Communisis profits up 23% year-on-year in 2012

By Simon Nias, Thursday 07 March 2013

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Communisis has recorded a 23% increase in operating profit before exceptional items to 11.6m on turnover of 229.8m in its preliminary results for the year ended 31 December 2012.

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Communisis chief executive Andy Blundell

Excluding pass-through sales the group increased its operating margin from 5.5% to 6.5% taking it closer to it's double-digit goal, which chief executive Andy Blundell said he was "pretty confident" of achieving in 2016.

This was in spite of a slight decline in IDC margin, from 12.8% to 12.6%, which was counteracted by a 0.7% leap in SPS margin, to 7.6%, which finance director Nigel Howes attributed to better utilisation of the group's production capacity.

"A lot of the new contract activity is focused around the production end [SPS] and the more volume we put through our production facilities the better the utilisation and the higher the margins and that indeed is a key component of our business model, so progressively we’re expecting to see all these margins improving," said Howes.

He added that the minor slip in IDC margins was down to a "change of mix in the underlying services within IDC". "Not every service carries the same margin, so that depends on the mix that is demanded by clients from one period to another," he explained.

Blundell said that the group expected to see further improvement in SPS margin while growing its already double-digit margin IDC division to represent a bigger percentage of group sales than the current 13.1%.

"Clearly we need IDC to grow to be a greater part of the whole and secondly we will progressively take SPS into more specialist areas and will progressively restructure out of lower margin activity so in the round that will get us there," he said.

Blundell highlighted the increase in overseas revenue from 4% of turnover in 2011 to 7% of turnover in 2012 as an important step on the road to achieving the group's overseas growth ambitions.

"We have a twin aspiration of double-digit margins and more than 20% of our business in overseas markets and achieving 7% in the timeframe we have is probably slightly ahead of where we thought we would be as of December last year," he added.

On the business front, Communisis announced a new three-year managed service contract extension with Yorkshire Building Society, which will see it produce all direct mail for YBS in addition to its existing provision of security products.

The group has also been awarded a three-year contract for the production and deployment of "all revenue generating communications" with Thames Waters, following a redesign of the utilities provider's bills, which have been printed on Communisis' HP T400 platform in Liverpool since February 2013.

Another sign-up to the group's white paper solution has come from long-standing client HSBC, with whom Communisis signed a 10 year, £250m BPO contract in 2006. This has now been extended by two years to 2018 with the production of all transactional documents being migrated to the HP T400.

Group turnover rose 10.3% on 2011 to almost £230m, while pre-tax profit increased nearly 63% year-on-year to £6.8m. Communisis share price was 52p at the time of writing, down slightly on yesterday's 52 week high of 56.75 but still some way above the 40p/share price of the group's recent, oversubscribed share issue, which raised £20m for growth capital.

Meanwhile, group commercial director John Wells will step down from the board on 9 May and move to a part-time role.

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