Coronavirus (COVID-19): Update
In the light of the rapidly evolving situation resulting from the spread of COVID-19 and its development into a global pandemic, 4imprint today provides an update on the Group’s current trading and operations.
Our first priority remains the health, safety and well-being of our people. This will not change. We will be informed by the latest governmental recommendations and measures and we will play our part to control the spread of COVID-19.
COVID-19 poses two primary threats to our business operations:
- Supply chain disruption. As noted in the Group’s 2019 full year results announcement on 3 March 2020, around 60% of the blank products that we sell originate in China. In February 2020, at the height of the COVID-19 disruption in China, this part of the supply chain was a major concern. However, the timing of the inventory cycle meant that our domestic suppliers have been able to fulfil our customer orders since then. At the same time, we have closely monitored a substantial recovery of production capacity in Chinese factories. A more pressing supply concern now is the spread of COVID-19 in North America and the UK and the resulting potential restrictions on the operations of our domestic suppliers. We have very strong relationships with our suppliers and we will continue to work closely with them in the coming days and weeks as the situation evolves.
- Demand implications of global pandemic. The rapid spread of COVID-19 in North America and the UK has now begun to have a serious impact on demand in our business. In our results announcement on 3 March 2020, we noted that trading results in the first two months of 2020 were in line with the Board’s expectations. To be more specific, total orders received were up more than 13% over the same period in 2019, and this level of demand activity continued through 9 March 2020. From 10 March 2020 onwards, however, we have experienced a significant reduction in daily order flow. Over this short space of time, daily order counts have been very volatile, and have fallen materially to an average over the last three trading days of around 40% of the prior year.
We are unable to predict how long this lower level of order activity will last, but clearly the effects of COVID-19 will impact revenue and profitability in the current financial year. In the immediate term we are materially recalibrating our marketing activities and identifying and implementing cost saving initiatives, whilst being careful not to compromise the long-term prospects of the business. We have every confidence in the flexibility and professionalism of our team members to look after our customers at this difficult time.
There is no historical precedent in the business for the demand reduction that we are seeing. At this point the speed and volatility of the unfolding crisis makes accurate or responsible forecasting very challenging. We are, however, actively working through models at various levels of demand and duration that will help guide our decision making. Additional guidance will be provided to the market as and when we have more clarity.
4imprint remains very well-financed, with a $51m cash balance at the end of February 2020 and no debt. Given the strength and market position of the business prior to the COVID-19 crisis, the Board remains confident in the ability of the team to manage the business successfully through difficult times and to protect longer-term value for all stakeholders.
This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/ 2014. The person who arranged the release of this announcement on behalf of 4imprint was David Seekings, Chief Financial Officer of 4imprint.
For further information, please contact:
4imprint Group plc
Kevin Lyons-Tarr, Chief Executive Officer
David Seekings, Chief Financial Officer
Tel. + 44 (0) 20 3709 9680
Tel. + 44 (0) 20 3128 8100