRECTORS’ CONFLICTS OF INTEREST
The Companies Act 2006 codifies the duty of the Directors to avoid a
situation in which they have, or could have, an interest that conflicts,
or may possibly conflict, with the interests of the Company. A
Director will not be in breach of that duty if the relevant matter has
been authorised in accordance with the Articles of Association by the
other Directors. Each Director has confirmed that they are aware of
the need to notify the Company of any potential conflict of interest.
Andrew Scull has notified the Company that until 27 December 2019
he was a Director and Company Secretary of the 4imprint Pension
Trustee Company Limited and a Director and Company Secretary of
4imprint 2016 Pension Trustee Company Limited, which administers
the legacy defined benefit pension scheme.
STRATEGIC REPORTCORPORATEGOVERNANCEFINANCIALSTATEMENTSADDITIONAL INFORMATIONOVERVIEW 42
4imprint Group plc Annual Report 2019
Statement on Corporate Governance continued
BOARD ACTIVITIES IN 2019
STRATEGY
• Site visit to Oshkosh in October 2019 including Annual Strategy
GOVERNANCE
• Review of the Group’s key corporate governance policies and
Review
procedures
• Review of progress in the further roll-out of the brand
• Review of reports on regulatory matters including health and
component of the marketing mix
safety and work environment
• Consideration of other potential strategic initiatives and
investment plans, both on-site and via updates at regularly
scheduled Board meetings
• Appointment of an additional Non-Executive Director
• Appointment of a new Company Secretary
• External Board Effectiveness Review
FINANCE
• Review and approval of full year and half year results
• Review and approval of 2020 budget and the three-year plan
• Approval of dividends to be paid in 2019
RISK MANAGEMENT
• Review of principal risks and uncertainties
• Review of information security and cyber risk
• Updates and discussions on the implications of the US-China
trade dispute, Brexit and other evolving risks
Throughout the period ending 28 December 2019 and in accordance with provision C.2.1 of the 2016 Code and provision 28 of the 2018
Code, the Board has carried out a robust assessment of the principal risks and uncertainties and the possible longer-term emerging risks facing
the Group, including those that would threaten its business model, future performance, solvency or liquidity. This is described in the Principal
Risks & Uncertainties section on pages 22 to 26.
The Board has assessed the future prospects of the Group in accordance with provision C.2.2 of the 2016 Code and provision 31 of the 2018
Code. Based on the results of this analysis, the Board has a reasonable expectation that the Group will be able to continue in operation and
meet its liabilities as they fall due over the three-year period of their assessment. Details of the assessment performed by the Board, including
an assessment of those risks most likely to impact the Group’s future prospects and viability, have been set out on page 21.
BOARD EFFECTIVENESS REVIEW
Both the 2016 Code and the 2018 Code require the Board to conduct an external evaluation of the performance and effectiveness of the
Board and its Committees every three years. During 2019 a Board Effectiveness Review was undertaken by independent external consultants
Odgers Berndtson. Odgers Berndtson has previously assisted in Board-level recruitment, but otherwise has no other connection with the
Company.
The review process involved:
• Odgers Berndtson meeting the Executive Directors to understand the strategic landscape, business challenges and operational, cultural,
financial and people factors that underpin the Company’s successful performance
• Odgers Berndtson meeting the Company Secretary to understand how the Board functions
• All Board members completing a Board Effectiveness Survey followed up by one-to-one interviews with an Odgers Berndtson consultant to
discuss their survey responses.
The output of the evaluation was presented in a report to the Board at its December 2019 meeting and the Directors discussed the points
raised by the review.
43
4imprint Group plc Annual Report 2019
Key points raised in the review are summarised in the table below. During 2020, the Board will look to implement the recommendations and
actions arising from the review.
Topic
Feedback
BOARD LEADERSHIP AND COMPANY PURPOSE
DIVISION OF RESPONSIBILITIES
• The Company’s purpose and strategy are clear and agreed by the Board members
• The annual strategy review and Board meeting in Oshkosh is valued by the Board as an
opportunity to meet with the Senior Management Team and employees and to visit
operational assets
• The Board should develop its processes and reporting of the alignment of purpose, values
and strategy with Group culture and with the interests of all stakeholders
• Board attendance by Chair and NEDs is excellent
• Chair and NEDs regularly connect with the CEO and CFO outside of Board meetings
• An improved balance of NEDs to EDs of 3:2 has been achieved following the appointment
of Tina Southall in May 2019 and the resignation of Andrew Scull from the Board in
December 2019
• The Board should reassess its processes for engaging with all its stakeholders as required
by s172 CA 2006
COMPOSITION, SUCCESSION AND EVALUATION • The Nomination Committee has influenced the strengthening of the Senior Management
Team
• The Senior Management Team present to the Board at the annual strategy review,
providing the Board with an opportunity to assess the capability supporting the CEO
and CFO
• The induction process for Tina Southall who joined as a NED in May 2019 was
comprehensive
• During 2020 the Board should commence planning for a replacement Chair of the Audit
Committee who retires in 2021
• The Board should further develop its succession planning
AUDIT, RISK AND INTERNAL CONTROL
• The Chair of the Audit Committee contribution as a sounding board for the CFO is
REMUNERATION
highly valued
• The Board annually reviews and challenges the top corporate risks in the context of
the strategy
• As the Group continues to grow, the Board should continue to review the Group’s risk
mitigation actions including a broader challenge in respect of disruptive or emerging risks
• The Board should review the potential impact of integrated or cumulative risks
• The Remuneration Committee meets annually to review and approve general salary
increases across the workforce as well as the remuneration of executives and the Senior
Management Team
• External remuneration consultants have been appointed to ensure the continued
alignment of policies to US and UK regulations and assist with market benchmarking
• The Board should review gender pay ratios in the UK and US workforce
• The Remuneration Committee Chair should engage proactively with Shareholders on key
remuneration policies
CORPORATE GOVERNANCE POLICIES
During 2019 the Board has reviewed and updated its Corporate Governance Policies. This included updating its Environmental Policy and Social
and Ethical Policy which set out broad guidelines within which the Group should conduct its business operations. More details of these policies
are set out on pages 34 and 35.
The Board is committed to guarding against any form of modern slavery or human trafficking taking place in any part of its business operations
or in the Group’s supply chains. The Board has updated its Modern Slavery Statement which further articulates the Group’s stance on
supporting and enforcing the provisions of the Modern Slavery Act 2015. In accordance with section 54(1) of the Modern Slavery Act 2015,
our slavery and human trafficking statement is published annually on the Company’s website and can be found at https://investors.4imprint.
com/modern-slavery-statement.
All Corporate Governance Policies were reconsidered and approved by the Board at a meeting on 17 December 2019.
ENGAGEMENT WITH STAKEHOLDERS
The Board is committed to its responsibilities to all its stakeholders, including Shareholders, team members, customers, suppliers, the
communities in which it operates and the Pension Trustee, and strives to ensure effective engagement with, and encourage participation from,
each of these groups. The Directors are mindful of these responsibilities and consider them as part of their decision-making process. The
Companies Act 2016 s172 statement on pages 27 to 29 sets out how the Board has engaged with these different stakeholder groups.
STRATEGIC REPORTCORPORATEGOVERNANCEFINANCIALSTATEMENTSADDITIONAL INFORMATIONOVERVIEW 44
4imprint Group plc Annual Report 2019
Nomination Committee Report
CHAIRMAN’S OVERVIEW
As Chairman of the Nomination Committee, I am pleased to present
my report for 2019 to Shareholders. The focus of the Committee in
2019 has continued to be on ensuring that the size, composition and
structure of the Board are appropriate for the delivery of the Group’s
strategic objectives.
RESPONSIBILITIES OF THE NOMINATION COMMITTEE
The responsibilities of the Nomination Committee include:
• Reviewing the structure, size and composition of the Board and
making recommendations to the Board with regard to any
adjustments that are necessary
Identifying and nominating candidates for the approval of the
Board to fill Board vacancies as and when they arise
•
• Putting in place plans for succession at Board level
The Nomination Committee ensures that Directors are appointed to
the Board on merit, against objective criteria and with due regard to
ensuring that the Board shows a balance of skills, knowledge and
experience. The Nomination Committee has terms of reference which
were reconsidered and approved by the Board of the Company at its
Board meeting on 17 December 2019. These terms of reference are
available for inspection at the Company’s registered office during
normal business hours.
COMPOSITION OF THE NOMINATION COMMITTEE
I chair the Nomination Committee and I am an Independent
Non-Executive Director. The other members of the Committee during
the period were John Warren, the Senior Independent Non-Executive
Director, and, from 30 July 2019, Tina Southall, an Independent
Non-Executive Director. Paul Moody, the Non-Executive Chairman of
the Company, is usually invited to attend formal meetings of the
Committee. Executive Directors may also be invited to attend
meetings of the Nomination Committee. The Company Secretary
also attends the meetings.
MEETINGS OF THE NOMINATION COMMITTEE
The Nomination Committee meets as frequently as is required to
fulfil its duties. When there are no specific decisions or
recommendations to be made, the Chairman of the Committee
consults the other members of the Committee as necessary. During
the period ended 28 December 2019 there was one meeting of the
Nomination Committee which was attended by myself and John
Warren (as members of the Nomination Committee) and certain
Executive Directors by invitation. Further details on attendance of
meetings of the Nomination Committee is set out in the Statement
on Corporate Governance, found at page 41.
MAIN ACTIVITIES OF THE NOMINATION COMMITTEE DURING THE
PERIOD ENDED 28 DECEMBER 2019
The Nomination Committee’s principal activities during the year
included:
• Review of the composition of the Board, including both Executive
and Independent Non-Executive Directors. Following a search
process using an external recruitment consultant, Tina Southall
was appointed as an additional Independent Non-Executive
Director in May 2019. Andrew Scull stood down as Corporate
Services Director and Company Secretary in December 2019 and
consequently, the Board now comprises three Independent
Non-Executive Directors (excluding the Non-Executive Chairman)
and two Executive Directors.
• The appointment of Emma Taylor as Company Secretary on
27 December 2019 to replace Andrew Scull. This appointment,
along with the appointment of Tina Southall, has improved the
gender diversity of the Directors and Officers of the Company.
Emma has served the Company as Group Tax Manager since
2007, and we are delighted that our succession plans have
worked effectively to appoint an internal candidate to the
Company Secretary role.
• Review and discussion with the Executive Directors on talent
management and succession planning which has remained a key
area of focus for the Committee. The Committee is dedicated to
ensuring that an effective succession plan is maintained in respect
of the Company’s Directors and for the Senior Management
Team.
• Review of the executive and Senior Management Team based at
the Oshkosh site in the USA.
• Participation in the Board Effectiveness Review undertaken in
October 2019 (see pages 42 and 43 for details).
EXTERNAL SEARCH CONSULTANCY
A search process using an external recruitment consultant, Odgers
Berndtson, was used in the recruitment and appointment of Tina
Southall as an additional Independent Non-Executive Director in May
2019. Odgers Berndtson was also engaged to conduct a Board
Effectiveness Review in October 2019 but otherwise has no other
connection with the Company or any individual Directors.
DIVERSITY POLICY
The Committee supports the Code provision that boards should
consider the benefits of diversity, including gender and ethnicity,
when making appointments and is committed to ensuring diversity,
not just at Board level, but also across the Group’s senior
management.
The Committee understands the importance and beneficial effect of
diversity within the workforce and aims to foster a culture that
recruits, develops and promotes team members at all levels
regardless of background. The Group is committed to promoting the
principle of equal opportunity and to combatting discrimination
throughout its workforce as well as in senior management, and no
applicant or employee receives less favourable treatment on the
grounds of nationality, age, gender, sexual orientation, religion, race,
ethnicity or disability. The Group recognises its responsibility to
disabled persons and endeavours to assist them to make their full
contribution at work.
In relation to gender diversity, in July 2019 the Company took part in
the Hampton Alexander Review which monitors gender balance in
FTSE 100 and FTSE 250 companies. The Company was admitted to
the FTSE 250 on 24 June 2019 and, based on data as at 30 June
2019, and shown in the Hampton Alexander Report published in
November 2019, the Board was 14.3% female (one female out of
seven Board members) and 42.9% of the senior management team
including direct reports were female. Andrew Scull stood down as
Corporate Services Director in December 2019 and, consequently, the
Board is now 16.6% female (one female out of six Board members).
The Committee’s aim as regards the composition of the Board is that
it should have a balance of experience, skills and knowledge to
enable each Director and the Board to discharge their duties
effectively. The Committee agrees that it is appropriate that it should
seek to have diversity on its Board; however, it does not consider that
this can be best achieved by establishing specific quotas and
appointments will continue to be made based on merit, with diversity
in mind.
More information about the Company’s people and culture can be
found in the Responsibility section on pages 31 and 32.
APPOINTMENT AND REPLACEMENT OF DIRECTORS
Directors may be appointed by the Company by ordinary resolution
or by the Board. A Director appointed by the Board holds office only
until the next AGM and is then eligible for election by the
Shareholders.
At every AGM of the Company, all Directors put themselves forward
for re-election. The office of Director shall be vacated if he or she: (a)
resigns or offers to resign and the Board resolves to accept such
offer; (b) is, or has been, suffering from mental ill-health; (c) becomes
bankrupt or compounds with creditors generally; (d) is prohibited by
law from being a Director; (e) ceases to be a Director by virtue of the
provisions of the Companies Act; or (f) is removed from office
pursuant to the Articles of Association.
45
4imprint Group plc Annual Report 2019
All Non-Executive Directors have written letters of appointment. The
terms and conditions for the appointment of Non-Executive Directors
are available for inspection at the Company’s registered address
(during normal working hours) on request.
Full biographies of each Director can be found on pages 38 and 39.
Each Director named therein will be seeking re-election at the 2020
AGM. The Board is satisfied that, having been subject to a recent
formal performance evaluation in relation to the fulfilment of their
s172 duty, each Director seeking re-election continues to be an
effective member of the Board.
INDEPENDENCE OF DIRECTORS
The Code states that at least half the members of the boards of
public companies in the FTSE 350, excluding the Chairman, should be
Independent Non-Executive Directors, meaning that those directors
should be independent in character and judgment, and free from
relationships or circumstances which are likely to affect, or could
appear to affect, their judgment.
The Independent Non-Executive Directors play a key role in ensuring
the maintenance of high business standards, assist in the formation
of strategy and provide a constructive and experienced perspective.
The Board considers that Paul Moody, Charles Brady, John Warren
and Tina Southall are independent for the purposes of the Code. The
Board reviews the independence of Non-Executive Directors on an
ongoing basis and manages a succession plan which considers the
skills balance of the Board, the tenure of existing Non-Executive
Directors and the Company’s strategy and diversity policy.
CHARLES BRADY
CHAIRMAN OF THE NOMINATION COMMITTEE
3 March 2020
STRATEGIC REPORTCORPORATEGOVERNANCEFINANCIALSTATEMENTSADDITIONAL INFORMATIONOVERVIEW 46
4imprint Group plc Annual Report 2019
Audit Committee Report
I am pleased to present my report to Shareholders as Chairman of
the Audit Committee.
RESPONSIBILITIES OF THE AUDIT COMMITTEE
The Audit Committee is responsible for maintaining an appropriate
relationship with the Group’s external auditors and for reviewing the
Group’s internal financial controls and the audit process. It assists the
Board in seeking to ensure the integrity of the financial and non-
financial information supplied to Shareholders and that such
information presents a fair, balanced and understandable assessment
of the Group’s performance and position.
The Audit Committee has terms of reference which were
reconsidered and approved by the Board at its meeting on
17 December 2019. These terms of reference are available for
inspection at the Company’s registered office during normal business
hours. The Board considers that the Audit Committee members have
an understanding of the following areas:
• The principles of, and developments in, financial reporting
including the applicable accounting standards and statements of
recommended practice
• Key aspects of the Group’s operations including corporate policies
and the Group’s internal control environment
• Matters which may influence the presentation of the financial
statements
• The principles of, and developments in, company law, sector-
specific laws and other relevant corporate legislation
• The role of internal and external auditing and risk management
• The regulatory framework for the Group’s businesses
The Committee reviews the effectiveness, objectivity and
independence of the external auditors and also considers the scope
of their work and fees paid for audit and non-audit services.
COMPOSITION OF THE AUDIT COMMITTEE
I chair the Audit Committee and I am the Senior Independent
Non-Executive Director. I am a chartered accountant and was Group
Finance Director of United Biscuits (Holdings) Plc and WH Smith PLC.
The Board is of the view that I have recent and relevant financial
knowledge and experience derived in particular from current roles as
Chairman of the Audit Committee at Bloomsbury Publishing Plc,
Welsh Water and Greencore Group plc.
The other members of the Committee during the period were
Charles Brady and, from 30 July 2019, Tina Southall, both
Independent Non-Executive Directors. The Chairman of the Company
and the Chief Financial Officer are normally invited to attend
meetings of the Audit Committee as are, from time to time, the Chief
Executive Officer and the Group Financial Controller. The Company
Secretary and external audit partner also attend the meetings.
HOW THE AUDIT COMMITTEE DISCHARGES ITS RESPONSIBILITIES
The Committee has unrestricted access to Company documents and
information, as well as to employees of the Company and the
external auditors. Members of the Committee may, in pursuit of their
duties, take independent professional advice on any matter, at the
Company’s expense. The Audit Committee Chairman reports the
outcome of Audit Committee meetings to the Board.
The Audit Committee meets at least twice each year and has an
agenda linked to events in the Group’s financial calendar. The Audit
Committee met twice during 2019.
In order to fulfil its terms of reference, the Audit Committee receives
and reviews presentations and reports from the Group’s senior
management and the external auditors.
MAIN ACTIVITIES OF THE COMMITTEE IN REGARD TO THE PERIOD
ENDED 28 DECEMBER 2019
In regard to the period ended 28 December 2019, the Audit
Committee’s business has included the following items:
• Consideration and approval of half year results announcement
• Consideration and approval of full year results announcement and
the Annual Report and Accounts
• Principal judgmental accounting matters affecting the Group
based on reports from both the Group’s management and the
external auditors
• Review of external audit
• Consideration of the internal controls within the Group
• Consideration and approval of risk assessments relating to the
Group’s businesses
• Specific investigations as required
ANNUAL REPORT AND ACCOUNTS AND RESULTS ANNOUNCEMENTS
During the period, the Audit Committee formally reviewed draft half
and full year results announcements and the Annual Reports and
Accounts. These reviews considered:
• The accounting principles, policies and practices adopted in the
Group’s financial statements and proposed changes to them
• Significant accounting issues and areas of judgment and
complexity
• The integrity of the financial and non-financial information
The Committee was satisfied with management’s presentation of the
2019 half and full year results announcements and the Annual
Reports and Accounts for the period ended 28 December 2019.
The external auditors confirmed to the Committee that they were not
aware of any material misstatements during the course of their audit.
After reviewing the presentation from management and following
discussions with the external auditors, the Committee is satisfied
that:
• The financial statements appropriately address the critical
judgments and key estimates both in respect of the amounts
reported and the related disclosures in the financial statements
• The processes used for determining the value of the assets and
liabilities have been appropriately reviewed, challenged and are
sufficiently robust
• The Annual Report and Accounts taken as a whole are fair,
balanced and understandable and provide the information
necessary for Shareholders to assess the Group’s position and
performance, business model and strategy and should be
recommended to the Board
In arriving at the conclusion that the Annual Report and Accounts
were fair, balanced and understandable the Committee considered:
• Any feedback provided by Shareholders on the Group’s 2018
Annual Report and Accounts and trading updates, and
information received by the Board throughout the period
• The processes underpinning the compilation of the Annual Report
and Accounts and the Group’s reporting governance framework
• The reviews and findings of the Group’s external auditors
As necessary, the Audit Committee holds private meetings with the
external auditors to review key issues within their spheres of interest
and responsibility.
FINANCIAL REPORTING AND SIGNIFICANT FINANCIAL JUDGMENTS
The Committee assesses whether suitable accounting policies have
been adopted and whether management has made appropriate
estimates and judgments. Where necessary the Committee discusses
accounting policies, judgments and estimates with management.
The Committee also reviews reports by the external auditors on the
full year results which highlight any issues arising from the work
undertaken in respect of the year end audit.
Specific areas of audit and accounting estimates reviewed by the
Committee were:
47
4imprint Group plc Annual Report 2019
ACCOUNTING FOR DEFINED BENEFIT PENSION SCHEME
The defined benefit pension scheme is material to the financial
position of the Group. The amount shown in the balance sheet is
sensitive to changes in key actuarial assumptions. The Committee
reviewed the appropriateness and consistency of these assumptions
and the auditors confirmed that the assumptions used were
reasonable and within an acceptable range. Full disclosure of the
pension scheme is provided in note 18 to the financial statements,
which includes the key period end assumptions and the sensitivities
on page 88.
LEASES
The Group has adopted IFRS 16 this financial year. The lease liability
is initially measured at the present value of expected future lease
payments discounted at the interest rate implicit in the lease or, if
that cannot be determined, the lessee’s incremental borrowing rate.
It was not possible to ascertain the interest rates implicit in the
existing leases therefore estimates have been based on the
incremental cost of borrowing for similar terms and assets.
Additionally, an estimate of the residual term over which the Oshkosh
office lease will be rolled over has also been necessary (note 16).
The Committee has reviewed these estimates with management and
is satisfied they are appropriate.
SUPPLIER REBATES
As in previous years, the businesses accrued rebates due from key
suppliers based on agreed fixed rates relating to the volumes of
goods purchased in a calendar year. The Committee does not
consider the Group’s rebates to be highly complex as: they are
volume-related; agreement periods are coterminous with the Group’s
accounting period; there are written agreements in place with
suppliers; and historically rebates have been collected. However, FRC
guidance has highlighted this as an area of focus and the rebates are
material to the results for the period.
The Committee has discussed, with management and the external
auditors, any estimates made in accruing suppler rebates and the
collectability of these amounts. The Committee is satisfied that the
amounts accrued are appropriate and are recoverable.
EXTERNAL AUDIT
The Audit Committee is responsible for the development,
implementation and monitoring of the Group’s policy on external
audit, overseeing relations with the external auditors and making
recommendations to the Board on appointment or re-appointment
of the external auditors.
The Company complies with the Statutory Audit Services for Large
Companies Market Investigation (Mandatory Uses of Competitive
Tender Process and Audit Committee Responsibilities) Order 2014
and undertook a competitive tender process in 2018, described in
the 2018 Annual Report and Accounts. Following this process Ernst &
Young LLP were appointed as the Group’s external auditors at the
2019 AGM for the financial year commencing 30 December 2018. It
is the intention of the Committee that the Company tender the
external audit at least every ten years.
The Group’s policy on external audit prohibits certain types of
non-audit work from being performed by the external auditors,
particularly in cases where the external auditors’ objectivity and
independence would be put at risk. Before any significant non-audit
work is commissioned, the nature and extent of such work is
considered, initially by the Chief Financial Officer and the Company
Secretary, to determine if such work would put at risk the external
auditors’ objectivity and independence. This process includes
discussion with the audit partner at Ernst & Young LLP. The matter is
then referred to the Audit Committee for approval, prior to
commissioning. During 2019, the Group’s external auditors provided
$13,000 of non-audit services to the Group.
Details of fees paid to the auditors in respect of audit and non-audit
services are shown in note 2 to the consolidated financial statements.
To fulfil its responsibility regarding the independence of the existing
external auditors, the Audit Committee reviewed:
• Changes and rotation of external audit team members in the
audit plan for the current year
• A report from the external auditors describing their arrangements
to identify, report and manage any conflicts of interest
• The nature and extent of non-audit services, if any, provided by
the external auditors
To assess the effectiveness of the external auditors, the Audit
Committee reviewed:
• The relevant skills and experience of the audit partner and team
and their knowledge of the business
• Planning and scope of the audit and identification of areas of
audit risk
• Execution of the audit plan
• Formal reports presented to the Audit Committee
To fulfil its responsibility for oversight of the external audit process,
the Audit Committee reviewed:
• The terms, areas of responsibility, associated duties and scope of
the audit as set out in the external auditors’ engagement letter for
the forthcoming year
• The external auditors’ overall work plan for the forthcoming year
• The external auditors’ fee proposal
• The major issues that arose during the course of the audit and
their resolution
• Key accounting and audit judgments
• The levels of errors identified during the audit
• Recommendations made by the external auditors in their
management letters and the adequacy of management’s
response
Based upon its reviews, the Committee has recommended the
re-appointment of Ernst & Young LLP, as external auditors, to the
Board.
INTERNAL CONTROL
The Audit Committee is required to assist the Board to fulfil its
responsibilities relating to the adequacy and effectiveness of the
control environment and the Group’s compliance with the Corporate
Governance Code. To fulfil these duties, the Audit Committee
reviewed:
• The external auditors’ review of internal controls and audit
highlights memoranda
• Any reports on the systems of internal controls and risk
management
Given the present nature of the business model and structure of the
Group with one main operating site, stable operating and financial
systems and the close involvement of the Executive Directors in the
day-to-day running of the business, the Board does not currently
consider the establishment of a separate internal audit function to be
necessary. However, this matter is reviewed by the Board at least
annually. The absence of internal audit probably does result in
additional substantive testing by the external auditors, but the overall
impact is difficult to assess.
The Group has a ‘Whistleblowing’ policy which contains
arrangements for the Company Secretary to receive, in confidence,
complaints on accounting, risk issues, internal controls, auditing
issues and related matters for reporting to the Audit Committee as
appropriate.
STRATEGIC REPORTCORPORATEGOVERNANCEFINANCIALSTATEMENTSADDITIONAL INFORMATIONOVERVIEW 48
4imprint Group plc Annual Report 2019
Audit Committee Report continued
The control system of the Group is intended to manage rather than
eliminate the risk of failure to meet the Group’s objectives and any
such system can only provide reasonable and not absolute assurances
against material misstatement or loss. The effectiveness of the
control system including financial, operating, compliance and risk
management is reviewed by the Board at least annually.
Additionally, through the management process outlined in the
Statement on Corporate Governance on pages 40 to 42, the Group
operates a continuous process of identifying, evaluating and
managing the significant risks faced by each business and the Group
as a whole. This process, which has been in place throughout 2019
and up to the date of the approval of this Annual Report, complies
with the FRC guidance and includes the following:
• A defined organisational structure with appropriate delegation
of authority
• Formal authorisation procedures for all investments
• Clear responsibilities on the part of management for the
maintenance of good financial controls and the production
and review of detailed, accurate and timely financial
management information
• The control of financial risks through clear authorisation levels
Identification of operational risks and the development of
•
mitigation plans by senior management
• Regular reviews of both forward-looking business plans and
historic performance
• Regular reports to the Board from the Executive Directors
The internal controls extend to the financial reporting process and
the preparation of the consolidated financial statements. The basis of
preparation of the consolidated financial statements is set out on
page 70.
The internal control process will continue to be monitored and
reviewed by the Board, which will, where necessary, ensure
improvements are implemented. During the period the Board has
undertaken a review of the effectiveness of internal controls and
systems. No material matters were identified.
As Chairman of the Committee, I will be present at the 2020 AGM to
answer questions on this report, matters within the scope of the
Audit Committee’s responsibilities and any significant matters
brought to the Audit Committee’s attention by the external auditors.
JOHN WARREN
CHAIRMAN OF THE AUDIT COMMITTEE
3 March 2020
49
4imprint Group plc Annual Report 2019
Remuneration Committee
Annual Statement by the Chairman
2019 HIGHLIGHTS
• Overseeing the implementation of the Company’s current
Remuneration Policy: determining base salary increases and
setting appropriately stretching forward looking bonus
targets for both Executive Directors and senior management
• Reviewing incentives and considering whether they were
aligned to Company performance over the short and long
term and assessing the need for discretion to ensure the
Company maintains an appropriate pay for performance
relationship
• Reviewing the remuneration-related provisions of the
2018 Code
• Reviewing executive pension provisions considering recent
views of investors and their advisors
2020 PRIORITIES
• Review of Remuneration Policy in preparation for its
consideration by Shareholders at the 2021 AGM
• Engage with Shareholders and investor advisors on new
policy proposals
• Ensure thorough consideration of the remuneration-related
provisions of the 2018 Code as part of policy review
• Consideration of possible suitable CEO pay ratio disclosures
• Continue to monitor governance, regulatory and investor
developments on executive compensation matters
KEY REMUNERATION PRINCIPLES
The Committee’s long-held view regarding remuneration is that
it should be:
• Competitive when compared to organisations of a similar
size, complexity and type
• Linked to the long-term strategy of the Group
• Clear, easy to understand and motivating
• Structured to not promote unacceptable behaviour or
encourage unacceptable risk-taking
• Structured to avoid reward for failure
On behalf of the Remuneration Committee (the “Committee”) I am
pleased to provide information divided into the following
two sections:
• This Annual Statement which summarises the remuneration
decisions made during the year and the context in which these
decisions have been taken
• The Remuneration Report for the year ended 28 December 2019
(see pages 51 to 55)
BUSINESS CONTEXT FOR EXECUTIVE REMUNERATION
Over the last several years 4imprint Group plc (the “Group”) has
performed extremely well, consolidating its position as a leading
direct marketer of promotional products in each of its target markets.
In 2019 the business produced strong financial results, including:
• Group revenue growth of 17% (all organic)
•
•
•
• Consistent investment in marketing and infrastructure to lay the
Increase in underlying operating profit of 19%
Increase in basic earnings per share of 21%
Increase in dividend per share paid and proposed of 20%
foundations for future growth
The excellent corporate performance of the Group demonstrates that
the current strategy is well-conceived and remains fit for purpose.
COMMITTEE DECISIONS AND UNDERTAKINGS IN 2019
REWARDING PERFORMANCE
The incentives for the year ended 28 December 2019 were in line
with the Company’s approved Remuneration Policy including the
2015 Incentive Plan, the full details of which can be found on the
corporate website at https://investors.4imprint.com/media/1569/
remuneration-policy-approved-at-the-2018-agm.pdf.
Following the strong overall performance outlined above, the
Committee determined that the annual bonus for Executive Directors
was a maximum award of 100% of base salary.
This decision is in the context of:
• Sales growth of 17% (out of a performance range of 11%–19%)
• Operating profit of $58m (out of a performance range of
$53m–$55m)
The calculation of the annual bonus is based on the results of the
North American business since this represents 97% of Group
revenue, and its financial performance is the dominant factor
influencing the Group’s financial results.
50% of the annual bonus for Executive Directors will be deferred into
shares for five years.
The Committee believes that the annual bonus appropriately reflects
the overall performance in 2019 and more details are set out in the
Remuneration Report on page 53.
CORPORATE GOVERNANCE DEVELOPMENTS
As explained in the Statement on Corporate Governance, it is the
2016 Code which applies to the financial year reported on. However,
the Committee has carefully reviewed the requirements of the 2018
Code during the year.
The Committee concluded that, given the Code’s focus, the core
construct of current policy remains fit for purpose and that practice
to date and the Committee’s Terms of Reference (which were revised
during the year) already reflect the Code’s requirements in the areas
of:
• Promotion of long-term shareholdings by Executive Directors to
ensure Shareholders alignment (the current Executive Directors
are among the largest individual Shareholders in the Group)
• Pension contribution rates for Executive Directors which are
already aligned to the workforce
‘Remuneration schemes’ are aligned with a five year time horizon
•
• Focus on fair pay, given relatively modest current executive pay
levels
• The need to review workforce remuneration and related policies
and take these into account when setting the policy for Executive
Director remuneration
However, the Committee also observed certain features of its current
policy as worthy of consideration and review in the context of the
2018 Code. These areas were:
• The expectation for shareholding guidelines to be extended to
apply post-employment
• The expectation to review the alignment of incentives and
rewards with culture
• The expectation to engage with the workforce to explain how
executive remuneration aligns with wider company pay policy
• Strengthening existing channels of employee engagement
The above areas will be reviewed as part of the policy review that the
Committee will commence during 2020 and, where appropriate,
incorporated as part of the revised policy or revised Committee
processes, or both, presented to Shareholders at the AGM in 2021.
For many FTSE 350 organisations this is the first year of reporting on
the CEO Pay Ratio. Although the Group is not required to disclose
this information owing to the number of UK employees, the
Committee is currently reviewing what effective disclosure (if any)
can be made in this area.
The effectiveness of the Committee was considered as part of the
external Board Effectiveness Review conducted during 2019. I am
pleased to report that the Committee was found to be performing
satisfactorily.
STRATEGIC REPORTCORPORATEGOVERNANCEFINANCIALSTATEMENTSADDITIONAL INFORMATIONOVERVIEW 50
4imprint Group plc Annual Report 2019
Remuneration Committee continued
Annual Statement by the Chairman
REMUNERATION POLICY REVIEW
The 4imprint Group plc Remuneration Policy approved at the 2018
AGM will expire at the AGM in 2021. The Board will propose a
further Policy for approval by Shareholders at that time. The
Committee will consult with Shareholders and investor advisors on
the new Policy proposals during the course of 2020 to seek their
views.
Alongside the Committee-led review of the Policy, the Board
continues to be kept up-to-date on Governance and Policy
developments and will be revising its policies and practices to ensure
they evolve in line with the new governance and regulatory
requirements and I look forward to reporting on these in due course.
CONCLUSION
The voting outcome at the 2019 AGM in respect of the Annual
Remuneration Report for the year ended 28 December 2018 was
approval by 98.2% of Shareholders who voted.
I look forward to welcoming you, and receiving your support, at the
upcoming AGM.
CHARLES BRADY
CHAIRMAN OF THE REMUNERATION COMMITTEE
3 March 2020
DIRECTOR CHANGES
Following the announcement included in the half year results for
2019, 4imprint Group plc confirmed that Andrew Scull stepped
down from the Board as Corporate Services Director and Company
Secretary in December 2019. In all respects Andrew is considered to
be a ‘Good Leaver’. His leaving terms were within the approved
Policy, consisting of remuneration until the end of his employment on
30 June 2020. It was agreed by the Committee that Andrew’s bonus
for 2019 would be measured using the same grid as the CEO and
CFO and he therefore received a maximum bonus of 50% of salary
paid in cash. Andrew will not be participating in the 2020 Executive
Director annual bonus and will receive no other payment for loss of
office. No further appointments have been made to the Board
following his departure.
COMMITTEE DECISIONS AND UNDERTAKINGS DURING 2020
IMPLEMENTATION OF POLICY IN 2020
The annual bonus performance targets for 2020 have been agreed
by the Committee based on the principles set out in the 2015
Incentive Plan. These targets were set following a robust process
taking into account external and internal expectations concerning
future corporate performance, together with knowledge of both last
year’s targets and outturn. The bonus plan, structured based on
revenue growth percentage and operating profit performance of the
North American business remain unchanged from last year. The
Committee believes that these targets are appropriately supportive of
the Group’s strategy and when considered together mitigate
inappropriate risk-taking. The underlying targets for 2020 are not
being disclosed in this report for commercial reasons, however they
will be disclosed in next year’s Annual Report.
The Group does not operate a long-term incentive plan. Given the
existing shareholdings of the current Executive Directors, and the five
year bonus deferral mechanism it is felt that such a plan is not
currently required, however this position will be reviewed as part of
the upcoming policy review.
Base salary increases which take effect from 1 January 2020 for
Executive Directors were aligned with increases paid to the wider
workforce. Accordingly, Kevin Lyons-Tarr and David Seekings have
received base salary increases of 3% for 2020.
51
4imprint Group plc Annual Report 2019
Remuneration Report
This report sets out the information required by the Companies Act
2006, Schedule 8 of the Large and Medium sized Companies and
Groups (Accounts and Reports) Regulations 2008 and the Listing
Rules of the Financial Conduct Authority. This report is unaudited
except where otherwise stated. An ordinary resolution to approve
this report will be put to the AGM on 5 May 2020.
REMUNERATION GOVERNANCE
REMUNERATION COMMITTEE COMPOSITION
The Remuneration Committee is a committee whose membership is
comprised solely of Independent Non-Executive Directors, being
Charles Brady (Chairman of the Committee), John Warren and Tina
Southall. The Committee meets at least twice a year and may invite
other attendees as it sees fit. Attendance at Committee Meetings in
2019 is shown in the table below.
Charles Brady
Tina Southall
John Warren
Remuneration
Committee
meetings in
2019
2
1*
2
* Tina Southall was appointed to the Remuneration Committee on 30 July 2019.
In exercising its responsibilities and carrying out key decisions, the
Remuneration Committee is mindful of the size and structure of the
Company’s businesses. It regularly assesses the remuneration of
Executive Directors and senior management in the context of the
remuneration of the wider workforce and of the Company’s actual
and projected growth and profitability. The Remuneration
Committee also considers the return on value passed on to
Shareholders, and engages, as appropriate, with Shareholders and
other stakeholders to explain and discuss existing policy and future
decision making.
Towards the end of 2019 the Committee engaged Willis Towers
Watson as remuneration consultants. No fees were paid to Willis
Towers Watson during 2019.
DIRECTORS’ REMUNERATION POLICY
The Company has a well-established and clear Remuneration Policy
which includes a simple and transparent approach to both fixed and
variable pay. The Remuneration Policy is structured to focus on
incentivisation and to avoid reward for failure and is designed not to
promote unacceptable behaviour or encourage unacceptable risk
taking, in line with the Company’s culture and purpose. The
Committee has responsibility for reviewing the Remuneration Policy
on an ongoing basis with a view to ensuring that it appropriately
reflects the Company’s strategy.
REMUNERATION COMMITTEE RESPONSIBILITIES
The principal duties of the Remuneration Committee are reflected in
its terms of reference and include the following:
• To determine and recommend to the Board the overall
The current Directors’ Remuneration Policy was approved at the
Company’s AGM on 8 May 2018 and full details can be found on the
corporate website at https://investors.4imprint.com/media/1569/
remuneration-policy-approved-at-the-2018-agm.pdf.
remuneration policy of the Company
• To determine and recommend to the Board the remuneration of
the Executive Directors and the Non-Executive Chairman of the
Board
• To review and approve the level and structure of remuneration for
senior management
• To determine the targets for any performance-related bonus and
share incentive schemes operated for Executive Directors and
senior management
• To review and approve any material termination payments
The remuneration of Non-Executive Directors is determined by the
Non-Executive Chairman of the Board and the Executive Directors.
The Board will propose a further Remuneration Policy for approval by
Shareholders at the 2021 AGM.
DIRECTORS’ CONTRACTS
A summary of the key elements of the Executive Directors’ current
service agreements, as well as guidelines explaining the Group’s
contracts policy, is set out in the approved Remuneration Policy,
available at https://investors.4imprint.com/media/1569/remuneration-
policy-approved-at-the-2018-agm.pdf.
The Executive Directors’ service contracts and the Non-Executive
Directors’ letters of appointment are available for inspection at the
Company’s registered office during normal business hours.
STRATEGIC REPORTCORPORATEGOVERNANCEFINANCIALSTATEMENTSADDITIONAL INFORMATIONOVERVIEW 52
4imprint Group plc Annual Report 2019
Remuneration Report continued
REMUNERATION IMPLEMENTATION
DIRECTORS’ REMUNERATION – SINGLE TOTAL FIGURE (AUDITED INFORMATION)
Apart from Kevin Lyons-Tarr and David Seekings, Directors are paid in Sterling. It is therefore considered more appropriate to present the
Directors’ remuneration in Sterling. The US dollar remuneration amounts for Kevin and David are disclosed separately below.
Base salary
£
Benefits
£
Annual bonus
(i)
£
Long-term
incentives
£
Pension
(ii)
£
Total
remuneration
2019
£
Fixed pay
£
Variable pay
£
2019
Executive
K. Lyons-Tarr
A. Scull (iii)
D. Seekings
Non-Executive
P. Moody
J. Warren
C. Brady
C. Southall
388,145
202,152
258,763
120,000
45,000
45,000
29,365
14,106
20,047
18,177
385,125
101,076
256,750
–
–
–
–
–
–
–
–
Total
1,088,425
52,330
742,951
–
–
–
–
–
–
–
–
7,783
30,323
7,674
–
–
–
–
795,159
353,598
541,364
120,000
45,000
45,000
29,365
410,034
252,522
284,614
120,000
45,000
45,000
29,365
385,125
101,076
256,750
–
–
–
–
45,780
1,929,486
1,186,535
742,951
2018
Executive
K. Lyons-Tarr
A. Scull (iii)
D. Seekings
Non-Executive
P. Moody
J. Warren
C. Brady
Total
Base salary
£
Benefits
£
Annual bonus
(i)
£
Long-term
incentives
£
359,930
196,265
239,953
120,000
35,000
35,000
986,148
13,079
20,832
15,741
357,526
98,133
238,351
–
–
–
–
–
–
49,652
694,010
–
–
–
–
–
–
–
Pension
(ii)
£
7,290
29,440
7,200
–
–
–
Total
remuneration
2018
£
737,825
344,670
501,245
120,000
35,000
35,000
Fixed pay
£
Variable pay
£
380,299
246,537
262,894
120,000
35,000
35,000
357,526
98,133
238,351
–
–
–
43,930
1,773,740
1,079,730
694,010
Benefits include car allowance, medical insurance, life assurance and income protection.
(i) For Kevin Lyons-Tarr and David Seekings 50% of the annual bonus is payable in the form of conditional share awards pursuant to the terms
of the 2015 Incentive Plan.
(ii) Andrew Scull received £30,323 (2018: £29,440) pay in lieu of pension contributions.
(iii) Andrew Scull resigned as an Executive Director on 27 December 2019.
KEVIN LYONS-TARR AND DAVID SEEKINGS US DOLLAR REMUNERATION
2019
Executive
K. Lyons-Tarr
D. Seekings
2018
K. Lyons-Tarr
D. Seekings
Base salary
$
Benefits
$
Annual bonus
$
Long-term
incentives
$
Pension
$
Total
remuneration
$
Fixed pay
$
Variable pay
$
495,583
330,389
18,011
23,208
491,727
327,818
480,614
320,409
17,464
21,020
477,405
318,270
–
–
–
–
9,937
9,798
1,015,258
691,213
523,531
363,395
491,727
327,818
9,734
9,614
985,217
669,313
507,812
351,043
477,405
318,270
SALARIES
The Chief Executive Officer, the Chief Financial Officer and the Corporate Services Director all received an increase in basic annual salary in
2019 of 3%, reflecting the increase in the cost of living. Such increase was in line with the increase applied to the remuneration of the
businesses’ workforce in general.
At its meeting in January 2020, the Remuneration Committee awarded a 2020 basic annual salary increase of 3% to the Chief Executive
Officer and the Chief Financial Officer, this being in line with the increase in 2020 basic annual salary for all employees. The Corporate Services
Director resigned from the Board on 27 December 2019.
In addition, the Remuneration Committee approved an increase in the Chairman’s annual fee to £150,000 with effect from 1 January 2020.
53
4imprint Group plc Annual Report 2019
SHORT AND LONG TERM INCENTIVES: 2015 INCENTIVE PLAN
The Executive Directors participate in the 2015 Incentive Plan (the “Plan”) through which they may receive an annual bonus, half of which is
paid in cash and half of which is deferred into shares, through the award of nil cost options or conditional share awards.
The bonus is variable and depends on performance targets being achieved. The performance measures used for the Executive Directors are
based on the North American business (which comprises 97% of the revenue of the Group) achieving certain levels of operating profit and
revenue growth.
The operating profit and revenue growth targets for 2019 were set by the Remuneration Committee at its meeting in January 2019. The
Committee approved a target grid which set out a variable amount of bonus payable, as a percentage of base salary, depending on the extent
to which operating profit achieved for 2019 was over $53m and revenue growth was over 11%. If operating profit was $53m and revenue
growth was 11%, a bonus of 10% of base salary would be achieved. If operating profit was below $53m and revenue growth below 11%, no
bonus would be achieved.
The target grid for 2019 determined that if budget operating profit of $55m and revenue growth of 14% were achieved for the US business,
the Executive Directors would each earn a bonus of 50% of base salary.
For the year ended 28 December 2019, the North American business achieved operating profit of $58m and revenue growth of 17% which
resulted in a bonus payable to the Executive Directors of 100% of base salary, payable 50% in cash and 50% in the form of conditional share
awards with a vesting period of five years. The Committee approved these bonus awards in its meeting in January 2020 and had no
requirement to exercise its discretion to alter the amount of bonus payable.
STATEMENT OF DIRECTORS’ SHAREHOLDING AND SHARE INTERESTS (AUDITED INFORMATION)
Details of the beneficial interests in the number of ordinary shares held in the Company by each Director and their connected persons are set
out below:
Paul Moody
Kevin Lyons-Tarr
Andrew Scull
David Seekings
John Warren
Charles Brady
Tina Southall
* Or date of appointment/resignation.
Holding at
28 December
2019*
Holding at
29 December
2018*
5,000
258,180
45,000
181,327
5,000
1,000
–
5,000
254,036
50,000
178,478
5,000
1,000
–
There has been no change in the Directors’ interests in the share capital of the Company since 28 December 2019 to the date of this report.
SCHEME INTERESTS AWARDED DURING THE FINANCIAL YEAR (AUDITED INFORMATION)
Scheme interests awarded in the year comprise deferred bonus payments and SAYE scheme interests only.
Details of share options held by the Directors are set out below:
Holding at
29 Dec 2018
Granted
during the
year
900
6,376
4,121
4,514
–
–
–
–
–
10,196
Exercised
–
(6,376)
–
–
–
Holding at
28 Dec
2019*
Date of grant
Share price at
date of grant
Exercise price
From
To
Exercisable
900 26 Sept 2018
30 Mar 2016
30 Mar 2017
15 Apr 2018
28 Mar 2019
–
4,121
4,514
10,196
£20.00
£12.55
£17.75
£15.80
£24.00
$22.16
nil
nil
nil
nil
4 Dec 2020
30 Mar 2019
30 Mar 2020
15 Apr 2021
28 Mar 2024
4 Dec 2020
30 Mar 2019
30 Mar 2020
15 Apr 2021
28 Mar 2024
1,761
792
(1,761)
792 25 Sept 2019
£29.90
£22.70
1 Nov 2022
3 Apr 2023
900
4,383
2,747
3,009
–
–
–
–
–
6,797
–
(4,383)
–
–
–
900 26 Sept 2018
30 Mar 2016
30 Mar 2017
15 Apr 2018
28 Mar 2019
–
2,747
3,009
6,797
£20.00
£12.55
£17.75
£15.80
£24.00
$22.16
nil
nil
nil
nil
4 Dec 2020
30 Mar 2019
30 Mar 2020
15 Apr 2021
28 Mar 2024
4 Dec 2020
30 Mar 2019
30 Mar 2020
15 Apr 2021
28 Mar 2024
K. Lyons-Tarr
US ESPP
2015 Incentive Plan
2015 Incentive Plan
2015 Incentive Plan
2015 Incentive Plan
A. Scull
SAYE
D. Seekings
US ESPP
2015 Incentive Plan
2015 Incentive Plan
2015 Incentive Plan
2015 Incentive Plan
* Or date of resignation.
Gains made on exercise of options in the period were £156,850 for Kevin Lyons-Tarr, £107,822 for David Seekings and £26,908 for Andrew
Scull (2018: £7,338 for both Kevin Lyons-Tarr and David Seekings).
STRATEGIC REPORTCORPORATEGOVERNANCEFINANCIALSTATEMENTSADDITIONAL INFORMATIONOVERVIEW 54
4imprint Group plc Annual Report 2019
Remuneration Report continued
During 2019 the middle-market value of the share price ranged from £18.00 to £35.00 and was £35.00 at the close of business on
28 December 2019.
During the period 16,993 awards of conditional shares were made under the Plan, in respect of 2018 bonus awards made to the US-based
Executive Directors. The intention is to make awards in 2020 in accordance with the rules of the Plan, in respect of 2019 bonus awards.
Details of share options granted by 4imprint Group plc as at 28 December 2019 are given in note 23. None of the terms and conditions of the
share options were varied during the period. The performance criteria for all Directors’ options were consistent with the Remuneration Policy.
Once an award has vested, the exercise of share options is unconditional, subject to the Rules of the option grant.
PAYMENTS TO PAST DIRECTORS
It is the Committee’s intention to disclose any payments to past Directors, including the vesting of share-based awards post departure on a
basis consistent with the continuing Executive Directors. Andrew Scull resigned as an Executive Director on 27 December 2019. Details of
payments made to Andrew in respect of the financial year ended 28 December 2019 are set out within this report. There were no other
payments to past Directors during the year.
PAYMENTS FOR LOSS OF OFFICE
There were no payments for loss of office made during the year.
PERFORMANCE GRAPH AND TABLE
TOTAL SHAREHOLDER RETURN
The graph below illustrates the Company’s Total Shareholder Return performance relative to the FTSE SmallCap, FTSE SmallCap Media and
FTSE 250 indices of which the Company is a constituent. The graph shows performance of a hypothetical £100 invested over the period.
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
Dec 08
Dec 09
Dec 10
Dec 11
Dec 12
Dec 13
Dec 14
Dec 15
Dec 16
Dec 17
Dec 18
Dec 19
4IMPRINT
FTSE SMALL CAP MEDIA
FTSE SMALL CAP
FTSE 250
TOTAL REMUNERATION OF EXECUTIVE CHAIRMAN/CHIEF EXECUTIVE OFFICER
2010
£’000
2011
£’000
2012
£’000
2013
£’000
2014
£’000
120
120
738
1,380
738
1,380
180
180
2015
£’000
326
45
2016
£’000
481
2017
£’000
564
2018
£’000
738
2019
£’000
795
371
481
564
738
795
n/a
n/a
n/a
100
–
33.30
66.70
–
60
–
40
–
50
–
100
100
–
–
Kevin Lyons-Tarr was appointed Group Chief Executive Officer on 31 March 2015. Prior to that, the Executive Chairman, John Poulter, fulfilled
the role.
K. Lyons-Tarr
J.W. Poulter
K.J. Minton
Total remuneration
Annual variable award
Percentage versus max
opportunity (%)
Long-term incentive
Vesting rate (%)
40
172
212
100
–
55
4imprint Group plc Annual Report 2019
PERCENTAGE CHANGE IN REMUNERATION OF CHIEF EXECUTIVE OFFICER AND EMPLOYEES
The table below shows the percentage change in remuneration of the Director undertaking the role of Chief Executive Officer and the
Company’s employees as a whole between 2019 and 2018.
Salary
Taxable benefits
Annual bonus
Percentage increase in
remuneration in 2019 compared
with remuneration in 2018
Chief
Executive
Officer
Average pay
based on all
employees
3%
3%
3%
1%
–13%
–15%
The average pay increases shown in the table for all employees reflect that new employees starting in the period were principally at junior staff
levels. Taxable benefits principally apply to UK employees, so the percentage change is skewed by the increasing numbers of US employees.
Existing employees typically received a salary increase just below 3% in 2019 and benefits were unchanged.
RELATIVE IMPORTANCE OF SPEND ON PAY
The table below shows the Group’s actual spend on pay relative to dividends:
Wages and salaries
Dividends paid
2019
$m
58.24
20.66
2018
$m
Percentage
change
51.38
32.98
13%
–37%
Dividends paid in 2018 reflect a one-off special dividend of 60.0c per share ($16.28m) paid in May 2018; excluding this the dividend increase
is 24%.
STATEMENT OF VOTING AT GENERAL MEETING
At the 2019 AGM Shareholders approved the Remuneration Policy, which can be found on the corporate website at https://investors.4imprint.
com/investors/Shareholders-information/agm-company-documents/.
Votes cast by proxy and in the meeting in respect of Directors’ remuneration were as follows:
Resolution
Approval of Remuneration Report
Approval of Remuneration Policy
Votes for
% for
Votes against
% against
Votes
withheld
(abstentions)
20,803,509
19,117,268
98.20% 382,305
85.97% 3,120,163
1.80% 317,155
14.03% 190,697
AGM
2019
2018
IMPLEMENTATION OF POLICY IN 2020
The annual bonus performance targets for 2020 have been agreed by the Remuneration Committee at its meeting in January 2020 and are
based on the principles set out in the 2015 Incentive Plan. The bonus plan variables, consisting of revenue growth percentage and operating
profit performance of the North American business, remain unchanged from last year. The targets are not disclosed in this report for
commercial reasons.
On behalf of the Board,
CHARLES BRADY
CHAIRMAN OF THE REMUNERATION COMMITTEE
3 March 2020
STRATEGIC REPORTCORPORATEGOVERNANCEFINANCIALSTATEMENTSADDITIONAL INFORMATIONOVERVIEW 56
4imprint Group plc Annual Report 2019
Directors’ Report
The Directors present their report and the audited consolidated and
Company financial statements for the period ended 28 December
2019. The Company’s Statement on Corporate Governance is
included in the Corporate Governance section on pages 40 to 43 of
this Annual Report. The Statement on Corporate Governance forms
part of the Directors’ Report and is incorporated into it by cross-
reference.
4imprint Group plc (registered number 177991) is a public limited
company incorporated in England and Wales, domiciled in the UK
and listed on the London Stock Exchange. It is limited by shares. Its
registered office is 25 Southampton Buildings, London WC2A 1AL.
DIVIDENDS
Dividends are determined in US dollars and paid in Sterling,
converted at the exchange rate at the time the dividend is
determined.
SHARE CAPITAL
The Group’s objective for managing capital is described in note 21.
The Company has a single class of share capital which is divided into
ordinary shares of 38 6/13 pence each. The shares are in registered
form.
RIGHTS AND OBLIGATIONS ATTACHING TO SHARES
Subject to applicable statutes and other Shareholders’ rights, shares
may be issued with such rights and restrictions as the Company may
by ordinary resolution decide, or, if there is no such resolution or in
so far as it does not make specific provision, as the Board may
decide. At each Annual General Meeting (“AGM”), the Company
seeks annual Shareholder authority for the Company’s Directors to
allot shares, in certain circumstances, for cash. Currently, there are no
such restrictions in place over the issued share capital of the
Company, other than those required by law or regulation.
An interim dividend of 25.00c (20.52p) per ordinary share was paid
on 17 September 2019 and the Directors recommend a final dividend
of 59.00c (46.16p) per share. The proposed final dividend, if
approved, will be paid on 15 May 2020 in respect of shares
registered at the close of business on 14 April 2020.
RELATIONS WITH SHAREHOLDERS
SUBSTANTIAL INTERESTS
At 28 December 2019 the Company had been notified of the
following interests in the issued ordinary share capital of
the Company:
The total distribution paid and recommended for 2019 on the
ordinary shares is $23.6m or 84.00c (66.68p) per share (2018:
$19.6m or 70.00c (53.15p) per share).
CROSS-REFERENCE TO STRATEGIC REPORT
The Strategic Report is set out on pages 6 to 36 of the Annual
Report. It includes the Chief Executive’s Review and Financial Review,
which contain information and disclosures concerning the Group’s
financial performance and position, future prospects, key
performance indicators, principal risks and uncertainties, risk
management objectives and policies, going concern and viability. The
Board regularly considers the Company’s approach to its risk
management objectives and policies and reviewed the Company’s
risk management processes at a Board meeting in October 2019. The
Board concluded that the current risk management processes are
appropriate for the nature of the business and current Group
structure. Details of the Company’s risk management processes are
set out on page 22.
In addition, the Responsibility section, which is included within the
Strategic Report, contains information in respect of the Group’s
approach to social and ethical responsibility, the environment, health
and safety, diversity, disabled persons and employee welfare. These
policies and practices demonstrate the importance which the
Directors place on fostering the Group’s relationships with its
employees, customers and suppliers. These elements of the Strategic
Report are incorporated into the Directors’ Report by cross-reference.
DIRECTORS
The names and biographical details of the present Directors, their
committee memberships, independence status and identification of
the Senior Independent Director are given on pages 38 and 39. The
Directors served throughout the period ended 28 December 2019
and up to the date of signing of these financial statements, with the
exception of Andrew Scull who resigned as a Director and Company
Secretary on 27 December 2019.
The interests of the Directors in the shares of the Company are
shown on page 53.
None of the Directors, nor their associated companies, nor any
members of their families, had any interest either during or at the
end of the period ended 28 December 2019 in any contract with the
Company or its subsidiaries requiring disclosure under Sections 197,
198, 200, 201 and 203 of the Companies Act 2006.
Standard Life Aberdeen Plc
BlackRock Inc.
FIL Limited
Montanaro Asset Management
AXA Investment Managers
Invesco Perpetual Asset Management
Kames Capital Plc
Number of
shares
3,449,911
3,036,120
1,160,653
1,145,588
907,857
847,147
804,260
%
12.28
10.81
4.13
4.08
3.23
3.02
2.86
The Company has received notifications of changes in holdings since
28 December 2019 from BlackRock Inc. that their holding is now
2,996,145 shares.
The Board places a high value on its relations with its investors and
consults with Shareholders in connection with specific issues where it
considers it appropriate. The Group, principally through the Chief
Executive Officer and Chief Financial Officer, has regular dialogue
and meetings with institutional Shareholders, fund managers and
analysts. Subject always to the constraints regarding sensitive
information, discussions cover a wide range of issues, including
strategy, performance, management and governance.
The Board considers it important to understand the views of
Shareholders, in particular any issues which concern them. The
Senior Independent Non-Executive Director is available to meet major
Shareholders, if they so wish.
QUALIFYING THIRD PARTY INDEMNITY PROVISIONS
Qualifying third party indemnity agreements have been signed by the
Company in respect of Kevin Lyons-Tarr, David Seekings, Andrew
Scull, Paul Moody, John Warren, Charles Brady and Tina Southall,
with effect from the date of their respective appointments to the
Board of Directors.
SHARES HELD IN TRUST FOR EMPLOYEE SHARE SCHEMES
The trustees of the 4imprint 2012 Employee Benefit Trust may vote or
abstain from voting on shares held in the trust in any way they
consider appropriate.
SIGNIFICANT AGREEMENTS
There are no agreements containing provisions entitling a
counterparty to exercise termination or other rights in the event of a
change of control.
57
4imprint Group plc Annual Report 2019
INDEPENDENT AUDITORS
On the recommendation of the Audit Committee, a resolution to
reappoint Ernst & Young LLP (“EY”) as independent external auditor
will be proposed at the 2020 AGM, together with a resolution
granting the Directors the authority to determine EY’s remuneration.
DIRECTORS’ STATEMENT AS TO DISCLOSURE OF INFORMATION TO
INDEPENDENT AUDITORS
In the case of each of the persons who are Directors of the Company
at the date this report was approved:
• So far as each of the Directors is aware, there is no relevant audit
information (as defined in the Companies Act 2006) of which the
Company’s auditors are unaware
• Each of the Directors has taken all of the steps that he ought to
have taken as a Director to make himself aware of any relevant
audit information (as defined) and to establish that the Company’s
auditors are aware of that information
Approved by the Board and signed on its behalf by
EMMA TAYLOR
COMPANY SECRETARY
3 March 2020
REMUNERATION REPORT
Details of the procedures and guidelines used by the Remuneration
Committee in determining remuneration are outlined in its report on
page 51.
PURCHASE OF OWN SHARES
Following approval at the 2019 AGM of Resolution 14, the Company
is authorised, generally and without conditions, to make market
purchases, as defined in the Companies Acts, of its ordinary shares of
38 6/13 pence subject to the provisions set out in such Resolution. This
authority applies from 7 May 2019 until the earlier of the end of the
2020 AGM or 6 August 2020 unless previously cancelled or varied by
the Company in a general meeting. No such cancellation or variation
has taken place. During the period, no shares have been purchased
by the Company, but the Employee Benefit Trust purchased 81,705
(2018: 88,000) ordinary shares.
WAIVER OF DIVIDENDS
The dividend income in respect of the 87,306 shares (2018: 55,734
shares) held in the 4imprint 2012 Employee Benefit Trust has been
waived at the date of this report.
GOING CONCERN
The going concern statement is on page 21.
ENVIRONMENT AND SUSTAINABILITY
The Board recognises its obligations to protect the environment and
is committed both to achieving required environmental standards
across all the activities of the Group and to minimising its
environmental impact. Further information about the Group’s
environmental and sustainability policy is set out in the Responsibility
section on pages 34 and 35.
GREENHOUSE GAS EMISSIONS REPORT
Global greenhouse gas (“GHG”) emissions data for the period
Tonnes of carbon dioxide
equivalent
2019
2018
Combustion of fuel and operation of facilities
(Scope 1)
Electricity, heat, steam and cooling purchased
for own use (Scope 2)
Emissions intensity per thousand dollars
of revenue
11
9
2,724
2,818
0.003
0.004
The emissions data set out above relates to the operations of the
Group for the period ended 28 December 2019.
METHODOLOGY
All of the emission sources required under the Companies Act 2006
(Strategic Report and Directors’ Reports) Regulations 2013 for Scope
1 and Scope 2 emissions have been reported.
The emission factors used were from the UK Government’s GHG
Conversion Factors for Company Reporting 2019, except for
electricity usage in the USA where EPA conversion factors were used.
POLITICAL DONATIONS
No political donations were made in the period ending 28 December
2019 or prior period.
ANNUAL GENERAL MEETING
Notice of the AGM is set out in a separate document. Items of special
business to be considered at the AGM are described in detail in the
Notice of the AGM and the notes on the business to be conducted.
STRATEGIC REPORTCORPORATEGOVERNANCEFINANCIALSTATEMENTSADDITIONAL INFORMATIONOVERVIEW 58
4imprint Group plc Annual Report 2019
Statement of Directors’ Responsibilities
in respect of the Financial Statements
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulation.
Company law requires the Directors to prepare financial statements for each financial period. Under that law the Directors have prepared the
Group financial statements in accordance with International Financial Reporting Standards (“IFRSs”) as adopted by the European Union and
Company financial statements in accordance with IFRSs as adopted by the European Union. Under company law the Directors must not
approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company
and of the profit or loss of the Group and Company for that period.
In preparing the financial statements, the Directors are required to:
• Select suitable accounting policies and then apply them consistently
• State whether applicable IFRSs as adopted by the European Union have been followed for the Group financial statements and IFRSs as
adopted by the European Union have been followed for the Company financial statements, subject to any material departures disclosed
and explained in the financial statements
• Make judgments and accounting estimates that are reasonable and prudent
• Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Company will continue
in business
The Directors are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure
that the financial statements and the Directors’ Remuneration Report comply with the Companies Act 2006 and, as regards the Group
financial statements, Article 4 of the IAS Regulation.
The Directors are responsible for the maintenance and integrity of the Company’s website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
The Directors consider that the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the
information necessary for Shareholders to assess the Company’s performance, business model and strategy.
Each of the Directors, whose names and functions are listed in the Board of Directors on pages 38 and 39, confirm that, to the best of their
knowledge:
• The Company financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and
fair view of the assets, liabilities, financial position and profit of the Company
• The Group financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair
view of the assets, liabilities, financial position and profit of the Group
• The Strategic Report on pages 6 to 36 and Directors’ Report on pages 56 and 57 include a fair review of the development and performance
of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces
EMMA TAYLOR
COMPANY SECRETARY
3 March 2020
59
4imprint Group plc Annual Report 2019
Independent Auditor’s Report
to the Members of 4imprint Group plc
OPINION
In our opinion:
• 4imprint Group plc’s Group financial statements and parent company financial statements (the “financial statements”) give a true and fair
view of the state of the Group’s and of the parent company’s affairs as at 28 December 2019 and of the Group’s profit for the year then
ended;
• the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
• the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union as
applied in accordance with the provisions of the Companies Act 2006; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006, and, as regards the Group
financial statements, Article 4 of the IAS Regulation.
We have audited the financial statements of 4imprint Group plc which comprise:
Group
Parent company
Group balance sheet at 28 December 2019
Company balance sheet at 28 December 2019
Group income statement for the 52 weeks ended 28 December 2019
Statement of changes in Company Shareholders’ equity for the
52 weeks ended 28 December 2019
Group statement of comprehensive income for the 52 weeks ended
28 December 2019
Company cash flow statement for the 52 weeks ended
28 December 2019
Group statement of changes in Shareholders’ equity for the 52 weeks
ended 28 December 2019
Related notes A to R to the financial statements together with
a description of the basis of preparation and summary of
accounting policies
Group cash flow statement for the 52 weeks ended 28 December 2019
Related notes 1 to 30 to the financial statements, together with a
description of the basis of preparation and summary of significant
accounting policies
The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance with the
provisions of the Companies Act 2006.
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report below. We
are independent of the Group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
CONCLUSIONS RELATING TO PRINCIPAL RISKS, GOING CONCERN AND VIABILITY STATEMENT
We have nothing to report in respect of the following information in the Annual Report, in relation to which the ISAs (UK) require us to report
to you whether we have anything material to add or draw attention to:
• the disclosures in the Annual Report set out on pages 22 to 26 that describe the principal risks and explain how they are being managed or
mitigated;
• the Directors’ confirmation set out on page 42 in the Annual Report that they have carried out a robust assessment of the principal risks
facing the entity, including those that would threaten its business model, future performance, solvency or liquidity;
• the Directors’ statement set out on page 21 in the financial statements about whether they considered it appropriate to adopt the going
concern basis of accounting in preparing them, and their identification of any material uncertainties to the entity’s ability to continue to do
so over a period of at least twelve months from the date of approval of the financial statements;
• whether the Directors’ statement in relation to going concern required under the Listing Rules in accordance with Listing Rule 9.8.6R(3) is
materially inconsistent with our knowledge obtained in the audit; or
• the Directors’ explanation set out on page 21 in the Annual Report as to how they have assessed the prospects of the entity, over what
period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable
expectation that the entity will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment,
including any related disclosures drawing attention to any necessary qualifications or assumptions.
STRATEGIC REPORTCORPORATEGOVERNANCEFINANCIALSTATEMENTSADDITIONAL INFORMATIONOVERVIEW 60
4imprint Group plc Annual Report 2019
Independent Auditor’s Report continued
to the Members of 4imprint Group plc
OVERVIEW OF OUR AUDIT APPROACH
Key audit matters
• Management override of internal controls through manual journals to revenue; and
• Accounting for supplier rebates.
Audit scope
• We performed an audit of the complete financial information of two full scope component and audit
procedures on specific balances for a further five components.
• The components where we performed full or specific audit procedures accounted for 100% of Profit before tax,
100% of Revenue and 100% of Total assets.
Materiality
• Overall Group materiality of $2.7m which represents 5% of underlying profit before taxation.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of
the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified.
These matters included those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing
the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in
our opinion thereon, and we do not provide a separate opinion on these matters.
RISK – MANAGEMENT OVERRIDE OF INTERNAL CONTROLS THROUGH MANUAL JOURNALS TO REVENUE
DESCRIPTION OF RISK
There is a risk that management may override controls to intentionally misstate revenue transactions through inappropriate manual journal
entries and consequently underlying operating profit.
Investor focus on the Group’s revenue performance, together with the management reward and incentive schemes, being based on revenue
percentage growth and underlying operating profit targets, create an incentive for management to manipulate revenue recognition.
There are no significant judgments involved in the recognition of revenue and our audit risk is focussed on manual journals to the
revenue accounts.
Revenue for the year was $861m (2018: $738m) and underlying operating profit was $54m (2018: $45m).
Refer to the Accounting policies (page 71); and note 1 of the Consolidated Financial Statements (page 74).
OUR RESPONSE TO THE RISK
We identified, documented and confirmed our understanding of the Group’s revenue recognition policies and assessed the design
effectiveness and application of key controls over the revenue process.
We performed testing to validate a sample of revenue transactions extracted from the sales invoicing system to revenue recorded in the
general ledger.
In respect of revenue from 4imprint, Inc. and 4imprint Direct Limited, which together form 100% of the Group’s revenue, we performed data
analytics testing over the entire revenue process from revenue recognition through to invoice settlement. Where the postings did not follow our
expectation, we investigated outliers and tested these entries to assess their validity by agreeing the transactions back to source documentation.
We tested journal entries posted to revenue accounts, applying parameters designed to identify entries that were not in accordance with our
expectations. This included analysing and selecting journals for testing which appeared unusual in nature due to size, preparer or being
manually posted and therefore outside the normal course of business. We verified such journals to source documentation to confirm that the
entries supported the revenue recognised and that the entries were valid.
KEY OBSERVATIONS COMMUNICATED TO THE AUDIT COMMITTEE
We did not identify evidence of management override through inappropriate journal entries recorded to revenue in the period.
RISK – ACCOUNTING FOR SUPPLIER REBATES
DESCRIPTION OF RISK
The Group receives significant rebates from its suppliers, primarily through 4imprint, Inc. These relate to volume-based rebates on purchases
made from key product suppliers throughout the financial period.
The rebates received are determined by formal signed agreements with suppliers and depend on the level of spend within the financial period.
Supplier agreements are coterminous with the Group’s year end. The percentage of purchases paid as a rebate from certain suppliers increases
based on predetermined thresholds within supplier agreements.
There is a risk that rebates recognised are overstated when compared to the eligible amounts set out in the rebate agreements and/or are
recognised in advance of achievement of the right to earn the income. Income received from supplier rebates is material in relation to the profit
in the period.
Rebate contracts include variable rebate rates which are dependent on product categories and volumes purchased. As this is our first year audit
we have treated this as a significant risk. There is no significant judgment in calculating the value of supplier rebates receivable. There is also an
element of judgment included in assessing the recoverability of the rebate receivable at the balance sheet date. In total the Group has
recognised $22m rebate income and a rebate receivable balance of $16m at the balance sheet date.
Refer to the Accounting policies (page 71); and note 14 of the Consolidated Financial Statements (page 83).
61
4imprint Group plc Annual Report 2019
OUR RESPONSE TO THE RISK
For a sample of supplier rebates we obtained rebate agreements and inspected them to assess whether rebates received, and receivable, by
the Group had been accounted for in the correct financial period and in accordance with specific terms agreed with suppliers.
We recalculated expected supplier rebate income and receivables based upon spend with suppliers in the period, taking account of agreed
rebate rates per signed agreements and cash received during the year for rebate income.
We obtained direct confirmations from a sample of suppliers to agree rebate receivables due at the balance sheet date.
We compared a sample of cash receipts received in the year to the prior year receivables balances to assess the historical accuracy of
management’s rebate calculations and assessment of recoverability of amounts outstanding at the year end.
We checked a sample of purchase transactions to the purchase reports used in the rebate calculations to assess whether rebate transactions
were recorded in the correct period and with regard to the relevant supplier. We inspected a sample of post year end credit notes to check the
recoverability of rebate receivable balances.
We examined journal entries to rebate accounts to investigate whether there were unusual entries posted into these accounts.
We performed audit procedures over this risk area on 4imprint, Inc. which covered 53% of the risk amount.
KEY OBSERVATIONS COMMUNICATED TO THE AUDIT COMMITTEE
Rebate income was recorded in accordance with contractual terms, in the correct period and the related year end receivables balance was
appropriately valued. We identified a projected understatement of rebate income and receivables; however, the amount was not material.
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
TAILORING THE SCOPE
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for each
entity within the Group. Taken together, this enables us to form an opinion on the consolidated financial statements. We take into account
size, risk profile, the organisation of the Group and effectiveness of group-wide controls, changes in the business environment and other
factors such as recent Internal audit results when assessing the level of work to be performed at each entity.
In assessing the risk of material misstatement to the Group financial statements, and to ensure we had adequate quantitative coverage of
significant accounts in the financial statements, of the 7 reporting components of the Group, we selected 7 components covering entities
within the United States of America and the United Kingdom, which represent the principal business units within the Group.
Of the 7 components selected, we performed an audit of the complete financial information of 2 components (“full scope components”)
which were selected based on their size or risk characteristics. For the remaining 5 components (“specific scope components”), we performed
audit procedures on specific accounts within that component that we considered had the potential for the greatest impact on the significant
accounts in the financial statements either because of the size of these accounts or their risk profile.
The reporting components where we performed audit procedures accounted for 100% of the Group’s Profit before tax, 100% of the Group’s
Revenue and 100% of the Group’s Total assets.
For the current year, the full scope components contributed 100% of the Group’s Profit before tax, 97% of the Group’s Revenue and 96% of
the Group’s Total assets.
The specific scope components contributed 0% of the Group’s Profit before tax, 3% of the Group’s Revenue and 4% of the Group’s Total
assets. The audit scope of these components may not have included testing of all significant accounts of the component but will have
contributed to the coverage of significant accounts tested for the Group.
INVOLVEMENT WITH COMPONENT TEAMS
All audit work performed for the purposes of the audit was undertaken by the Group audit team.
OUR APPLICATION OF MATERIALITY
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit and
in forming our audit opinion.
MATERIALITY
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the economic
decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our audit procedures.
We determined materiality for the Group to be $2.7 million, which is 5% of underlying profit before tax. We believe that profit before tax
provides us with a normalised trend in trading performance.
We determined materiality for the Parent Company to be £2.25 million, which is 1% of equity.
STRATEGIC REPORTCORPORATEGOVERNANCEFINANCIALSTATEMENTSADDITIONAL INFORMATIONOVERVIEW 62
4imprint Group plc Annual Report 2019
Independent Auditor’s Report continued
to the Members of 4imprint Group plc
STARTING
BASIS
ADJUSTMENTS
MATERIALITY
• Profit before tax – $54.0m
• Non-underlying items:
• Defined benefit pension charges – $0.7m
• Underlying profit before tax –$54.7m
• Materiality of $2.7m (5% of underlying profit before tax)
During the course of our audit, we reassessed initial materiality and there was no change in final materiality from original assessment
at planning.
PERFORMANCE MATERIALITY
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the
probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement was that
performance materiality was 50% of our planning materiality, namely $1.3m. We have set performance materiality at this percentage due to
this being our first year as auditors.
Audit work at component locations for the purpose of obtaining audit coverage over significant financial statement accounts is undertaken
based on a percentage of total performance materiality. The performance materiality set for each component is based on the relative scale and
risk of the component to the Group as a whole and our assessment of the risk of misstatement at that component. In the current year, the
range of performance materiality allocated to components was $0.26m to $1.3m.
REPORTING THRESHOLD
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of $0.13m, which is set at 5%
of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other
relevant qualitative considerations in forming our opinion.
OTHER INFORMATION
The other information comprises the information included in the Annual Report set out on pages 1 to 58, including the Strategic Report, set
out on pages 6 to 36, Governance, set out on pages 40 to 43, and Additional information set out on pages 109 to 111, other than the financial
statements and our auditor’s report thereon. The Directors are responsible for the other information.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this
report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to
be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether
there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have
performed, we conclude that there is a material misstatement of the other information, we are required to report that fact.
We have nothing to report in this regard.
63
4imprint Group plc Annual Report 2019
In this context, we also have nothing to report in regard to our responsibility to specifically address the following items in the other
information and to report as uncorrected material misstatements of the other information where we conclude that those items meet the
following conditions:
• Fair, balanced and understandable set out on page 58 – the statement given by the Directors that they consider the Annual Report
and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for Shareholders to
assess the Group’s performance, business model and strategy, is materially inconsistent with our knowledge obtained in the audit; or
• Audit committee reporting set out on pages 46 to 48 – the section describing the work of the audit committee does not appropriately
address matters communicated by us to the audit committee; or
• Directors’ statement of compliance with the UK Corporate Governance Code set out on page 40 – the parts of the Directors’
statement required under the Listing Rules relating to the Company’s compliance with the UK Corporate Governance Code containing
provisions specified for review by the auditor in accordance with Listing Rule 9.8.10R(2) do not properly disclose a departure from a relevant
provision of the UK Corporate Governance Code.
OPINIONS ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006
In our opinion, the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with the Companies
Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared
is consistent with the financial statements and those reports have been prepared in accordance with applicable legal requirements;
• the information about internal control and risk management systems in relation to financial reporting processes and about share capital
structures, given in compliance with rules 7.2.5 and 7.2.6 in the Disclosure Rules and Transparency Rules sourcebook made by the Financial
Conduct Authority (the FCA Rules), is consistent with the financial statements and has been prepared in accordance with applicable legal
requirements; and
information about the Company’s corporate governance code and practices and about its administrative, management and supervisory
bodies and their committees complies with rules 7.2.2, 7.2.3 and 7.2.7 of the FCA Rules.
•
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
In the light of the knowledge and understanding of the Group and the parent company and its environment obtained in the course of the
audit, we have not identified material misstatements in:
• the Strategic Report or the Directors’ Report; or
• the information about internal control and risk management systems in relation to financial reporting processes and about share capital
structures, given in compliance with rules 7.2.5 and 7.2.6 of the FCA Rules.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in
our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from
branches not visited by us; or
• the parent company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the
accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit; or
• a Corporate Governance Statement has not been prepared by the Company.
RESPONSIBILITIES OF DIRECTORS
As explained more fully in the Directors’ responsibilities statement set out on page 58, the Directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group and parent company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either
intend to liquidate the Group or the parent company or to cease operations, or have no realistic alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always
detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
EXPLANATION AS TO WHAT EXTENT THE AUDIT WAS CONSIDERED CAPABLE OF DETECTING IRREGULARITIES, INCLUDING FRAUD
The objectives of our audit, in respect to fraud, are: to identify and assess the risks of material misstatement of the financial statements due to
fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing
and implementing appropriate responses; and to respond appropriately to fraud or suspected fraud identified during the audit. However, the
primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the entity and management.
STRATEGIC REPORTCORPORATEGOVERNANCEFINANCIALSTATEMENTSADDITIONAL INFORMATIONOVERVIEW 64
4imprint Group plc Annual Report 2019
Independent Auditor’s Report continued
to the Members of 4imprint Group plc
Our approach was as follows:
• We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group and determined that the most
significant are those that relate to the reporting framework (IFRS, FRS 101, the Companies Act 2006 and UK Corporate Governance Code)
and the relevant tax compliance regulations in the USA and UK. In addition, we concluded that there are certain significant laws and
regulations which may have an effect on the determination of the amounts and disclosures in the financial statements being the Listing
Rules of the UK Listing Authority, and those laws and regulations relating to occupational health and safety and data protection.
• We understood how 4imprint Group plc is complying with those frameworks by making enquiries of management and those responsible
for legal and compliance procedures. We corroborated our enquiries through our review of board minutes, papers provided to the Audit
Committee and any correspondence received from regulatory bodies.
• We assessed the susceptibility of the Group’s financial statements to material misstatement, including how fraud might occur by meeting
with management to understand where it considered there was susceptibility to fraud. We also considered performance targets and their
influence on efforts made by management to manage earnings or influence the perceptions of analysts. We considered the programs and
controls that the Group has established to address risks identified, or that otherwise prevent, deter and detect fraud; and how senior
management monitors those programs and controls. Where the risk was considered to be higher, we performed audit procedures to
address each identified fraud risk. These procedures included testing manual journals and were designed to provide reasonable assurance
that the financial statements were free from fraud or error.
• Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Our procedures
involved: journal entry testing, with a focus on manual journals and journals indicating large or unusual transactions based on our
understanding of the business; enquiries of Group management; and focused testing, as referred to in the key audit matters section above.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at
https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
OTHER MATTERS WE ARE REQUIRED TO ADDRESS
• We were appointed by the Company on 7 May 2019 to audit the financial statements for the year ending 28 December 2019 and
subsequent financial periods.
• The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the parent company and we remain
independent of the Group and the parent company in conducting the audit.
• The audit opinion is consistent with the additional report to the audit committee.
USE OF OUR REPORT
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our
audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an
auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other
than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
CHRISTOPHER VOOGD
(SENIOR STATUTORY AUDITOR)
for and on behalf of Ernst & Young LLP, Statutory Auditor
Birmingham
3 March 2020
Notes:
1. The maintenance and integrity of the 4imprint Group plc web site is the responsibility of the Directors; the work carried out by the auditors does not involve
consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were
initially presented on the web site.
2. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
65
4imprint Group plc Annual Report 2019
Group Income Statement
for the 52 weeks ended 28 December 2019
Revenue
Operating expenses
Operating profit
Finance income
Finance costs
Pension finance charge
Net finance income/(cost)
Profit before tax
Taxation
Profit for the period
Earnings per share
Basic
Diluted
Underlying* basic
* Underlying is before defined benefit pension charges and exceptional items.
Note
1
2
1
5
6
7
7
7
2019
$’000
2018
$’000
860,844
738,418
(807,224)
(694,096)
53,620
44,322
818
(67)
(378)
373
250
(23)
(403)
(176)
53,993
44,146
(11,276)
(8,952)
42,717
35,194
Cents
Cents
152.42
151.87
154.41
125.61
125.22
129.77
STRATEGIC REPORTCORPORATEGOVERNANCEFINANCIALSTATEMENTSADDITIONAL INFORMATIONOVERVIEW 66
4imprint Group plc Annual Report 2019
Group Statement of Comprehensive Income
for the 52 weeks ended 28 December 2019
Profit for the period
Other comprehensive (expense)/income
Items that may be reclassified subsequently to the income statement:
Currency translation differences
Items that will not be reclassified subsequently to the income statement:
Return on pension scheme assets (excluding interest income)
Re-measurement (losses)/gains on post-employment obligations
Tax relating to components of other comprehensive income
Effect of change in UK tax rate
Total other comprehensive expense net of tax
Total comprehensive income for the period
Note
2019
$’000
2018
$’000
42,717
35,194
24
18
18
(173)
(434)
2,372
(2,164)
(570)
(9)
(544)
(1,951)
1,582
390
(21)
(434)
42,173
34,760
67
4imprint Group plc Annual Report 2019
Group Balance Sheet
at 28 December 2019
Note
2019
$’000
2018
$’000
9
10
11
12
13
14
15
16
17
16
18
19
24,369
1,152
1,985
4,338
31,844
11,456
52,899
140
41,136
105,631
19,012
1,084
–
5,636
25,732
9,878
46,228
644
27,484
84,234
(1,630)
–
(59,209)
(50,252)
–
(500)
(60,839)
(50,752)
44,792
33,482
(415)
–
(12,305)
(15,016)
(968)
(931)
(13,688)
(15,947)
62,948
43,267
22
24
18,842
68,451
5,254
18,842
68,451
5,427
(29,599)
(49,453)
62,948
43,267
Non-current assets
Property, plant and equipment
Intangible assets
Right-of-use assets
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Current tax debtor
Cash and cash equivalents
Current liabilities
Lease liabilities
Trade and other payables
Current tax creditor
Net current assets
Non-current liabilities
Lease liabilities
Retirement benefit obligations
Deferred tax liabilities
Net assets
Shareholders’ equity
Share capital
Share premium reserve
Other reserves
Retained earnings
Total Shareholders’ equity
The financial statements on pages 65 to 97 were approved by the Board of Directors on 3 March 2020 and were signed on its behalf by:
KEVIN LYONS-TARR
CHIEF EXECUTIVE OFFICER
DAVID SEEKINGS
CHIEF FINANCIAL OFFICER
STRATEGIC REPORTCORPORATEGOVERNANCEFINANCIALSTATEMENTSADDITIONAL INFORMATIONOVERVIEW
68
4imprint Group plc Annual Report 2019
Group Statement of Changes in Shareholders’ Equity
for the 52 weeks ended 28 December 2019
Balance at 31 December 2017
Profit for the period
Other comprehensive income/(expense)
Currency translation differences
Re-measurement losses on post-employment obligations
Deferred tax relating to post-employment obligations (note 12)
Deferred tax relating to losses re post-employment obligations (note 12)
Effect of change in tax rates (note 12)
Total comprehensive income
Proceeds from options exercised
Own shares utilised
Own shares purchased
Share-based payment charge
Deferred tax relating to share options (note 19)
Deferred tax relating to losses re share options (note 12)
Dividends
Retained earnings
Share
capital
$’000
Share
premium
reserve
$’000
Other
reserves
(note 24)
$’000
Own
shares
$’000
Profit
and loss
$’000
Total
equity
$’000
18,842
68,451
5,861
(1,699)
(50,373)
41,082
(434)
35,194
35,194
(434)
(369)
69
321
(21)
(369)
69
321
(21)
(434)
35,194
34,760
1,722
1,722
2,420
(2,420)
–
(2,187)
(2,187)
808
808
6
60
6
60
(32,984)
(32,984)
Balance at 29 December 2018
18,842
68,451
5,427
(1,466)
(47,987)
43,267
Adjustments arising from adoption of IFRS 16 (note 30)
–
–
–
–
(187)
(187)
Balance at 30 December 2018 after adjustments
18,842
68,451
5,427
(1,466)
(48,174)
43,080
Profit for the period
Other comprehensive income/(expense)
Currency translation differences
Re-measurement gains on post-employment obligations
Deferred tax relating to post-employment obligations (note 12)
Deferred tax relating to losses re post-employment obligations (note 12)
Effect of change in tax rates (note 12)
Total comprehensive income
Proceeds from options exercised
Own shares utilised
Own shares purchased
Share-based payment charge
Deferred tax relating to share options (note 19)
Deferred tax relating to losses re share options (note 12)
Dividends
(173)
42,717
42,717
(173)
208
(40)
208
(40)
(530)
(530)
(9)
(9)
(173)
42,346
42,173
339
1,343
(1,343)
339
–
(2,906)
(2,906)
928
94
928
94
(101)
(101)
(20,659)
(20,659)
Balance at 28 December 2019
18,842
68,451
5,254
(3,029)
(26,570)
62,948
69
4imprint Group plc Annual Report 2019
Group Cash Flow Statement
for the 52 weeks ended 28 December 2019
Cash flows from operating activities
Cash generated from operations
Tax paid
Finance income received
Finance costs paid
Net cash generated from operating activities
Cash flows from investing activities
Purchases of property, plant and equipment
Purchases of intangible assets
Proceeds from sale of property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Capital element of lease payments
Proceeds from share options exercised
Purchases of own shares
Dividends paid to Shareholders
Net cash used in financing activities
Net movement in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Exchange gains/(losses) on cash and cash equivalents
Cash and cash equivalents at end of the period
Analysis of cash and cash equivalents
Cash at bank and in hand
Short-term deposits
Note
2019
$’000
2018
$’000
25
56,248
(10,318)
818
(67)
41,651
(7,844)
250
(23)
46,681
34,034
(7,673)
(2,492)
(505)
–
(395)
32
(8,178)
(2,855)
(1,687)
339
(2,906)
–
1,722
(2,187)
8
(20,659)
(32,984)
(24,913)
(33,449)
13,590
27,484
62
(2,270)
30,767
(1,013)
41,136
27,484
15
15
41,136
–
41,136
23,648
3,836
27,484
STRATEGIC REPORTCORPORATEGOVERNANCEFINANCIALSTATEMENTSADDITIONAL INFORMATIONOVERVIEW 70
4imprint Group plc Annual Report 2019
Notes to the Group Financial Statements
GENERAL INFORMATION
4imprint Group plc, registered number 177991, is a public limited company incorporated in England and Wales, domiciled in the UK and listed
on the London Stock Exchange. Its registered office is 25 Southampton Buildings, London WC2A 1AL.
The Group presents the consolidated financial statements in US dollars and numbers are shown in US dollars thousands. A substantial portion
of the Group’s revenue and earnings are denominated in US dollars and the Board is of the opinion that a US dollar presentation gives a more
meaningful view of the Group’s financial performance and position.
ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been
consistently applied to all the periods presented, apart from those affected by the early adoption of IFRS 16 ‘Leases’. Under IFRS 16 there is no
distinction between finance and operating leases from a lessee’s perspective, with all leases, subject to options to exclude leases with a
duration of 12 months or less and leases of low value assets, included on the balance sheet by recognition of a right-of-use asset and a lease
liability. This impacts the accounting policy for leases and the new policy is shown below. On transition the Group decided to take advantage
of the modified retrospective option not to restate prior periods, but to recognise a lease liability at the date of initial application, based on
discounted future cash flows, along with a right-of-use asset at a carrying amount as if the Standard had been applied since the
commencement date of the lease, but discounted at the incremental borrowing rate at the date of initial application. The financial impacts of
this policy change are shown in note 30.
BASIS OF PREPARATION
The financial statements have been prepared under the historical cost convention in accordance with International Financial Reporting
Standards (“IFRSs”) as adopted by the EU, IFRS IC interpretations and those parts of the Companies Act 2006 applicable to companies
reporting under IFRS. The standards used are those published by the International Accounting Standards Board (“IASB”) and endorsed by the
EU that applied to the 2019 financial year, which started on 30 December 2018, except for the early adoption of IFRS 16 as noted above.
After making enquiries, the Directors have reasonable expectations that the Group has adequate resources to continue to operate for a period
of at least twelve months from the date these financial statements were approved (see page 21). Accordingly, they continue to adopt the going
concern basis in preparing the consolidated financial statements.
BASIS OF CONSOLIDATION
The consolidated financial statements include the financial statements of the Company and its subsidiaries for the period. Subsidiaries are all
entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has
rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the
activities of the entity. The financial statements of subsidiaries, as amended to conform to Group accounting policies, are included in the
consolidated financial statements from the date that control commences until the date that control ceases.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured
as the fair value of the consideration paid. Identifiable assets and liabilities and contingent liabilities assumed in a business combination are
measured initially at their fair value at the acquisition date. The excess of the cost of acquisition over the Group’s share of identifiable net assets
is recorded as goodwill. Acquisition-related costs are expensed as incurred.
The results of subsidiaries acquired or disposed of during the period are included in the consolidated income statement from the effective date
of acquisition or up to the effective date of disposal, as appropriate. In addition, comparatives are also restated to reclassify disposed
businesses to show them as discontinued operations. Additionally those that meet the criteria of IFRS 5 ‘Non-current Assets Held for Sale and
Discontinued Operations’ are classified as held for sale and shown as discontinued operations.
All subsidiaries have the same year end date as the Group.
JUDGMENTS, ESTIMATES AND ASSUMPTIONS
CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
The preparation of the consolidated financial statements requires management to make judgments, estimates and assumptions that affect the
application of policies, the amounts reported for assets and liabilities as at the balance sheet date and the amounts reported for revenues and
expenses during the year.
The estimates and associated assumptions are based on historical experiences and various other factors that are believed to be reasonable
under the circumstances, the results of which form the basis of making judgments about carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these estimates.
Critical accounting policies are those that require significant judgments or estimates and potentially result in materially different results under
different assumptions or conditions. Management considers the following to be the critical accounting policies:
PENSIONS
As disclosed in note 18, the Group sponsors a defined benefit pension scheme closed to new members and future accruals. Period end
recognition of the liabilities under this scheme and the return on assets held to fund these liabilities require a number of significant actuarial
assumptions to be made, including inflation rate, discount rate and mortality rates. Small changes in assumptions can have a significant impact
on the expense recorded in the income statement and on the pension liability in the balance sheet. Sensitivities to changes in these
assumptions are disclosed in note 18.
LEASES
An estimate of the residual term over which the Oshkosh office lease will be rolled over has been necessary (note 16).
71
4imprint Group plc Annual Report 2019
OTHER ACCOUNTING POLICIES
REVENUE
The activity from which the Group derives revenue is the sale and delivery of promotional products.
The Group operates a ‘drop-ship’ model in which it acts as principal as it has control over the goods and services before transfer to
the customer.
The price for each sale is fixed at the time of order, inclusive of any discounts given. Revenue is shown net of discounts, refunds and sales tax.
Payment terms vary by customer but are either payment with order or within 30 days of delivery.
The performance obligations in the contract with the customer are satisfied upon delivery of the goods and revenue is recognised when
control of the goods has transferred to the customer upon delivery.
SUPPLIER REBATES
Amounts due under rebate agreements are recognised based upon volumes of products purchased during the period to which the rebates
relate at the relevant rebate rates, per supplier agreements. Amounts are credited to the cost of purchase of goods for resale and any
accrued income is included in other receivables. Provision is made against such receivables to the extent it is considered that the amounts are
not recoverable.
SEGMENTAL REPORTING
The reporting requirements of IFRS 8 require operating segments to be identified on the basis of internal reports about components of the
Group that are regularly reviewed by the chief operating decision maker to allocate resources to the segments and to assess their performance.
The chief operating decision maker has been identified by the Directors as the Board.
LEASES
A lease is defined as a contract that conveys the right to control the use of an identified asset for a period of time in exchange for
consideration. At the commencement date of a lease a right-of-use asset and a lease liability are recognised in the financial statements.
The lease liability is initially measured at the present value of expected future lease payments discounted at the interest rate implicit in the lease
or, if that rate cannot be determined, the lessee’s incremental borrowing rate. Subsequently the lease liability decreases by the lease payments
made, offset by interest on the liability, and may be remeasured to reflect any reassessment of expected payments or to reflect any lease
modifications.
The right-of-use asset is initially measured at cost. This comprises the amount of the initial lease liability plus: any lease payments made on or
before the commencement date less incentives received; any incremental costs of obtaining the lease; and, if any, the costs of
decommissioning the asset and any restoration work to return the asset to the condition required under the terms of the lease. Subsequently
the right-of-use asset is measured using the cost model. The asset is amortised on a straight-line basis over the expected term of the lease,
adjusted for any remeasurement of the lease liability, and is shown net of the accumulated depreciation and any impairment provisions.
The Group has elected to use the recognition exemptions for low value assets and short-term leases are expensed to operating profit on a
straight-line basis over the term of the lease.
SHARE-BASED PAYMENTS
Share options, which are all equity-settled, are measured at fair value at the date of grant allowing for any market conditions, if applicable.
The fair value is charged to the income statement over the vesting period of the share option schemes on a straight-line basis. The value of
the charge is adjusted each year to reflect any non-market or service conditions that impact the expected number of options that will become
exercisable. All options cancelled are fully expensed to the income statement upon cancellation.
EXCEPTIONAL ITEMS
Income or costs which are both material and non-recurring, whose significance is sufficient to warrant separate disclosure in the financial
statements, are referred to as exceptional items. The Directors consider that the separate disclosure of these items assists in understanding
the Group’s financial performance.
TAXATION
The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it
relates to items recognised in other comprehensive income, or directly in equity in which case the tax is recognised in other comprehensive
income or directly in equity, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the
countries where the Group’s subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax
returns with respect to situations in which applicable tax regulation is subject to interpretation and establishes provisions where appropriate
on the basis of amounts estimated to be paid to tax authorities.
Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and
their carrying amounts in the Group’s financial statements. However, deferred income tax is not accounted for if it arises from initial
recognition of an asset or liability in a transaction, other than a business combination that at the time of the transaction affects neither
accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially
enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised, or the deferred income
tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the
temporary differences can be utilised.
STRATEGIC REPORTCORPORATEGOVERNANCEFINANCIALSTATEMENTSADDITIONAL INFORMATIONOVERVIEW 72
4imprint Group plc Annual Report 2019
Notes to the Group Financial Statements continued
OTHER ACCOUNTING POLICIES CONTINUED
DIVIDENDS
Final equity dividends are recognised in the Group’s financial statements in the period in which the dividends are approved by the
Shareholders. Interim equity dividends are recognised when paid.
FOREIGN CURRENCY
The functional and presentation currency of the Company is Sterling. However, the Group’s financial statements are presented in US dollars.
Transactions in currencies other than the functional currency of the Company or subsidiary concerned are recorded at the exchange rate
prevailing at the date of the transaction. At each balance sheet date, monetary assets and liabilities denominated in foreign currencies
are translated at the exchange rate prevailing at the balance sheet date. Translation differences on monetary items are taken to the
income statement.
On consolidation the balance sheets of Sterling enterprises are translated into US dollars at the exchange rate ruling at the balance sheet date
and income statements are translated at average rates for the period under review. One-off material transactions are translated at the spot rate
on the transaction date. The resulting exchange differences are taken to the cumulative translation differences reserve and are reported in the
statement of comprehensive income.
On disposal of an operation any cumulative exchange differences held in Shareholders’ equity are recycled to the income statement.
DERIVATIVE INSTRUMENTS
Derivatives are recognised initially at fair value and are re-measured at fair value at each reporting date.
The Group only uses derivative forward foreign exchange contracts to hedge highly probable cash flows that meet the qualifying criteria for
hedge accounting and never for maturities more than 12 months. The fair value of the hedging derivative is classified as a current asset
or liability.
The Group applies hedge accounting to these transactions designating them as cash flow hedges. The effective portion of changes in these
cash flow hedges are deferred in a hedging reserve, where material, and then charged to the income statement when the forecast sale or
purchase occurs or if the forecast transaction is no longer expected to occur. Any ineffective portion of the cash flow hedge is recognised
immediately in the income statement.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost less accumulated depreciation and any impairment losses. No depreciation is provided on
freehold land. For all other property, plant and equipment, depreciation is calculated to write-off their cost less residual value by equal annual
instalments over the period of their estimated useful lives, which are reviewed on a regular basis. Leasehold assets are depreciated over the
shorter of the term of the lease or their estimated useful lives.
Cost comprises the purchase price plus costs directly incurred in bringing the asset into use.
The principal useful lives currently fall within the following ranges:
Freehold and long leasehold buildings
Short leasehold buildings
Plant, machinery, fixtures and fittings
Computer hardware
50 years
Life of lease
3–15 years
3 years
Profits and losses on disposal which have arisen from over or under depreciation are accounted for in arriving at operating profit and are
separately disclosed when material.
INTANGIBLE ASSETS
Acquired software licences and expenditure on developing websites and other computer systems, providing they meet the criteria for
recognition under IAS 38, are capitalised, held at historic cost and amortised from the date of commissioning on a straight-line basis over their
useful economic lives (currently three to five years). Amortisation is charged to operating expenses. Internal non-development costs are
expensed to operating expenses as incurred.
An expense is recognised in operating expenses for catalogues and other related marketing expenses when the business has access to them.
IMPAIRMENT OF ASSETS
All property, plant and equipment and intangible assets are reviewed for impairment in accordance with IAS 36 ‘Impairment of Assets’ if there
is an indication that the carrying value of the asset may have been impaired. Where an impairment review is required, the carrying value of the
assets is measured against their value in use based on future estimated cash flows, discounted by the appropriate cost of capital, resulting from
the use of those assets. Assets are grouped at the lowest level for which there is a separately identifiable cash flow (cash generating unit). An
impairment loss is recognised for the amount at which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is
the higher of an asset’s fair value less costs to sell and value in use.
INVENTORIES
Inventories are valued at the lower of cost, net of provisions for slow-moving and discontinued items, and net realisable value using the first in
first out basis. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.
Items in transit where the Group has control are included in inventories.
73
4imprint Group plc Annual Report 2019
TRADE RECEIVABLES
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less
provision for impairment. A provision for impairment of trade receivables is established based on the expected credit loss. The Group applies
the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables,
which are grouped based on shared credit risk characteristics and the days past due. The amount of the provision is recognised in the income
statement. Trade receivables are discounted when the time value of money is considered material.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes cash in hand, deposits held on call with banks and other short-term highly liquid investments with original
maturities of three months or less. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet. In the cash flow
statement, cash and cash equivalents are shown net of bank overdrafts. Cash deposits with an original maturity in excess of three months are
classified as other financial assets.
TRADE PAYABLES
Trade payables are recognised initially at fair value and subsequently measured at amortised cost. Trade and other payables are discounted
when the time value of money is considered material.
PENSIONS
The Group operates defined contribution plans for the majority of its UK and US employees. The regular contributions are charged to the
income statement as they are incurred.
The Group sponsors a defined benefit scheme, which is closed to new members and future accruals. The Group accounts for the defined
benefit scheme under IAS 19 ‘Employee Benefits’. The deficit of the defined benefit pension scheme is recognised in full on the balance sheet
and represents the difference between the fair value of the plan assets and the present value of the defined benefit obligation at the balance
sheet date. A full actuarial valuation is carried out at least every three years and the defined benefit obligation is updated on an annual basis,
by independent actuaries, using the projected unit credit method.
Pension charges recognised in the income statement consist of administration costs of the scheme, exceptional costs of risk reduction exercises
incurred by the scheme, exceptional past service cost for GMP equalisation and a finance cost based on the interest on net pension scheme
liabilities calculated in accordance with IAS 19.
Differences between the actual and expected return on assets, experience gains and losses and changes in actuarial assumptions are included
directly in the statement of comprehensive income.
BORROWINGS
Borrowings are measured initially at fair value net of transaction costs incurred and subsequently carried at amortised costs using the effective
interest rate method. Arrangement fees are amortised over the life of the borrowing. Borrowings are discounted when the time value of
money is considered material.
OWN SHARES HELD BY EMPLOYEE SHARE TRUSTS
Own shares acquired, to meet future obligations under employee share options, are held in independent trusts. These are funded by the
Company and purchases of shares by the trusts are charged directly to equity.
Administration expenses of the trusts are charged to the Company’s income statement as incurred.
IFRS STANDARDS EFFECTIVE IN FUTURE FINANCIAL STATEMENTS
The IASB and IFRS IC have issued new or amended standards and interpretations which are effective for accounting periods as noted below.
IFRS 16 ‘Leases’ has been adopted early and the impact of this standard upon the financial statements is shown in note 30. Management does
not believe the impact of adopting the new or amended standards and interpretations listed below will have a material impact on the results
or net assets of the Group.
IFRIC 23 ‘Uncertainty over Income Tax Treatments’ (effective 1 January 2019)
Amendments to IFRS 9 ‘Financial Instruments’ (effective 1 January 2019)
Annual improvements 2015-2017 (effective 1 January 2019)
Amendments to IAS 28 ‘Investments in Associates and Joint Ventures’ (effective 1 January 2019)*
Amendments to IAS 19 ‘Employee Benefits’ (effective 1 January 2019)*
Amendments to IFRS 3 ‘Business Combinations’ (effective 1 January 2020)*
Amendments to IAS 1 ‘Presentation of Financial Statements’ and IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’
(effective 1 January 2020)*
IFRS 17 ‘Insurance Contracts’ (effective 1 January 2021)*
* Not yet endorsed by the EU.
Note: the current financial reporting period commenced on 30 December 2018.
STRATEGIC REPORTCORPORATEGOVERNANCEFINANCIALSTATEMENTSADDITIONAL INFORMATIONOVERVIEW 74
4imprint Group plc Annual Report 2019
Notes to the Group Financial Statements continued
1 SEGMENTAL REPORTING
The chief operating decision maker has been identified as the Board of Directors and the segmental analysis is presented based on the Group’s
internal reporting to the Board.
At 28 December 2019, the Group has two operating segments, North America and UK & Eire. The costs of the Head office are reported
separately to the Board, but this is not an operating segment.
REVENUE
North America
UK & Eire
Total Group revenue
PROFIT
North America
UK & Eire
Underlying* operating profit from 4imprint Direct Marketing
Head office costs
Underlying operating profit
Defined benefit pension scheme administration costs (note 18)
Exceptional items (note 4)
Operating profit
Net finance income (note 5)
Pension finance charge (note 5)
Profit before tax
* Underlying is before defined benefit pension charges and exceptional items.
OTHER SEGMENTAL INFORMATION
2019
$’000
2018
$’000
839,284
714,554
21,560
23,864
860,844
738,418
2019
$’000
2018
$’000
57,446
48,496
(42)
465
57,404
48,961
(3,472)
(3,602)
53,932
45,359
(312)
–
(316)
(721)
53,620
44,322
751
227
(378)
(403)
53,993
44,146
Assets
Liabilities
Capital expenditure
Depreciation
Amortisation
2019
$’000
2018
$’000
2019
$’000
2018
$’000
2019
$’000
2018
$’000
2019
$’000
2018
$’000
2019
$’000
North America
87,701
72,280
(57,790)
(46,544)
8,124
2,838
(2,255)
(2,085)
(1,760)
UK & Eire
Head office
3,886
3,570
(2,834)
(2,868)
45,888
34,116
(13,903)
(17,287)
50
4
48
1
(86)
(4)
(103)
(12)
(23)
(156)
2018
$’000
(422)
(23)
–
137,475
109,966
(74,527)
(66,699)
8,178
2,887
(2,345)
(2,200)
(1,939)
(445)
75
4imprint Group plc Annual Report 2019
GEOGRAPHICAL ANALYSIS OF REVENUE AND NON-CURRENT ASSETS
2019
Total revenue by destination
Property, plant and equipment
Intangible assets
Right-of-use assets
2018
Total revenue by destination
Property, plant and equipment
Intangible assets
Right-of-use assets
2 OPERATING EXPENSES
The following items have been charged/(credited) in arriving at operating profit:
Purchase of goods for resale and consumables
Changes in inventories
Increase in stock provision
Impairment loss on trade receivables
Staff costs
Marketing expenditure (excluding staff costs)
Depreciation of property, plant and equipment
Amortisation of intangible assets
Amortisation of right-of-use assets
Operating lease payments
Exceptional items
Defined benefit pension scheme administration costs
Net exchange (gains)/losses
Other operating expenses
North
America
$’000
UK
$’000
All other
countries
$’000
Total
$’000
839,472
19,912
1,460
860,844
23,417
952
1,099
1,944
North
America
$’000
53
41
UK
$’000
–
–
–
24,369
1,152
1,985
All other
countries
$’000
Total
$’000
714,665
22,515
1,238
738,418
18,036
1,028
–
976
56
–
–
–
–
19,012
1,084
–
Note
2019
$’000
2018
$’000
13
14
3
9
10
4
18
538,859
466,351
(1,577)
(4,524)
–
959
6
347
65,186
57,433
146,798
123,866
2,345
2,200
440
1,499
21
–
312
(65)
445
–
2,007
721
316
349
52,447
44,579
807,224
694,096
STRATEGIC REPORTCORPORATEGOVERNANCEFINANCIALSTATEMENTSADDITIONAL INFORMATIONOVERVIEW 76
4imprint Group plc Annual Report 2019
Notes to the Group Financial Statements continued
2 OPERATING EXPENSES CONTINUED
During the period the Group obtained the following services from its auditors at costs as detailed below:
Fees payable to the Company’s auditors for the audit of the Parent Company, non-statutory audits of overseas
subsidiaries and audit of consolidated financial statements
Fees payable to the Company’s auditors and its associates for other services:
– the audit of Company’s subsidiaries pursuant to legislation
Non-audit fees
– IT general controls review
2019
$’000
2018
$’000
250
185
19
269
13
282
15
200
–
200
The 4imprint defined benefit pension scheme has incurred fees from the Group’s auditors of $nil (2018: $17,025) for audit services.
3 EMPLOYEES
STAFF COSTS
Wages and salaries
Social security costs
Pension costs – defined contribution plans
Share option charges
Social security costs in respect of share options
AVERAGE MONTHLY NUMBER OF PEOPLE (INCLUDING EXECUTIVE DIRECTORS) EMPLOYED
Distribution and production
Sales and marketing
Administration
KEY MANAGEMENT COMPENSATION
Salaries, fees and short-term employee benefits
Social security costs
Pension costs – defined contribution plans
Share option charges
Social security costs in respect of share options
Note
2019
$’000
2018
$’000
58,238
51,378
4,419
3,880
1,580
1,356
928
21
808
11
65,186
57,433
18
23
23
2019
Number
2018
Number
442
508
195
368
463
181
1,145
1,012
2019
$’000
2018
$’000
2,444
2,349
135
20
249
4
126
19
312
4
2,852
2,810
Key management compensation in the period comprised the emoluments of all Directors (which are disclosed separately in the Remuneration
Report).
77
4imprint Group plc Annual Report 2019
DIRECTORS’ REMUNERATION
Aggregate emoluments
Pension costs – defined contribution plans
4 EXCEPTIONAL ITEMS
Past service costs re defined benefit pension scheme pensioner GMP equalisation
2019
$’000
2018
$’000
2,444
2,349
20
19
2019
$’000
–
2018
$’000
721
The past service costs in 2018 result from the High Court judgment in the Lloyds case on 26 October 2018, which confirmed that the
equalisation of benefits between male and female members of the defined benefit plan at retirement extends to Guaranteed Minimum
Pensions (“GMP”). The charge is an estimate calculated by the Company’s actuaries, based on key high-level data from the Plan’s last full
actuarial valuation and the legal position as understood at the date of these financial statements. The actual result may differ from this
estimate, which has not been updated since first calculated.
5 NET FINANCE INCOME AND COST
Finance income/(cost)
Bank and other interest receivable
Bank interest payable
Lease interest charge
Pension finance charge (note 18)
Net finance income/(cost)
6 TAXATION
Current tax
UK tax – current
Overseas tax – current
Overseas tax – prior periods
Total current tax
Deferred tax
Origination and reversal of temporary differences
Adjustment in respect of prior periods
Total deferred tax (notes 12 and 19)
Taxation
2019
$’000
2018
$’000
818
(22)
(45)
751
(378)
373
250
(23)
–
227
(403)
(176)
2019
$’000
2018
$’000
–
–
10,845
8,212
(523)
(41)
10,322
8,171
954
–
954
803
(22)
781
11,276
8,952
STRATEGIC REPORTCORPORATEGOVERNANCEFINANCIALSTATEMENTSADDITIONAL INFORMATIONOVERVIEW 78
4imprint Group plc Annual Report 2019
Notes to the Group Financial Statements continued
6 TAXATION CONTINUED
The tax for the period is different to the standard rate of corporation tax in the respective countries of operation. The differences are
explained below:
Profit before tax
Profit before tax for each country of operation multiplied by rate of corporation tax applicable in the
respective countries
Effects of:
Adjustments in respect of prior periods
Expenses not deductible for tax purposes and non-taxable income
Other differences
Utilisation of tax losses not previously recognised
Taxation
2019
$’000
2018
$’000
53,993
44,146
12,927
10,452
(523)
14
(91)
(63)
105
(164)
(1,051)
(1,378)
11,276
8,952
The net deferred tax asset at 28 December 2019 has been calculated at a tax rate of 17% (2018: 19% for items reversing pre April 2020 and
17% for all other items) in respect of UK deferred tax items and 25% (2018: 21%) in respect of US deferred tax items.
The amount of current tax recognised directly in Shareholders’ equity in 2019 was $nil (2018: $nil).
No current tax was recognised in other comprehensive income (2018: $nil).
The lump sum funding to the defined benefit pension scheme planned for 2020 may impact on future effective tax rates.
7 EARNINGS PER SHARE
BASIC, DILUTED AND UNDERLYING
The basic, diluted and underlying earnings per share are calculated based on the following data:
Profit after tax
Profit before tax
Adjustments:
Exceptional items (note 4)
Defined benefit pension scheme administration costs (note 18)
Pension finance charge (note 18)
Underlying profit before tax
Taxation (note 6)
Tax relating to above adjustments
Underlying profit after tax
2019
$’000
2018
$’000
42,717
35,194
2019
$’000
2018
$’000
53,993
44,146
–
312
378
721
316
403
54,683
45,586
(11,276)
(8,952)
(131)
(274)
43,276
36,360
79
4imprint Group plc Annual Report 2019
Basic weighted average number of shares
Adjustment for employee share options
Diluted weighted average number of shares
Basic earnings per share
Diluted earnings per share
Underlying basic earnings per share
Underlying diluted basic earnings per share
2019
Number
‘000
2018
Number
‘000
28,026
28,018
102
88
28,128
28,106
2019
Cents
2018
Cents
152.42
125.61
151.87
125.22
154.41
129.77
153.85
129.37
The basic weighted average number of shares excludes shares held in the 4imprint Group plc employee share trusts. The effect of this is to
reduce the average by 59,908 (2018: 67,125).
The basic earnings per share is calculated based on the profit for the financial period divided by the basic weighted average number of shares.
For diluted earnings per share, the basic weighted average number of ordinary shares in issue is adjusted to assume conversion of all potential
dilutive ordinary shares. The potential dilutive ordinary shares relate to those share options granted to employees where the exercise price is
less than the average market price of the Company’s ordinary shares and are likely to vest at the balance sheet date.
The underlying basic earnings per share is calculated before the after-tax effect of exceptional items and defined benefit pension charges and
is included because the Directors consider this gives a measure of the underlying performance of the ongoing business.
8 DIVIDENDS
Equity dividends – ordinary shares
Interim paid: 25.00c (2018: 20.80c)
Supplementary paid: nil (2018: 60.00c)
Final paid: 49.20c (2018: 40.00c)
2019
$’000
2018
$’000
7,146
5,848
–
16,282
13,513
10,854
20,659
32,984
In addition, the Directors are proposing a final dividend in respect of the period ended 28 December 2019 of 59.00c (46.16p) per share, which
will absorb an estimated $16.5m of Shareholders’ funds. Subject to Shareholder approval at the AGM, these dividends are payable on 15 May
2020 to Shareholders who are on the register of members at close of business on 14 April 2020. These financial statements do not reflect
these proposed dividends.
STRATEGIC REPORTCORPORATEGOVERNANCEFINANCIALSTATEMENTSADDITIONAL INFORMATIONOVERVIEW 80
4imprint Group plc Annual Report 2019
Notes to the Group Financial Statements continued
9 PROPERTY, PLANT AND EQUIPMENT
Cost:
At 30 December 2018
Additions
Disposals
Exchange difference
At 28 December 2019
Depreciation:
At 30 December 2018
Charge for the period
Disposals
Exchange difference
At 28 December 2019
Net book value at 28 December 2019
Freehold land with a value of $737,000 (2018: $729,000) has not been depreciated.
Cost:
At 31 December 2017
Additions
Disposals
Exchange difference
At 29 December 2018
Depreciation:
At 31 December 2017
Charge for the period
Disposals
Exchange difference
At 29 December 2018
Net book value at 29 December 2018
Freehold
land and
buildings
$’000
Plant,
machinery,
fixtures &
fittings
$’000
Computer
hardware
$’000
Total
$’000
13,541
15,060
1,943
30,544
4,998
2,313
362
7,673
–
26
(159)
(330)
(489)
13
1
40
18,565
17,227
1,976
37,768
2,099
8,022
1,411
11,532
457
1,575
313
2,345
–
3
(159)
(330)
(489)
7
1
11
2,559
9,445
1,395
13,399
16,006
7,782
581
24,369
Freehold
land and
buildings
$’000
Plant,
machinery,
fixtures &
fittings
$’000
Computer
hardware
$’000
Total
$’000
13,451
13,646
1,680
28,777
142
1,978
372
2,492
–
(52)
(527)
(37)
(105)
(4)
(632)
(93)
13,541
15,060
1,943
30,544
1,680
425
–
(6)
7,129
1,419
(503)
(23)
1,139
9,948
356
2,200
(82)
(2)
(585)
(31)
2,099
8,022
1,411
11,532
11,442
7,038
532
19,012
81
4imprint Group plc Annual Report 2019
10 INTANGIBLE ASSETS
Computer software
Cost:
At start of period
Additions
Disposals
Exchange difference
At end of period
Amortisation:
At start of period
Charge for the period
Disposals
Exchange difference
At end of period
Net book value at end of period
The average remaining life of intangible assets is 2.6 years (2018: 2.4 years).
11 RIGHT-OF-USE ASSETS
Cost:
At 30 December 2018
Adjustment arising from adoption of IFRS 16 (note 30)
At 30 December 2018 after adjustment
Addition*
Disposals
Exchange difference
At 28 December 2019
Depreciation:
At 30 December 2018
Adjustment arising from adoption of IFRS 16 (note 30)
At 30 December 2018 after adjustment
Charge for the period
Disposals
Exchange difference
At 28 December 2019
Net book value at 28 December 2019
* The addition relates to the reassessment of the lease term of the Oshkosh office (see note 16).
2019
$’000
2018
$’000
2,543
2,765
505
395
(485)
(606)
6
(11)
2,569
2,543
1,459
1,627
440
445
(485)
(606)
3
(7)
1,417
1,459
1,152
1,084
Leasehold
land and
buildings
$’000
Plant,
machinery,
fixtures &
fittings
$’000
–
1,773
1,773
1,625
–
7
3,405
–
–
–
1,419
–
4
1,423
1,982
–
83
83
–
(70)
–
13
–
–
–
80
(70)
–
10
3
Total
$’000
–
1,856
1,856
1,625
(70)
7
3,418
–
–
–
1,499
(70)
4
1,433
1,985
STRATEGIC REPORTCORPORATEGOVERNANCEFINANCIALSTATEMENTSADDITIONAL INFORMATIONOVERVIEW 82
4imprint Group plc Annual Report 2019
Notes to the Group Financial Statements continued
12 DEFERRED TAX ASSETS
At start of period
Income statement charge
Deferred tax (charge)/credited to other comprehensive income
Deferred tax (charge)/credited to equity
Effect of change in UK tax rate – other comprehensive income
Exchange difference
At end of period
2019
$’000
2018
$’000
5,636
5,912
(762)
(570)
(101)
(9)
(340)
390
60
(21)
144
(365)
4,338
5,636
No deferred tax is recognised on the unremitted earnings of overseas subsidiaries. No tax is expected to be payable on them in the
foreseeable future.
$1.00m (2018: $0.15m) of the deferred tax asset is expected to reverse within the next twelve months.
The movement in the deferred tax asset during the period is shown in the following table:
DEFERRED TAX ANALYSIS
At 30 December 2018
Income statement charge
Deferred tax charged to other comprehensive income
Deferred tax charged to equity
Effect of change in tax rates
Exchange difference
At 28 December 2019
At 31 December 2017
Income statement (charge)/credit
Deferred tax credited to other comprehensive income
Deferred tax credited to equity
Effect of change in tax rates
Exchange difference
At 29 December 2018
Depreciation/
capital
allowances
$’000
4
–
–
–
–
–
4
Depreciation/
capital
allowances
$’000
4
2
–
–
–
(2)
4
Pension
$’000
Losses
$’000
Total
$’000
2,623
3,009
5,636
(552)
(40)
–
(9)
69
(210)
(530)
(101)
–
75
(762)
(570)
(101)
(9)
144
2,091
2,243
4,338
Pension
$’000
3,216
(467)
69
–
(21)
(174)
Losses
$’000
Total
$’000
2,692
5,912
125
321
60
–
(340)
390
60
(21)
(189)
(365)
2,623
3,009
5,636
Deferred tax assets have been recognised where it is considered that there will be sufficient taxable profit available in future against which the
deductible temporary timing differences can be utilised.
Deferred tax is recognised in other comprehensive income or in equity when the items it relates to are recognised, in the same or a different
period, in those categories.
No deferred tax asset has been recognised for losses carried forward in holding companies of $23.6m (2018: $21.3m). These losses have no
expiry date and may be available for offset against future profits in these companies.
83
4imprint Group plc Annual Report 2019
13 INVENTORIES
Finished goods and goods for resale
2019
$’000
2018
$’000
11,456
9,878
During both the current and previous period, inventory was carried at cost less appropriate provisions. The carrying values did not exceed the
fair value less cost to sell. Provisions held against inventory total $181,000 (2018: $181,000).
During the period there has been no charge in the income statement in respect of provisions for slow-moving and obsolete stock
(2018: $6,000).
The amount of inventory charged to the income statement is shown in note 2.
14 TRADE AND OTHER RECEIVABLES
Trade receivables
Less: Provision for impairment of trade receivables
Trade receivables – net
Other receivables
Prepayments
Trade terms are a maximum of 30 days credit.
2019
$’000
2018
$’000
30,580
26,268
(966)
(348)
29,614
25,920
16,638
15,928
6,647
4,380
52,899
46,228
Due to their short-term nature the fair value of trade and other receivables does not differ from the book value.
The impairment of trade receivables charged to the income statement was $959,000 (2018: $347,000). There is no impairment of any
receivables other than trade receivables.
Other receivables include rebates receivable of $16,022,000 (2018: $15,270,000).
The ageing of past due trade receivables which are not impaired, based on the customer’s creditworthiness and payment history, is as follows:
Time past due date
Up to 3 months
3 to 6 months
Over 6 months
The ageing of impaired trade receivables is as follows:
Time past due date
Current
Up to 3 months
3 to 6 months
Over 6 months
2019
$’000
9,558
2,144
520
2018
$’000
7,851
1,070
562
12,222
9,483
2019
$’000
162
433
253
118
966
2018
$’000
60
20
121
147
348
STRATEGIC REPORTCORPORATEGOVERNANCEFINANCIALSTATEMENTSADDITIONAL INFORMATIONOVERVIEW 84
4imprint Group plc Annual Report 2019
Notes to the Group Financial Statements continued
14 TRADE AND OTHER RECEIVABLES CONTINUED
The trade receivables impairment provision for 2019 is calculated using the simplified approach to the expected credit loss model.
The provisions made are based on the following percentages:
Age of trade receivable
Current
31–60 days
61–90 days
91–180 days
181–365 days
Over 365 days
These percentages are based on a combination of historical experience and current economic conditions.
The carrying amounts of trade and other receivables are denominated in the following currencies:
Sterling
US dollars
Euros
Canadian dollars
Movements in the provision for impairment of trade receivables are as follows:
At start of period
Utilised
Provided
Exchange difference
At end of period
15 CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Short-term deposits
Amount
$’000
Provision
%
17,554
6,915
3,076
2,397
635
0.9
3.0
7.5
10.6
17.0
3
100.00
2019
$’000
2018
$’000
2,896
2,704
46,930
40,599
103
96
2,970
2,829
52,899
46,228
2019
$’000
348
(341)
959
–
966
2018
$’000
194
(193)
347
–
348
2019
$’000
2018
$’000
41,136
23,648
–
3,836
41,136
27,484
85
4imprint Group plc Annual Report 2019
16 LEASES
The Group leases office space in office facilities in Oshkosh and London. The Oshkosh lease typically has a five year term whereas the London
lease is a one to two year term. The Group also has some items of equipment on lease for a term of five years. In addition there are various
items of machinery on short-term leases and some office equipment with low value. The Group applies the IFRS 16 exemptions for short-term
and low value leases. No leases contain variable payment terms.
Details on right-of-use assets, including analysis by asset class, are shown in note 11.
LEASE LIABILITIES
Expiring within one year
Expiring within two to five years
The movement in lease liabilities in the period are shown below:
At start of period
Adjustment arising from the adoption of IFRS 16 (note 30)
Additions
Interest charge
Lease payments
Reassessment of lease term
Exchange difference
At end of period
The amounts recognised in the income statement are as follows:
Depreciation of right-of-use assets (note 11)
Interest expense on lease liabilities
Short-term leases
Low value leases
2019
$’000
1,630
415
2019
$’000
–
2,105
2,105
–
45
(1,732)
1,625
2
2,045
2019
$’000
1,499
45
6
15
1,565
The cash outflow on leases in the period was $1,753,000.
The lease term of the Oshkosh office premises ends on 31 March 2020. An option to extend the lease for a further five years expires on the
same date. The growth of the business means that additional office space will be required and management has been exploring various
solutions. Further work needs to be undertaken and, once completed, a recommendation will be put to the Board for consideration. This will
necessitate the business staying within the existing office space in the short-term on an agreed ‘holding over’ lease, as allowed in the original
lease agreement. Whilst there is no fixed term for this holding over, currently a reasonable estimate of the period required before alternative
space would be available for occupancy is twelve months from the date of the current lease expiry. Consequently, the lease term has been
reassessed at the year end and the right-of-use asset and lease liability have been increased to reflect an additional twelve months’ tenancy to
31 March 2021.
The interest rates inherent in the leases could not be ascertained, therefore, estimates have been used based upon incremental costs of
borrowing for a similar term and asset. Had a 0.25% higher interest rate been used, the profit before tax would have been $5,000 lower and
net assets $3,000 lower.
STRATEGIC REPORTCORPORATEGOVERNANCEFINANCIALSTATEMENTSADDITIONAL INFORMATIONOVERVIEW 86
4imprint Group plc Annual Report 2019
Notes to the Group Financial Statements continued
17 TRADE AND OTHER PAYABLES – CURRENT
Trade payables
Other tax and social security payable
Other payables
Accruals and deferred income
2019
$’000
2018
$’000
43,668
39,484
4,159
3,444
134
122
11,248
7,202
59,209
50,252
All trade payables have a maturity of 30 days or less from the balance sheet date.
Due to their short-term nature, the fair value of trade and other payables does not differ from the book value.
18 EMPLOYEE PENSION SCHEMES
The Group operates defined contribution plans for its UK and US employees. The regular contributions are charged to the income statement as
they are incurred. The charges recognised in the income statement are:
Defined contribution plans – employers’ contributions (note 3)
The Group also sponsors a UK defined benefit pension scheme which is closed to new members and future accrual.
The amounts recognised in the income statement are as follows:
Administration costs paid by the scheme
Pension finance charge
Exceptional items – past service costs re GMP equalisation (note 4)
Total defined benefit pension charge
The amounts recognised in the balance sheet comprise:
Present value of funded obligations
Fair value of scheme assets
Net liability recognised in the balance sheet
2019
$’000
2018
$’000
1,580
1,356
2019
$’000
312
378
–
2018
$’000
316
403
721
690
1,440
2019
$’000
2018
$’000
(36,322)
(33,103)
24,017
18,087
(12,305)
(15,016)
The funds of the scheme are held in trust and administered by a corporate Trustee to meet pension liabilities for around 371 past employees of
the Group. The level of retirement benefit is principally based on salary earned in the best three consecutive tax years in the ten years prior to
leaving active service and is linked to changes in inflation both pre and post retirement.
The scheme is subject to the funding legislation outlined in the Pensions Act 2004 which came into force on 30 December 2005. This, together
with documents issued by the Pensions Regulator, and Guidance Notes adopted by the Financial Reporting Council, set out the framework for
funding defined benefit occupational pension plans in the UK.
The Trustee of the scheme is required to act in the best interest of the scheme’s beneficiaries. The appointment of trustees is determined by
the scheme’s trust documentation.
The scheme typically exposes the Company to actuarial risks such as investment risk, interest rate risk, mortality risk and longevity risk. A
decrease in corporate bond yields, a rise in inflation or an increase in life expectancy would result in an increase to scheme liabilities. This
would detrimentally impact the balance sheet position, potentially require an increase in future cash contributions from the Company and may
give rise to increased charges in future income statements. Caps on inflationary increases are in place to protect the scheme against extreme
inflation. Assets are held in a diversified growth fund, designed to give lower volatility than equities, and in a liability-driven investment fund,
designed to provide some hedge against movement in the liabilities due to interest rate fluctuation and inflation. The funds use derivatives to
reduce risk.
87
4imprint Group plc Annual Report 2019
An actuarial valuation was undertaken as at 30 September 2019 in accordance with the scheme funding requirements of the Pensions Act
2004. The draft actuarial valuation showed a deficit of £14.4m. A recovery plan has been agreed with the Trustee under which the Company
commits to a revised schedule of contributions. The recovery plan period is five years and under the plan a lump sum of £7.5m is payable in
May 2020 and ongoing contributions of £2.46m per annum are payable by the Company. These contributions commence on 1 July 2020,
and increase by 3% annually. In addition, an annual allowance of £0.30m, rising by 3% annually, is payable towards costs of administration of
the scheme.
For the purposes of IAS 19, numbers from the draft actuarial valuation as at 30 September 2019, which was carried out by a qualified
independent actuary, have been updated on an approximate basis to 28 December 2019. There have been no changes in the valuation
methodology adopted for this period’s disclosures compared to the previous period’s disclosures.
Changes in the present value of the net defined benefit obligation are as follows:
Balance at 31 December 2017
Administration costs paid by the scheme
Exceptional items – past service costs re GMP equalisation
Interest (expense)/income
Return on scheme assets (excluding interest income)
Re-measurement gains due to changes in financial assumptions
Contributions by employer
Benefits paid
Exchange gain/(loss)
Balance at 29 December 2018
Administration costs paid by the scheme
Interest (expense)/income
Return on scheme assets (excluding interest income)
Re-measurement gains due to changes in scheme experience
Re-measurement gains due to changes in demographic assumptions
Re-measurement losses due to changes in financial assumptions
Contributions by employer
Benefits paid
Exchange (loss)/gain
Balance at 28 December 2019
Present
value of
obligations
$’000
Fair value
of scheme
assets
$’000
Net
obligation
$’000
(36,739)
18,633
(18,106)
(316)
(721)
(889)
–
–
486
(316)
(721)
(403)
–
(1,951)
(1,951)
1,582
–
–
3,932
1,848
(1,848)
2,132
(1,165)
1,582
3,932
–
967
(33,103)
18,087
(15,016)
(312)
(919)
–
541
(312)
(378)
–
2,372
2,372
1,425
1,429
(5,018)
–
–
–
1,425
1,429
(5,018)
–
3,593
3,593
1,288
(1,288)
–
(1,112)
712
(400)
(36,322)
24,017
(12,305)
The major categories of scheme assets as a percentage of total scheme assets are as follows:
Diversified growth fund
Liability-driven investments
Cash
2019
2018
$’000
%
$’000
13,443
56.0
6,548
10,442
43.5
10,658
132
0.5
881
%
36.2
58.9
4.9
The scheme holds no 4imprint Group plc shares or any property occupied by the Group.
It is the policy of the Trustee and the Company to review the investment strategy from time to time and at the time of each funding valuation.
The Trustee investment objectives and the processes undertaken to measure and manage the risks inherent in the scheme investment strategy
are documented in the scheme’s Statement of Investment Principles.
STRATEGIC REPORTCORPORATEGOVERNANCEFINANCIALSTATEMENTSADDITIONAL INFORMATIONOVERVIEW 88
4imprint Group plc Annual Report 2019
Notes to the Group Financial Statements continued
18 EMPLOYEE PENSION SCHEMES CONTINUED
The assets are held in: (i) a quoted diversified growth fund, investing in equities, bonds, property, hedge funds, private equity, commodities,
currency and cash, designed to give long-term total returns with lower volatility than equities; and (ii) a liability-driven investment fund
designed to provide some hedge against movements in the liabilities due to interest rate fluctuation and inflation. This fund invests in a growth
fund, which uses traditional assets, such as equities and bonds, and investment strategies based on advanced derivative techniques such as
directional strategies and relative value strategies; a hedge portfolio, investing in a range of instruments that provide similar interest rate and
inflation sensitivities to the scheme; and cash.
The principal assumptions applied by the actuaries, as determined by the Directors, at each period end were:
Rate of increase in pensions in payment
Rate of increase in deferred pensions
Discount rate
Inflation assumption – RPI
– CPI
2019
2018
2.90%
3.10%
2.15%
2.10%
1.95%
2.80%
2.95%
3.20%
2.15%
2.10%
The mortality assumptions adopted at 28 December 2019 reflect the most recent version of the tables used in the draft September 2019
triennial valuation. The assumptions imply the following life expectancies at age 65:
Male currently age 40
Female currently age 40
Male currently age 65
Female currently age 65
2019
2018
22.3 yrs
23.4 yrs
24.1 yrs
25.3 yrs
21.3 yrs
21.9 yrs
23.0 yrs
23.8 yrs
The sensitivities on the key actuarial assumptions at the end of the period were:
Discount rate
Rate of inflation
Rate of mortality
Change in assumption
Change in defined benefit obligation
Decrease of 0.25%
Increase of 0.25%
Increase in life expectancy of one year
4.2%
2.0%
3.9%
The sensitivities shown above are approximate. Each sensitivity considers each change in isolation and is calculated using the same
methodology as used for the calculation of the defined benefit obligation at the end of the period. The inflation sensitivity includes the impact
of changes to the assumptions for revaluation and pension increases. In practice it is unlikely that the changes would occur in isolation.
The weighted average duration of the defined benefit obligation at 28 December 2019 is 20 years.
19 DEFERRED TAX LIABILITIES
At start of period
Adjustment arising from the adoption of IFRS 16 (note 30)
Charged to the income statement
Prior period adjustment
Deferred tax credited to equity
Exchange difference
At end of period
2019
$’000
931
2018
$’000
763
(62)
(265)
869
192
–
(94)
1
968
498
463
(22)
(6)
(2)
931
89
4imprint Group plc Annual Report 2019
The movements in the net deferred tax liability (subject to the offsetting of balances within the same jurisdiction as permitted by IAS 12) during
the period, are shown in the following table. Deferred tax assets and liabilities are only offset where there is a legally enforceable right of offset
and there is an intention to settle the balances net.
DEFERRED TAX ANALYSIS
At 29 December 2018
Adjustment arising from the adoption of IFRS 16 (note 30)
At 30 December 2018 after adjustment
Income statement charge/(credit)
Deferred tax credited to equity
Exchange difference
At 28 December 2019
Depreciation/
capital
allowances
$’000
1,730
–
1,730
440
–
1
Other
$’000
(799)
(62)
(861)
(248)
(94)
–
Total
$’000
931
(62)
869
192
(94)
1
2,171
(1,203)
968
Included in the table above are deferred tax assets in respect of timing differences and future deductions relating to conditional share awards
for US employees of which $136,000 (2018: $139,000) is expected to reverse within the next twelve months.
At 30 December 2017
Adjustment for changes in accounting policies
At 31 December 2017 after adjustment
Income statement debit
Prior period adjustment
Deferred tax credited to equity
Exchange difference
At 29 December 2018
Depreciation/
capital
allowances
$’000
1,452
–
1,452
283
(3)
–
(2)
Other
$’000
(689)
(265)
(954)
180
(19)
(6)
–
Total
$’000
763
(265)
498
463
(22)
(6)
(2)
1,730
(799)
931
20 BORROWINGS
The Group had no drawdown on its borrowing facilities at 28 December 2019 (29 December 2018: no drawdown).
The Group had the following undrawn committed borrowing facilities available at 28 December 2019:
Borrowing facilities
Expiring within one year
Expiring in more than one year
Floating rate
2019
$’000
2018
$’000
1,309
1,769
20,000
20,000
Facilities comprised an unsecured US$20.0m line of credit for 4imprint, Inc., which expires on 31 May 2021 and an unsecured UK overdraft
facility of £1.0m for the Company, which expires on 31 December 2020.
STRATEGIC REPORTCORPORATEGOVERNANCEFINANCIALSTATEMENTSADDITIONAL INFORMATIONOVERVIEW 90
4imprint Group plc Annual Report 2019
Notes to the Group Financial Statements continued
21 FINANCIAL RISK MANAGEMENT
The Group’s activities expose it to a variety of financial risks including currency risk, credit risk, liquidity risk and capital risk.
CURRENCY RISK
The Group operates internationally and is exposed to various currency movements. Risk arises predominantly from the remittance of overseas
earnings in US dollars. In addition, Group subsidiaries may make both sales and purchases in a currency other than their functional currency
and have foreign currency trade receivables and trade payables in relation to these transactions.
The Group uses derivative financial instruments to partly hedge foreign currency cash flows arising from sales and purchases of goods, as well
as remittances from its overseas subsidiaries. The Group does not hedge the currency exposure of profits and assets of its overseas subsidiaries
or other financial transactions.
At 28 December 2019 the Group had no forward currency contracts outstanding (2018: none).
The movement in the exchange rates compared to prior period decreased profit after tax by $0.22m and decreased net assets by $0.01m.
Closing rate was US$1.31 (2018: US$1.27) and the average rate used to translate profits was US$1.28 (2018: US$1.34).
A strengthening in the Sterling exchange rate by 10% (the approximate range of movement of the exchange rate during the year) would
reduce profit in the period by $0.54m and net assets at period end by $0.03m.
CREDIT RISK
Credit risk arises from deposits with banks and financial institutions, as well as credit exposure to trade receivable balances due from customers.
The risk associated with banks and financial institutions is managed on a Group basis and all banking relationships must be approved by the
Chief Financial Officer or the Board based on the credit rating of the bank.
The Group holds cash balances on deposit with its principal US and UK banks.
FINANCIAL INSTRUMENTS
The table below sets out the Group’s financial instruments by category:
Financial assets at amortised cost
Trade and other receivables (excluding prepayments) (note 14)
Cash and cash equivalents (note 15)
Financial liabilities at amortised cost
2019
$’000
2018
$’000
46,252
41,848
41,136
27,484
Trade and other payables (excluding non-financial liabilities) (note 17)
(59,209)
(50,252)
Lease liabilities
Expiring within one year
Expiring within two to five years
2019
$’000
1,630
415
2018
$’000
–
–
All trade receivables and payables have contracted maturities of 30 days or less from the balance sheet dates. All other receivables and
payables are due/payable within one year.
Trade receivables are amounts due from customers for goods sold in the ordinary course of business. Other receivables are non-derivative
financial assets with fixed or determinable payments that are not quoted in an active market. If collection of the amounts is expected in one
year or less they are classified as current assets. If not, they are presented as non-current assets.
Cash was held with the following banks at the period end:
Lloyds Bank plc
JPMorgan Chase Bank, N.A.
Other
2019
Rating
2019
Deposit
$’000
Aa2
6,096
Aa1
35,031
9
41,136
2018
Rating
Aa2
Aa1
2018
Deposit
$’000
6,081
21,397
6
27,484
There is no concentration of credit risk with respect to trade receivables as the Group has a large number of customers.
Credit risk arising from customers is delegated to the senior management of each business to a maximum level per customer above which it is
referred to the Chief Financial Officer for approval. External credit agency assessment reports are referred to as part of this process.
91
4imprint Group plc Annual Report 2019
LIQUIDITY RISK
Group borrowing requirements are managed centrally and the majority of borrowing arrangements are currently with the Group’s principal
US bank and terms are agreed which are considered appropriate for the funding requirement of the Group at that time.
Operating working capital is managed to levels agreed with the Group and cash forecasts are reviewed regularly by management.
The Group monitors its levels of cash and indebtedness to ensure adequate liquid funds are available to meet the foreseeable requirements of
the Group. The Group does not actively monitor a gearing ratio but seeks to maintain an appropriate level of financial flexibility. Details of
borrowing facilities are given in note 20 and lease liabilities in note 16.
At 28 December 2019 the cash position (note 15) of the Group was $41.14m (2018: $27.48m).
CAPITAL RISK MANAGEMENT
The objective for managing cash, debt and equity capital is to safeguard the Company’s ability to continue as a going concern, in order to
provide returns for Shareholders and benefits for other stakeholders.
The policy for capital allocation is shown on page 20.
In 2019 the Company has provided returns to Shareholders in the form of dividends, details of which are included in note 8. Shares were
purchased by an employee benefit trust, to cover the SAYE options maturing over the next three years.
22 SHARE CAPITAL
Issued and fully paid
28,085,530 (2018: 28,085,530) ordinary shares of 38 6/13p each
All shares have the same rights.
2019
$’000
2018
$’000
18,842
18,842
The Company issued no ordinary shares in the period (2018: none). Share option exercises were satisfied by transfer of shares from an
employee benefit trust.
At 28 December 2019 the following options have been granted and were outstanding under the Company’s share option schemes:
Scheme
US ESPP
UK SAYE
UK SAYE
2015 Incentive Plan
2015 Incentive Plan
2015 Incentive Plan
2015 Incentive Plan
Total
Number
of ordinary
shares
2019
Number
of option
holders
2019
Number
of ordinary
shares
2018
Date of
grant
Subscription
price
Date exercisable
From
To
26/09/18
102,222
514
107,454
$22.16 Dec 2020 Dec 2020
11/05/16
–
25/09/19
17,873
30/03/16
–
30/03/17
14,907
15/04/18
16,547
30/03/19
39,285
–
40
–
8
8
9
25,912
£10.22 July 2019 Dec 2019
–
£22.70 Nov 2022 Apr 2023
24,027
14,907
nil Mar 2019 Mar 2026
nil Mar 2020 Mar 2027
16,547
nil Apr 2021 Apr 2028
–
nil Mar 2022 Mar 2029
190,834
188,847
The weighted average exercise price for options outstanding at 28 December 2019 was £11.19 (2018: £11.34).
Details of share schemes are disclosed in note 23.
2015 INCENTIVE PLAN
Under the 2015 Incentive Plan 50% of the annual bonus of the Chief Executive Officer, Chief Financial Officer and seven senior managers will
be deferred into shares as awards of nil cost options or conditional shares, based on the share price at 31 December of the relevant year. The
awards will be made in a 42 day period following the announcement of the Group’s full year results and the options will normally not be
exercisable until at least three years from the date of the award, conditional upon the person still being in the employment of a Group
company. The awards to Executive Directors, from 4 March 2019, will not be exercisable until five years from the date of the award. It is
expected that 21,632 options or conditional shares, with a total fair value of $986,000, will be awarded in respect of the 2019 bonus.
STRATEGIC REPORTCORPORATEGOVERNANCEFINANCIALSTATEMENTSADDITIONAL INFORMATIONOVERVIEW 92
4imprint Group plc Annual Report 2019
Notes to the Group Financial Statements continued
23 SHARE-BASED PAYMENTS
Share options may be granted to senior management and, in addition, SAYE or equivalent schemes exist for all UK and US employees. The
exercise price for SAYE options is equal to the market rate, less any discount up to the limit imposed by the local tax authority at the
pricing date.
The fair value of the options is determined using the Black-Scholes model for SAYE and ESPP and is spread over the vesting period of the
options. The significant inputs into the model are: an expected life of between 2.2 and 3.0 years for the ESPP and SAYE options; the volatility
measured at the standard deviation of expected share price returns is based on statistical analysis of daily share prices over the last five years;
and the risk-free rate is based on zero coupon government bond yields.
Charge resulting from spreading the fair value of options
Social security costs in respect of share options
Total
The fair value per option granted and the assumptions used in the calculation are as follows:
Grant date
Share price at grant date
Exercise price
Number of employees
Shares under option
Vesting period (years)
Expected volatility
Option life (years)
Expected life (years)
Risk-free rate
Expected dividends expressed as a dividend yield
Possibility of ceasing employment before vesting
Expectations of meeting performance criteria
Fair value per option
2019
$’000
928
21
949
2018
$’000
808
11
819
US
ESPP
scheme
UK
SAYE
scheme
UK
SAYE
scheme
26/09/18
25/09/19
11/05/16
£20.00
£29.90
£13.61
$22.16
£22.70
£10.22
514
40
102,222
17,873
2.2
30%
2.2
2.2
3.0
30%
3.5
3.0
–
–
3.0
30%
3.5
3.0
0.85%
0.36%
0.53%
2.0%
2.0%
2.0%
5%
5%
5%
100%
100%
100%
£4.62
£8.09
£4.03
In respect of the 2015 Incentive Plan the fair value of the awards of options or conditional shares made in 2016, 2017, 2018 and 2019 are
based on the share price at 31 December 2015, 31 December 2016, 31 December 2017 and 31 December 2018, respectively. The option life is
from the date of first notification of the Plan at the end of March 2015 until exercise in March 2019 for the 2016 awards and 4.25 years from
the start of the financial year to which the awards relate for subsequent awards. The fair value of the expected awards of 21,632 options or
conditional shares in respect of 2019 is based on the share price at 31 December 2019.
93
4imprint Group plc Annual Report 2019
A reconciliation of option movements over the period to 28 December 2019 is shown below:
Outstanding at start of period
Granted
Forfeited/cancelled
Exercised
Outstanding at end of period
Exercisable at end of period
Range of exercise prices
Nil
£10–11
£16–17
£17–18
£22–23
24 OTHER RESERVES
Balance at 31 December 2017
Currency translation differences
Balance at 29 December 2018
Currency translation differences
Balance at 28 December 2019
2019
2018
Weighted
average
exercise
price (£)
Number
of shares
Weighted
average
exercise
price (£)
Number
of shares
188,847
11.34
173,411
9.15
57,158
7.10
125,414
14.59
(5,038)
17.36
(5,564)
12.91
(50,133)
5.35
(104,414)
12.68
190,834
11.19
188,847
11.34
–
–
–
–
2019
2018
Weighted
average
exercise
price
Number of
shares
Weighted average remaining
life (years)
Expected
Contractual
Weighted
average
exercise price
Number of
shares
Weighted average remaining
life (years)
Expected
Contractual
0.00
70,739
1.43 1.43 to 2.39
0.00
55,481 0.2 to 2.3 0.2 to 9.3
–
–
–
–
£10.22
25,912
$22.16
102,222
0.94
0.94
–
–
0.5
–
1.0
–
–
–
–
–
$22.16
107,454
1.93
1.93
£22.70
17,873
2.85
3.35
–
–
–
–
Capital
redemption
reserve
$’000
Cumulative
translation
differences
$’000
Total
$’000
369
5,492
5,861
–
(434)
(434)
369
5,058
5,427
–
(173)
(173)
369
4,885
5,254
The capital redemption reserve arose on the redemption of preference shares in 2000. The currency translation difference represents the
accumulated exchange movements on non-US dollar functional currency subsidiaries from 29 December 2003 (transition date to IFRS) to the
balance sheet date.
STRATEGIC REPORTCORPORATEGOVERNANCEFINANCIALSTATEMENTSADDITIONAL INFORMATIONOVERVIEW 94
4imprint Group plc Annual Report 2019
Notes to the Group Financial Statements continued
25 CASH GENERATED FROM OPERATIONS
Operating profit
Adjustments for:
Depreciation charge
Amortisation of intangibles
Amortisation of right-of-use assets
Loss on disposal of property, plant and equipment
Exceptional non-cash items
Decrease in exceptional accrual
Share option charges
Defined benefit pension administration charge
Contributions to defined benefit pension scheme
Changes in working capital:
Increase in inventories
Increase in trade and other receivables
Increase in trade and other payables
Cash generated from operations
2019
$’000
2018
$’000
53,620
44,322
2,345
2,200
440
445
1,499
–
–
–
928
312
–
7
721
(52)
808
316
(3,593)
(3,932)
(1,577)
(2,266)
(6,579)
(2,422)
8,853
1,504
56,248
41,651
26 CONTINGENT LIABILITIES
The Group has no known contingent liabilities (2018: none).
27 CAPITAL COMMITMENTS
The Group had capital commitments contracted for but not provided for in the financial statements at 28 December 2019 for property, plant
and equipment of $1.4m (2018: $nil).
28 RELATED PARTY TRANSACTIONS
The Group did not participate in any related party transactions.
Key management compensation is disclosed in note 3.
29 POST BALANCE SHEET EVENTS
A recovery plan has been agreed with the Trustee under which the Company commits to a revised schedule of contributions. The recovery plan
period is five years and under the plan a lump sum of £7.5m is payable in May 2020 and ongoing contributions of £2.46m per annum are
payable by the Company. These contributions commence on 1 July 2020. This amount rises annually by 3%. In addition, an annual allowance
of £0.30m, rising by 3% annually, is payable towards costs of administration of the scheme.
We are closely monitoring the situation with regard to COVID-19, the novel coronavirus. Impact on the business has so far been minimal,
reflecting the timing of the inventory cycle of our domestic suppliers. However, the situation is very fluid and if production restrictions in China
persist, the potential for disruption of our supply chain increases. Should this virus become a global pandemic, the potential effect on the
business would expand beyond the supply chain. More detail is provided in the Chief Executive’s Review on page 7.
95
4imprint Group plc Annual Report 2019
30 IMPACT OF NEW ACCOUNTING STANDARDS
On transition to IFRS 16 the modified retrospective option was selected, with no restatement of prior periods so prior year numbers are not
directly comparable. In addition, the exemptions for low value assets and leases with a duration of 12 months or less were taken. It was not
possible to ascertain the interest rates implicit in the existing leases therefore the lease liabilities were discounted at the lessees’ incremental
borrowing rates. The weighted average rate used was 3.778%.
As the option to not restate prior periods was selected, the implementation of IFRS 16 ‘Leases’ has resulted in a revision to the opening equity
of the Group. This results in an opening adjustment to reduce net equity by $187,000 as follows:
Balance sheet
Non-current assets
Property, plant and equipment
Right-of-use assets
Intangible assets
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Current tax
Cash and cash equivalents
Current liabilities
Lease liabilities
Trade and other payables
Current tax
Net current assets
Non-current liabilities
Lease liabilities
Retirement benefit obligations
Deferred tax liability
Net assets
29 Dec
2018
as reported
$’000
Opening
IFRS 16
adjustment
$’000
Opening
30 Dec
2018
revised
$’000
19,012
–
19,012
–
1,856
1,856
1,084
5,636
–
–
1,084
5,636
25,732
1,856
27,588
9,878
46,228
644
27,484
84,234
–
–
–
–
–
9,878
46,228
644
27,484
84,234
–
(1,701)
(1,701)
(50,252)
(500)
–
–
(50,252)
(500)
(50,752)
(1,701)
(52,453)
33,482
(1,701)
31,781
–
(404)
(404)
(15,016)
(931)
–
62
(15,016)
(869)
(15,947)
(342)
(16,289)
43,267
(187)
43,080
STRATEGIC REPORTCORPORATEGOVERNANCEFINANCIALSTATEMENTSADDITIONAL INFORMATIONOVERVIEW 96
4imprint Group plc Annual Report 2019
Notes to the Group Financial Statements continued
30 IMPACT OF NEW ACCOUNTING STANDARDS CONTINUED
The reconciliation between the commitment under non-cancellable operating leases at 29 December 2018 and the lease liability adjustment
above is as follows:
Operating lease obligations at 29 December 2018
Maintenance element
Less leases of low value assets
Discounting
Lease liabilities
The impact on the current year is as follows:
Balance sheet at 28 December 2019
Non-current assets
Property, plant and equipment
Right-of-use assets
Intangible assets
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Current tax debtor
Cash and cash equivalents
Current liabilities
Lease liabilities
Trade and other payables
Net current assets
Non-current liabilities
Lease liabilities
Retirement benefit obligations
Deferred tax liability
Net assets
$’000
2,201
(9)
(40)
(47)
2,105
Before
adjustment
$’000
IFRS 16
adjustment
$’000
As
reported
$’000
24,369
–
24,369
–
1,985
1,985
1,152
4,338
–
–
1,152
4,338
29,859
1,985
31,844
11,456
52,899
140
41,136
105,631
–
–
–
–
–
11,456
52,899
140
41,136
105,631
–
(1,630)
(1,630)
(59,209)
–
(59,209)
(59,209)
(1,630)
(60,839)
46,422
(1,630)
44,792
–
(415)
(415)
(12,305)
–
(12,305)
(983)
15
(968)
(13,288)
(400)
(13,688)
62,993
(45)
62,948
97
4imprint Group plc Annual Report 2019
Income statement for the 52 weeks ended 28 December 2019
Revenue
Operating expenses
Operating profit
Finance income
Finance costs
Pension finance charge
Net finance income
Profit before tax
Taxation
Profit for the period
Earnings per share
Basic
Diluted
Before
adjustment
$’000
IFRS 16
adjustment
$’000
As reported
$’000
860,844
–
860,844
(807,456)
232 (807,224)
53,388
232
53,620
818
(22)
(378)
418
–
(45)
–
(45)
818
(67)
(378)
373
53,806
187
53,993
(11,229)
(47)
(11,276)
42,577
140
42,717
Cents
Cents
151.92
151.37
152.42
151.87
CASH FLOW STATEMENT
There is no net impact upon the net movement of cash and cash equivalent. However, in 2019, cash generated from operations increased by
$1,732,000, offset by an increase in outflow on finance costs paid, within operating activities, of $45,000 and capital elements of lease
payments, within financing activities, of $1,687,000.
STRATEGIC REPORTCORPORATEGOVERNANCEFINANCIALSTATEMENTSADDITIONAL INFORMATIONOVERVIEW 98
4imprint Group plc Annual Report 2019
Company Balance Sheet
at 28 December 2019
Non-current assets
Property, plant and equipment
Right-of-use asset
Investments
Deferred tax assets
Other receivables
Current assets
Other receivables
Cash and cash equivalents
Current liabilities
Lease liabilities
Other payables
Net current assets
Non-current liabilities
Retirement benefit obligations
Amounts due to subsidiary companies
Net assets
Shareholders’ equity
Share capital
Share premium reserve
Capital redemption reserve
Retained earnings*
Total equity
Note
2019
£’000
2018
£’000
A
B
C
D
E
3
31
3
–
104,738
104,182
3,313
4,442
248,107
252,018
356,192
360,645
E
373
462
3,848
4,083
4,221
4,545
F
G
(31)
–
(1,059)
(1,617)
(1,090)
(1,617)
3,131
2,928
J
(9,397)
(11,834)
K (122,193)
(126,103)
(131,590)
(137,937)
227,733
225,636
M
10,802
10,802
38,575
38,575
208
208
N
178,148
176,051
227,733
225,636
*COMPANY’S INCOME STATEMENT.
Under Section 408 of the Companies Act 2006 an income statement for the Company is not presented. Profit after tax and before external
dividends payable for the period, of £19,959,000 (2018: £26,446,000) is included in retained earnings of the Company.
The financial statements on pages 98 to 108 were approved by the Board of Directors on 3 March 2020 and were signed on its behalf by:
KEVIN LYONS-TARR
CHIEF EXECUTIVE OFFICER
DAVID SEEKINGS
CHIEF FINANCIAL OFFICER
99
4imprint Group plc Annual Report 2019
Statement of Changes in Company
Shareholders’ Equity
for the 52 weeks ended 28 December 2019
Balance at 31 December 2017
Profit for the period
Other comprehensive income/(expense)
Re-measurement loss on post-employment obligations
Deferred tax relating to post-employment obligations
Deferred tax relating to losses
Effect of change in UK tax rate
Total comprehensive income
Proceeds from options exercised
Own shares purchased
Own shares utilised
Share-based payment charge
Deferred tax relating to losses
Dividends
Retained earnings
Share capital
£’000
Share
premium
reserve
£’000
Capital
redemption
reserve
£’000
Own
shares
£’000
Profit
and
loss
£’000
Total
equity
£’000
10,802
38,575
208
(1,315)
175,168
223,438
26,446
26,446
(276)
(276)
52
240
(16)
52
240
(16)
26,446
26,446
1,322
1,322
(1,623)
(1,623)
1,880
(1,880)
605
45
–
605
45
(24,597)
(24,597)
Balance at 29 December 2018
10,802
38,575
208
(1,058)
177,109
225,636
Adjustments arising from adoption of IFRS 16 (note R)
(2)
(2)
Balance at 30 December 2018 after adjustments
10,802
38,575
208
(1,058)
177,107
225,634
Profit for the period
Other comprehensive income/(expense)
Re-measurement gain on post-employment obligations
Deferred tax relating to post-employment obligations
Deferred tax relating to losses
Effect of change in UK tax rate
Total comprehensive income
Proceeds from options exercised
Own shares purchased
Own shares utilised
Share-based payment charge
Capital instrument granted to subsidiary
Deferred tax relating to losses
Dividends
19,959
19,959
163
(31)
163
(31)
(415)
(415)
(7)
(7)
19,669
19,669
268
268
(2,273)
(2,273)
1,055
(1,055)
172
556
–
172
556
(79)
(79)
(16,214)
(16,214)
Balance at 28 December 2019
10,802
38,575
208
(2,276) 180,424
227,733
STRATEGIC REPORTCORPORATEGOVERNANCEFINANCIALSTATEMENTSADDITIONAL INFORMATIONOVERVIEW 100
4imprint Group plc Annual Report 2019
Company Cash Flow Statement
for the 52 weeks ended 28 December 2019
Cash flows from operating activities
Cash used in operations
Tax paid
Finance income
Finance costs (including lease interest paid)
Net cash generated from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Capital element of lease payments
Proceeds from share options exercised
Own shares purchased
Dividends received
Dividends paid to Shareholders
Net cash used in financing activities
Net movement in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Cash and cash equivalents at end of the period
Analysis of cash and cash equivalents
Cash at bank and in hand
Short-term deposits
Note
2019
£’000
2018
£’000
L
(4,747)
(4,051)
–
–
20,272
19,832
(10,117)
(9,772)
5,408
6,009
(3)
(3)
(124)
(1)
(1)
–
268
1,322
(2,273)
(1,623)
12,703
19,960
(16,214)
(24,597)
(5,640)
(4,938)
(235)
1,070
4,083
3,013
3,848
4,083
3,848
1,060
–
3,023
3,848
4,083
101
4imprint Group plc Annual Report 2019
Notes to the Company’s
Financial Statements
GENERAL INFORMATION
4imprint Group plc, registered number 177991, is a public limited company incorporated in England and Wales, domiciled in the UK and listed
on the London Stock Exchange. Its registered office is 25 Southampton Buildings, London WC2A 1AL. The Company’s financial statements are
presented in Sterling. Numbers are shown in pounds thousands.
BASIS OF PREPARATION
The financial statements have been prepared under the historical cost convention in accordance with IFRS as adopted by the EU, IFRS IC
interpretations and those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The standards used are those
published by the International Accounting Standards Board (IASB) and endorsed by the EU that applied to the 2019 financial year, which
started on 30 December 2019, except for the early adoption of IFRS 16 ‘Leases’.
After making enquiries, the Directors have reasonable expectations that the Company has adequate resources to continue to operate for a
period of not less than twelve months from the date these financial statements were approved. Accordingly, they continue to adopt the going
concern basis in preparing the financial statements.
JUDGMENTS, ESTIMATES AND ASSUMPTIONS
CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
The preparation of the financial statements requires management to make judgments, estimates and assumptions that affect the application
of policies, the amounts reported for assets and liabilities as at the balance sheet date and the amounts reported for revenues and expenses
during the year.
The estimates and associated assumptions are based on historical experiences and various other factors that are believed to be reasonable
under the circumstances, the results of which form the basis of making judgments about carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these estimates.
Critical accounting policies are those that require significant judgments or estimates and potentially result in materially different results under
different assumptions or conditions. Management considers the following to be the only critical accounting policy:
PENSIONS
As disclosed in note 18, the Company sponsors a defined benefit pension scheme closed to new members and future accruals. Period end
recognition of the liabilities under this scheme and the return on assets held to fund these liabilities require a number of significant actuarial
assumptions to be made including inflation rate, discount rate and mortality rates. Small changes in assumptions can have a significant impact
on the expense recorded in the income statement and on the pension liability in the balance sheet. Sensitivities to changes in these
assumptions are disclosed in note 18.
ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of these financial statements are the same as those adopted in the consolidated
financial statements on pages 71 to 73 except for the investments and intercompany loans policies noted below. These policies have been
consistently applied to all the periods presented, apart from those impacted by the implementation of IFRS 16 ‘Leases’ (see the accounting
policies note on page 70). Accounting standards effective for the first time in the period have had no impact on the Company’s financial
statements.
INVESTMENTS
Investments in subsidiaries are stated at cost. Impairment reviews are carried out if there is some indication that the carrying value of the
investments may have been impaired. Where, in the opinion of the Directors, an impairment of the investment has arisen, provisions are made
in accordance with IAS 36 ‘Impairment of Assets’.
AMOUNTS OWED BY SUBSIDIARY UNDERTAKINGS
Amounts owed by subsidiary undertakings are assessed for expected credit losses on a general basis under IFRS 9 ‘Financial Instruments’.
Where required, the Company recognises a provision on this basis reflecting either the lifetime or 12-month expected credit loss dependent on
the change in credit risk since initial recognition of the financial asset. The amount of the provision is recognised in the income statement.
Amounts owed by subsidiary undertakings are discounted when the time value of money is considered material.
STRATEGIC REPORTCORPORATEGOVERNANCEFINANCIALSTATEMENTSADDITIONAL INFORMATIONOVERVIEW 102
4imprint Group plc Annual Report 2019
Notes to the Company’s
Financial Statements continued
A. PROPERTY, PLANT AND EQUIPMENT
Cost:
At 31 December 2017
Additions
Disposals
At 29 December 2018
Additions
Disposals
At 28 December 2019
Depreciation:
At 31 December 2017
Charge for the period
Disposals
At 29 December 2018
Charge for the period
Disposals
At 28 December 2019
Net book value at 28 December 2019
Net book value at 29 December 2018
B. RIGHT-OF-USE ASSETS
Cost:
At 30 December 2018
Adjustments arising from adoption of IFRS 16 (note R)
At 30 December 2018 after adjustment
At 28 December 2019
Depreciation:
At 30 December 2018
Adjustments arising from adoption of IFRS 16 (note R)
At 30 December 2018 after adjustment
Charge for the period
At 28 December 2019
Net book value at 28 December 2019
Fixtures &
fittings
£’000
275
1
(216)
60
3
(15)
48
258
9
(210)
57
3
(15)
45
3
3
Leasehold
land and
buildings
£’000
–
153
153
153
–
–
–
122
122
31
103
4imprint Group plc Annual Report 2019
C. INVESTMENTS
Cost:
At 29 December 2018
Capital contribution to subsidiary undertaking
At 28 December 2019
Shares in
subsidiary
undertakings
£’000
104,182
556
104,738
The capital contribution represents IFRS 2 ‘Share-based Payments’ charges in respect of US subsidiaries which will not be recharged until the
options vest.
SUBSIDIARY UNDERTAKINGS
The subsidiaries at 28 December 2019 are set out below. All of these subsidiaries are wholly owned and have ordinary share capital only, apart
from 4imprint USA Limited and 4imprint US Group Inc., which also have preference shares.
Company
4imprint, Inc.
4imprint Direct Limited
4imprint UK Holdings Limited
4imprint USA Limited
4imprint North America Limited
4imprint US Group Inc.
4imprint Limited
Cavendish Place Newco No.1 Limited
4imprint Pension Trustee Company Limited
4imprint 2016 Pension Trustee Company Limited
Country of incorporation
and operation
Business
USA
England
England
England
England
USA
England
England
England
England
Promotional products
Promotional products
Holding company
Holding company
Holding company
Holding company
Dormant
Dormant
Dormant
Dormant
The dormant companies are exempt from statutory audit. There is no requirement, in the USA, for statutory audits of the US subsidiaries.
The registered address of all subsidiaries registered in England is 25 Southampton Buildings, London WC2A 1AL. The registered address
of 4imprint, Inc. is 101 Commerce Street, Oshkosh, WI 54901, USA and of 4imprint US Group Inc. is 103 Foulk Road, Suite 202,
Wilmington, DE 19803, USA.
STRATEGIC REPORTCORPORATEGOVERNANCEFINANCIALSTATEMENTSADDITIONAL INFORMATIONOVERVIEW 104
4imprint Group plc Annual Report 2019
Notes to the Company’s
Financial Statements continued
D. DEFERRED TAX ASSETS
At start of period
Income statement debit
Deferred tax (debited)/credited to other comprehensive income
Deferred tax (debited)/credited to equity
At end of period
DEFERRED TAX ANALYSIS
At 30 December 2018
Income statement charge
Deferred tax debited to other comprehensive income
Deferred tax debited to equity
At 28 December 2019
At 31 December 2017
Income statement (charge)/credit
Deferred tax credited/(debited) to other comprehensive income
Deferred tax credited to equity
At 29 December 2018
The deferred income tax (debited)/credited to other comprehensive income is as follows:
Tax relating to post-employment obligations
Effect of change in UK tax rate
Tax relating to losses
E. OTHER RECEIVABLES
Amounts due from subsidiary companies
Other receivables
Prepayments and accrued income
Less non-current portion: Amounts due from subsidiary companies
Pension
£’000
2,067
(432)
(38)
–
1,597
Pension
£’000
2,381
(350)
36
–
2,067
2019
£’000
2018
£’000
4,442
4,376
(597)
(453)
(79)
(255)
276
45
3,313
4,442
ACA
£’000
Losses
£’000
Total
£’000
3
–
–
–
3
2,372
4,442
(165)
(415)
(79)
(597)
(453)
(79)
1,713
3,313
ACA
£’000
Losses
£’000
Total
£’000
2
1
–
–
3
1,993
4,376
94
240
45
(255)
276
45
2,372
4,442
2019
£’000
(31)
(7)
(415)
(453)
2018
£’000
52
(16)
240
276
2019
£’000
2018
£’000
248,287
252,254
140
53
171
55
248,480
252,480
(248,107)
(252,018)
373
462
Current amounts due from subsidiary companies are repayable on demand. The amounts are not interest-bearing. Non-current amounts due
from subsidiary companies are due in two to five years. All amounts are interest-bearing at market rates of interest.
There is expected to be no credit losses in respect of these receivables.
105
4imprint Group plc Annual Report 2019
The carrying amounts of the Company’s trade and other receivables are denominated in the following currencies:
Sterling
US dollars
2019
£’000
2018
£’000
126,213
126,362
122,267
126,118
248,480
252,480
F. LEASES
The Company leases office space in a serviced office facility in London. The lease typically has a one to two year term. In addition, there is
some office equipment of low value. The Company applies the IFRS 16 exemptions for short-term and low value leases. No leases contain
variable payment terms.
Details on right-of-use assets are shown in note B.
LEASE LIABILITIES
Expiring within one year
The movement in lease liabilities in the period are shown below:
At start of period
Adjustments arising from adoption of IFRS 16 (note R)
Interest charge
Lease payments
At end of period
The amounts recognised in the income statement are as follows:
Depreciation of right-of-use assets (note B)
Interest expense on lease liabilities
Low value leases
The cash outflow on leases in the period was £131,000.
G. OTHER PAYABLES – CURRENT
Other payables
Other tax and social security
Amounts due to subsidiary companies
Accruals
The amounts due to subsidiary companies are not interest-bearing and are repayable on demand.
2019
£’000
31
2019
£’000
–
155
155
2
(126)
31
2019
£’000
122
2
5
129
2019
£’000
92
37
590
340
2018
£’000
89
32
1,050
446
1,059
1,617
STRATEGIC REPORTCORPORATEGOVERNANCEFINANCIALSTATEMENTSADDITIONAL INFORMATIONOVERVIEW 106
4imprint Group plc Annual Report 2019
Notes to the Company’s
Financial Statements continued
H. PROVISIONS
At start of period
Utilised
Released
At end of period
2019
£’000
–
–
–
–
2018
£’000
108
(30)
(78)
–
The provisions related to dilapidation costs in respect of a property leased by the Company. The lease expired in 2018 and was not renewed.
J. RETIREMENT BENEFIT OBLIGATIONS
The amount recognised in the balance sheet represents the net liability in respect of the closed defined benefit pension scheme. Full details of
the defined benefit scheme are contained in note 18 on pages 86 to 88.
The Sterling analysis of the balance sheet amount is as follows:
Present value of funded obligations
Fair value of scheme assets
Net obligations recognised in the balance sheet
Changes in the present value of the net defined benefit obligation are as follows:
Balance at 31 December 2017
Administration costs paid by the scheme
Exceptional items – past service costs re GMP equalisation
Interest (expense)/income
Return on scheme assets (excluding interest income)
Re-measurement gain due to changes in financial assumptions
Contributions by employer
Benefits paid
Balance at 29 December 2018
Administration costs paid by the scheme
Interest (expense)/income
Return on scheme assets (excluding interest income)
Re-measurement gains due to changes in scheme experience
Re-measurement gains due to changes in demographic assumptions
Re-measurement loss due to changes in financial assumptions
Contributions by employer
Benefits paid
Balance at 28 December 2019
2019
£’000
2018
£’000
(27,740)
(26,090)
18,343
14,256
(9,397)
(11,834)
Present
value of
obligations
£’000
Fair value
of scheme
assets
£’000
Net
obligation
£’000
(27,194)
13,792
(13,402)
(237)
(562)
(666)
–
–
364
(237)
(562)
(302)
–
(1,461)
(1,461)
1,185
–
1,185
–
2,945
2,945
1,384
(1,384)
–
(26,090)
14,256
(11,834)
(244)
(720)
–
424
(244)
(296)
–
1,858
1,858
1,116
1,119
(3,930)
–
–
–
1,116
1,119
(3,930)
–
2,814
2,814
1,009
(1,009)
–
(27,740)
18,343
(9,397)
107
4imprint Group plc Annual Report 2019
K. AMOUNTS DUE TO SUBSIDIARY COMPANIES – NON-CURRENT
The amounts due to subsidiary companies of £122,193,000 (2018: £126,103,000) are due in two to five years. The loans are interest-bearing at
market rates of interest, ranging from 8.0% to 8.2%
L. CASH USED IN OPERATIONS
Operating loss
Adjustments for:
Depreciation charge
Amortisation of right-of-use assets
Exceptional non-cash items
Decrease in exceptional accrual
Share option charges
Defined benefit pension administration charge
Contributions to defined benefit pension scheme
Changes in working capital:
Decrease/(increase) in trade and other receivables
(Decrease)/increase in trade and other payables
Movements in amounts due to/from subsidiary undertakings
Cash used in operations
2019
£’000
2018
£’000
(2,004)
(3,017)
3
122
–
–
172
244
9
–
562
(39)
605
237
(2,814)
(2,945)
32
(98)
(404)
(54)
75
516
(4,747)
(4,051)
The exceptional non-cash items in 2018 related to past service costs for pensioner GMP equalisation (see note 4 on page 77).
M. SHARE CAPITAL
Allotted and fully paid
28,085,530 (2018: 28,085,530) ordinary shares of 38 6/13p each
2019
£’000
2018
£’000
10,802
10,802
During the period no ordinary shares were issued (2018: none). Share option exercises were satisfied by transfer of shares from an employee
benefit trust.
The options that have been granted and were outstanding under the Company’s share option schemes at the year-end are shown in note 22
on page 91. Full details of the share option schemes are given in note 23 on pages 92 and 93.
Employees of the Company had interests in 2,613 SAYE options (2018: 5,828).
N. DISTRIBUTABLE RESERVES
The profit and loss reserve of £180,424,000 (2018: £177,109,000) in the Company includes £125,915,000 (2018: £125,915,000), which is
non-distributable.
STRATEGIC REPORTCORPORATEGOVERNANCEFINANCIALSTATEMENTSADDITIONAL INFORMATIONOVERVIEW 108
4imprint Group plc Annual Report 2019
Notes to the Company’s
Financial Statements continued
O. CONTINGENT LIABILITIES
The Company had no known contingent liabilities at 28 December 2019 (2018: none).
P. EMPLOYEES
Wages and salaries
Social security costs
Pension costs – defined contribution plans
Share option charges
2019
£’000
918
114
9
131
2018
£’000
852
104
9
557
1,172
1,522
The average number of people, including Executive Directors, employed by the Company during the period was 4 (2018: 4).
Q. RELATED PARTY TRANSACTIONS
During the period the Company has been party to a number of transactions with fellow subsidiary companies:
Income statement
Finance income due from subsidiary companies
Finance costs due to subsidiary companies
Balance sheet
Interest-bearing loans due from subsidiary companies at end of period
Interest-bearing loans due to subsidiary companies at end of period
Key management compensation, comprising remuneration of the Directors, was:
Salaries, fees and short-term employee benefits
Social security costs
Share option charges
2019
£’000
2018
£’000
20,261
19,824
10,109
9,762
248,107
252,018
122,193
126,103
2019
£’000
2018
£’000
1,929
1,774
106
198
94
236
2,233
2,104
All related party transactions were made on terms equivalent to those that prevail in arm’s length transactions.
R. IMPACT OF NEW ACCOUNTING STANDARDS
On transition to IFRS 16 the modified retrospective option was selected, with no restatement of prior periods. The exemptions for low value
assets and leases with a duration of 12 months or less were taken. It was not possible to ascertain the interest rates implicit in the existing
leases, therefore the lease liabilities were discounted at the lessees’ incremental borrowing rates. The weighted average rate used was 2.75%.
As the option to not restate prior periods was selected, the implementation of IFRS 16 ‘Leases’ has resulted in a revision to the opening equity
of the Group. As the lease had only just over one year to run, this results in an opening adjustment to reduce net equity by £2,000, with the
creation of a right-of-use asset with net book value of £92,000 and a lease liability of £94,000. The impact on profit for the year was only
£1,000 and there was no impact on overall cash flow.
109
4imprint Group plc Annual Report 2019
Alternative Performance Measures
An Alternative Performance Measure (“APM”) is a financial measure of historical or future financial performance, financial position, or cash
flows, other than a financial measure defined or specified within IFRS.
The Group uses APMs to supplement standard IFRS measures to provide users with information on underlying trends and additional financial
measures, which the Group considers will aid the users’ understanding of the business.
DEFINITIONS
Underlying operating profit is profit before defined benefit pension charges and exceptional items. The defined benefit pension plan relates
to employees and former employees of businesses sold by the Group and not to employees of the ongoing business. Exceptional items are
defined below. Both these items may be volatile in magnitude and distort the underlying performance measures of the ongoing business.
A reconciliation of underlying operating profit to operating profit is shown in note 1 and the calculation of underlying EPS is shown in note 7.
Underlying operating margin % is underlying operating profit divided by total revenue.
Exceptional items are income or costs that are both material and non-recurring.
Revenue per marketing dollar is the total revenue of the Group divided by the total marketing expense of the Group. This provides a measure
of the productivity of the marketing expenditure, which is a cornerstone of the Group’s organic revenue growth strategy.
Free cash flow is defined as the net movement in cash and cash equivalents, before distributions to Shareholders but including exchange
gains/(losses) on cash and cash equivalents. It is a measure of cash available for allocation in line with the Group’s capital allocation policy
(see page 20).
Cash conversion is defined as the percentage of free cash flow to underlying operating profit and is provided as a measure of the efficiency of
the Group’s business model (see pages 16 and 17) to generate cash.
Return on average capital employed is defined as underlying profit before tax divided by the simple average of opening and closing non-
current assets, excluding deferred tax, plus net current assets and non-current lease liabilities. This is given to show a relative measure of the
Group’s efficient use of its capital resources.
Capital expenditure is defined as purchases of property, plant and equipment and intangible assets net of proceeds from the sale of property,
plant and equipment. These numbers are extracted from the cash flows from investing activities shown in the Group cash flow statement.
Underlying operating cash flow is defined as cash generated from operations, before pension contributions and defined benefit pension
administration charges, less capital expenditure. This reflects the cash flow directly from the ongoing business operations.
Underlying profit before tax is defined as profit before tax excluding defined benefit pension scheme charges and exceptional items.
Underlying profit after tax is defined as profit after tax before defined benefit pension scheme charges and exceptional items, net of any
related tax charges.
Underlying earnings per share is defined as underlying profit after tax divided by the weighted average number of shares in issue during the
financial year.
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STRATEGIC REPORTCORPORATEGOVERNANCEFINANCIALSTATEMENTSOVERVIEW
110
4imprint Group plc Annual Report 2019
Five Year Financial Record
INCOME STATEMENT
Revenue
2019
$’000
2018
$’000
2017
$’000
2016
$’000
2015
$’000
860,844
738,418
627,518
558,223
497,219
Underlying* operating profit
53,932
45,359
42,029
37,947
33,215
Defined benefit pension scheme administration costs
Exceptional items
Operating profit
Finance income
Finance costs
Net pension finance charge
Profit before tax
Taxation
Profit for the period
(312)
–
(316)
(721)
(291)
(311)
(454)
(2,940)
(394)
(858)
53,620
44,322
41,284
34,696
31,963
818
(67)
250
(23)
(378)
(403)
3
(125)
(503)
22
(46)
37
(7)
(521)
(836)
53,993
44,146
40,659
34,151
31,157
(11,276)
(8,952)
(11,734)
(9,672)
(8,462)
42,717
35,194
28,925
24,479
22,695
* Underlying has been restated to include share option charges in 2017, 2016 and 2015.
Basic earnings per ordinary share
152.42c
125.61c
103.15c
87.27c
81.26c
Dividend per share – paid and proposed
84.00c
70.00c
118.10c
52.50c
38.89c
BALANCE SHEET
Non-current assets (excluding deferred tax)
27,506
20,096
19,967
20,020
19,365
2019
$’000
2018
$’000
2017
$’000
2016
$’000
2015
$’000
Deferred tax assets
Net current assets
Retirement benefit obligations
Other liabilities
Shareholders’ equity
4,338
5,636
5,912
5,030
4,388
44,792
33,482
35,083
25,299
28,781
(12,305)
(15,016)
(18,106)
(19,290)
(23,114)
(1,383)
(931)
(763)
(1,734)
(968)
62,948
43,267
42,093
29,325
28,452
Net cash
41,136
27,484
30,767
21,683
18,381
111
4imprint Group plc Annual Report 2019
Registered Office and
Company Advisers
4imprint Group plc
25 Southampton Buildings
London WC2A 1AL
Telephone +44 (0)20 3709 9680
E-mail
hq@4imprint.co.uk
Registered number
177991 England
Independent auditor
Ernst & Young LLP
No. 1 Colmore Square
Birmingham B4 6HQ
Joint stockbrokers
Peel Hunt LLP
Moor House
120 London Wall
London EC2Y 5ET
Liberum Capital Limited
Ropemaker Place
25 Ropemaker Street
London EC2Y 9LY
Registrar and transfer office
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Bankers
Lloyds Bank plc
JPMorgan Chase Bank, N.A.
STRATEGIC REPORTCORPORATEGOVERNANCEOVERVIEWFINANCIALSTATEMENTSADDITIONAL INFORMATION 112
4imprint Group plc Annual Report 2019
Notes
Group plc
Group office
4imprint Group plc
25 Southampton Buildings
London WC2A 1AL
Telephone +44 (0)20 3709 9680
E-mail
hq@4imprint.co.uk
Trading offices
USA
4imprint, Inc.
101 Commerce Street
Oshkosh
WI 54901, USA
Telephone +1 920 236 7272
+1 920 236 7282
Fax
sales@4imprint.com
E-mail
UK
4imprint Direct Limited
5 Ball Green
Cobra Court
Trafford Park
Manchester M32 0QT
Freephone 0800 055 6196
Telephone +44 (0)161 850 3490
+44 (0)161 864 2516
Fax
sales@4imprint.co.uk
E-mail
4
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