Berenberg removes 'sell' rating on 4imprint after interim results

The promotional products specialist reported a declining return on marketing investment for the first half of the year and lower gross margins, which fitted in with Berenberg’s previous ‘sell’ thesis apart from the fact that the issues were not related to competition.

Instead, supply chain issues arose from major suppliers struggled to cope with 4imprint’s step-change in growth as a result of recent market investment, meaning the company had to resort to paying four to five times more for secondary air freight suppliers.

However, with the supply chain issues now resolved during the second half of the year and revenue higher than expected, Berenberg analysts see the FTSE Small Cap-listed firm as having good “momentum” for the rest of the year.

As such, analysts upgraded the target price for shares of 4imprint from 1,400p per share to 1,925p.

“Following the company’s FY17A results, we were apprehensive about its ability to deliver comparable returns on incremental marketing spend on new television and radio campaigns. Through highly selective and local campaigns, however, 4imprint has been able to achieve this,” said Berenberg’s broker note.

The analysts stated that the approach is “clearly paying off” as new customer orders are up by 13% year on year and organic revenue growth is up by 17%.