Increased outsourcing of corporate communications functions is underpinning earnings growth for Communisis (CMS). The group continues to drive up its market share on the back of big-ticket contract wins, like the six-year deal with Axa UK to provide marketing and communication services - worth between £40m and £50m. The end result is that - despite the weak euro - adjusted operating profits grew by 18 per cent to £7.2m.
The group's core 'produce' business, which provides services ranging from chequebook production to utility bills and bank statements, generated an 11 per cent increase in adjusted operating profits to £9.7m. The business benefited from the first full six-month contribution from incoming customer communication work under a contract with Lloyds Banking. Volumes were eroded faster than expected in chequebooks, although customers were perhaps more reluctant than expected to switch to high-margin digital from paper-based formats.
Revenues for the group's 'deploy' segment, which provides multichannel marketing services, fell 11 per cent. Around half of the related business transactions were euro denominated, and therefore suffered in translation. Communisis opened in three new locations - Bucharest, Milan and Warsaw - gaining new clients in the drinks, food and pharmaceutical sectors. This will help offset a fall in demand from lower-margin print sourcing clients in the UK.
Broker Liberum expects adjusted EPS of 5.7p this year, up from 4.6p in 2014.
COMMUNISIS (CMS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 49p | MARKET VALUE: | £102m | |
| TOUCH: | 49-50p | 12-MONTH HIGH: | 70p | LOW: 45p |
| DIVIDEND YIELD: | 4.2% | PE RATIO: | NA | |
| NET ASSET VALUE: | 57p* | NET DEBT: | 36% | |
| Half-year to 30 June | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 169 | 2.9 | 1.1 | 0.67 |
| 2015 | 175 | 3.2 | 1.2 | 0.73 |
| % change | +3 | +12 | +8 | +9 |
Ex-div: 10 Sep Payment: 8 Oct *Includes intangible assets of £194m, or 93p a share | ||||
