Print firm to invest £2m from cost cuts

The Leeds-based group, which has in recent years shifted from being a traditional print firm to a 'marketing services provider', said the latest round of cost cuts will result in a net 15 job losses.

However, the group said its latest streamlining is a vital part of its growth strategy. It upgraded internal forecasts for 2011 and 2012, lifting shares 8.3 per cent to 29.5p.

Chief executive Andy Blundell said Communisis is aligning its business in a way that "better suits the direction of its marketplace and the demands of its customers".

He said: "We're announcing significant investment in areas where we're going at a pace, like creative and data services.

"Whilst redundancies associated with this programme are regrettable, we will be re-investing about half of the cost savings in the new skills needed to meet the increasing demands of our customers for innovative and cost-effective solutions."

Communisis plans to close its logistics site in Leicester, where it employs 50 staff, transferring the work to a site in Newcastle.

It also plans to reorganise its senior and middle management and other head office functions, which will see job losses. In total the group plans to make 30 job cuts, and has started consulting staff, but said when planned new roles are factored in, there will be a net decrease of 15 roles.

The cost cuts will yield annual savings of 4m, with a partial benefit in 2011 and a full effect by 2012.

"It (cost cutting) is never done in the sense that you are continuously re-aligning structure and cost base as to where the business wants to go," said Mr Blundell.

In July, Communisis unveiled a growth plan that saw it split into two divisions: intelligence-driven communications (IDC) and specialist production and sourcing (SPS).

Its higher-margin IDC arm, which uses data for a wide range of marketing campaigns, will get the bulk of the new investment. Mr Blundell said this could be in the form of more training for staff, new roles and new equipment and software.

Increasingly the group is moving towards more higher-value work for customers, compared to its previous staple of simple printing work.

"The days of you waking up on a Saturday morning to loads of 'Dear Householder' letters have moved on," he added. "What you are getting now is fewer, more targeted pieces.

"If you look at IDC, a lot of our delivery now is actually pure data in the context of lifestyle or credit referencing. We are working with clients to analyse targets and react to these. In our data business we have grown so fast and we need a bigger outboard on the back of our boat."

Communisis suffered in 2009 as recession, meltdown in the financial sector and a sharp fall in bank marketing hammered profits and sales.

Its Leeds Direct Mail business, which employs about 500 people, was particularly hard hit with around 50 job cuts when it shut three print lines.

Communisis has installed Hewlett Packard high-speed colour digital equipment in its place, which is reaping rewards.

Mr Blundell said the Leeds business has performed much more strongly in recent months and is unaffected by the job cuts.

Communisis said the exceptional costs from the streamlining will be offset by an exceptional gain as a result of settling some pension obligations during the year.

Overall, it does not expect the cuts to have any effect on its 2010 operating profit expectations.

Thumbs-up from the analysts

Analysts at house brokers Brewin Dolphin upgraded their target price from 32p to 39p and moved from 'add' to 'buy'.

"We continue to see scope for further upgrades if the economic recovery continues, and, in particular, we see upside from the re-investment of 2m of cost savings into the intelligence-driven communications segment," they said. They upgraded Communisis's 2011 pre-tax profits forecasts by 17.8 per cent to 7.3m and 2012's by 27.4 per cent to 8.5m.

Analysts at Equity Development said: "The upgrades may come at a time of macro-economic uncertainty but they reflect the steady, successful implementation of the company's strategy."