11 July 2011 – contract

Communisis has said that following a competitive tendering process, it expects its existing contract with HSBC Bank plc for Direct Mail services to be awarded to another supplier.  As yet no termination notice has been received by Communisis but a statement from HSBC quoted in a trade publication means this is highly likely.  One month’s notice is required to terminate the agreement.

Contracts with HSBC for statement, billing and cheque printing are unaffected.  The company expects that the loss of revenue from this contract, were it to be terminated in the current financial year, would largely be limited to the fourth quarter.  Strong performance in other service areas, including work with new customers, means that the company’s current expectations for results for 2011 and 2012 are unchanged by the likely contract loss.  At the current share price we continue to rate the shares as a BUY despite the setback.