14th Dec 2006 07:00
14 December 2006
Trading update for the year ending 31 December 2006
Operational performance
The Group's Transactional Printing Services Division has performed well and is ahead of market expectations in terms of revenues and profits. Our business forms and direct mail activities are substantially in line with market expectations from a profit perspective, although revenues are lower than expected.
Our Print Management Services Division is experiencing difficult market conditions with margin erosion. Certain contractual terms within a number of larger contracts may bring price reductions before the year end and, in a few cases these price reductions could be retrospective. The Board therefore now considers it prudent to accrue against the implications of these possible retrospective price reductions. Consequently Communisis is expected to report profit from operations (before exceptional items) that is below current market expectations but that is likely to be in-line with that reported for 2005.
Exceptional gains and costs
During the year, the Group generated an exceptional profit from the sale of property assets of ‚£13.1 million. The closure of our facility in Altrincham, and the merger of this operation into our Leeds plant is expected to be completed by the end of the year as envisaged. However the disruption to the business has been greater than previously expected. This, and the consequent additional resources required for the integration, mean that the exceptional costs of the project have increased. Once the exceptional costs relating to Board changes, the now completed capital reconstruction, and the costs of the aborted disposal process in early 2006 are included, it is expected that the Group will report a lower than expected net exceptional gain of about ‚£1 million for the year.
Strategy review
The management team, led by Chief Executive Steve Vaughan, who joined in October, has been undertaking a wide-ranging review of all aspects of the business. The initial findings suggest that Communisis can introduce higher value service offerings to both existing and new customers, thereby generating profitable growth. However, there is a need for investment in operational and account management disciplines in order to bring greater customer focus to the business. This review is still underway. Management will be in a position to provide a comprehensive presentation of all aspects of the plan at the time of the Group's preliminary results.
For further information, please contact:
Steve Vaughan, Chief Executive Tel: 020 7426 4690Communisis plcPeter King, Finance Director Tel: 020 7426 4690Communisis plcWilliam Clutterbuck Tel: 020 7379 5151Maitland
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