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
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Deploy - Our presence Hub Client 1 Client 2 Client 3
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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
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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