4imprint Group — Moving on up

4imprint presents a unique investment case: a UK-listed company, with British and US management, run out of the US and with 98% of revenues generated in the US. It is a distributor of promotional products across the spectrum of enterprises in North America, with a large range of product across categories from pens to apparel. Up until the onset of the pandemic, it had a very impressive long-term financial record, with revenue growth for the five years from FY13 through to FY19 at a CAGR of 17.2% (10-year CAGR of 15.0%). For obvious reasons related to the severe impact of pandemic-related lockdowns on the US economy, FY20 broke this pattern, with a 35% drop in revenue over the prior year. Growth resumed in FY21, with a strong Q4 helping drive revenues up 41% on prior year, with current year forecasts pushing past the FY19 figure. The strategic objective remains $1bn of revenues, which we now expect to be achieved in FY23e.

4imprint operates in a large and diverse market. The Advertising Specialty Institute (ASI), an industry body, estimated the value of the US promotional products distribution market in 2020 at US$20.7bn, down from $25.8bn in 2019, but that FY20 figure included substantial quantities of unbranded PPE. Recently released FY21 figures show a good underlying recovery, reflecting the reopening of the US economy, to $23.2bn for the year – a figure likely to contain a much lower proportion of unbranded PPE. After the FY20 retrenchment, 4imprint was the second largest distributor excluding PPE (third with PPE included) yet has an estimated market share of less than 3%. For FY10 to FY19, the market grew at a CAGR of 5.0%. 4imprint has hitherto consistently grown faster than the market, barring FY20 when its decline was broadly in line with the underlying trend (ex PPE). It has achieved this through building market share helped by its reputation for quality, reliability and customer service. There are no direct comparators, as the other large players have differentiated business models, described below.

Understanding 4imprint’s management of marketing is central to understanding the company. With marketing costs typically representing 16-18% of group revenues, this is fundamentally a variable cost and flexing it allows management to control the overall group operating margin. The group’s strong long-term record stems from a data-driven approach to understanding its customers and meeting (and anticipating) their requirements – just as true over the pandemic period as in ‘normal’ trading. The marketing uses data to select what products are presented to which audiences, when and via what channel. The meld of automation and personalisation is very effective in delivering top-line growth, using a range of techniques to drive customer acquisition and retention, complemented with TV and radio campaigns for brand awareness. This portfolio approach to marketing gives the flexibility to adapt quickly to market conditions and how customers have been working. Marketing effectiveness ($1 revenue earned relative to $1 spent) was $5.46 in H121, broadly in line with the 10-year first-half average, despite the spend being more weighted to brand awareness.

4imprint’s cash positive balance sheet afforded it a substantial cushion against the sharp pandemic-prompted revenue downturn. The business’s underlying cash requirements are modest, as it is primarily a marketing and distribution business, with minimal need to invest in large stock positions or substantial pieces of capital equipment. The growth of apparel in the product mix is increasing the working capital requirement, but it remains modest in relation to the size of the balance sheet. Historically, significant cash was absorbed by a legacy pension scheme funding requirement (all in the UK) and a (trustee-agreed) $9.14m lump-sum contribution was paid in May 2020, with the objective to fund the scheme to ‘buy-out’ ready levels by FY25, meaning this is no longer a significant factor.

The positive year-end trading update indicates FY21 revenues of $787m, which is ahead of our earlier forecast of $775m. With the positive momentum, we have also raised our FY22e revenue estimate to $900m (was $850m) and introduced forecasts for FY23e, where we are looking for $1bn, which was set before the pandemic as a strategic corporate goal. As indicated above, historically the marketing spend was flexed to drive the top line while generating a relatively stable operating margin. This was in a range of 4.9% to 6.7% over FY11–19. We now envisage the management of operating margin (through control of marketing spend) back to the lower end of this range in FY23e. This slight element of caution reflects some ongoing uncertainty about the speed and trajectory of the reopening of the US economy, as well as continuing supply chain issues and labour cost pressures. A DCF based on a WACC of 8%, terminal growth of 3% and medium-term EBITDA margin of 6.5% suggests a valuation of £33.29, 26% above the current level. 4imprint generally trades at a significant premium to other marketing stocks, which have widely differing business models. It is trading on an FY22e EV/EBITDA of 21.5x, compared to a sector rating of 10.5x. Faster growth erodes this premium for FY23e, with 4imprint trading at 17.2x versus sector on 10.2x.

4imprint’s business model is remarkably straightforward. It supplies customised, promotional products to customers across North America (98% of revenues) and the UK and Ireland (2% of revenues). The company had grown its revenues steadily over many years to FY19. COVID-19 lockdowns had a severe effect on demand as corporate America diverted its attention to managing the immediate impacts, side-lining marketing initiatives.

Despite the dramatic changes in the operating environment, 4imprint’s ethos was unchanged. Management is protective of the group’s reputation for ‘best-in-class’ customer service and of its partnership approach to dealing with its suppliers. In both aspects, the brand’s positioning undoubtedly helped to give a degree (obviously unquantifiable) of resilience against the worst of the market impacts. The scale of the operation is large, running at around 1.4m orders a year, but all are individually customised and of great importance to the customer. The market is highly fragmented; there are reported to be over 30k distributor firms in North America alone. It is, however, substantial, estimated by industry body ASI at $23.2bn in 2021, despite the impact of COVID-19 on the economy. 4imprint’s growth has consistently outstripped the market, with an all-organic revenue CAGR of 13.0% for the period FY11–21e, compared to an estimated market growth of 4.8%. This premium growth is being delivered through the group’s sophisticated direct marketing operation, based on data and covering online and offline approaches to recruit new customers and to drive return visits. Marketing spend is managed with a view to driving the top line while broadly maintaining operating margin. How the spend has been tailored to suit the changed circumstances is described in more detail below.

Promotional products are used by businesses to increase the profile of their services, products or events, and also to motivate staff within their own operations. The product range offered by 4imprint is extensive, from the basic, such as pens, bags and drinkware, through to higher priced items such as apparel, business gifts and full displays for trade shows. All are customised with the name and/or logo of the organisation doing the promotion. As of FY20, 4imprint had over 5,000 products that can be customised and shipped in less than 24 hours (order today, ship tomorrow) and over 600 exclusive lines. Overall, the group lists around 50,000 SKUs, taking into account different colourways, etc. The average order quantity is over 300 items. In FY21, the group handled around 1.4m orders (616k in H121, 815k H221) up from the 960k achieved in the hardest hit year, FY20, and at 90% of the level of 1.59m recorded in FY19. Average order value for FY21 was roughly $550.

The immediacy of the relationships with both customers and suppliers allows for trends to be quickly identified and addressed. 4imprint only carries a small amount of inventory, principally the own-branded Crossland apparel. The general method of working is on a ‘drop-ship’ basis, whereby the supplier holds the inventory, prints the product and ships it directly to the customer. This gives 4imprint the ability to offer a far higher number of product lines, without any of the associated stock risk. It does require a high degree of trust and co-operation between the group and its supplier base, which it cements through a collaborative/partnership-based approach and prompt payment. The closeness of these relationships held the group in good stead through the COVID-19 pandemic. A supplier operating at lower than usual levels will prefer to work with those they know and trust, in the knowledge that they will be paid, and on time.

At the half year-end in June 2021, 4imprint was holding $12.6m of finished goods and goods for resale (including goods in transit) compared with H121 revenues of $326.8m, up from $11.3m recorded at end FY20. This half-year figure is greater as a proportion of sales than the prior year (3.9% from 3.2%). In part, this reflects the increasing proportion of apparel in the mix (with the need to hold ‘blanks’ ahead of embroidery and finishing) but, in any case, we would regard this as a sensible approach to take given the challenges in supply chain and logistics. The need to ensure smooth fulfilment of customer orders is, if anything, heightened in the circumstances and could prove a competitive advantage.

Over FY20, some promotional product distributors switched their product bias with a move into unbranded PPE. 4imprint added some COVID-19 specific lines, such as hand sanitiser and branded face masks, but they were within the existing product sphere.

The top categories of product in 2021 will likely be updated with the final results but are likely to be broadly the same as those for FY20, below.

While it is easy to envisage a high degree of automation with an online business model, part of the strength of the business is the management of the combination of digital and analogue. This applies both to the marketing and the operational side, where day-to-day activities involve a far higher element of handholding for customers for whom this type of buying is not central to their normal working practices. Customer service personnel talk to customers over the phone to guide them through the process, in normal times from the main office in Oshkosh, Wisconsin, but also over recent months remotely when required.

4imprint employs around 1,100 people, usually supplemented with temporary employees according to the demand cycle across the year. Around 650 (normally) work at the main office, with the balance employed at the distribution centre nearby, also in Oshkosh, Wisconsin. Over 300 are employed in a customer-facing capacity. At the height of the pandemic, the majority of office-based staff worked from home and, as conditions eased, the group adopted a hybrid working model marrying the benefits of flexibility for the workforce with increased efficiency. The distribution centre and embroidery facility was shut for several weeks in FY20, then reopened with reduced throughput and with social distancing, scaling back up as conditions allowed.

Within the main office, there are some specialist teams: one focused on inbound enquiries from Canada, including French speakers; an education team, focused on K-12, colleges and universities, and on licensing; federal, state and local government; Spanish speakers; and a small team specifically dealing with claims and credits. Supplier faults/errors and delivery issues are dealt with by this team and the overall rate of orders needing attention of this type runs at less than 2%.

The personal approach is a crucial element of the differentiation over an order from an online platform, such as Amazon. A team member taking an inbound call has access to that customer’s order history and digital artwork and can walk the customer through the options and process or talk through those with an inbound enquiry from a new potential customer, building the level of trust needed to drive longer-term, repeat business.

Having been based in Oshkosh since the early 1990s, 4imprint is a well-established local employer and cultivates its reputation as a preferred employer through offering benefits such as training, onsite medical and dental provision (company-funded), holiday pay and pensions. Staff retention is very good, with turnover in low single digits, with the company’s reputation enhanced locally by the way it treated its staff during the pandemic.

Orders are processed, customised, then despatched, mostly direct from the supplier. The large distribution facility is in an industrial zone on the outskirts of Oshkosh. An idea of the scale is shown in the video below.

The distribution centre has three key roles: ‘Blue Box’ marketing, sample pick and pack and embroidery to customise apparel and bags etc. 4imprint is well known for these Blue Boxes, which are a core element of the marketing, designed to drive customer retention. The contents of the boxes are tailored according to the relevant data, with catalogues and relevant samples enclosed.

Embroidered apparel is the area where 4imprint’s proportion of revenue is lower than the distributor market and is therefore an area of focus in driving the top line. It has a particularly high perceived value and is often used as an element of staff motivation, in addition to the promotional benefit. It obviously sells through at higher price points and boosts basket size. The embroidery side of 4imprint’s offering differs to its other products due to the degree of customisation that must be carried out before despatch. Management has evaluated the business and commercial dynamics of in-housing as opposed to external sourcing. The key issues swaying the argument to an internal solution principally surround scalability, product quality and speed. Unless these can all align, the risk to client satisfaction – and hence quality, repeat business – is too high. Bespoke digital printing is also carried out at the facility for display materials and where transfer printing is preferred or technically superior to embroidery for fabrics and bags. 4imprint has expanded its capacity here, adding three direct-to-garment printing presses.

The UK and Ireland business broadly replicates that in North America, but on a far smaller scale and without the embroidery facility.

4imprint has many years of experience honing what does and does not work when it comes to encouraging existing customers to buy and how to recruit new business customers. Management monitors marketing effectiveness through KPIs such as the number of customers acquired, and the percentage of those customers retained after 12 and after 24 months. The long-term trends for these metrics are shown in the exhibit below, which clearly shows the degree of disruption prompted by the pandemic. The recovery in customer acquisition was already apparent in Q221 and the Q3 trading update, while not citing numbers, referred to customer acquisition remaining strong.

The group uses a wide range of marketing techniques, including a residual element of ‘traditional’ printed catalogues, search engine marketing, email, quantitative analytics, Blue Box physical samples (used for customer retention) and, more recently, television and radio campaigns aimed at boosting brand awareness. The mix has changed in response to the altered trading landscape and is unlikely to revert to previous patterns, with direct mail now a smaller proportion of spend than online or brand support. Catalogue circulation in H121 was at 65% of FY19 levels, but, despite the seeming anachronism, these are likely to remain in the mix as they are still very effective in a B2B context and suit the nature of the businesses that form the core customer constituency, likely sitting on the desk of the targeted individual. Photographic work is carried out in studios at the head office, with models all drawn from the workforce. This has obvious cost benefits but also adds to the authenticity of the branding.

Linear TV was added to the marketing mix in FY18 to promote the group’s brand awareness rather than to directly drive sales, with results exceeding early expectations. It drives an increased proportion of direct traffic to the website, as opposed to traffic delivered via search/Google, and in inbound interest over the phone. Unprompted brand awareness was in double digits at the time of the interim results, while aided awareness increased by over 20% versus the summer of 2020.

The management of the marketing mix is sophisticated and is based on the data derived from each marketing exercise, which is fed back into the planning. This systemic management of the marketing effort is a vital part of the group’s IP and is key to how the group has been able to build its market share through understanding customers’ needs and buying patterns. This has been even more crucial over the last two years, when flexibility and speed of response have been paramount.

We look at the customer landscape in the section below, but it is easy to overlook the importance of the supplier relationships in the business model. 4imprint guards its corporate integrity closely and this extends to its supply chain. Ethical standards on employment and sourcing back through the chain are high and the potential reputational impact of any lowering or breach of these standards on either 4imprint or its clients is considerable. The group’s general approach is that of partnership. Given its industry positioning as market leader, it will tend to be the supplier’s largest customer, but it also endeavours to be a favoured customer through good communication and prompt payment. This attitude has stood the group in strong stead over recent periods, with complexities and delays with shipments from China and the intricacies of the logistics of distribution in North America. With a rapidly shifting product mix and a production environment with novel challenges, solid communication and trust have been essential. Where other distributors may be looking to stretch terms of trade and supply of goods may be constrained if the logistics have been more challenging, the element of trust may be the crucial deciding factor on who to deal with. Being paid on time also helps considerably.

Just as there is ongoing consolidation within the distributors, there has been a mirroring process happening within the supply base, with the bigger suppliers getting bigger and private equity funding having moved into the sector. This trend may well accelerate post pandemic, particularly if the smaller players lack the funding to support the necessary working capital. As 4imprint’s business has scaled up, it has had to manage its supplier relationships to continue to meet customer expectations on quality and on expedited delivery schedules. This has necessitated gravitating to suppliers also of greater scale, where key factors, such as regulatory requirements, product safety and documented provenance, are easier to manage.

There is a natural limit on supplier concentration, given the sheer number of SKUs being offered across the various catalogues and online. In general terms, management estimates that the 10 largest suppliers account for around half of the overall group volume. Roughly one-third (and growing) of the total supplier base supplies multiple product lines, a further third is supplying apparel and the balance have a particular product speciality.

There is a core team of senior merchandisers negotiating larger contracts and conducting social/ compliance audits, with around 25 further team members in support. Goods are designed and produced overseas and shipped to the US for decoration or else sourced domestically.

Supplier prices are normally published and set on an annual basis.

The size of the US promotional products market for FY21 was estimated at $23.2bn by the industry body ASI. This is a good increase from the $20.7bn estimated market size for FY20, but with this latter figure included around $6.0bn of unbranded PPE, which would not traditionally have been handled, making the recovery even more marked. Although the FY21 market total will also include an element of unbranded PPE, this is likely to represent a much smaller proportion than in the prior year.

Stripping out the unbranded PPE, management estimates that around one-third of the total market is accounted for by corporate programmes, namely contractual relationships with large corporations. Given the overall scale of the promotional products sector, 4imprint can afford to sidestep this corporate programme segment of the market, which would be significantly more capital intensive and contractual in nature. This leaves around two-thirds of the market truly addressable, allowing for considerable further growth before any market share constraints might emerge.

This is a competitive landscape (the other industry body, PPAI, estimates around 30k distributors), but the participants are predominantly small and locally active. Over the last few years, 4imprint’s growth has moved it up the relative ‘league table’ and in FY19 it had the largest sales of all US promotional product distributors, although still only accounted for below 3% of the estimated market.

With the swing to PPE in the mix, and the retrenchment of more traditional categories, 4imprint lost its top slot in FY20 to HALO Branded Solutions (FY20 revenues: $765.7m, +3.6%, boosted by PPE and the prior year acquisition of Axis Promotions; owned by TPG Growth). Second largest by sales was Staples Promotional Products (privately owned), where FY20 revenues were estimated at $643.6m in 2019, although around 30% of this figure is understood to be PPE. Staples has a markedly different business model based on regional field salesforces travelling around the client pool. It is particularly heavily weighted to corporate programmes. Excluding PPE, its FY20 revenue would have been around $450m, below 4imprint’s $560m.

Proforma (FY20 sales: $538.5m) has a franchise-based business model based on printing, design and brand promotion, with a steep pivot to PPE at the height of the pandemic. BDA (FY20 sales: $477.4m, ex PPE $411m) has a strong franchise in licensed sports affiliated merchandise.

Altitude Group is not considered a direct competitor as it is a SaaS and platform business within the sector, as opposed to a distributor.

Amazon has often been cited as a potential threat to 4imprint’s business model. While Amazon is underestimated at any competitor’s peril, we do not believe it will take a significant proportion of this type of trade. As explained above, 4imprint’s operation involves a meaningful amount of interaction with the client to make sure that the design and specification are as required. For distributors selling through the Amazon Marketplace, the commission charged can vary from 15–25% of the sale price. As volumes are modest, due to the personalisation, this proposition is not likely to be that attractive to the core supplier base.

CEO Kevin Lyons-Tarr has been with the business since 1991 and is based in Oshkosh, Wisconsin. He has performed a number of roles within the group, including CIO and COO, and became president of the direct marketing business in 2004. He was appointed as an executive director in 2012 and then CEO in March 2015. David Seekings, the group CFO (KPMG-trained), is also a long-standing employee, having joined as group financial controller in 1996. He moved from the UK to Oshkosh in 2000 to take up the role of CFO of 4imprint direct marketing and was appointed overall group CFO in March 2015, remaining in the US. They are both based (physically) at the centre of the principal office in Oshkosh from where the direct marketing is carried out.

As has been highlighted by the recent experience, the key sensitivity for 4imprint is the health (or otherwise) of the economy, particularly that of corporate entities across North America. Its particular sweet spot is small and medium-sized commercial enterprises with between 20 and 500 employees. These firms are large enough to be considering marketing their organisations, but not so large as to have the capacity to source directly or be of sufficient scale to take out a corporate programme. As such, the normal economic cyclicality is limited, with some counter-cyclical elements as businesses may be more likely to drive differentiation and bolster their market positioning. The shifts in trading patterns over the pandemic were unprecedented and profound. The group’s strong balance sheet provided the management team with the comfort needed to preserve the integrity of the business, which has set it in good stead for recovery.

4imprint has considered its corporate responsibility as a key facet of its ethos long before ESG became more general practice. It has now formalised its approach. In particular:

Throughout the pandemic, the group prioritised worker retention and kept employees on the payroll, despite there being a period when the main office and the distribution centre were closed.

Recent non-executive appointments mean the group’s board of directors consists of two executive directors, namely the CEO and CFO, and six non-executive directors, of whom three are women. One of these newly appointed directors, Jaz Rabadia, is a chartered energy manager with over 14 years of experience in energy, recycling and sustainability roles. She is head of responsible business and sustainability at JustEat.

For a company operating on a ‘mature’ basis, we would normally assess the valuation relative to other quoted businesses with similar operating models. We would then sense-check this valuation via a discounted cash flow analysis. The issue for 4imprint is that there are not any genuine quoted peers to measure it against. For context, therefore, we have looked at the multiples of other smaller/medium-sized marketing services companies and those of a smaller group of US B2B distributors, although they operate in different market segments with greatly differing dynamics.

The UK small- and mid-cap marketing services groups self-evidently have business models substantially different from 4imprint and none have anything like the consistent performance record. They are nevertheless listed in the same sector and provide a particular backdrop.

4imprint has historically traded at a premium to these stocks, reflecting its financial record, strong balance sheet and high levels of cash conversion. 4imprint’s FY21 EBITDA margin of 4.5%, versus these marketing services companies at 15.8% is simply a reflection of its different business model as a distributor, with those peers shown in the table primarily ‘people’ businesses. Looking back to the same exercise before the onset of the pandemic in January 2019, the stock was trading at a FY1 P/E premium of 47%. Now the premium is 48%, so effectively unchanged relative to peers.

We have historically also looked at US-quoted distributors, but here the pool of relevant stocks is very limited – more so since Core-Mark, a distributor into the convenience food sector, was taken over by PFG for 0.15x historic revenues in summer FY21. Veritiv, a full-service B2B provider of packaging and hygiene products, trades on a FY22 P/E of 10.5x and EV/EBITDA of 6.0x.

Given the issues with the peer-based approach and given the group’s financial characteristics – particularly the element of repeat business and the management towards a maintained operating margin – a DCF is our preferred valuation technique.

In Exhibit 8, below, we show a range of terminal growth rates and WACCs, predicated on the projections contained in the financial summary in Exhibit 11. Beyond the explicit forecast period, the assumption is for revenue growth of 8%, which is below that achieved historically (FY11–19 CAGR 17.8%). Using a WACC of 8% and a terminal growth rate of 3%, and assuming that EBITDA margins are stable over FY24–31 at the 6.5% level (which is below the average of 6.9% achieved across FY11–19, just to be conservative), the implied valuation in sterling is £33.29, using an exchange rate of £1:$1.36. This represents a premium of 26% to the current share price.

The positive year-end trading update indicated that FY21 revenues were $787m, ahead of our earlier forecast of $775m. Post the H121 results, which showed revenues 23% ahead of the prior year, we had lifted our full-year revenue forecast to this level from $700m, having previously upgraded in March and then again in May as order counts recovered across the year.

Total order count for the year ended up at 90% of 2019 levels, implying a degree of moderation in H221 – to be expected, given there was bound to be an element of ‘catch-up’ as the US economy reopened. Order counts in May were at 82% of 2019 levels, 96% of 2019 levels for June, and 12% ahead by July. It is particularly encouraging that orders from new customers have been even higher, up 18% on July 2019.

With the positive momentum, we have also raised our FY22e revenue estimate to $900m (was $850m) and initiated forecasts for FY23e, where we are looking for $1bn, which was set before the pandemic as a strategic corporate goal.

We have modelled gross margin at 29% for FY22–23e, which is lower than the level achieved pre-pandemic, which tended to be around 32–33%, but this reflects the increasing proportion of apparel in the mix, as well as a degree of underlying inflation (although the impact of this is shared with the suppliers).

Putting this into a longer-term context, our forecast revenue for FY22 now outstrips that generated in FY19 and growth looks set to resume.

Marketing spend is the largest component of operating cost, historically amounting to 17-18% of group revenue. This marketing spend was flexed to drive the top line while generating a relatively stable operating margin. This was in a range of 4.9% to 6.7% over FY11–19. We now envisage operating margin reverting to the lower end of this range in FY23e. We have taken a relatively cautious view on this front, given the strain in the economy from inflationary pricing pressure on goods and shipping and shortages in the labour market.

The company has until now separately identified the administration costs of the defined benefit pension scheme. Now that the legacy pension scheme funding is no longer a material issue (and indeed the scheme should be ‘buy-out’ ready by mid-2024), those costs are to be absorbed within general administration costs and the related interest charge will be absorbed within the interest line. We have made the requisite adjustments to our presentation of the figures and restated the historic figures in Exhibit 11 below.

With the last couple of years having been so disrupted, it is helpful to look at the cash flow over a longer period, as shown below. This clearly shows how cash generative the underlying business is, with limited requirement for capital spend (although plans were obviously curtailed in FY20 and FY21 while the effects of the pandemic were most apparent). Before that, spend was focused on extending and increasing capacity at the distribution centre in Oshkosh, particularly on the embroidery capability. Strain on capacity at the main head office and call centre may be relieved as volumes step up again with the flexibility for some element of remote working, given the experience gained from forced work-from-home periods.

The exhibit above also highlights the effect of the legacy pension scheme. With that situation effectively now resolved, or at least considerably reduced in scale, more operational cash flow should be available for allocation elsewhere. Given the nature of the industry, M&A is not (generally) attractive, given the paucity of operators of scale – hence is comparatively low on the list of capital allocation priorities set out in the FY20 annual report:

The long-held strategy of maintaining a strong, cash-positive balance sheet proved its worth over the last couple of years, enabling management to take a longer-term view and maintaining the capacity to rebuild. There is no debt on the balance sheet bar the lease liabilities, which amounted to $12.7m at the half year. The group does have an undrawn, committed $20m line of credit available, should it be needed.

The cash figure quoted in the year-end trading update of $41.6m was a little lower than we had anticipated ($45.9m), but this is likely to reflect a higher proportion of apparel in the product mix and some management of working capital to cater for the friction in the supply chain. In theory, this latter factor should reverse in FY22.