News

The government's proposal to ban unsolicited cheques from credit card companies is likely to 'impact on group profitability' for the current year, Communisis has said.

Today, the government unveiled plans to outlaw the widespread practice of credit card companies sending cheques to customers that had not requested them.

While not yet law, Communisis said the White Paper released by the government today is likely to have an immediate impact on the behaviour of its clients in the sector.

In 2008, overall group revenue from the printing of such cheques was £4.2m, however Communisis said today that the impact of profits was "likely to be material due to the high operational gearing within this business".

The promotional cheque business represents about 2% of total revenues at the company, however its contribution to the company's £12.7m profit in 2008 was a higher percentage.

Chief executive Steve Vaughan said he was not surprised by the news, adding that the company had already taken steps to mitigate the effect of the announcement.

However, the benefits of any further cost-cutting exercises are not likely to be felt until next financial year.

Vaughan said that there are no dedicated teams associated with the contract, as it is part of the cheques business, however it was "too early to tell" if there would be any jobs lost as a result of the move.

"There is a lot that still needs working out in terms of exactly what this covers," he said. "In addition, it may be that clients move to other forms of transactional marketing, which we can help with as well, so it may even be good for us."

The government will now consult on the proposals with a further announcement due in the autumn.

Communisis's share price fell 5% on the news to 24p.