By Hannah Jordan, Thursday 08 March 2018
In the 12 months to 31 December 2017 Communisis reported increases in revenues and profits with a significant reduction in net debt, whilst securing two major long-term contracts.
In its preliminary results, out today, the customer communications and marketing services group reported revenues up 4% to £375.8m (2016 £361.9m), which it said was driven primarily by expansion of international operations. Overseas revenues now account for 30% of group revenues, up 4% on 2016.
Adjusted operating profit for the group increased from £19.5m in 2016 to £21.2m while adjusted pre-tax profits were up 3% to £17.2m. The group continued to drive down net debt in the year, with a reduction of £6.1m to £24.3m.
Adjusted earnings per share (EPS) grew 5% to 6.4p while the proposed final divided for the year is up 10% on last year at 1.77p.
In a separate announcement, the group announced it has secured the contract renewal for the issuance of the UK’s TV Licensing communications and transactional mailing for the BBC, through Proximity London, following a competitive process. A major win for the business going forward, the contract has an initial renewal term of six years with an option to extend for a further six.
During the year the business also secured a further five-year contract for its transactional communications for HSBC as well as winning a new five-year contract with the bank for marketing communications, a contract it lost to St Ives in 2011.
Alongside its financial results, Communisis also announced a new three-year growth plan (2018-2020) that will focus on delivering increased shareholder returns through improved value to clients, EPS growth at 5-10% compound annual growth rate, and there will be a strong focus on growing margins with related pricing initiatives.
The Value Enhancement Programme (VEP) 2020 will focus on three key strategies: Digital First, Global Reach and Empowered Organisation.
Under the Digital First theme, the group will make digital central to its transactional business by moving forward with its existing activities in the area and partnering with technology partners to support this goal.
“It’s about creating even more value for our clients and returning that to our shareholders,” said chief executive Andy Blundell. “The priority is further increasing our underlying profitability and in a sustainable way. We’ve done a lot of work to make our financials more resilient and in terms of margin that is now the priority.
“For our clients, it will mean a richer communication for financial services through digital and working with us to navigate the horrors of regulation such as GDPR and for FMCG clients a faster speed to market and being able to execute marketing campaigns in a quicker and more direct way with more data flowing both ways and more measurement in terms of marketing ROI."
Blundell said GDPR posed a great challenge for the sector and that as a result of such influences he believed that there would be further consolidation across the industry in 2018.
“The VEP is a new approach to pure marketing, looking at our pipeline, working out our prospects for the future and if they are appropriate for this kind of plan, which has heavy emphasis on commercial aspects, pricing and margin.”
Blundell said expected rates of print decline were variable across applications. “The underlying decline in cheque consumption is a headline figure of around 8-10% but it is very varied and demographic driven with consumers but people forget this is driven by business users who write a lot more cheques.
“If we look at direct statutory mail we’ve had a fantastic year, while transactional is a very mixed picture and does show decline but there are plenty of opportunities with competitors losing market share to us and examples such as our work with HMRC have poured a new load of work into the tank.”
Its Global Reach activities will focus on supporting and further growing the group’s international hub network, which already includes Paris, Madrid, Rome, Warsaw, and Frankfurt, Istanbul, Dubai and New York - sales in overseas markets have grown in the last year from 26% to 30%.
In today’s announcement, the group said it intended to significantly increase its USA presence, following strong results from its New York office and also announced the opening next month of a Hong Kong office. Blundell said he expected the business to become progressively more international and push its overseas business beyond 30% of group revenues.
Under the Empowered Organisation theme, the business will focus on pushing new marketing and commercial initiatives and focus on where it can best deliver value.
“We have some fantastic people in the organisation and we want to devolve some responsibilities to our local site and country managers to allow them to be more entrepreneurial and push the profitability of their particular sites,” Blundell said.
In the group’s divisions Customer Experience reported adjusted operating profit up £2.5m to £22.4m on revenues of £189.3m (2016: £185), while Brand Deployment increased adjusted operating profit by £300,000 to £16.5m on revenues of £186.6m (2016: £176.9m).
Gains for Customer Experience were driven by new business wins and a strong year for both digital and traditional direct mail, which the business said continued to decline but at lower levels than anticipated.
Brand Deployment, meanwhile, was boosted by Managed Services enjoying strong first year results from Germany, Poland, France, Spain, Italy and Dubai. The modest operating profit resulted from investment in developing international presence and moving forward the group said it would focus on increasing margin through operational efficiencies and integration of new client wins.
Looking forward Blundell said the VEP was refreshing and clear. “These aren’t things that have been dreamt up, we are just giving these some real focus. The opportunity is how we succeed in delivering against the plan and I am pretty confident as we move forward.”
Communisis share price was up 3.74% in morning trading, following the announcements, to 66.6p (52 week high: 73p, low: 46p).