A 10-year marketing services contract win has provided the catalyst to reignite Communisis' (CMS) share price, up 11.5% to 60.75p. The deal with Lloyds Banking (LLOY) is testament to Communisis' ability to use an existing client relationship to win additional work. In this case, it is the largest 'available' outsourcing contract of its kind in the UK.
The Lloyds deal has been a year in the making. Communisis will produce statements and statutory communication material for the whole of the group. This covers a range of large and small brands, from Lloyds and HBOS to Scottish Widows and some motor insurance providers.
The deal is very significant to future earnings visibility. Chief executive officer Andy Blundell tells Shares that the Lloyds deal is the same size as the entire existing business undertaking transactional communication. While this implies it will need to make some upfront investment to expand its printing capacity this was, in part, the reason behind March's £20 million fund raising – undertaken to support both organic and acquisitive growth.
Communisis helps to personalise financial services and utility bills, regardless of whether they are send by post or electronically. It produces the bills and uses marketing intelligence to tailor product or service promotions to each customer.
As consumers are more likely to look at a transactional bill than a standard direct mail shot, Communisis has an opportunity to help its clients, which also include Nationwide and Yorkshire Building Society, to add targeted marketing messages.
We highlighted the company's organic growth potential in a 'griller' article last month (20 June). Our initial question was whether investors should money into a company that had already displayed decent share price gains. Having spoken in depth with chief executive officer Andy Blundell, the answer was a resounding 'yes' in the case of Communisis. And today's announcement is proof that we made the correct call.
There are no financial details on the value of the Lloyds contract, though analysts might get a steer at half-year results on 1 August, which could be the trigger for earnings upgrades.
Communisis has historically done ad hoc communication work for Lloyds – in addition to a long-term cheque printing contract.