16 April 2021
4imprint Group plc (the "Company")
Publication and Posting of the Annual Report and Accounts 2020
The Company has published its Annual Report and Accounts 2020 ("Annual Report"), together with a Notice of Annual General Meeting and Form of Proxy, and these documents have been posted to Shareholders.
Copies of the Annual Report and Notice of Annual General Meeting are available on the Company's website, https://investors.4imprint.com.
Copies of the Annual Report, Notice of Annual General Meeting and Form of Proxy have been submitted to the National Storage Mechanism and will shortly be available at https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
The Annual General Meeting (the "AGM") of the Company is scheduled to be held at 11.00 on 18 May 2021 at 4imprint, 5 Ball Green, Cobra Court, Trafford Park, Manchester, M32 0QT.
However, in light of the continuing COVID-19 situation and the public health guidance and social distancing measures issued by the Government, we intend to hold the AGM with the minimum attendance required to form a quorum and Shareholders will not therefore be able to attend the AGM in person.
The situation is constantly evolving, and the Government may change current restrictions or guidance. Any changes to the arrangements for our AGM (including any change to the location, time or date of the meeting) will be communicated to Shareholders in accordance with our Articles of Association and by Stock Exchange Announcement, as early as possible before the date of the meeting
Given Shareholders will unfortunately not be able to attend the AGM in person, we strongly recommend that all Shareholders complete and submit a proxy form in accordance with the instructions set out in the Shareholder Notes to the Notice of Annual General Meeting. Shareholders are also encouraged to submit any questions that they would have raised at the AGM in advance, and we will publish the answers to those questions on our website, as set out in the Notice of Annual General Meeting.
A condensed set of the financial statements for the 53 weeks ended 2 January 2021, together with information on important events that occurred during that financial period and their impact on the financial statements, were contained in the Final Results RNS announcement made on 16 March 2021. That information, together with the information set out in the appendices to this announcement, which is extracted from the Annual Report, constitute the material required by DTR 6.3.5R which is required to be communicated in full unedited text through a Regulatory Information Service. This announcement is not a substitute for reading the Annual Report.
In the appendices, "Group" is 4imprint Group plc and its subsidiaries, and page references are to pages in the Annual Report and Accounts 2020.
For further information, please contact:
Emma Taylor
Company Secretary
4imprint Group plc
Tel: 020 3709 9680
E-mail: agm@4imprint.com
Appendices
A. 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 United Kingdom law and regulations.
Company law requires the Directors to prepare financial statements for each financial period. Under that law the Directors have elected to prepare the Group and Company financial statements in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006 and International Financial Reporting Standards adopted pursuant to Regulation (EC) No.1606/2002 as it applies in the European Union ("IFRSs"). 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 the Company and of the profit or loss of the Group for that period.
In preparing the financial statements, the Directors are required to:
• Select suitable accounting policies in accordance with IAS 8 'Accounting Policies, Changes in Accounting Estimates and Errors' and then apply them consistently
• Make judgments and accounting estimates that are reasonable and prudent
• Present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information
• Provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group's and Company's financial position and financial performance
• In respect of the Group's and Company's financial statements, state whether IFRSs have been followed, subject to any material departures disclosed and explained in the financial statements
• Prepare the financial statements on the going concern basis unless it is appropriate to presume that the Group and Company will not continue in business
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 comply with the Companies Act 2006. They 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.
Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Remuneration Report and Corporate Governance Statement that comply with that law and those regulations. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website.
Each of the Directors, whose names and functions are listed in the Board of Directors on pages 46 and 47, confirm, to the best of their knowledge:
• That the consolidated financial statements, prepared in accordance with IFRSs, give a true and fair view of the assets, liabilities, financial position and profit of the Company and undertakings included in the consolidation taken as a whole
• That the Annual Report, including the Strategic Report, includes a fair review of the development and performance of the business and the position of the Company and undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face
• That they consider the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Group's position, performance, business model and strategy
Emma Taylor
Company Secretary
16 March 2021
B. Principal risks & uncertainties
The list below is extracted in full and unedited from the Annual Report and Accounts 2020, pages 26 to 31.
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, market and environmental risks
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Macroeconomic conditions |
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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 (excluding the COVID-19 pandemic), the promotional products market has typically softened broadly in line with the general economy.
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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.
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Link to strategy • Organic revenue growth • Cash generation and profitability |
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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 aims to provide operational and financial flexibility to facilitate continued investment in the business through different economic cycles. |
Direction • The COVID-19 pandemic has had a significant negative impact on demand for our products due to the overall economic impact of the pandemic as well as the resulting restrictions/concerns around meetings/gatherings • 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 ↑Significantly increased |
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Markets & competition |
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Description of risk The promotional products markets in which the business operates are intensely competitive. New or disruptive business models looking to break down the prevailing distributor/supplier structure may become a threat. Buying groups and online marketplaces may allow smaller competitors access to improved pricing and services from suppliers. Private equity interest in the promotional products industry has increased in recent years, offering potential funding for existing competitors or new entrants. The effects of the COVID-19 pandemic may reduce the use of promotional products in the future.
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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. • Customer acquisition and retention could fall, impacting revenue in current and future periods. |
Link to strategy • Market leadership • Organic revenue growth • Cash generation and profitability |
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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. Negative customer feedback is investigated and addressed rapidly. • Management regularly surveys customers and engages in research to monitor changing customer interests and perceptions. Merchandising and supply chain teams, in collaboration with our suppliers, have experience in rapidly adapting the product range to meet evolving consumer demand. Management is prepared to test and/or add additional products to meet changing customer service requirements. |
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 |
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Currency exchange |
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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, purchases of own shares 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 and on translation of Sterling costs into US dollars.
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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.
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Link to strategy • Cash generation and profitability • Robust financial structure |
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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.
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Direction • Political instability, interest rate policy and trade tensions (US) and the consequences of Brexit (UK) have led to increased volatility in currency markets ↑ Increased |
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Climate change & environment |
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Description of risk Climate change potentially affects our operations, facilities, supply chain, team members, communities and our customers in a variety of ways. As such, it presents a multitude of risks to the business and threatens our ability to achieve our strategic objectives.
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Potential impact · Extreme weather-related events that impact our customers and/or our suppliers can have 'episodic' negative impact on revenue, customer acquisition and retention, and they can also cause increases to our product and distribution costs. Some of our suppliers are located in geographic areas that are subject to increased risk for these events. · The transition to a low-carbon economy presents several key risks: · Potential for increased operational costs related to mitigation efforts, increased regulatory compliance and carbon taxes. · Increased product costs charged by our suppliers due to increased input costs and regulatory compliance. · Customers will increasingly require a wider range of low-carbon, sustainable product options that may be difficult to identify and source, negatively impacting demand. · Increasingly stakeholders will demand that companies are actively and appropriately addressing climate change and there is an increased level of reputational risk for companies that are perceived not to be doing so. |
Link to strategy • Cash generation and profitability • Building a sustainable business |
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Mitigating activities · The flexible nature of our 'drop-ship' model allows for relatively rapid adjustment to episodes of extreme weather. The business has very low customer concentration which helps mitigate an element of the risk as well. · The business has set a goal to become 'carbon neutral' by no later than December 2022 and management is actively monitoring and measuring progress towards this goal. · Our merchandising teams actively collaborate with our suppliers to continuously curate our range of products to adapt and meet the needs and tastes of our customers. |
Direction • There is an increasing sense of urgency globally, and as such, the risks in this area will increase as well ↑ Increased |
Operational risks
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Business facility disruption |
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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 pandemic, fire, flood, loss of power or internet/telecommunication failure.
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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. · A significant portion of our apparel orders are embroidered in-house at our distribution centre, therefore disruption at this facility would impact our ability to fulfil these orders. · The Group's reputation for excellent service and reliability may be damaged.
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Link to strategy • Market leadership • Organic revenue growth • Cash generation and profitability |
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Mitigating activities · Back-up and business continuity procedures are in place to ensure that customer service disruption is minimised. · Websites are cloud-based, and data is backed up immediately to off-site servers. · Relationships are maintained with third party embroidery contractors to provide an element of back-up in the event of facility unavailability. · A significant proportion of our office and customer service staff can work from home, mitigating some risk should offices become unavailable. |
Direction • The COVID-19 pandemic raises the risk of potential shutdown of one or all of our facilities ↑ Increased |
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Disruption to the product supply chain or delivery service |
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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.
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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.
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Link to strategy • Market leadership • Organic revenue growth • Cash generation and profitability • Building a sustainable business |
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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. · Dialogue with key suppliers has been increased during the pandemic to monitor for signs of distress. · Wherever possible, relationships are maintained with suitable alternative suppliers for each product category. · Secondary relationships are in place with alternative parcel carriers. |
Direction • Risk inherent in increasing supplier concentration • COVID-19 pandemic has increased risk ↑ Increased |
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Disturbance in established marketing techniques |
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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. Pandemic conditions that lead to increased levels of people working from remote locations may diminish the effectiveness of this technique. · 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. · TV/Video/Brand: Fluctuations in available inventory may cause the price of this technique to increase beyond our acceptable thresholds. The evolving nature of how consumers access this type of content can change our ability to effectively access our audience. In addition, the evolving landscape around data privacy legislation potentially affects our ability to access and analyse customer data information.
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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 decrease the yield on our marketing activities and might increase compliance costs and the possibility of lawsuits.
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Link to strategy • Market leadership • Organic revenue growth • Cash generation and profitability |
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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. · TV/Video/Brand: Given that this is the newest element of our marketing portfolio, our utilisation of this technique is still in the early stages of its development, allowing for a high degree of flexibility. · Data privacy requirements are monitored closely and assessed.
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Direction • Marketing diversification continues via the successful integration of a brand component to the marketing portfolio • The COVID-19 pandemic has negatively impacted offline response rates ↑ Increased |
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Reliance on key personnel |
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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.
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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.
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Link to strategy • Market leadership/revenue growth • Cash generation and profitability • Building a sustainable business |
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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, both at Board and operational levels. |
Direction • The business has been able to attract and retain appropriate talent = Unchanged |
Technological risks
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Failure or interruption of information technology systems and infrastructure |
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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.
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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.
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Link to strategy • Market leadership • Organic revenue growth • Cash generation and profitability |
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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. |
Direction • The IT platform is mature, and performance has been efficient and resilient, including through the COVID-19 pandemic with high levels of staff working from home = Unchanged |
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Failure to adapt to new technological innovations |
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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 is 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.
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Potential impact · If the business fails to identify and adopt 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.
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Link to strategy • Market leadership • Organic revenue growth • Building a sustainable business |
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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.
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Direction • Innovation remains a priority = Unchanged |
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Cyber threats |
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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.
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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.
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Link to strategy • Cash generation and profitability • Shareholder value |
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Mitigating activities · The business employs experienced IT staff whose focus is to identify and mitigate IT security vulnerabilities. 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 to maintain and enhance the integrity and efficiency of the IT infrastructure and its security. |
Direction • The general incidence and publicity around cyber-crime continues to increase • Increased incidence of malicious cyber activity during the current COVID-19 pandemic ↑ Increased |
C. Related party transactions
There are no related party transactions requiring disclosure.
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