In its preliminary results Communisis posted sales up 18% to £270.1m for the year to 31 December 2013, fuelled by significant new contract wins such as the major ten-year outsourcing deal with Lloyds Banking Group and a nine-year transactional mailing deal with Nationwide.
Operating profits, prior to exceptionals, jumped 16% to £13.3m and pre-tax profits were up 26% to £4.9m.
Chief executive Andy Blundell told PrintWeek he was “very proud” of the group’s performance. “This is our fourth consecutive year of growth. We set out our promises clearly and we’ve delivered on them, and we want to carry on doing that.”
Blundell was also upbeat about future prospects for the firm: “There is more optimism in the UK and according to the latest reports marketing budgets are up for this year. I feel the business is now in a good place, in terms of scale and our trusted partner status, to deliver more growth in 2014.”
He said he was very pleased with the progress of content marketing specialist Editions Publishing, which Communisis acquired six months ago, and remained alert to further M&A opportunities should they arise.
The firm is set to take its total spend on HP T-series inkjet presses to £30m with the addition of a further three presses this year.
A second T400 has just been installed at its Copley production site near Halifax, acquired as part of the Lloyds TSB deal, and an additional T300 is likely to be installed at its existing Speke transactional print plant.
The new presses will mean that Halifax and Speke will effectively replicate each plant’s facilities with two T400s and a T300 at each site. It also has two T300s at its Leeds facility.
Leeds has now been restructured to focus on high-speed colour for specialist direct mail, statutory communications and transactional print.
“We are moving away from the commodity end of DM. If clients need that, we can outsource it,” Blundell added.
Although Communisis’ net debt increased to £25.7m from £20m, this was lower than market expectations.
Exceptional costs of £3.5m, of which £1.75m was still to be paid at the year-end, included the changes at Leeds and relocation of its cheque printing operations.
On a segmental basis, sales in its ‘design’ operation rose 18.75% to £20.9m, ‘produce’ grew 5.5% to £117.3m, and ‘deploy’ increased 11.5% from £50.1m to £55.9m.
’Pass-through’ sales for managed services clients grew from £51m to £76m.
Profits rose in both design and deploy. However, operating profits in produce, which includes print production, fell by almost 9% from £21.3m to £19.3m, due to a decline in high-margin cheque printing work and the start-up costs associated with new contracts.
“The volume erosion on the cheques side has been faster than historical averages – whether that will continue we don’t know,” explained finance director Nigel Howes. “And we have been taking on some big new contracts, which have complex conversion processes and initial transition costs. So in the early stages we have some relative inefficiencies.”
Communisis’ working capital requirements have also increased, resulting in free cash outflow of £5.6m (2012 inflow: £6.6m). It has put in place new commercial arrangement with some of its clients to “to help mitigate the additional working capital demands of the rapidly expanding managed services business”.
Howes added: “There’s an inevitable demand on working capital which is a natural reflection of growth in the business. We are constantly looking at managing that – it’s an area of relentless focus.”
He said the group continued to look at “innovative ways” to minimise its pension exposure. Its scheme had a deficit of £27.7m at the year-end, with the triennial actuarial valuation due to take place at the end of this month.
Communisis increased its dividend to shareholders by 9% to 1.8p a share.
The share price, which hit a 52-week high of 74.25p last month, fell 0.5p to 69.5p in early trading.
