Profits are down but confidence is rising at Communisis

SIGNS of an improving economy and key contract wins have boosted Communisis’ confidence after a difficult first half.

The Leeds-based print solutions firm reported that pre-tax profits had slipped significantly for the six months ended June 30 to £1.7m compared to £4.6m for the same period 2008.

It also announced that chief executive Steve Vaughan has decided to stand down at the end of the year to be replaced by Andy Blundell – currently the firm’s sales director.

Communisis said that the background of economic recession combined with the company’s exposure to the financial services industry had resulted in “substantial” volume reductions in most of its manufacturing plants – and in particular direct mail in Leeds.

As a result, turnover for the period was £95m compared to £148m last year.

However, the group said that the second quarter’s trading had been better than the first and that cost-cutting strategies would benefit the business going into the second half.

It has also won business in existing and new sectors included winning a contract by gaming and betting services business William Hill, which will see Communisis provide William Hill’s marketing division with a full range of services including consulting.

The agreement will run for three years.

Mr Vaughan said that the firm’s strategy of pursuing higher margin services with customers had helped the firm with new profit streams “cushioning” unfavourable conditions.

He said that there were some indications that the worst of conditions was behind the firm with volumes increasing in direct mail.

Technology and services has also continued to grow in revenue and profit with the value-added services offered now covering the whole marketing process.

However, Mr Vaughan said that some of its bigger customers were still delaying decisions on the purchase of higher technology services and products.

Despite a drop in revenue for its print sourcing division, profitds remained largely unchanged from late 2008 volumes and customers are continuing to be attracted including T-Mobile and the Department for Children, Schools and Families.

“Trading conditions have not been easy during the last nine months. Although there are some signs that conditions are beginning to improve, we are anticipating only a slow recovery,” continued Mr Vaughan.

“Our strategy of value-added services has brought wider and deeper customer relationships, better and more resilient margins, enduring competitive advantage and a stronger balance sheet. These stand us in good stead for the future. As a result, the board has decided to pay an unchanged interim dividend of 0.86p.”

He added that he had very much enjoyed his last three years as chief executive.

“During this time the group has made the most of its strengths and limited or where possible removed its weaknesses.

“Our strategy gives us a clear place in the market to help our customers communicate more profitably with their customers.”