Following a busy a year, in which the business restructured into a more simplified model comprising two divisions – Brand Deployment and Customer Experience – Communisis reported a 15% increase in adjusted profit before tax to £16.7m (2015: £14.5m).
Revenues increased marginally to £361.9m (2015: £354.2m). The company reduced net debt by £9m to £30.4m, while adjusted earnings per share was up 17% at 6.07p (2015: 5.18p). Free cash generation also improved, increasing to £12.9m (2015 £12m).
The board confirmed a full-year dividend per share of 2.42p, up 10%.
“We are really proud of the 2016 results, they are strong. It’s a good day for Communisis,” said Communisis chief executive Andy Blundell. He was particularly proud of the debt reduction, which reflected real progress in the company, he said.
Blundell highlighted the company’s growth in international revenues during the year, which increased from 18% to 26% of total group sales and said that it was not inconceivable that number could grow to 50%.
“Seven years ago this business didn’t have any sales outside the UK and as I sit here talking to you today we have 26% of turnover outside the UK and it is growing rapidly.
"We have people on the ground from Paris across to Istanbul and Dubai and we intend to push further east and south in Brand Deployment. The important thing is that the model is de-risked because we go to territories with our clients on a sponsored basis,” he said.
Alongside its results the business announced it was taking its first step into the US with a small office in New York, due to go live in June, with existing client LinkedIn for whom the company provides content marketing services.
“It’s a rapidly growing relationship. It gives us the opportunity to expand into other areas of content marketing and other areas of brand deployment given the US is the biggest market globally for brand deployment. It’s an interesting and exciting move for us,” Blundell said.
During the year Communisis secured a number of major multi-year contracts including a six-year customer fulfillment agreement with Liverpool Victoria Friendly Society in March, a five-year contract with HMRC for all outbound customer communication due to start this summer, a three-year Sony customer service contract and three-year EMEA marketing print management agreement with a global healthcare provider.
Blundell said the HMRC contract was a major move for the business back into the public sector and the new business won in 2016 gave the firm “great visability going forward” due to the length of the contracts.
In the divisions the new Customer Experience segment performed better than expected although revenues slipped to £169.3m (2015: £180.2m), reflecting the shifting balance from print to digital, and the reduction of £14m of non-margin-generating 'pass-through' revenue. Adjusted profit from operations was £22.2m (£23.6m)
Brand Deployment, meanwhile performed well with growth revenue including pass-through increasing to £176.9m (2015: £144.4m) and was positively impacted by favourable exchange rates and a full year of trading in additional countries. The company has 50 international clients on its books now, compared to 29 last year. Adjusted operating profit was up 15% to £16.2m.
The group’s pension deficit ballooned from £41.1m to £55m during the year due to falling corporate bond yields. At the end of 2016 the company took steps to continue its dividend payments in the face of the deficit and Blundell said the scheme was currently undergoing its triennial valuation this month, which determines the level of cash contributions, the last having been carried out in 2014 when the deficit was £19.5m.
He said: “The important thing is not the size of the deficit, it’s whether we are taking an established approach to meet our obligations – yes we are – and also what is the likely outcome.
“We think that the corporate contribution will increase somewhat and we think the outcome will fall well within the forecast increase in our free cash. We can afford it. Bond yields are at an all time low so the long-term trend will be upward and if that’s the case it will erode the deficit.”
Elsewhere in the business, after nine years as chair of Communisis Peter Hickson announced his retirement in February and the company appointed David Gilbertson as non-executive director and chairman designate, set to assume the role of chairman on 1 May following the AGM.
Looking to the year ahead Blundell said being the most efficient operator and focusing on core strengths made Communisis the market leader, a position he intended to keep.
“We will move further along the technology axis and there will be investment behind it. We will extend our reach geographic reach even further and we are happy with the two-division structure.
“Our 2017 year has started in line with expectations – so far so good – and we are positive for the remainder of the year and for growth to continue,” Blundell said.
Communisis share price closed on a 52-week high yesterday ahead of this morning’s announcement. The price dropped to 48.7p in early morning trading but had climbed to 52.2p at the time of writing.