Interim Results

1 August 2013

Communisis plc

("Communisis" or the "Group")

Interim Results for the six months ended 30 June 2013

Leading provider of personalised customer communication services Communisis plc (LSE: CMS), reports interim results for the six months ended 30 June 2013.

The Group had a successful half year with significant new contract wins and accelerated growth in international markets.

Profit from operations and operating margin before exceptional items increased substantially over the prior period, signalling further progress towards the achievement of a double-digit operating margin on sales (excluding pass through). Revenues from markets outside the UK grew faster than expected towards the medium term target of 20% of the total being derived from overseas.

Financial Highlights

§ Profit from operations (before exceptional items and the amortisation of acquired intangibles) up 19% to £5.1m (H1 2012 £4.3m*)

- Operating margin (before amortisation of acquired intangibles and excluding pass through) increased to 5.6% (H1 2012 4.9%*)

- Turnover 8% higher at £121.2m (H1 2012 £112.6m)

- Overseas revenues grew significantly to 13% of total revenues (H1 2012 5%)

§ Profit after tax 33% lower at £1.0m (H1 2012 £1.5m*) and basic earnings per share of 0.55p

(H1 2012 1.06p*) reflecting the after tax effect of exceptional items and new share issues

§ Adjusted earnings per share (fully diluted after new share issues and excluding after tax effects of

exceptional items and the amortisation of acquired intangibles) 9% lower at 1.49p (H1 2012 1.63p*)

§ Interim dividend 9% higher at 0.60p (H1 2012 0.55p)

§ Growth-related working capital resulted in a free cash outflow of £9.7m (H1 2012 £1.8m)

§ Period-end net debt reduced to £12.9m (H1 2012 £27.5m)

§ Financial position strengthened

- £20m raised as growth capital for investment in new contracts, restructuring costs, small

acquisitions and working capital

- Bank debt refinanced in July with £55m revolving credit facility committed until March 2018 and £5m of overdraft renewable annually

* Restated to reflect the changes to IAS19

Operational Highlights

Growth and Diversification

§ Significant new multi-year contractual relationships

- Lloyds Banking Group - ten year term

- Nationwide Building Society - nine year term

- Yorkshire Building Society and Thames Water - three year terms

§ Extended contracts in respect of:

- Managed services in ten new European countries for FMCG client P&G

- Transactional services for a major financial services client

§ Diversified sources of revenues with a greater proportion coming from non-financial services

sectors and overseas territories

Operational Excellence

§ Continued investment in growth opportunities

§ Successful implementation of recently announced contracts and migration onto market-leading high-speed colour digital platforms

§ Growing presence of on-site teams as an important element of the client service model

§ Ongoing restructuring and site consolidation, aligning the cost base with the demands of a fast

changing market

Commenting on the results Communisis Chief Executive, Andy Blundell, said:

"Communisis has continued to execute its strategy for profitable growth, delivering results that give the Board confidence for the remainder of the year.

There have been a number of very significant developments during the first half of 2013, especially the long-term contract wins with Lloyds Banking Group and Nationwide Building Society together with a substantial geographical expansion of our services to P&G.

The Group is well placed to take advantage of fast developing market opportunities due to its strengthened financial position and its reputation for production excellence and innovation."

For further information, please contact:

About Communisis

Communisis is the leading provider of personalised customer communication services that specialises in helping clients communicate with their customers more effectively and more profitably in fast-changing markets.

Communisis has a reputation for production excellence and innovation and is trusted by many leading, consumer-facing brands to design, produce and deploy multi-channel personalised customer communications accurately, securely, reliably and at scale.

Chief Executive's Review

Summary

Communisis has continued to execute successfully on its strategy for profitable growth during the first half of 2013. Our results were on target and considerably ahead of the same period last year, enabling us to continue with our policy to pay a progressive dividend which has increased by 9% at the interim.

Profit from operations (before exceptional items and the amortisation of acquired intangibles) increased 19% to £5.1m (H1 2012 £4.3m restated) whilst operating margin on the same basis improved to 5.6% (H1 2012 4.9% restated). Total turnover was 8% ahead at £121.2m (H1 2012 £112.6m).

New business development included a very significant ten-year contract with Lloyds Banking Group ("LBG") for the outsourcing of all transactional communication and an expansion of our activities with P&G into new countries and new services. Production is now live for customers such as British Telecommunications ("BT") and Nationwide Building Society ("Nationwide"), under contracts that we announced recently.

We are investing in our operational base where we see growth opportunities. At the same time we have re-structured legacy capacity in the more mature product areas, which will mean the closure of our Trafford Wharf production site and a re-alignment of operations at our Leeds facility.

We continue to analyse a range of acquisition opportunities to broaden and deepen our service offering.

The Group's financial position has been considerably strengthened during the period by the twin initiatives of an equity raise in March that contributed £20m of growth capital and an early re-financing of enlarged bank debt facilities, on improved terms and for an extended period until March 2018.

Communisis shares were re-admitted to the FTSE Small-Cap Index in the quarterly review in June this year.

Aspiration

The Group's aspiration is to be the leading provider of personalised customer communication services.

During the period we made further progress against both key financial targets for the medium term being the achievement of a double-digit margin on sales (excluding pass through), which was 5.6% in the first half of 2013 compared to 4.9% in 2012, and the derivation of 20% of revenues from overseas sources, which have grown to 13% in the first half of 2013 against 7% in 2012.

Our services are grouped around a sequence of activities being Design, Produce and Deploy and we have now adopted these headings in our segmental reporting.

These services are focused on the integrated design, production and deployment of personalised customer communications. These communications are typically of a marketing, regulatory or transactional nature and can be distributed either on paper or in digital formats, through e-mail, text message, mobile content or social media.

Design includes brand communication strategy, content management and insight and measurement services that cover creative, data analytic and digital marketing activities.

Production includes the specialist, high volume printing of transactional documents such as billings, statements and cheques; together with direct mail and other regulated communications.

Deployment covers the management of third party supply chains together with the fulfilment and distribution of marketing services product.

Markets

The Group operates in an overall market that is attractive and fast-moving. The marketing spend of our clients is being more tightly focused so as to target individual consumers. This trend suits our approach which is driven by insight and data-analytics. Our activities in Design benefit from the de-coupling of production agency services from the conceptual aspects of brand development that are typically offered by the larger agency networks. Solutions which link persuasive content to precise delivery are finding favour. Our clients' spend is justified by measurement as we help them toward improved return on investment.

In Production and Deployment, the markets are seeing a "flight to scale" that plays to Communisis' strengths. The drivers are the ongoing outsourcing of business-critical activities, which with increasing regulation will only be directed to a trusted partner, and the progressive implementation of an international approach to marketing services. This has been talked about for some years but is only now becoming a reality. Such trends will lead to a consolidation of the supplier base and the need to deliver services locally across more territories outside the UK - especially, for Communisis, in the Europe, Middle East and African ("EMEA") region. The implication for our bid pipeline is that it will increasingly comprise fewer but larger opportunities that span more service lines across a wider geographic area. Where successful, such bids are expected to lead to substantial multi-year contractual commitments and the opportunity to develop long-lasting, embedded client relationships.

Clients

Lloyds Banking Group

The Group has been chosen by LBG as its outsource partner for the production of all transactional customer communications in the UK.

The contract, which remains subject to ratification by the LBG Board and is expected to become effective later this month, was announced in July.

This is the largest available contract of its kind in the UK. Under the arrangements Communisis will assume responsibility for LBG's current manufacturing sites in Copley and Crawley. The Company's annual production volumes for these services will double on an annualised basis, confirming Communisis as the clear UK market-leader in the outsourced production of transactional communications. Substantial revenues will be generated for Communisis over the ten year term of the contract.

Progressive implementation of the contract is planned from October 2013, with Communisis making a significant commitment to the same high-speed colour digital platforms already in use elsewhere in the Group.

P&G

Our partnership with P&G has expanded rapidly into new countries and new service areas.

We deliver external brand building services on behalf of P&G. These are the activities that promote the P&G brands in retail environments or directly to consumers. Communisis works with P&G to operate the related supply chains more efficiently and on a more cohesive basis throughout EMEA. All products are sourced locally and are not manufactured by the Group; rather our value is based on the technology we deploy and the skills of the Communisis teams that manage these services within each territory.

The majority of our people supporting the P&G activities are now based overseas. Communisis is already active across 14 countries outside the UK and in recent months we have delivered projects as far afield as Sweden, Turkey and North Africa.

The previously announced contracts with BT, Nationwide, Yorkshire Building Society and Thames Water have all been implemented successfully during the period and are now in live production.

Operations

Our investment priorities are in the growth areas of our business and have been reflected either in direct capital expenditure or in operating lease commitments. The priority areas are IT infrastructure and process improvement and transactional capacity. IT includes further progress on projects Mantl and Skyline which join up our front-end processes and our multi-site production workflow, respectively. In transactional, we have invested in more insertion capability and in a new postal sortation line. Under our partnership with Hewlett Packard ("HP") we are already one of the largest global operators of the "T series" high-speed colour digital technology at our Leeds and Liverpool facilities and further commitments to these HP platforms are planned for Copley in support of the LBG contract, enhancing our reputation for deploying market-leading technology.

Further site consolidation and restructuring plans were announced in June as part of our ongoing drive for cost efficiencies.

Cheque production at the Group's Trafford Wharf site in Manchester will cease by the end of 2013 and production will move to the Communisis facility in Leeds.

The Leeds site will be reconfigured with a substantial amount of the remaining, more commoditised direct-mail print being outsourced and managed instead through the third party supply chain. The more specialist, higher margin direct mail and other production will remain in Leeds. The changes will provide the capacity needed to accommodate the cheque production transferred from Trafford Wharf and the printing of other transactional communications, acting as a supplementary facility for the Group's operations in Liverpool.

Indirect overhead costs will be further reduced as processes and support services are streamlined to improve efficiency. The restructuring will also provide scope for planned reinvestment in new skills and services.

Board Appointment

In June we announced the appointment of Peter Harris, as non-executive Director and Chairman of the Audit Committee, effective 1 July 2013.

Peter's financial experience spans 30 years during which he has played key roles in driving the profitability and growth of listed and private companies.

Peter is currently Interim Finance Director of Centaur Media Plc which he joined in July 2013.

Peter was previously Finance Director of Engine, the UK's largest privately owned marketing services group. Prior to that, he was Group Finance Director of Capital Radio Plc.

Outlook

Our markets are providing further growth opportunities for transactional and marketing communication services, both in the UK and internationally. Taken together with the benefits of our continuing investment in market-leading technology, new skills and from the progressive migration from legacy capacity, the Board is confident about the Group's prospects for the remainder of the year.

Andy Blundell

Chief Executive

Finance Review

Profitability

The table below is an extract from the Group's segmental Income Statement.

Segmental Reporting

New segmental reporting has been adopted in 2013 so that it is better aligned with the Group's strategic direction and the way in which the activities are now managed.

Turnover, operating profit and margins before exceptional items are now reported in three segments, being Design, Produce and Deploy. Pass through revenues, being those purchased materials that are passed on to clients at cost with no added value, are reported separately, as are unallocated central costs that support integrated service offerings.

Change in Accounting Policy

Changes in the guidance on the basis of the calculation and presentation of pension charges under International Accounting Standard 19R (IAS 19R) have led to a change in accounting policy in 2013 and a consequent restatement of the 2012 results on a consistent basis for comparative purposes. This has resulted in an additional operating charge of £0.3m in the first half of 2013 (H1 2012 £0.5m) as shown in the table above summarising the Income Statement.

Results

Profit from operations (before exceptional items and amortisation of acquired intangibles) increased by 19% to £5.1m (H1 2012 £4.3m restated) on turnover that was 8% ahead at £121.2m (H1 2012 £112.6m). Operating margin on sales (excluding pass through), which is a key financial metric, continued to improve from a restated 4.9% in the first half of 2012 to 5.6% for the same period in 2013 and towards our double-digit target in the medium term.

The overall increase in turnover was principally due to the growth in overseas managed services which is reflected in both the Deploy segment as fees and in pass through revenues. Fees generated by the three businesses acquired towards the end of the first half of 2012 together with those from more on-site studios at clients accounted for the additional sales in the Design segment. The net reduction in revenues in the Produce segment was attributable to the progressive decline in demand from the more mature cheque printing and direct mail markets offset by growth in transactional services.

The sources of revenue have continued to diversify during the period with those derived from the financial services sector accounting for 41% (H1 2012 48%) and those from overseas growing to 11% (H1 2012 4%) on a rolling twelve month basis. Overseas revenues in the first half of 2013 increased to 13% (H1 2012 5%) of total sales, as the Group expanded its relationships with a number of clients, including P&G, into ten new European countries and towards our medium term target of 20%. The proportion of revenues derived from financial services clients could increase again in future periods as the significant new contracts with Nationwide and Lloyds Banking Group become operational but only to a level that is still reasonably balanced with that of other sectors.

Within operating margins the Design contribution was adversely affected by the mix of services delivered during the period whilst the Deploy contribution benefited from the growth in higher margin managed and fulfilment services. Central support costs increased by 10% as further investment was made in central management, IT and marketing to support the expansion in overseas activities and integrated offerings. Turnover is usually weighted towards the second half of the year so that, with a more consistent cost base throughout the year, the second half margins tend to be higher. Consequently margins are typically lower in the first half of the year than for the year as a whole.

The exceptional items in the first half of 2013 total £2.1m which includes the net costs of closing the Group's cheque production site at Trafford Wharf, a further rationalisation of the direct mail facility in Leeds and ongoing indirect overhead reductions, as announced in June 2013. A further estimated £1.4m of costs relating to these changes will be charged as an exceptional item in the second half of 2013 with most of the cash costs being incurred before the end of the year.

The 2013 tax charge is based on the estimated effective rate for the year of 24.1% which is slightly higher than the standard rate of 23.25% as it includes the taxation of certain overseas profits in higher rate jurisdictions.

Profit after tax was 33% lower, principally due to increased exceptional costs, whilst basic earnings per share reduced by 48% due to the additional impact of the share issues during the period.

Dividends of 1.1p per share were paid in the first half of 2013 in respect of 2012 and an interim dividend of 0.6p per share will be paid for 2013, an increase of 9% on the prior year. The dividend will be paid on 11 October 2013 to shareholders on the register at the close of business on 13 September 2013.

Cash Flow and Net Debt

The table below summarises the cash flows for the period and the closing net debt position.

Operating cash flows and free cash flow worsened during the period principally due to the effects on working capital of transition costs on new contracts, of growth in pass through revenues from overseas managed services contracts and of longer credit terms demanded by leading brand clients.

The Group experiences minimal bad debts and strong credit control remains a priority, despite cash management pressures from clients, with overdue debt at June 2013 reducing to 5.4% (H1 2012 9.7%). Tight working capital management continues to be an area of focus in which a number of improvement opportunities are regularly considered.

The pension scheme contributions represent the first two quarterly rental payments under the previously reported arrangement involving the securitisation of a rental stream on one of the Group's freehold properties.

The Group raised £20m from a successful equity raise in March 2013, partly for the purpose of funding working capital, as described more fully below.

The net effect of these cash flows together with the ongoing capital repayments on finance leases was to reduce net debt to £12.9m at June 2013 (H1 2012 £27.5m), creating significant headroom on existing facilities.

The recently announced LBG contract will involve substantial investment in the region of £12.5m in capital expenditure, working capital and other mobilisation costs as the contract becomes operational in the second half of the year.

Capital Structure

The Group's financial position was strengthened during the period through the successful raising of growth capital and the early refinancing of bank debt facilities.

Growth Capital

£20m was raised through a substantially oversubscribed share issue in March 2013. The principal purpose of the equity raise was to support the next phase of profitable growth by securing funds for investment in new contracts, for restructuring costs and for small acquisitions and working capital.

Bank Facilities

The Group's bank facilities were refinanced on 31 July 2013 on improved terms. The Group's existing banking partners, Barclays, HSBC and Lloyds Banking Group, were joined by RBS so that the Group now enjoys the support of all four major UK banks.

£60m of facilities have been arranged, comprising a £55m revolving credit facility committed for almost five years until March 2018 and a £5m overdraft that is renewable annually.

Nigel Howes

Finance Director

Consolidated Income Statement

for the half year ended 30 June 2013: unaudited

*Restated to reflect the changes to IAS 19 (Note 10)

Dividends paid and proposed during the period were £2.1 million and £1.1 million respectively (30 June 2012 £1.4 million and £0.8 million respectively, 31 December 2012 £2.1 million and £2.1 million respectively).The accompanying notes are an integral part of these Consolidated Financial Statements. All income and expenses relate to continuing operations.

Consolidated Statement of Comprehensive Income

for the half year ended 30 June 2013: unaudited

The accompanying notes are an integral part of these Consolidated Financial Statements.

Consolidated Cash Flow Statement

for the half year ended 30 June 2013: unaudited

The accompanying notes are an integral part of these Consolidated Financial Statements.

Consolidated Balance Sheet

30 June 2013: unaudited

The accompanying notes are an integral part of these Consolidated Financial Statements.

Consolidated Statement of Changes in Equity

for the half year ended 30 June 2013: unaudited

The accompanying notes are an integral part of these Consolidated Financial Statements.

Notes to the Consolidated Financial Statements

for the half year ended 30 June 2013: unaudited

1 Segmental information

At 30 June 2013, the Group is now organised into three main reportable segments: Design, Produce and Deploy (Note 10).

Business segments

The segment results for the half year ended 30 June 2013 are as follows:

The restated segment results for the half year ended 30 June 2012 were as follows:

The restated segment results for the year ended 31 December 2012 were as follows:

2 Net finance costs

3 Income tax

The tax charge on continuing operations for the period is based upon an effective rate of 24.1%.

On 20 March 2013 it was announced that the corporation tax rate was to be reduced to 20% from 1 April 2015; the rate will fall to 21% from 1 April 2014. At the balance sheet date the legislation introducing these reductions was not substantively enacted and therefore the provision for deferred tax has continued to be made at 23%. If this rate change had been substantively enacted at the balance sheet date the deferred tax asset would have reduced by approximately £192,000.

4 Earnings per share

143,964 (30 June 2012 886,138, 31 December 2012 573,730) shares were held in trust at 30 June 2013.

Earnings per share from continuing operations before exceptional items

Net profit from continuing operations before exceptional items and amortisation of acquired intangibles, attributable to equity holders of the parent is derived as follows:

Adjusted earnings per share uses the same weighted average number of ordinary shares as reported above.

5 Dividends paid and proposed

6 Cash generated from operations

7 Acquisitions

On 18 April 2012, the Group acquired the whole issued share capital of Kieon Limited ("Kieon"). Kieon is a UK-based specialist software production agency, with an offshore development facility in Bangalore India. The addition of Kieon to the Group widens and deepens Communisis' creative services capabilities to include the building of websites and mobile and other digital applications. Details of the consideration paid and book values of assets and liabilities acquired are set out below. This transaction was accounted for by the purchase method of accounting.

The goodwill recognised above comprises certain intangible assets that cannot be individually separated and reliably measured due to their nature. These items include an assembled workforce and the expected value of synergies through future earning capacity and cost savings.

The results of this business are included within the Design (previously IDC) business segment.

The acquired business contributed revenue of £661,000 and a profit of £30,000 from the date of acquisition (18 April 2012) to 31 December 2012. If the combination had taken place at the beginning of the year the consolidated profit of the Group would have been £5,222,000 and revenue from continuing operations would have been £230,054,000.

Acquisition and set up costs of £46,000 were expensed and included in exceptional items.

On 3 May 2012, the Group acquired the trade and certain assets of Yomego Limited ("Yomego"). Yomego is a specialist social media agency that advises on the role of social media as an integral part of broader on-line and off-line marketing campaigns, measures its effectiveness and provides insights into brand reputation and sentiment across social media sources. Details of the consideration paid and book values of assets and liabilities acquired are set out below: