PRELIMINARY RESULTS 2016 PRESENTATION ANDY BLUNDELL, CHIEF EXECUTIVE MARK STONER, FINANCE DIRECTOR MARCH 2017
2016 HIGHLIGHTS 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
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.
OUR CLIENTS ARE FACING UNPRECEDENTED CHANGE – 4 REGULATORY, TECHNOLOGY AND CONSUMER BEHAVIOUR. OUR PURPOSE IS TO HELP THEM STAY AHEAD OF THESE CHALLENGES
HOW WE DO THIS 5 CUSTOMER EXPERIENCE BRAND DEPLOYMENT ‘ONE TO ONE’ ‘ONE TO MANY’ Mission critical, personalised communications Brand activation and retail communication to known individuals Integrated agency services: customer Shopper marketing and brand activation engagement, corporate communications, campaigns, marketing supply chain specialised content, transactional and implementation, fulfilment and logistics and regulatory communications POS procurement
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
CUSTOMER EXPERIENCE 7 7
BRAND DEPLOYMENT 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 9
SOME OF OUR CLIENTS Customer Experience Brand Deployment
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
CONTINUED TRANSFORMATION – PRINT TO SERVICES 12 2015 REVENUE SPLIT 2016 REVENUE SPLIT 39% 35% 61% 65% 2016 CONTRIBUTION SPLIT 2015 CONTRIBUTION SPLIT DIRECT PRINT MANUFACTURE 41% 45% 59% OUTSOURCED SERVICES AND DIGITAL 55%
SECTOR ANALYSIS 13 REVENUE BY SECTOR 2016 REVENUE BY SECTOR 2015 FMCG / Retail FMCG / Retail 15% 17% Banking 27% Banking 3% 35% Public sector 3% Public sector 3% 8% Utilities Utilities 7% Telecomms 7% Telecomms Other Other 40% 35%
VALUE CREATION 14 Growth Value Efficiency People HOW WE CREATE VALUE FOR STAKEHOLDERS
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
INTERNATIONAL GROWTH 16 INTERNATIONAL REVENUE AS A % OF TOTAL REVENUE 95.8 100 90 80 66.5 64.4 70 26% 60 48.9 50 18% 40 £m 30 20 10 0 2013 2014 2015 2016
EFFICIENCY 17 17 COST OPTIMISATION Simplified two divisional structure Outsourcing non core activities Operational efficiency programmes in all main manufacturing locations Headcount reduced in year by 8%
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
19 FINANCIAL OVERVIEW
FINANCIAL HIGHLIGHTS 20 Continued growth in profitability COMPARISON FY 2016 AS CONSTANT TO FY 2015 £M REPORTED CURRENCY and adjusted EPS Total revenue £362m +2% 0% Dividend increased by 10% Adjusted operating profit £19.5m +6% +2% Adjusted profit before tax £16.7m +15% +9% Improved free cash flow reducing Adjusted earnings per share 6.07p +17% +10% net debt by £9m Final dividend per share 1.61p +10% +10% Free cash flow £12.9m +7% - Net debt £30.4m (23)% -
DELIVERING REVENUE AND EARNINGS GROWTH 21 ADJUSTED OPERATING PROFIT 24.0 22.0 Growing revenue base, 26% international 19.5 20.0 18.3 18.0 16.0 16.0 Profitability growth +70% in 5 years 13.3 14.0 11.5 12.0 £m Adjusted EPS on growth trajectory, following 10.0 8.0 6.0 equity raise in 2013 4.0 2.0 0.0 2012 2013 2014 2015 2016 ADJUSTED EARNINGS PER SHARE (EPS) GROSS REVENUE 400.0 6.5 362.0 354.0 6.07 343.0 350.0 6 300.0 270.0 Pence per share (pps) 5.5 5.18 230.0 250.0 5 £m 4.62 200.0 4.51 4.5 4.19 150.0 4 100.0 3.5 50.0 0.0 3 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016
DELIVERING DEBT REDUCTION AND DIVIDEND GROWTH 22 DIVIDEND GROWTH 3.00 2.42 2.50 Pence per share (pps) 2.20 2.00 Increasingly cash generative 2.00 1.80 1.65 Net debt reduced by £9m 1.50 Dividend increased by 10% pa 1.00 Net debt at 1x EBITDA at Dec ’ 16 0.50 0.00 2012 2013 2014 2015 2016 BANK DEBT AND FACILITIES (£m) FREE CASH FLOW 80.0 12.9 14.0 12.0 70.0 12.0 60.0 10.0 50.0 8.0 6.6 6.0 40.0 6.0 £m 4.0 30.0 2.0 20.0 0.0 10.0 *2012 2013 2014 2015 2016 -2.0 - -4.0 2012 2013 2014 2015 2016 -6.0 -5.6 Period end bank debt Average intra period bank debt Total facilities
SUMMARY INCOME STATEMENT 23 FY 2016 FY 2015 £M £M Revenue driven by International growth in GROSS REVENUE 362 354 Customer Experience 22.2 23.6 Brand Deployment, offset by lower print Brand Deployment 16.2 14.1 volumes in Customer Experience Central Costs (13.3) (13.0) Corporate Costs (5.6) (6.4) Adjusted Operating Profit +6% Adjusted operating profit 19.5 18.3 Exchange rate benefit of £0.9m Net finance costs (2.8) (3.8) Adjusted profit before tax 16.7 14.5 Exceptional items related to outsource of Amortisation of acquired intangibles (0.8) (1.2) non core activities and efficiency Exceptional items (4.3) 4.0 Statutory profit before tax 11.6 17.3 improvements Tax (3.0) (2.8) Effective tax rate of 23% Profit after tax 8.6 14.5 Basic EPS (p) 4.12 6.98 Adjusted EPS +17% Adjusted EPS fully diluted (p) 6.07 5.18
SEGMENTAL OVERVIEW 24 CUSTOMER EXPERIENCE 2016 2015 VARIANCE Print volume erosion and reduction of postal pass through Gross Revenue £185m £210m (12)% offset by higher service revenues Transactional and service improved performance, offset by Operating profit * £22.2m £23.6m (6)% Agency reduction(marketing budgets and margin pressure) Operating Margin * 12.0% 11.2% +0.8% Larger proportion of higher margin services BRAND DEPLOYMENT 2016 2015 VARIANCE Continuing growth through additional territories (Dubai, Gross Revenue £177m £144m +23% 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 * Adjusted, pre central and corporate costs
SUMMARY CASH FLOW AND NET DEBT 25 2016 2015 VARIANCE £M £M £M ADJUSTED EBITDA 29.9 29.3 0.6 £9M REDUCTION IN NET DEBT TO £30M • Working capital increase (0.5) 0.2 (0.7) Reduced levels of capital expenditure Pension contributions (2.8) (2.9) 0.1 Higher dividends Interest and tax (4.3) (3.7) (0.6) Exceptional items (3.7) (2.1) (1.6) Foreign exchange benefit £2m Capital expenditure (5.7) (8.8) 3.1 DIVIDENDS INCREASED 10%, REPRESENTING • Free cash flow 12.9 12.0 0.9 40% OF FREE CASH FLOW Investment in new contracts (1.2) (2.2) 1.0 BANK FACILITIES DUE FOR RENEWAL MARCH • Dividends (4.8) (4.3) (0.5) ‘18, COVENANTS REMAIN WELL COVERED Other 1.7 (0.3) 2.0 Decrease in bank debt 8.6 5.2 3.4 £9.3M PROMISSORY LOAN NOTES REPAID • Net bank debt (19.5) (28.0) 9.5 DURING JANUARY 2017 Finance leases (1.6) (2.1) 0.5 Promissory loan notes (9.3) (9.3) - Net debt (30.4) (39.4) 9.0
PENSION 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
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”
28 APPENDICES
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