The introduction of General Data Protection Regulation (GDPR) earlier this year has led to a reduction in the volume of marketing material sent out to households – welcome news for most of us, but it led to a slowdown in the direct mail business at Communisis (CMS). The impact of the changes will be felt most keenly in the second half of the year, though management said much of the slowdown was due to companies simply getting to grips with the new rules and it is confident growth will return thereafter.
Despite the regulatory change, trading held up well, though that isn’t immediately obvious in reported half-year earnings. However, the 2017 returns were flattered by a reassessment of an old debt provision, which boosted comparative first-half profits by £1.1m. On an underlying basis, operating profits were up 7 per cent.
The group’s future lies online, and to reflect that it launched its ‘value enhancement programme’ strategy in March. As part of this, it is moving further into digital communications and expanding its business globally. Progress is being made on both fronts, but slowly. Digital channels now account for 14 per cent of outbound communications, from 9 per cent last year. Overseas revenues increased just one percentage point to 34 per cent of total sales, but a major contract expansion is expected to lead to a boost in the second half
Analyst Liberum is expecting pre-tax profit of £18.3m, giving EPS of 6.8p in 2018 (from £17.2m and 6.4p in 2017).
| COMMUNISIS (CMS) | ||||
| ORD PRICE: | 51p | MARKET VALUE: | £107m | |
| TOUCH: | 51-52.8p | 12-MONTH HIGH: | 73p | LOW: 47p |
| DIVIDEND YIELD: | 5.3% | PE RATIO: | 9 | |
| NET ASSET VALUE: | 66p* | NET DEBT: | 17% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 173 | 4.8 | 1.76 | 0.89 |
| 2018 | 189 | 4.0 | 1.52 | 0.93 |
| % change | +9 | -16 | -14 | +4 |
| Ex-div: | 13 Sep | |||
| Payment: | 12 Oct | |||
| *Includes intangible assets of £178m, or 85p a share | ||||
