communisis preliminary results presentation 2016...simplified two divisional structure outsourcing...
TRANSCRIPT
![Page 1: Communisis Preliminary Results Presentation 2016...Simplified two divisional structure Outsourcing non core activities Operational efficiency programmes in all main manufacturing locations](https://reader034.vdocuments.us/reader034/viewer/2022042207/5ea987b3a455b20304764d7e/html5/thumbnails/1.jpg)
PRELIMINARY RESULTS 2016 PRESENTATION
ANDY BLUNDELL, CHIEF EXECUTIVE
MARK STONER, FINANCE DIRECTOR
MARCH 2017
![Page 2: Communisis Preliminary Results Presentation 2016...Simplified two divisional structure Outsourcing non core activities Operational efficiency programmes in all main manufacturing locations](https://reader034.vdocuments.us/reader034/viewer/2022042207/5ea987b3a455b20304764d7e/html5/thumbnails/2.jpg)
2
FINANCIAL
Continued growth in profitability and adjusted EPS +17%
Dividend increase by 10%
Improved free cash flow reducing net debt by £9m
OPERATIONAL
Four major new contract wins
Expansion in International sales to 26% of Group revenue
Simplified Group structure
2016 HIGHLIGHTS
![Page 3: Communisis Preliminary Results Presentation 2016...Simplified two divisional structure Outsourcing non core activities Operational efficiency programmes in all main manufacturing locations](https://reader034.vdocuments.us/reader034/viewer/2022042207/5ea987b3a455b20304764d7e/html5/thumbnails/3.jpg)
3
COMMUNISIS IS AN INTEGRATED MARKETING SERVICES
COMPANY WHICH IMPROVES COMMUNICATION
BETWEEN BRANDS AND THEIR CUSTOMERS.
WE CREATE ENGAGING CONTENT AND DELIVER IT
ACROSS MULTIPLE CUSTOMER TOUCH-POINTS;
IN DIGITAL, BROADCAST AND PRINT CHANNELS.
![Page 4: Communisis Preliminary Results Presentation 2016...Simplified two divisional structure Outsourcing non core activities Operational efficiency programmes in all main manufacturing locations](https://reader034.vdocuments.us/reader034/viewer/2022042207/5ea987b3a455b20304764d7e/html5/thumbnails/4.jpg)
OUR CLIENTS ARE FACING UNPRECEDENTED CHANGE –REGULATORY, TECHNOLOGY AND CONSUMER BEHAVIOUR.
4
OUR PURPOSE IS TO HELP THEM STAY AHEAD OF THESE CHALLENGES
![Page 5: Communisis Preliminary Results Presentation 2016...Simplified two divisional structure Outsourcing non core activities Operational efficiency programmes in all main manufacturing locations](https://reader034.vdocuments.us/reader034/viewer/2022042207/5ea987b3a455b20304764d7e/html5/thumbnails/5.jpg)
HOW WE DO THIS 5
CUSTOMER EXPERIENCE BRAND DEPLOYMENT
‘ONE TO ONE’ ‘ONE TO MANY’
Mission critical, personalised communications
to known individuals
Brand activation and retail communication
Integrated agency services: customer
engagement, corporate communications,
specialised content, transactional and
regulatory communications
Shopper marketing and brand activation
campaigns, marketing supply chain
implementation, fulfilment and logistics and
POS procurement
![Page 6: Communisis Preliminary Results Presentation 2016...Simplified two divisional structure Outsourcing non core activities Operational efficiency programmes in all main manufacturing locations](https://reader034.vdocuments.us/reader034/viewer/2022042207/5ea987b3a455b20304764d7e/html5/thumbnails/6.jpg)
CUSTOMER EXPERIENCE 6
VERTICALS Banking, Utilities, Insurance
MARKETS UK – 2016 revenue £185m
REVENUE VISIBILITY HIGH
Multi year contracts
Blue chip clients
CAPITAL INTENSITY MEDIUM
Fully invested print operations
Leased leading edge print equipment
Increasing technology and people
GROWTH STRATEGY LEADERSHIP
Marketing leadership
Invest in higher margin areas
![Page 7: Communisis Preliminary Results Presentation 2016...Simplified two divisional structure Outsourcing non core activities Operational efficiency programmes in all main manufacturing locations](https://reader034.vdocuments.us/reader034/viewer/2022042207/5ea987b3a455b20304764d7e/html5/thumbnails/7.jpg)
7
CUSTOMER EXPERIENCE7
![Page 8: Communisis Preliminary Results Presentation 2016...Simplified two divisional structure Outsourcing non core activities Operational efficiency programmes in all main manufacturing locations](https://reader034.vdocuments.us/reader034/viewer/2022042207/5ea987b3a455b20304764d7e/html5/thumbnails/8.jpg)
8
VERTICALS FMCG, Retail
MARKETS International – 2016 revenue £177m
REVENUE VISIBILITY MEDIUM
Framework agreements
Sticky contracts
CAPITAL INTENSITY LOW
Sourcing model
Technology and people
GROWTH STRATEGY ORGANIC
New clients and new territories
Upsell existing Clients
BRAND DEPLOYMENT
![Page 9: Communisis Preliminary Results Presentation 2016...Simplified two divisional structure Outsourcing non core activities Operational efficiency programmes in all main manufacturing locations](https://reader034.vdocuments.us/reader034/viewer/2022042207/5ea987b3a455b20304764d7e/html5/thumbnails/9.jpg)
9BRAND DEPLOYMENT
![Page 10: Communisis Preliminary Results Presentation 2016...Simplified two divisional structure Outsourcing non core activities Operational efficiency programmes in all main manufacturing locations](https://reader034.vdocuments.us/reader034/viewer/2022042207/5ea987b3a455b20304764d7e/html5/thumbnails/10.jpg)
SOME OF OUR CLIENTS
Customer Experience Brand Deployment
![Page 11: Communisis Preliminary Results Presentation 2016...Simplified two divisional structure Outsourcing non core activities Operational efficiency programmes in all main manufacturing locations](https://reader034.vdocuments.us/reader034/viewer/2022042207/5ea987b3a455b20304764d7e/html5/thumbnails/11.jpg)
11
MARKET DYNAMICS
THE RISING IMPORTANCE OF CUSTOMER EXPERIENCE TO MOST CLIENTS
THE DEMAND FOR RELEVANT CONTENT AND PRECISE COMMUNICATION
DIGITAL IN THE OMNI-CHANNEL MIX
EXTERNAL INFLUENCES – REGULATION AND DE-REGULATION
OUTSOURCING TRENDS
INTERNATIONAL CAMPAIGNS AND CONTROL
![Page 12: Communisis Preliminary Results Presentation 2016...Simplified two divisional structure Outsourcing non core activities Operational efficiency programmes in all main manufacturing locations](https://reader034.vdocuments.us/reader034/viewer/2022042207/5ea987b3a455b20304764d7e/html5/thumbnails/12.jpg)
12
41%
59%
2016 CONTRIBUTION SPLIT
35%
65%
2016 REVENUE SPLIT
CONTINUED TRANSFORMATION – PRINT TO SERVICES
39%
61%
2015 REVENUE SPLIT
45%
55%
2015 CONTRIBUTION SPLIT
DIRECT PRINT MANUFACTURE
OUTSOURCED SERVICES AND DIGITAL
![Page 13: Communisis Preliminary Results Presentation 2016...Simplified two divisional structure Outsourcing non core activities Operational efficiency programmes in all main manufacturing locations](https://reader034.vdocuments.us/reader034/viewer/2022042207/5ea987b3a455b20304764d7e/html5/thumbnails/13.jpg)
13SECTOR ANALYSIS
27%
40%
7%
8%
3%
15%
REVENUE BY SECTOR 2015
FMCG / Retail
Banking
Public sector
Utilities
Telecomms
Other
35%
35%
7%
3%3%
17%
REVENUE BY SECTOR 2016
FMCG / Retail
Banking
Public sector
Utilities
Telecomms
Other
![Page 14: Communisis Preliminary Results Presentation 2016...Simplified two divisional structure Outsourcing non core activities Operational efficiency programmes in all main manufacturing locations](https://reader034.vdocuments.us/reader034/viewer/2022042207/5ea987b3a455b20304764d7e/html5/thumbnails/14.jpg)
14VALUE CREATION
Growth
People Efficiency
Value
HOW WE CREATE VALUE FOR STAKEHOLDERS
![Page 15: Communisis Preliminary Results Presentation 2016...Simplified two divisional structure Outsourcing non core activities Operational efficiency programmes in all main manufacturing locations](https://reader034.vdocuments.us/reader034/viewer/2022042207/5ea987b3a455b20304764d7e/html5/thumbnails/15.jpg)
GROWTH 15
6 year contract with LV=(Liverpool Victoria Friendly Society) for customer fulfilment services in UK
5 year contract with HMRC for all outbound customer communications
3 year contract with a global healthcare client across EMEA
3 year contract with Sony Europe for a range of customer communication services
![Page 16: Communisis Preliminary Results Presentation 2016...Simplified two divisional structure Outsourcing non core activities Operational efficiency programmes in all main manufacturing locations](https://reader034.vdocuments.us/reader034/viewer/2022042207/5ea987b3a455b20304764d7e/html5/thumbnails/16.jpg)
INTERNATIONAL GROWTH 16
INTERNATIONAL REVENUE
AS A % OF TOTAL REVENUE
48.9
66.5 64.4
95.8
26%
0
10
20
30
40
50
60
70
80
90
100
2013 2014 2015 2016
£m
18%
![Page 17: Communisis Preliminary Results Presentation 2016...Simplified two divisional structure Outsourcing non core activities Operational efficiency programmes in all main manufacturing locations](https://reader034.vdocuments.us/reader034/viewer/2022042207/5ea987b3a455b20304764d7e/html5/thumbnails/17.jpg)
1717
COST OPTIMISATION
Simplified two divisional structure
Outsourcing non core activities
Operational efficiency programmes in all main
manufacturing locations
Headcount reduced in year by 8%
EFFICIENCY
![Page 18: Communisis Preliminary Results Presentation 2016...Simplified two divisional structure Outsourcing non core activities Operational efficiency programmes in all main manufacturing locations](https://reader034.vdocuments.us/reader034/viewer/2022042207/5ea987b3a455b20304764d7e/html5/thumbnails/18.jpg)
PEOPLE 18
ATTRACT AND DEVELOP THE BEST
PEOPLE
Implemented best practice recruitment
tools with Randstad Sourceright
Continued investment in learning and
development
Expanded apprenticeship programme
![Page 19: Communisis Preliminary Results Presentation 2016...Simplified two divisional structure Outsourcing non core activities Operational efficiency programmes in all main manufacturing locations](https://reader034.vdocuments.us/reader034/viewer/2022042207/5ea987b3a455b20304764d7e/html5/thumbnails/19.jpg)
19
FINANCIAL OVERVIEW
![Page 20: Communisis Preliminary Results Presentation 2016...Simplified two divisional structure Outsourcing non core activities Operational efficiency programmes in all main manufacturing locations](https://reader034.vdocuments.us/reader034/viewer/2022042207/5ea987b3a455b20304764d7e/html5/thumbnails/20.jpg)
20
Continued growth in profitability
and adjusted EPS
Dividend increased by 10%
Improved free cash flow reducing
net debt by £9m
FINANCIAL HIGHLIGHTS
COMPARISON FY 2016TO FY 2015 £M
AS REPORTED
CONSTANT CURRENCY
Total revenue £362m +2% 0%
Adjusted operating profit £19.5m +6% +2%
Adjusted profit before tax £16.7m +15% +9%
Adjusted earnings per share 6.07p +17% +10%
Final dividend per share 1.61p +10% +10%
Free cash flow £12.9m +7% -
Net debt £30.4m (23)% -
![Page 21: Communisis Preliminary Results Presentation 2016...Simplified two divisional structure Outsourcing non core activities Operational efficiency programmes in all main manufacturing locations](https://reader034.vdocuments.us/reader034/viewer/2022042207/5ea987b3a455b20304764d7e/html5/thumbnails/21.jpg)
21
Growing revenue base, 26% international
Profitability growth +70% in 5 years
Adjusted EPS on growth trajectory, following
equity raise in 2013
DELIVERING REVENUE AND EARNINGS GROWTH
230.0
270.0
343.0 354.0 362.0
0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
400.0
2012 2013 2014 2015 2016
GROSS REVENUE
4.51
4.19
4.62
5.18
6.07
3
3.5
4
4.5
5
5.5
6
6.5
2012 2013 2014 2015 2016
ADJUSTED EARNINGS PER SHARE (EPS)
£m
£m
Pe
nc
e p
er
sha
re (
pp
s)
11.513.3
16.0
18.319.5
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
22.0
24.0
2012 2013 2014 2015 2016
ADJUSTED OPERATING PROFIT
![Page 22: Communisis Preliminary Results Presentation 2016...Simplified two divisional structure Outsourcing non core activities Operational efficiency programmes in all main manufacturing locations](https://reader034.vdocuments.us/reader034/viewer/2022042207/5ea987b3a455b20304764d7e/html5/thumbnails/22.jpg)
22
Increasingly cash generative
Net debt reduced by £9m
Dividend increased by 10% pa
Net debt at 1x EBITDA at Dec ’16
DELIVERING DEBT REDUCTION AND DIVIDEND GROWTH
6.6
-5.6
6.0
12.012.9
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
*2012 2013 2014 2015 2016
FREE CASH FLOW
£m
1.651.80
2.002.20
2.42
0.00
0.50
1.00
1.50
2.00
2.50
3.00
2012 2013 2014 2015 2016
DIVIDEND GROWTH
Pe
nc
e p
er
sha
re (
pp
s)
-
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
2012 2013 2014 2015 2016
BANK DEBT AND FACILITIES (£m)
Period end bank debt Average intra period bank debt
Total facilities
![Page 23: Communisis Preliminary Results Presentation 2016...Simplified two divisional structure Outsourcing non core activities Operational efficiency programmes in all main manufacturing locations](https://reader034.vdocuments.us/reader034/viewer/2022042207/5ea987b3a455b20304764d7e/html5/thumbnails/23.jpg)
23
Revenue driven by International growth in
Brand Deployment, offset by lower print
volumes in Customer Experience
Adjusted Operating Profit +6%
Exchange rate benefit of £0.9m
Exceptional items related to outsource of
non core activities and efficiency
improvements
Effective tax rate of 23%
Adjusted EPS +17%
SUMMARY INCOME STATEMENT
FY 2016£M
FY 2015£M
GROSS REVENUE 362 354
Customer Experience 22.2 23.6
Brand Deployment 16.2 14.1
Central Costs (13.3) (13.0)
Corporate Costs (5.6) (6.4)
Adjusted operating profit 19.5 18.3
Net finance costs (2.8) (3.8)
Adjusted profit before tax 16.7 14.5
Amortisation of acquired intangibles (0.8) (1.2)
Exceptional items (4.3) 4.0
Statutory profit before tax 11.6 17.3
Tax (3.0) (2.8)
Profit after tax 8.6 14.5
Basic EPS (p) 4.12 6.98
Adjusted EPS fully diluted (p) 6.07 5.18
![Page 24: Communisis Preliminary Results Presentation 2016...Simplified two divisional structure Outsourcing non core activities Operational efficiency programmes in all main manufacturing locations](https://reader034.vdocuments.us/reader034/viewer/2022042207/5ea987b3a455b20304764d7e/html5/thumbnails/24.jpg)
SEGMENTAL OVERVIEW
CUSTOMER EXPERIENCE 2016 2015 VARIANCE
Gross Revenue £185m £210m (12)%Print volume erosion and reduction of postal pass through
offset by higher service revenues
Operating profit * £22.2m £23.6m (6)%Transactional and service improved performance, offset by
Agency reduction(marketing budgets and margin pressure)
Operating Margin * 12.0% 11.2% +0.8% Larger proportion of higher margin services
* Adjusted, pre central and corporate costs
BRAND DEPLOYMENT 2016 2015 VARIANCE
Gross Revenue £177m £144m +23%
Continuing growth through additional territories (Dubai,
Poland, Romania), additional clients through existing
network, exchange rate benefit
Operating profit * £16.2m £14.1m +15% Recovery of Shopper, exchange rate benefit
Operating Margin * 9.2% 9.8% (0.6)% Service mix and entry costs
24
![Page 25: Communisis Preliminary Results Presentation 2016...Simplified two divisional structure Outsourcing non core activities Operational efficiency programmes in all main manufacturing locations](https://reader034.vdocuments.us/reader034/viewer/2022042207/5ea987b3a455b20304764d7e/html5/thumbnails/25.jpg)
25
• £9M REDUCTION IN NET DEBT TO £30M
Reduced levels of capital expenditure
Higher dividends
Foreign exchange benefit £2m
• DIVIDENDS INCREASED 10%, REPRESENTING
40% OF FREE CASH FLOW
• BANK FACILITIES DUE FOR RENEWAL MARCH
‘18, COVENANTS REMAIN WELL COVERED
• £9.3M PROMISSORY LOAN NOTES REPAID
DURING JANUARY 2017
SUMMARY CASH FLOW AND NET DEBT
2016
£M
2015
£M
VARIANCE
£M
ADJUSTED EBITDA 29.9 29.3 0.6
Working capital increase (0.5) 0.2 (0.7)
Pension contributions (2.8) (2.9) 0.1
Interest and tax (4.3) (3.7) (0.6)
Exceptional items (3.7) (2.1) (1.6)
Capital expenditure (5.7) (8.8) 3.1
Free cash flow 12.9 12.0 0.9
Investment in new contracts (1.2) (2.2) 1.0
Dividends (4.8) (4.3) (0.5)
Other 1.7 (0.3) 2.0
Decrease in bank debt 8.6 5.2 3.4
Net bank debt (19.5) (28.0) 9.5
Finance leases (1.6) (2.1) 0.5
Promissory loan notes (9.3) (9.3) -
Net debt (30.4) (39.4) 9.0
![Page 26: Communisis Preliminary Results Presentation 2016...Simplified two divisional structure Outsourcing non core activities Operational efficiency programmes in all main manufacturing locations](https://reader034.vdocuments.us/reader034/viewer/2022042207/5ea987b3a455b20304764d7e/html5/thumbnails/26.jpg)
26
HISTORICAL DEFINED BENEFIT SCHEME, CLOSED SINCE 2005
Good relationship with trustees, independent chairman
Goal of ‘Self Sufficiency’
FUNDING VALUATION EVERY 3 YEARS DRIVES CASH CONTRIBUTIONS
Previous triennial valuation was March 2014, £19m deficit, cash payments £2.9m pa
Next triennial March 2017
ACCOUNTING PENSION DEFICIT
Accounting deficit reduced from £57m in October to £55m at end of December 2016 (2015 £41.1m)
Assets £153m, Liabilities £208m
Discount rate reduced to 2.70% (2015 3.75%)
PENSION WELL MANAGED AND PAYMENTS AT AN AFFORDABLE LEVEL
PENSION
![Page 27: Communisis Preliminary Results Presentation 2016...Simplified two divisional structure Outsourcing non core activities Operational efficiency programmes in all main manufacturing locations](https://reader034.vdocuments.us/reader034/viewer/2022042207/5ea987b3a455b20304764d7e/html5/thumbnails/27.jpg)
27
OUTLOOK
“TRADING IN THE EARLY MONTHS OF THE YEAR HAS
STARTED IN LINE WITH EXPECTATIONS AND THE
BOARD IS LOOKING FORWARD TO ANOTHER
POSITIVE YEAR FOR THE GROUP”
![Page 28: Communisis Preliminary Results Presentation 2016...Simplified two divisional structure Outsourcing non core activities Operational efficiency programmes in all main manufacturing locations](https://reader034.vdocuments.us/reader034/viewer/2022042207/5ea987b3a455b20304764d7e/html5/thumbnails/28.jpg)
28
APPENDICES
![Page 29: Communisis Preliminary Results Presentation 2016...Simplified two divisional structure Outsourcing non core activities Operational efficiency programmes in all main manufacturing locations](https://reader034.vdocuments.us/reader034/viewer/2022042207/5ea987b3a455b20304764d7e/html5/thumbnails/29.jpg)
29BANK FACILITIES
HEADROOM
Total bank facilities £70m
Utilised at December 2016, plus £20m
Bank facility headroom 72%
Average utilisation during the period £33m
Headroom 53%
2 year promissory loan notes (Jan ’17) £9m
COVENANTS 2016 HURDLE
Net bank debt: EBITDA 1.0 < 2.5
EBITA: Interest 22.0 > 3.0
![Page 30: Communisis Preliminary Results Presentation 2016...Simplified two divisional structure Outsourcing non core activities Operational efficiency programmes in all main manufacturing locations](https://reader034.vdocuments.us/reader034/viewer/2022042207/5ea987b3a455b20304764d7e/html5/thumbnails/30.jpg)
30BALANCE SHEET
2016
£m
2015
£m
Property, plant and equipment 21.6 23.1
Intangible assets 187.9 192.4
Deferred tax and other 7.3 4.5
Non-current assets 216.8 220.0
Inventories 7.0 7.8
Receivables 66.2 55.1
Trade and tax payables (85.9) (75.6)
Pension deficit (55.5) (41.1)
Net debt (30.4) (39.4)
Net assets 118.2 126.8
Share capital 52.3 52.3
Reserves 65.9 74.5
Shareholders’ funds 118.2 126.8