Communisis at a glance

Communisis at a glance What we do Omni-channel Brand communication services For a better customer experience Marketing communications Design/Deploy •...
Author: Stuart Porter
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Communisis at a glance What we do Omni-channel Brand communication services For a better customer experience Marketing communications Design/Deploy • Relevant, engaging and captivating content

Key facts



Fully listed (CMS)



£105m market cap



4.4% dividend yield



2200+ employees (150+ overseas)



51 locations in 16 countries



Blue chip clients in: Financial services

17% Consumer goods

Customer communications Produce • Reliable, easy to understand and efficient documents

4%

41%

7%

Utilities Government & charities

8%

Retail

23%

Other

2

Communisis today – what do we do •

Add value to brand communications



Create and distribute marketing messages and customer communications on behalf of our clients



Work B2B, providing services B2C



Operate through three segments – Design, Produce and Deploy

Communisis Communisis

B2B

Our Ourclients clients

B2C

Their Their customers customers

Services

3

Some of our clients

4

2015 Interim results

Financial highlights Strong growth in profitability, operating margin and earnings per share driven by: • Enduring client relationships • Higher margin services Improved free cash flow and reduced bank debt by: • Targeted investment • Cash control

Dividend increase for the fifth consecutive year, in line with progressive dividend policy

Comparison H1 2015 to H1 2014

£m

As Reported

Constant Currency*

Total revenue

£175m

+3%

+6%

Adjusted operating profit**

£7.2m

+18%

+25%

Adjusted operating margin**

6%

+16%

+20%

Adjusted earnings per share***

2.01p

+15%

+23%

Dividend per share

0.73p

+9%

+9%

Free cash flow

£6m

+£5m

+£5m

Bank debt (improvement)

£32m

-£2m

-£2m

* As reported excluding the translation effect of changes in foreign exchange rates **Before exceptional items and the amortisation of acquired intangibles ***Fully diluted and excluding the after tax effects of exceptional items and the amortisation of acquired intangibles

6

Operational highlights Continued growth •

Integrated agency model developed and launched as PSONA  Life marketing Agency acquired. Insight-led shopper marketing agency



Significant new multi-year contractual relationships secured or retained  AXA UK. Six year term. Incoming and outgoing marketing and customer communications  EE. Two year contract. Marketing communications  Long-standing utility sector client. Five years. Outgoing transactional communications



Overseas expansion  Three new locations (Bucharest, Milan, Warsaw)  New consumer goods clients scaling up the portfolio

Innovation • New digital services platform developed for multi-channel customer messaging successfully used by Nationwide Building Society, as it enabled Apple Pay • Won gold and bronze POPAI awards for innovative point-of-purchase and in-store communications 7

Design

Design – Marketing communications Activities

Metrics

Building an integrated digital

H1 contribution increased from

agency - PSONA launched

£1.6m to £2m, +24%.



Bespoke London office opened

Margin reduced from 13.9% to



New capabilities acquired - Life



Marketing Agency - Insight-led shopper marketing

12.2%.  Full six months revenue from 2014 and early 2015 acquisitions  Recovery in data activities  repositioning in analytics

11%

 broader sector appeal  Synergy realisation  Weighting of certain retail based revenue and contribution to H2 with a

% of group contribution

more evenly spread cost base

9

Design – Any channel, any category Capabilities

Production & data agencies

Creative agencies

10

Direct mail programme to merchants

11

Digital journey to increase engagement

12

Internal communications

13

Produce

Produce – Customer communications Activities

Differentiation

Outgoing

Expertise in:



Personalised direct mail



Personalised cheque books



Personalised statements, billings and

• •

 Document composition

correspondence

 Process integrity

Digital messaging (email/mobile/tablet) –

 Regulatory compliance

new in 2014

 Reliable large scale production

Specialist customer communication consulting services – new in 2014

Incoming •

 IT integration

of personalised communications • Investment in market-leading

Digital capture, distribution and archiving of

technology, a significant barrier to

customer correspondence – new in 2014

entry • Trusted supplier of business-critical communications

% of group contribution

56%

15

Produce - Integrated technology & service excellence Correspondence preference database

Campaign workflow DAM

Rules

Document composition & production workflow

Print

E-mail

Web

SMS

Correspondence archive

16

Produce – Customer communications Trends

• Market growth from new outsourcing contracts  Incoming and outgoing • Market share gains • Digital messaging • Demand for specialist consulting • Migration from paper to digital formats

Metrics H1 contribution increased from £8.7m to £9.7m, +12% Margin improved from 11.2% to 12.5% • New higher margin services  Full six months contribution from incoming mail  Growth in non print including digital messaging and consulting (now 16% of contribution, nil in 2013) • Move to white paper • Process improvement and cost reduction • Better capacity utilisation on restructured base

17

Deploy

Deploy – Marketing communications Activities & capabilities • Brand activation services - sourcing and distributing point of sale marketing collateral across Europe • People, process and technology based service with modest infrastructure costs • Clients – consumer goods brands in the

Metrics H1 contribution increased from £5.6m to £5.8m, +3% Margin improved from 20.7% to 24.1% • Growth in revenues from new

food, drink, personal care, household,

clients and new territories on a

pharmaceutical and technology

constant currency basis

sectors

• Effective sourcing

33%

• Hubs in operation, scale economies on new clients • Euro weakness impacted sterling

% of group contribution

reported result by £(0.4)m

19

Deploy - Our presence Hub Client 1 Client 2 Client 3

20

Deploy – Marketing communications Rapid growth of clients and countries: •

Countries increased from 19 (2014) to 21 (H1

2015 H1 gross revenue by territory

£000

5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0

2015) •

Deploy strategic clients and countries

H1 clients grew from 9

23

21

19

(2014) to 23 (H1 2015)

15

6

6 2012

9

8 2013 Clients

2014

2015

Countries

21

2015 Interim results Summary financials

Summary income statement H1 2015 £m

H1 2014 £m



118.8

116.3



Pass through

55.8

53.0

Total revenue

174.6

169.3

currency basis



17.5

15.9

(10.3)

(9.8)

Adjusted operating profit

7.2

6.1

Amortisation of acquired intangibles

(0.8)

(0.4)

6.4

5.7

Exceptional items

(1.4)

(1.2)

Net finance costs

(1.8)

(1.6)

3.2

2.9

(0.7)

(0.7)

2.5

2.2

2.01p

1.75p

6.0%

5.2%

Central and corporate costs

Profit before tax Tax Profit after tax Adjusted earnings per share Operating margin

Profits weighted toward H2. Full year progress expected



Segmental contribution

Margin improved and toward the double-digit target

Exceptional items include ongoing restructuring costs and acquisition-related fees.



Tax charge at the estimated effective annual rate of 22.9%



Earnings per share increase +8% (+22% on constant currency) 

Focused on bottom line growth

2.10 Pence per share (pps)

Trading

Revenue increased 3% reported, 6% on a constant

Adjusted earnings per share

1.80 1.50 1.20 0.90 0.60 0.30 0.00

H1 2013

H1 2014

H1 2015

23

Margin & dividend

+10% +16%

+16% +0%

24

Summary cash flow & net debt statement H1 2014 £m

EBITDA

12.8

11.3

Working capital increase

(0.6)

(0.2)

Pension contributions

(0.6)

(0.6)

Interest and tax

(0.5)

(1.9)

Exceptional items

(1.7)

(1.9)

Capital expenditure

(3.4)

(5.6)

6.0

1.1

(1.1)

(1.4)

-

(5.8)

Dividends

(2.8)

(2.3)

Other

(0.7)

(0.1)

1.4

(8.5)

Net bank debt

(31.7)

(33.3)

Finance leases

(2.4)

(2.9)

Promissory loan notes

(9.3)

-

(43.4)

(36.2)

Free cash flow Investment in new contracts Acquisitions

Decrease (increase) in bank debt

Net debt



Improved free cash flow due to  Increased profitability  Tight working capital management  A tax repayment  More normal maintenance levels of capital expenditure



Acquisition of Life Marketing Agency  Consideration comprised new shares and twoyear promissory loan notes



Free cash flow improvement trend expected to continue

Free cash flow 5.0

£m

H1 2015 £m

0.0

H1 2013

H1 2014

H1 2015

-5.0

-10.0

25

Bank facilities Bank Debt and Facilities 80 70 60 £m

50 40 30 20 10 0

12M to June 10

12M to June 11

12M to June 12

Period end bank debt





12M to June 13

Average intra period bank debt

12M to June 14

12M to June 15

Total facilities

Bank debt less than 50% of facilities 

£65m Revolving Credit Facility until March 2018



£5m overdraft, renewable annually

Average rolling 12 month bank debt £44.5m 

due to inter-period fluctuations in working capital



Bank debt and average bank debt 1.1x and 1.6x EBITDA



Interest cover 4x

26

Summary balance sheet H1 2015 £m

H1 2014 £m

24.6

24.5

193.8

195.8

5.1

3.4

223.5

223.7

6.8

8.1

66.8

61.3

Trade and tax payables

(95.4)

(85.2)

Pension deficit

(39.2)

(31.4)

Net debt

(43.4)

(36.2)

Net assets

119.1

140.3

Share capital

51.9

49.7

Reserves

67.2

90.6

119.1

140.3

Property, plant and equipment Intangible assets Deferred tax and other Non-current assets Inventories Receivables

Shareholders’ funds



Reduction in net assets reflects a £21m goodwill impairment at December 2014



Intangible assets  Goodwill impairment offset by new intangibles on acquisitions



Pension deficit  Unchanged from December 2014  £19.5m triennial valuation deficit at March 2014  Changes principally driven by fall in gilt/bond yields

27

Outlook Confident outlook for the full year with the prospect of: • • •

Revenue growth Continuing profit improvement Ongoing cash generation and reduction in bank debt

Supported by: • • •

Success in winning and retaining multi-year contracts Growing reputation for delivering brand activation services across Europe Strong pipeline of opportunities

28

Investment case Management team with a record of achievement and strategy for growth •

Increasingly profitable and cash generative business



Continued move into higher margin services



Benefits of operational gearing following investments in market-leading technology and multi-year contracts



Client-led international expansion



Portfolio of blue-chip clients



Differentiated offer and competitive position



Progressive dividend policy

29