Communisis Share Discussion Threads

[rivaldo] 03/8/2017 11:33

Nicely up, and on good volumes too.

Techmarketview are positive and emphasise the transition to digital:



"Thursday 03 August 2017

Communisis, managing the transition

Communisis, the provider of integrated marketing services, announced results for the six months to the June which showed creditable progress. Revenue was up 6% to £186m and operating profits increased 10%, to £8.5m. They’ve also secured a bank refinancing, got nearer a settlement re their pension scheme deficit, generated £6m+ cash and increased dividends by 10%.

Although Communisis has seen its business shift away from Financial Services (80% of revenue 5 years ago to 35% now) this sector is doing well as companies look to outsource more with HSBC signing a 5-year contract for marketing communications and Nationwide and Virgin Money renewing their contracts. Strong growth in FMCG markets has made this the largest customer sector (39%). International business, now 30% of revenue, is also growing strongly, particularly in Spain and Holland.

An important shift of the business has been towards “digital”. 15% of revenue 5 years ago, Digital and Services now account for 60% and this proportion will continue to increase. For banks, as an example, the transition to digital is not instantaneous, but will take several years due to legacy issues, regulation and, importantly, customer preferences. Communisis is enabling this transition, having invested in the “traditional” business with more modern, automated facilities in “the print”, as well as working to optimise the (declining but profitable) cheque printing business where it has an 80%+ UK share. Communisis is also investing in “digital” with platforms to manage workflow and to improve integrated outbound communications, such as in the case of HMRC following its contract win last year.

Communisis now looks as if it is well-positioned to provide a broader range of services under the “digital” banner, as well as ensuring consistent financial performance from other established business lines and suppporting growth rates with its European operations."

[cheshire man] 03/8/2017 10:26

Me too GHF and reaping the income return along the way :-)

[glasshalfull] 03/8/2017 10:10

I've tweeted a photo of broker forecasts (@glasshalfull1).

Look excellent value down here on prospective PER 7.6 for this year & 5.6% div yield with strong cash generation.

While others are chasing the likes of FEVR & BOO on x60 multiples, I'm content to be holding such a boring stock ;-)

Kind regards
GHF

[edmundshaw] 03/8/2017 09:14

Aviva also interims today. Worth comparing management speak? Aviva much better sales pitch, but then also better progress.

[njb67] 03/8/2017 09:02

Joe
Quite possibly. Would be interesting to look at how this has evolved over the last five years or so, since CMS started to venture overseas. I do not have the figures to hand but my sense is that this is not proving as profitable as many folk had hoped.

Would be a good topic to explore with management when chance arises.

CMS has for many years had a bit of a jam tomorrow feel about it. I see there were more "one-off" restructuring charges again. These are pretty much annual event though.

Worth also asking Blundell about their profitability expectations over coming years. With good visibility of earnings due to long term contracts, some pointers toward when the jam will arrive would not go amiss.

GLA

[rivaldo] 03/8/2017 09:00

Liberum retain their Buy and 75p target today.

And Finncap retain their Buy and 65p target:

[speedsgh] 03/8/2017 08:45

Cash contributions to pension scheme:
FY 2016: £1.7m plus £1.1m rental payments
FY 2017: £2.55m plus £1.15m rental payments

Pension Scheme

At 30 June 2017, the deficit related to the defined benefit pension scheme on an IAS 19 basis has reduced to £42.0m compared with £55.5m at 31 December 2016. Gross scheme liabilities were £195.9m, and assets were £153.9m. The deficit reduction is primarily due to reduced liability figures from the 31 March 2017 actuarial valuation, alongside updated base tables for mortality assumptions.

The triennial actuarial valuation for the Pension Scheme as at 31 March 2017 has been concluded, with agreement in principle on the associated deficit repair payments. The funding deficit is expected to be valued around £29.8m (31 March 2014 £19.5m). Deficit repair contributions to the Scheme will be £2.55m, increasing in line with dividend increases, or 3% if higher, plus rental payments which remain unchanged at £1.15m through the Central Asset Reserve arrangement. We believe this is a balanced outcome for the Group and Pension Scheme Trustees, and provides certainty over cash payments for the next three years. The Board continues to work with the Trustees to seek opportunities to reduce the deficit and liability exposure, and accelerate progress to the goal of "self-sufficiency" for the defined benefit pension scheme.

[joe say] 03/8/2017 08:45

njb - agree that there's a slight worry on the international margins but surely as sales and volumes improve this is something that will slowly be addressed over time

[speedsgh] 03/8/2017 08:40

NET DEBT
H1 2017: £28.3m
FY 2016: £30.4m
H1 2016: £34.9m

[njb67] 03/8/2017 08:31

Steady improvement with all key metrics heading in the right direction.

Free cash generation a positive given previous concerns about debt and pension.

Only real concern is revenue growth, which is slowing. Need to understand what are main drivers behind this. Reduction in transactional workload? Slowing in net contract gains? pricing pressure on new deals?

Despite expansion into international sectors, revenue and margins are hardly improving.

GLA

[nick rubens] 03/8/2017 08:16

Good results, leading up to what should be equally good finals. I'm surprised how low the stock turnover has been last few weeks and would expect some institutions to be buying what looks like good value and a safe high yield. Recent new HMRC contract should lead to more outsourcing from them as the government tries to make it's public sector more efficient.

[masurenguy] 03/8/2017 08:01

Yes, a good set of solid interim results with the main highlights being:

* Revenue increased 6% to £186.0m.
* Overseas revenue increased to 30% of total Group revenue from 24% in H1 2016
* Adjusted operating profit increased by 10% to £8.5m
* Adjusted earnings per share up 2% to 2.46p
* Free cash flow increased to £6.5m, delivering a reduction in net debt to £28.3m
* Interim dividend increased 10% to 0.89pps
* Bank refinancing completed with a new 5 year facility secured on improved terms
* Settlement reached in principle with pension trustees in July after the triennial valuation

* Significant new contract win with HSBC for marketing communications for a 5 year term.
* Multi-year contract renewals completed for Nationwide, Virgin Money and Co-op.
* Expansion in international sales, which now account for 30% of total revenue (H1 2016 24%).

This should put them on a projected PER of around 8 for the current year and a yield of circa 5.6% at last nights closing price.

[joe say] 03/8/2017 07:58

Would also add that the pension outcome is reasonable imo - albeit with increased contributions

[edmundshaw] 03/8/2017 07:50

Yes, rivaldo, steady enough, though unspectacular.

And with new contracts, reduced debt, reduced interest rates and planned efficiency savings, returns are marked to get better over time. Obviously Blundell has learned from the overpromising fiasco of the past (seems a long time ago now), and I am cautiously expecting a good outcome for the full year...

Prospective yield around 5.5% has also got quite tasty.

[mcfly79] 03/8/2017 07:50

The prior year adjusted earnings included £0.7m of fx gains which are not there in the current year. Unfortunately this makes the headline increase in adjusted eps only 2% but on a constant currency basis the increase would have been 11%.

[rivaldo] 03/8/2017 07:36

Good, solid results with a number of pleasing aspects, including:

- increased overseas revenues again
- increased percentage of digital/service revenues
- 10% increased dividend
- new borrowing facilities at reduced cost
- reduced net debt again
- certainty over pension contributions



Certainly not spectacular, but reiterating unchanged expectations for the year means CMS remain decent value at this price imo. Particularly given the long-term nature of much of their work.

[gleach23] 31/7/2017 15:33

OK thanks - presumably MT is looking at a similar data source to me then

[sharw] 31/7/2017 15:27

gleach23 - the last bit of para 2 was written because I could not see any 47.34 trades with a sell label.

I am not an ADVFN subscriber and the trades I can see are only the LSE ones and there is a label on the page saying 'level 3 montage'. I had to go to the NEX site to see those trades. I can only assume that with your subscription the NEX trades are shown as well and with a sell label on the 47.34 ones.

[gleach23] 31/7/2017 14:53

sharw...my view of advfn trades includes NEX trades which have been reported as sells all day regardless of whether they are buys or sells for exactly the reason you point out...for the same reason though I don't understand the last sentence of your 2nd para

[sharw] 31/7/2017 13:52

MT - I don't understand. There is a trade of 5 (AT) @ 47.75 and one of 500 @ 47.34 both labelled as buys. There are 3 trades at 46.55 labelled as sells.

The official quote has been 46 - 48 all morning. I got a quote of 46.55 - 47.34 which coincides with those and also the trades on NEX. There are often cases with small caps where a quote is the "wrong" side of the mid causing a false computer-generated buy or sell label but not in this case.

The 14,912 was dealt on NEX but that does not itself label buys and sells. The quote there was 45-50 giving a mid of 47.5 so if some data provider took that it would get a sell label.

This shows the problems of trying to mix data from two exchanges but it is hardly a conspiracy to manipulate the price.

[gleach23] 31/7/2017 13:41

Hope you're right MT...and certainly the trades @ 47.34p are all buys reported as sells. However since the trade you mention the real sell trades @ 46.55p have outweighed the buys.

All negligible stuff though - just 31k of trades so far today...in the week of the update too...

Topped up myself last week so fingers crossed for Thurs.

[mount teide] 31/7/2017 12:17

Someone over the last week or so, seems to be quietly soaking up any selling by working hand in glove with the MM's who, are manipulating the offer price to give the impression trades like those today at 47.34p are reported as sells, when in fact they are buys at close to the real offer price.

The 14,912 @47.34p this morning cheerfully reported as a sell was in fact a small addition to the long term holding.

[owenski] 27/7/2017 08:44

Yes, thanks for that Mas.

[speedsgh] 27/7/2017 08:35

Nice work, Mas. Thanks for sharing.

[masurenguy] 27/7/2017 08:30

Interims due next Thursday (03/08).

The header has also now been updated to reflect the changes by major shareholders as at the end of May, during the 5 months since the beginning of this year. The most significant changes are as follows:

*Richard Griffths has increased his stake by a further 5.4m shares and he now holds 21.3% of the company. This is more than double the size of the next largest shareholder.

*Barclays have added 5.25m shares and doubled their holding to 4.9%

*AXA have added 1.35m shares and increased their holding by 21% to 3.4%

*Miton are a new holder above the 3.0% reporting threshold.

*Slater have halved their holding to 2.99%

*Investec, who were holding 4.3%, no longer retain a significant holding.