Administrators from Interpath Advisory were appointed at Communisis Ltd, Communisis UK Ltd, Communisis Digital Ltd and Communisis Data Intelligence Ltd on 28 December.
Immediately afterwards, the Communisis Brand Deployment business and certain assets of the Customer Experience [printed communications] business were sold to Paragon Customer Communications, which trades as Paragon.
This included the agencies Twelve and Editions and point-of-purchase specialist Vox Group.
The Paragon print deal is primarily for the delivery of services to Lloyds Banking Group and will involve Paragon managing over 100 million communications to and from the bank’s customers annually.
The Brand Deployment wing serves a number of major brands including Procter & Gamble, and operates internationally in more than 20 countries.
Paragon CEO Jeremy Walters commented: “I’m pleased that we’ve been able to close this deal. We’re now looking forward to releasing the potential that’s been created and to giving stability and a clear path forward to our impressive new colleagues and clients.”
Interpath said that 581 jobs had been saved via the Paragon sale, while 25 employees had transferred to new suppliers over the past two months as other customers moved their work out of Communisis.
However, Interpath also said that certain operations at the Communisis facilities in Liverpool, Leeds and Cramlington would cease, and 638 employees have been made redundant as a result.
Interpath said the Communisis Customer Experience business – essentially printed communications – had been hit by challenging trading conditions, declining volumes and rising costs.
The digital transformation programme agreed with Indian outsourcer Tech Mahindra in 2022, which sought to improve the group’s legacy tech platforms “proved to be more complex and costly than originally forecast”.
Complex deal
Back in October the Leeds-headquartered group had confirmed it was in "advanced talks” with more than one potential buyer.
However, the situation dragged on, and Communisis appeared increasingly strapped for cash. Major customers including Lloyds stumped up for a multimillion pound ‘Interim Funding Agreement’ to help keep the business afloat, while a raft of other customers jumped ship including HMRC and Nationwide.
Even despite that Lloyds, and other Communisis customers including MBNA, had to steer customers away from paper statements due to the issues at Communisis.
Stephen Absolom, managing director at Interpath Advisory and joint administrator, said: “First and foremost, we recognise that this will come as a devastating blow to those Communisis workers who have been impacted by redundancy.
“Our immediate priority will be to work with all affected employees to ensure that the full range of support is available to them.
“We will be making contact with Communisis’ key competitors, customers and other companies who work in this space to enquire around possible employment opportunities for staff. We will collate all relevant information, including contact details such as telephone numbers and hotlines, and we will also be speaking as a matter of urgency with the Job Centre Rapid Response Unit.
“We are also liaising with the Insolvency Service in relation to the timing of redundancy payments via the Redundancy Payments Service.”
A flurry of LinkedIn posts from former employees seeking new opportunities have appeared in recent hours.
Transactional print in decline
The most recent accounts for Communisis, for 2021, detailed a 20% decline at its transactional printing business due to the ongoing switch to digital communications for items such as statements.
Specialist print production at Communisis includes statements, regulatory communications, direct mail and chequebooks. It had produced around 700m information packs and 1.3bn pages per year, to every household in the country.
Communisis had turnover of just under £256m and employed more than 1,000 people in the UK, and around 200 overseas.
Brand deployment had grown to 52% of revenues.
Despite a 6% uplift in sales at its brand deployment sourcing wing, the bottom line loss attributable to the shareholders of then-parent company OSG Holdings was nearly £25m, while the equivalent loss the prior year had been £39.8m.
Interest paid on a £132.4m loan from the parent company was nearly £9m.
OSG had acquired Communisis in 2018 in a near-£154m deal. At the time Communisis had sales of £376m.
US-headquartered OSG Holdings went into Chapter 11 bankruptcy protection for the second time in 14 months in October and said it would cease to be the owner of Communisis when it completed that process.
In early December OSG emerged from Chapter 11, and said it had “exited its UK business”. However, the Communisis situation remained in limbo, with American restructuring expert Michael DiRende stepping in to replace OSG as the controlling party.
Complicating factors impacting the current situation included the Communisis legacy pension fund, which had a £20.8m deficit in the 2021 accounts.
Back in 2012 a rental stream on one of the group’s freehold properties was secured via a Central Asset Reserve Arrangement to help address the pension deficit.
In 2022, Communisis expected to pay £4.98m into the legacy pension scheme, of which £1.15m was rent, and £1.23m in admin costs including the Pension Protection Fund Levy.
There was no information regarding the pension situation at the time of writing.
However, Interpath Advisory managing director and joint administrator James Clark commented: “The complexity of the Communisis business means that this transaction is the culmination of many months of hard work from a wide range of stakeholders. We’d like to thank each of them, in particular the Communisis workforce who have maintained service levels to customers under extremely challenging circumstances.
“In addition, the support and efforts of the Communisis’ customers, suppliers, as well as the Pensions Trustees and regulatory bodies, have ultimately enabled this agreement with Paragon to be reached.”
