Lost contracts and delays to new projects mean small cap marketing specialist Communisis (CMS) will fall short of a lofty 2015 profit target.

Forecast earnings per share growth of more than 20% now looks out of reach because of weakness in Communisis’ Life Marketing Consultancy (LMC) business, a unit acquired at the start of 2015.

Communisis shares trade 14% lower at 45p.

Shares previously flagged the deal for LMC as unusual because despite a reported price tag of £23.3 million it did not involve the transfer of any cash.

Instead, it was funded by Communisis absorbing LMC liabilities via a loan note, the issue of new shares and a £7.2 million deferred consideration.

COMMUNISIS - Comparison Line Chart (Rebased

While earnings from the new unit are running below budget, management still expects to report double digit growth in group underlying operating profit, improved free cash flow and increased adjusted earnings per share in the year to 31 December 2015.

‘Communisis will show good growth overall and increased cash generation in 2015, despite being held back in the short term by a slower than expected start at Life,’ says chief executive Andy Blundell.

‘Recent contract wins and renewals together with the health of our pipeline provide positive indicators of the group’s prospects for 2016.’

House broker FinnCap says it is likely to downgrade earnings forecasts by 5% on the back of the news.

Earnings per share were pitched at 5.6p from pre-tax-profit of £15.5 million and revenue of £359.5 million.

‘We maintain our view that Communisis’ valuation versus medium to long-term growth prospects is attractive but the route to providing this has become a little harder with the company’s statement that full year 2015 results will be slightly below previous expectations,’ writes Guy Hewett at Finncap.

Issue Date: 12 Nov 2015