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communisisThe leading print partner

Communisis

•2008

AnnualReport&FinancialStatem

ents

www.communisis.com Cert no. SGS-COC-1202 2008 Annual Report & Financial Statements

ANOTHER YEAR OFMAKING CUSTOMERCOMMUNICATIONSMORE PROFITABLE

COM-P100-R+A08_Cov:COM-P100-R+A08_Cov 16/3/09 13:17

1 Financial Highlights

Business Review

2 Chairman’s Statement3 Chief Executive’s Report6 Financial Performance Report10 Corporate Social Responsibility Report15 Risks and Uncertainties

Governance

17 Statement of Directors’ Responsibilities18 Board of Directors19 Leadership Team20 Directors’ Report24 Corporate Governance Report28 Directors’ Remuneration Report

Financial Statements

34 Consolidated Income Statement35 Consolidated Balance Sheet

36 Consolidated Cash Flow Statement37 Consolidated Statement of Recognised

Income and Expense38 Notes to the Consolidated Financial

Statements74 Report of the Auditors on the

Consolidated Financial Statements75 Company Balance Sheet76 Reconciliation of Movements in Equity

Shareholders’ Funds77 Notes to the Company Financial

Statements92 Report of the Auditors on the Company

Financial Statements

Other information

93 Shareholder Information95 Summary Notice of Annual General

Meeting96 Contact Details

Contents

COM-P100-R+A08_Cov:COM-P100-R+A08_Cov 16/3/09 13:17

Annual Report & Financial Statements

Business ReviewGovernanceFinancial Statements

Communisis plc 2008

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Further operational gains made:

Strategic focus on higher margin services underlined by acquisition of Absolute Intuistic Ltdand disposal of Bath Business Forms

Acquisition of order book of Mail Solutions Ltd in November 2008; 12 new customers addedto Speke

Continued efficiency gains and cost cutting programme implemented

Widespread evidence of benefits of investment in added-value services throughout the Group

Good progress on Greenprint environmental plan – most measures ahead of target

Wide-ranging spread of integrated portfolio of higher-value services to address customers’key business issues; 32 of top 100 clients now use more than one service

Financial Highlights:Profit before tax up 61% to £12.7m (2007 £7.9m)

Operating cash inflow of £19.6m

Net debt reduced to £13.1m (£26.3m at 31 December 2007)

Further £20m debt facility agreed in February 2009,completing £40m of renewed facilities committed for three years

Earnings per share up 32% to 6.2p (2007 4.7p)

Final dividend of 1.635p per share makes full year dividend of 2.495p(2007 2.453p)

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Communisis plc 2008

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BUSINESS REVIEWChairman’s StatementThe results for 2008 show that Communisis achieved itsmajor objective which was the delivery of better financialreturns during the year. In spite of worsening economicconditions towards the end of the year, the Group deliveredimproved profits, higher earnings and an increased dividend.The balance sheet was further strengthened, not only by theproceeds from the sale of the Bath Business Forms businessbut also by excellent working capital control which producedan exceptional cash performance. In the course of the year,the strategic shape of Communisis was altered to improvethe quality of the Group’s future earnings through the disposalof the low margin, commodity Bath business followed by theacquisition of specialist data services provider AbsoluteIntuistic Ltd (‘Ai’) in December.

After accounting for the Bath disposal, revenue fell duringthe year to £258 million compared to £291 million in 2007.Profit from operations before exceptional items was £15.0million which was 43% above last year’s figure of £10.5million. Profit before tax was £12.7m, an increase of 61%(2007 £7.9m). Earnings per share were 6.2p per sharecompared with 4.7p last year, an increase of 32%. We areproposing a final dividend of 1.635p per share which will bringthe total dividend for the year to 2.495p, an increase of1.7% over last year.

During 2008, the management continued the progress madeduring the previous 18 months. Efficiency improved further inall of our factories and this was reflected in higher margins.Towards the end of the year, a range of overhead savings wasidentified which should benefit future earnings. Whilst thedisposal of the Bath business eliminated a low margin activity,it is now a major supplier. In addition, we continued to pursuehigher value-added business with both our existing andnew customers. Our ability to do so has been enhancedby the acquisition of Ai with its excellent customer base,many of whom are already clients of Communisis. Thebenefits of all of these strategic moves will show through infuture years.

In addition to our strong financial performance, the Group’srole in environmental stewardship grew considerably duringthe year. Following the publication of our Greenprintenvironmental plan in late 2007, performance on the keytargets such as carbon footprint and reduction in landfill usehas been a great credit to our employees who have embracedthe actions needed. The Corporate Social ResponsibilityReport shows how we are ahead of plan in almost allobjectives.

All businesses today are aware of the difficult economicclimate in which they have to operate and the Group’smanagement and employees have reacted effectively to thechallenge. On behalf of the Board, I would like to thank themfor all their effort and hard work. We have the protection of anumber of medium to long-term contracts, and have takenaction to address our cost levels. Whilst our customer base iscurrently standing up well, long-term planning is difficult sowe need to be positioned to cope with any volatility which maybe caused by the state of the economy. It is in this contextthat the excellent cash performance has been so importantfor the Group. Together with the renewal of our bank facilities,we are in a good financial position to face the future.

We have benefited from stability at Board level during theyear. Alistair Blaxill, who carries responsibility for our majoraccounts, joined the Board in May. Throughout the yearthe Board has worked well together, and is firmly behind thestrategic direction. We have dealt with a number of difficultissues and will continue to do so in the months ahead.In particular, addressing the remaining legacy issues,especially pensions, has been an important part of ourBoard discussions.

Looking forward, the Board will address the challenges in2009 and beyond. We must continue to deliver good financialreturns for our shareholders and maintain a strong balancesheet. Interesting opportunities may arise in the course of theyear, and we are now in a good position to react to them. Weshall continue to implement our plans so that Communisiscan build on the excellent performance of the year.

Peter HicksonChairman

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Communisis plc 2008

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Chief Executive’s ReportI am pleased to report that Communisis has once again madeconsiderable progress in the past year. Our plan to focus oncross-selling to our customers and develop a portfolio ofhigher-value services has served us well. At a time whenmany businesses in our sector are suffering seriousdifficulties, we have grown our profits and our balance sheetis significantly strengthened. It is largely because of the robustaction taken since the start of 2007 to turn around theperformance of the Group that we are in a better position toweather the effects of the current economic climate.

Our plan comprises three stages – first, to focus on the basicsand our customers; second, from mid-2007 to focus oncross-selling and value-added services. The third stage,which began in mid-2008 to build on these two foundations,has seen us introduce an integrated portfolio of high-valueservices to address key business issues for our customers.The benefits of this plan are reflected in our results.

The Group has changed shape in two important waysduring 2008.

First, it has shifted its centre of gravity higher up the valuechain. The disposal of the Bath Business Forms business inJune meant that we successfully exited the mostcommoditised part of our manufacturing base. We have alsosold our small business in Holland, and we are withdrawingour sales presence from Spain and France. Although it is nevergood to lose a contract, our exit from the Print Managementrelationship with Sainsbury’s at the end of August has seen alarge piece of very low margin outsourced print volume fallaway, with consequent benefit to margins. In contrast,our investment focus has been entirely on higher marginservices. The recent acquisition of Absolute Intuistic Ltd (‘Ai’),a provider of high value data services, demonstrates this mostclearly. But this investment is by no means isolated – £1.5mfurther investment in digital print and £2.3m in softwareapplications for document composition show our willingnessto invest to grow the business. As a result, Group operatingmargin in 2008 improved to 5.8% (2007 3.6%).

Second, our business segments reinforce each other far moreeffectively. A Group-wide structure has been put in place toplan and coordinate our sales efforts, operations andinvestment. The integration of our offering to the market andthe placement of work in the facility best designed to deliverit have become key parts of the way we work. We are thusable to focus on strong value propositions to our clients,adding high margin services to traditional offerings. It alsounlocks a further round of efficiency opportunities, based oneliminating duplication of cost and capability across the

Group. Continued focus on cross-selling has resulted in32 of our top 100 customers buying more than one servicefrom us, up from 24 in 2007.

Response to the economic climateWe have not ignored the macro-economic climate in decidinghow to implement our plan. We have continued, and if anythingincreased, our relentless focus on improving the balance sheet.Collection of cash has been improved again, with the amountof receivables overdue now down to 7% (2007 13%). We alsoreceived £8.2m cash inflow from the disposal of Bath,contrasting with a £4.5m cash outflow from the acquisition ofAi. As a consequence of this discipline, we have halved our netdebt to £13.1m (2007 £26.3m). To support this debt positionwe have had welcome success in renewing our Group lendingfacilities (totalling £40m) for three years, as detailed in theFinancial Performance Report. There can be no better time tohave a strong balance sheet.

Economic circumstances have affected all of our customers.Our bias towards the Financial Services sector naturallyincreases our concerns, with the most direct consequencebeing the lack of visibility of marketing spend. Communisis isinsulated against the worst effects of this uncertainty by thelong-term nature of many of our contracts; much of ourTransactional segment is covered by contracts of five yearduration or longer. However, there are parts of the business –particularly in Direct Mail – where we are exposed. We havetherefore taken cost control very seriously in recent months,and will continue to do so in 2009. We have completedredundancies affecting about 6% of our workforce, andimplemented a Group-wide wage freeze for 2009. We workedwith KPMG during the third quarter of 2008 to identify a rangeof efficiency projects in our overhead structure, and these arealready starting to deliver benefits in our cost base for 2009.Controlling fixed costs in all these ways helps to make usresilient to current conditions.

Two contingent liabilities inherited from historic businessdisposals crystallised during the year, following defaults bythe assignees of the underlying property leases caused bythe economic climate. These gave rise to a significantexceptional provision against the associated costs.

Resolving the pension planAt £135m, the gross pension scheme IFRS liability isconsiderably bigger than the market capitalisation of the wholeCompany and this produces undue volatility in the balancesheet. Despite additional contributions of £17m since 2005,the scheme deficit has not significantly reduced, and recentinvestment performance makes it clear that further cash will

Progress continues well and our focus is higher up the customer valuechain – we’ve integrated our services to achieve higher margins.




Communisis plc 2008

4

be required if there is no change in our approach to schememanagement. The Board has therefore decided to deploythis extra cash to reduce significantly the scheme liabilities,rather than simply to fund the deficit. We intend to inject up to£8m of cash into the scheme in stages over the course of 2009to fund enhanced transfer value and early retirementprogrammes. These actions between them are designed toremove about 75% of exposure to the scheme liability, andthereby reduce volatility on Company assets. These initiativeswill have appropriate control mechanisms to ensure that theywill not impact the Company’s levels of capital expenditure,operating capability or dividend policy. Details of the programmeare contained within the Financial Performance Report.

Segmental performanceTechnology & ServicesProfits increased by 27% to £5.1m (2007 £4.0m). Margins inthis our most value-added segment remain high at 43%, andthe revenue growth is coming through from many of ourcustomers. Our services now include consulting to improvethe marketing process and tools to deliver increased efficiencyand effectiveness to our customers’ marketing campaigns. Allof our IT products are integrated into a single portal that canbe accessed through the customer’s desktop, which makesthe sales process more straightforward. We have also beensuccessful in growing business from our £2.3m investment inHewlett Packard’s Exstream Dialogue product, whichautomates the document composition process. Several largecustomers were amongst the first to adopt the benefits thatthis product delivers. Our relationship with Procter & Gambleto deliver the IQ print procurement product has beenexpanded to include North America. Numerous smallercustomers are adopting elements of our IT solution.

Growth in this segment will be considerably increased in2009 following the acquisition of Ai in December 2008.Our whole portfolio of services is linked by the importanceof customer data. The acquisition of a company that offersgood services to data users – including analysis, cleansing,profiling and complex data combination to predict customerbehaviour – fits with our portfolio exceptionally well. Ai andCommunisis are both strong in Financial Services, butcomplementary in other markets. This will drive cross-selling.Our technology offerings also fit well together, and we willintegrate Ai Refiner, their software suite, into our ownmarketing portal. This will provide a single product setcovering all aspects of the marketing process, allowingdirect marketing from the desktop. In other respectsAi will operate as a separate business, so that ourintegration efforts can be focused on the software andcustomers alone.

Direct MailOur business in Leeds remains the largest Direct Mail factoryin Europe, and our investment programme during 2008increased our range of capabilities and the quality ofcampaigns we deliver. Profits increased by 55% to £5.5m(2007 £3.5m). We have broadened our range of customersduring the year in several important ways. Our efforts to growcharity sector business have paid off with customers such asthe Woodland Trust, RSPB and RNLI. The fastest growingcustomer was RBS Insurance, who have been at the forefrontof embracing our investment in digital print. We have investedmore than £2m over the last 18 months and now boast sevenpresses. This enables us to run much larger campaigns forcustomers with the highly personalised and more effectivedocument content that they look for. This technology hasspread from its former use in very short run jobs to campaignsof up to 250,000 recipients.

This is symptomatic of a more general trend across thisbusiness of customers turning away from high volume,low value production towards more targeted, shorter butmore frequent campaigns. Our investment programme isdesigned to re-purpose the factory in this way, step-by-step,over the next few years; the digital investment is one example.The challenge is to manage the balance of work during thattransition to maintain sufficient high volume work in themedium term to cover the fixed cost base, while growing thehigher margin, more specialised new services. It is fortunatethat we began this change programme two years ago.Nonetheless, this is a balancing act made more difficult bythe economic climate. Performance in the business was verystrong in the first half of 2008, and we came through thesummer in a very healthy financial position. But from lateSeptember we began to see the effects of customeruncertainty. A few of our more financially stressed bankingclients cancelled virtually all mailing in the fourth quarter, andother customers cut demand too. As a result, the Direct Mailbusiness fell short of its target for the year, and enters 2009with a run-rate reduced by about 20%. We have made theassumption that this level of demand will not increase duringthe whole of 2009, and have planned cost control measuresaccordingly. We are therefore pleased that efficiencyprogrammes commenced in 2008 will deliver benefits in 2009that help deal with this issue. However, if revenues decline inline with our assumptions, this will inevitably have an adverseeffect on the bottom line of this division.

TransactionalOverall, our Transactional segment increased its profits by20% to £13.3m (2007 £11.1m). There were two importantdevelopments in our statement and billing business in the

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Chief Executive’s Report continued

Long-term contracts and an excellent technology offering put us in astrong position during a challenging economic climate.

in a




Communisis plc 2008

5

ail factoryng 2008uality ofto £5.5mustomerss to grows such asgrowingforefrontinvestedast sevenaigns foreffectivelogy hasampaigns

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second half of 2008. The first came with the opportunisticacquisition of the order book of one of our competitors, MailSolutions Ltd, following a fire in their premises. We acquiredan order book of approximately £3m per year for aconsideration of up to £400,000. Most of this work fitted wellinto Speke, and has added 12 new customers to that facility.The largest contract involves production of portfoliovaluations for a large investment bank, and we have alsoadded some business-to-business work to our portfolio.Since this has been achieved with little additional cost exceptmaterials, this has had a positive effect on the bottom line.

The second has been the encouraging uptake of ourtechnology offerings by customers in statements. Both themajor customers in Speke have placed IT contracts with us tohelp their workflow and document production processes.This development is, we believe, tangible evidence oftranspromotional business growth. We now issue about300,000 e-mail communications a month for Centrica,for example. As our portfolio of services becomes moreintegrated, we should look for more examples like this.

Our cheques business continues to deliver excellent results.As previously disclosed, volume erosion in the cheque marketis running at between 8% and 10% per year, but we are ableto control costs to maintain margins. We continued our effortsto grow related security print business, with several successesin our payslip production service. We saw some short-termincrease in cheque usage in the latter part of the year, whichhelped to offset weakness in Direct Mail. It is difficult to predictwhether this will be repeated in 2009, but it does show thehigh level of operational gearing in this business.

Print SourcingOur Print Sourcing business increased profits by 52% to£1.3m (2007 £0.9m), even though it has, as predicted,continued to suffer margin pressure with the change in marketconditions and business model. It is no longer possible toachieve a profit from contracts involving only the mark-up ofbought-out print. However, these contracts can, whenmarried to a portfolio of higher-value services, form a usefulplatform to cross-sell and hence earn profits accounted forin other segments. We have achieved a number of usefulchanges in our mix of business, with the withdrawal fromproblematic small-scale presences in European offices andthe concentration on a smaller number of more promisingrelationships. We have renewed our major contracts with thePost Office and Veolia, for example. Around twenty PrintSourcing customers have now adopted elements of our ITportal, with more than a third of all print orders being placedthrough Connect or IQ.

Print Sourcing is the focus of a renewed effort to win severalmajor new customers, with an offering including print buying,but including our technology and manufacturing capabilities.Sales cycles with these major customer engagements arelong, but benefits will accrue over time.

OutlookWe cannot expect to weather the current economic climatewith no ill effects. Our competitors are already making effortsto cut prices to, we believe, unsustainably low levels.There is less work available for our Direct Mail business.Many of our customers, particularly in the Financial Servicessector, are seeking ways to save money. However,Communisis is in a very good position to emerge from thisdownturn ahead of its competitors. We have a strong balancesheet. Our investment in new services is well advanced, andprovides us with alternatives to price reduction whenaddressing customer demands to reduce expenditure. Inaddition, our customers are contemplating some majorprojects, such as the re-engineering of marketing process,which in easier times would not be considered. We are well-placed to benefit from these. Those of our segments that areunderpinned by long-term contracts also provide us withsome measure of stability which will contribute to a moreconsistent profit performance during difficult periods, as wesaw in the fourth quarter of 2008.

Taken together, these aspects of strength give us optimismfor the future. We expect 2009 to be a difficult year forall businesses, but we will not let up on our investmentin services, nor our focus on higher-value propositions.Our balance sheet strength allows us to do this. This isthe best response possible to the environment we all faceat present.

Steve VaughanChief Executive




Communisis plc 2008

6

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Despite the slowdown experienced by parts of the businessin the fourth quarter of 2008, Communisis delivered a 32%improvement in profit attributable to shareholders and halvedits net debt.

The Group enters an uncertain 2009 with a growing andincreasingly successful portfolio of higher margin, value-adding services to offer and a much reduced reliance on lowmargin, highly commoditised offerings. Much of our businessis on long-term contract and our balance sheet is furtherstrengthened. We have achieved our lowest level of net debtfor five years and successfully renewed our bank facilities fora three-year term.

ProfitabilityAll four of our business segments delivered year-on-yearprofit growth in excess of 20% in 2008. We have continued toinvest in marketing and account management as we said wewould and together this has enabled us to report a 43%increase in Profit from operations before exceptional items to£15.0m (2007 £10.5m).

Included within Profit from operations are two items that,because of both their size and nature, we have classified asexceptional. The disposal of our Bath Business Formsbusiness was completed in June, resulting in a £1.4m pre-taxexceptional gain, and was reported in our 2008 interimresults. The other exceptional item is a property leaseprovision. We have established the provision following thefailure of two businesses previously sold by the Group thatwere occupying properties under leases guaranteed byCommunisis. This issue is discussed in more detail below.

After accounting for all exceptional items, Profit fromoperations increased by 37% to £14.4m (2007 £10.5m).

The table opposite summarises our profit and loss accountand shows the revenue and profit performance of our fourbusiness segments.

Profits from our Technology & Services business have grownby 27% in 2008 and the margin has risen to 43% (200732%). Some of the one-off higher volume, lower marginassignments we undertook in 2007 have not recurred, leadingto a 4% year-on-year fall in revenue. In profit terms this workhas been more than replaced by new higher margin work froma much broader range of customers. In some cases, we havebegun new assignments only towards the end of 2008, andthe bulk of the revenue and profit is expected to be earnedover the next two to three years. With much of our 2009expectation for this segment already sold, the prospects for

continued strong growth in Technology & Services are verygood. In addition, we will see further strong growth in thissegment from the acquisition of Absolute Intuistic Ltd (‘Ai’).The impact of this transaction is discussed below under theheading Absolute Intuistic.

Print Sourcing profits grew to £1.3m in 2008 (2007 £0.9m);however, the result fell short of expectations at the beginningof the year. After a very strong first half driven by high activitylevels, the second half was impacted by the loss of theSainsbury’s and HBOS contracts. Other segments in theGroup have benefited significantly from the resultingrelationship with Williams Lea, although we no longer haveour lower margin Print Sourcing work. This segment hasalso borne a charge for the closure of our Spanish officeand undertook further cost reduction in December toachieve a full year of benefit in 2009. Whilst Print Sourcingmargins remain low at around 1%, customers in thissegment are increasingly likely to buy higher margin servicesfrom other segments.

Financial Performance Report

2008 2007£m £m

RevenueTechnology & Services 11.9 12.4Print Sourcing 96.7 107.4Direct Mail & Business Forms 91.8 115.7Transactional 57.3 55.1

257.7 290.6

ProfitTechnology & Services 5.1 4.0Print Sourcing 1.3 0.9Direct Mail & Business Forms 5.5 3.5Transactional 13.3 11.1Central costs (10.2) (9.0)

Profit from operations beforeexceptional items 15.0 10.5

Exceptional gain on disposal ofBusiness Forms 1.4 –

Provision for legacy property leases (2.0) –

Profit from Operations 14.4 10.5

Net finance cost (1.7) (2.6)Tax (4.1) (1.3)

Profit for the year 8.6 6.6

Earnings per share (pence) 6.2 4.7

Taken together, the range of sound financial management disciplinesare significantly contributing to the Group’s successful strategy.




Communisis plc 2008

7

Our Direct Mail and Business Forms segment performedvery strongly in 2008. The margin in this segment hasdoubled, from 3% in 2007 to 6% in 2008. In part this reflectsthe disposal of the lower margin Bath Business Formsbusiness in June. Of far more significance, however, is thecontribution that higher value services are making toprofits from our Leeds Direct Mail business. We are seeingstrong growth in digital print following a £2m investment instate-of-the-art facilities, and response handling is alsogrowing strongly. These services are both at margins inexcess of 20%. The change in the nature of work inDirect Mail positions us well to withstand an uncertaineconomic outlook and exactly reflects our strategy. Thebusiness has also benefited from the full year effect ofall the cost and efficiency measures implemented in 2007.The drive for increased efficiency and lower fixed costs willcontinue in 2009 nonetheless, although we are far betterplaced than we were two years ago. This business is still theone in our Group that has the most exposure to the marketdownturn. At the time of our October Interim ManagementStatement we reported a reduction in demand for highvolume direct mail campaigns. This weakness continued inquarter four of 2008 such that revenues were 20% belowour expectations. 2009 is budgeted to continue at this lowerrun rate.

Profits from our Transactional segment have grown by 20% to£13.3m (2007 £11.1m). In 2008 our cheque business benefitedfrom higher demand associated with the credit crunch. Withefficiency gains early in the year and by ensuring that printingis done in the facility best suited to the task, cheque profits areonce again at record levels. Our statement and billing businessgrew following a full year of contribution from our new contractwith Co-operative Group. In addition, we have been verysuccessful in selling technology solutions to our majorTransactional customers. Where we have done this, the profitsare included within the Technology & Services segment. Withthe acquisition of Mail Solutions contracts expected to deliverbenefits in 2009 we are well placed to withstand any softeningof discretionary spend.

Following investment in our account management andmarketing infrastructure in the second half of 2007, the runrate on Central Costs has been steady throughout 2008. Inaddition to the costs of our corporate head office, accountmanagement and marketing teams, we also include the costof Group procurement and IT development under the CentralCost caption. We expect to make further investments in themarket-facing teams and also in IT development in 2009.These investments will be paid for by efficiency savingselsewhere within Central Costs.

Operational restructuring costs have been successfullymanaged down to below the £1.5m target we set for 2008.These costs have been absorbed by the segment to whichthey relate and broadly have impacted all segments exceptTechnology & Services in equal proportion. We expect tospend at least this amount in 2009, possibly more dependingon how the economic situation unfolds.

Net finance costs have fallen by 35% to £1.7m (2007 £2.6m).If the non-cash impact of pensions, foreign exchange andinterest receivable on tax repayments in 2007 are excludedthe fall is an even more significant 42%. Whilst the Groupbenefited from the fall in interest rates towards the end of2008, the Group borrows at a margin over LIBOR and so wasimpacted by the much wider gap between LIBOR and thebank base lending rate that existed for much of 2008. Themajor driver for lower interest charges in 2008 was the lowerdebt levels achieved by the Group when compared with 2007.We expect that these upsides will be sustained in 2009though the benefit will be more than offset by a significantadverse swing in the non-cash pension interest charge. Thisis a consequence of the deterioration in the value of assetsheld by the pension fund. The Group pension issue isdiscussed in more depth below.

The tax charge of £4.1m (2007 £1.3m) represents an effectiverate of tax of 32% (2007 17%). The 2008 rate is distorted bythe very high (99%) effective rate of tax associated with thedisposal of the Bath Business Forms operation. Excludingthis exceptional transaction reveals an underlying effectivetax rate of 25% compared with the UK statutory rate for theyear of 28.5%. The major drivers of the lower rate are therelease of contingent provisions from prior years (£1.7m)offset by disallowable expenses, unrelieved overseas lossesassociated with our exit from the Dutch and Spanish PrintSourcing businesses and changes to the Industrial BuildingsAllowances regime. The effective rate in 2007 was lowfollowing the release of certain contingent provisions. Ourexpectation for the effective rate of tax in 2009 is for it to beslightly in excess of the UK statutory rate as a consequenceof disallowable expenses.

Overall, the Group’s robust financial performance in 2008results in Profit after tax and earnings per share bothincreasing by more than 30% compared with 2007.

Legacy property lease provisionsThe Group has retained a number of pre-sale liabilities fromthe significant disposal programme beginning in the year2000, and also from disposals previously made byWaddington plc (now Waddington Limited, a wholly-owned

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Communisis plc 2008

8

subsidiary of Communisis plc). The majority of these liabilitiestake the form of rent guarantees given to landlords ofproperties used by the businesses being sold. With thepassage of time, many of the guarantees have lapsed, or theleases have expired leaving no residual liability. A few remain,however, and where they do, the Group is dependent on thetenant’s ability to continue to pay the rent as it falls due.

Management monitor the financial health of all tenants wherethere is residual risk to the Group. Almost without exception,these tenants have settled their liabilities satisfactorily.However, in January 2008, one of these tenants, JaycareLimited (‘Jaycare’) went into administration. Although Jaycarewas subsequently bought from administration as a goingconcern, it avoided its liabilities under the lease as aconsequence of administration. Annual rent on the propertyoccupied by Jaycare is £225,000 and the first opportunity toexit the lease is in October 2012. In January 2009, the Groupwas notified that another tenant, Palgrave Brown (UK)Limited, had also been unable to avoid administration. In thiscase, annual rent is £230,000 and the first opportunity to exitthe lease is in March 2010.

The Board has reviewed these and all other remaining liabilitiesof this nature in the light of the current economic outlook andconsiders it appropriate to establish a provision of £2m. Thisprovision has been classified as exceptional because of itssize and the fact that the liabilities arise from businesses thatceased to be part of Communisis some years ago so that thecosts are not related to current operating activities.

Cashflow and net debtConsiderable profit growth and continued intensive focuson cash management resulted in a strong cashflowperformance for the second successive year. We havecontinued to make significant strategic investments whilst atthe same time halving Group net debt such that at £13.1m(2007 £26.3m, 2006 £44.9m) it is now at its lowest level forfive years.

We have maintained downward pressure on working capitaland this has produced a further cash inflow over the year.Largely this is driven by a further improvement in theamount of customer debt that is overdue. By the end of 2008just 7% of customer debt was overdue (2007 13%, 200633%). Expressed in absolute terms, the £13.5m ofunimpaired customer debt overdue at the end of 2006 hasbeen reduced to just £0.9m. Our management of customerdebt, as well as further inventory management initiatives, hasproduced a year-on-year working capital reduction of £1.7m(2007 £16.2m).

Tax cash outflows have continued to run at low levels in 2008as we have benefited from repayments following successfulresolution of capital loss claims. Lower debt levels throughout2008 have resulted in a reduction of more than £1m in the cashcost of interest on our debt facilities. Overall, the impact is a netinflow of cash from operating activities of £19.6m (2007 £27.9m).

We have continued to invest to support our strategy.In addition to an actual net capital expenditure cash outflow of£6.9m (2007 £8.5m) we have made further commitmentsof £2.8m which will fall due to be settled in 2009. In total,capital expenditure plus outstanding commitments is inline with management expectation for 2008. As well asapproximately £2m of annual spend maintaining our existingasset base, we have made significant investments intechnology for onward sale to customers and invested tomaximise efficiency and reduce our environmental impact. It isour intention to maintain our investment programme in 2009albeit at slightly reduced levels.

The cash impact of the acquisition of Ai, discussed below inmore detail, is limited in 2008 to payment of the initialconsideration of £4.5m. The disposal of Bath Business Formsgenerated £8.2m byway of initial consideration; there is a further£4.6m to follow that is not contingent on future performance.

2008 2007£m £m

Profit from operations beforeexceptional items 15.0 10.5

Depreciation and other non-cash items 7.9 9.3

Decrease in working capital 1.7 16.2

Additional pension scheme contributions (1.2) (3.1)

Interest and tax (3.8) (5.0)

Net cash inflow from operatingactivities 19.6 27.9

Net capital expenditure (6.9) (8.5)

Business disposals 8.2 1.2

Business acquisitions (4.5) –

Dividends (3.5) (1.8)

Other 0.3 (0.2)

Movement in net debt 13.2 18.6

Opening net debt (26.3) (44.9)

Group net debt (13.1) (26.3)

The table below summarises the Group’s key cash flows:

Financial Performance Report continuedThe 2008(2007 1.6of 2008 pof 1.7%.target ofshareholdregister a

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Communisis plc 2008

9

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ws: The 2008 final dividend is proposed to be 1.635p per share(2007 1.635p). This takes the total dividend payable in respectof 2008 profits to 2.495p per share (2007 2.453p), an increaseof 1.7%. The Group remains within its self-imposed cover ratiotarget of 2-2.5 times profit. Dividends will be paid, subject toshareholders’ approval, on 1 May 2009 to shareholders on theregister at the close of business on 3 April 2009.

In December 2008 the Group announced the replacement ofsome of its existing lending agreements with a three-year,£20m committed loan facility with Lloyds TSB plc. In addition,in February 2009, we have added a second £20m three-yearcommitted loan facility with Barclays Bank PLC. Both loansare fully revolving with the Lloyds and Barclays facilitiesrepayable in December 2011 and February 2012 respectively.Together these facilities leave us very well positioned tocontinue with our strategic plan.

Absolute IntuisticOn 22 December 2008 Communisis acquired the entire issuedshare capital of Ai for a total consideration of up to £12.5m incash. The Group paid an initial consideration of £4.5m.A deferred cash consideration of up to a further £8m ispayable early in 2011, based on financial performance overthe period from 1 September 2008 to 31 August 2010. In theirfinancial year to 31 August 2008, Ai achieved EBITDA of£0.9m, implying a multiple of five times for the initialconsideration. Deferred consideration becomes payable onthe uplift in EBITDA at the same multiple. The acquisition isexpected to be earnings accretive in 2009.

PensionsUnder International Accounting Standard rules our pensiondeficit gross of deferred tax has fallen to £11.1m (2007£14.7m). A fall in the long-term anticipated inflation ratecoupled with high corporate bond yields are the main driversof a £30m fall in the gross liability to £135m. This fall is notquite matched by the 18% fall year-on-year in the marketvalue of pension scheme assets held to match this liability.With corporate bond yields now falling and liabilities thereforerising, without an equivalent recovery in asset values in 2009the deficit can be expected to deteriorate.

The triennial pension scheme valuation, as at 30 September2008, is in progress. When last assessed, at 30 September2005, there was a deficit of £25m. With life expectancyincreasing and depressed asset values, despite additionalcontributions to the scheme of £17m since 2005, the earlyindications are that the triennial valuation will produce ahigher deficit.

The existing deficit recovery plan requires us to make fivefurther annual payments of £2m. Given current conditions, thetotal recovery payment required by the scheme will almostcertainly increase. In this situation we would expect to agreea repayment period considerably longer than the current fiveyears so that our investment programme is not undulyconstrained.

It is against this backdrop that the Board has been reviewingalternative strategies to deal with the challenges posed by thepension scheme. We have concluded that more value will bederived from future payments to the scheme if they areapplied to reduce and ultimately remove the risk associatedwith the liability. We consider that the most appropriatesolution is a programme of enhanced transfer and earlyretirement offers followed by the de-risking of retired memberliabilities with a specialist provider. This is expected to takethe form of either a buy-out or buy-in of the pensioner shareof the total remaining liability.

It is our intention to pursue this strategy. Our aim willbe to de-risk up to 75% of plan liabilities and we anticipatethe programme will run into the first half of 2010. This willresult in an acceleration of payments to the scheme, thequantum of which is dependent on market conditionsprevailing at the time of member transfer and alternativeinvestment opportunities that might arise. Our very low debtlevels coupled with new committed bank facilities indicatethat in 2009 the appropriate financial commitment will be inthe region of £8m.

OutlookWith our lowest level of debt for five years and new three-yearcommitted loan facilities totalling £40m, we are a verydifferent business to that of two years ago. We have reducedour exposure to low margin commodity print and added manyhigher margin, technology-based services to our range. Goinginto a period of economic uncertainty we will maintain thetight financial control that has served us so well and focus onselling these higher margin, value-adding services.

Peter KingFinance Director




Communisis plc 2008

10

Communisis remains strongly committed to its corporateresponsibilities in relation to the communities within which itoperates and to the environmental consequences of itsactivities. We believe that this commitment enhances ourprospects of successfully achieving our business objectives.

Policy and managementThroughout 2008, as in previous years, we have focused onthe following key areas:

the health and safety of our employees;improving our environmental performance;conducting our business with honesty and integrity; andcontributing to the development and wellbeing of our localcommunities.

Our internal control procedures also apply to Corporate SocialResponsibility (‘CSR’). Regular risk review reports are presentedto the Board and Leadership Team, and CSR is considered asappropriate in those reports.

Health, Safety and the Environment (‘H,S&E’) –organisation structureThe Group’s activities in the fields of H,S&E remain under thecontrol of our Head of Risk and Environmental Management(‘HREM’). In turn, the HREM reports to the Company Secretaryand thence to the Board. In addition, the H,S&E team includesthe Group Environmental Support Manager.

Individual operating businesses are responsible for H,S&Ematters and as such all responsibilities are in the hands ofsite Managing Directors or General Managers. Each sitemanager is supported by a site Health, Safety andEnvironmental Manager or Co-ordinator, who also has a ‘dottedline’ responsibility to the HREM. Overall responsibility for H,S&Elies with the Chief Executive.

All of our site H,S&E Managers and Co-ordinators are‘NEBOSH’ (National Examination Board for OccupationalHealth and Safety) qualified and this, together with a continuousreview and improvement of talent at our sites, leads us tobelieve that our H,S&E function is well placed to provide thehighest quality of service to each site and to help us achieveour goals.

Our commitment in this area is set out in our H,S&E Policies,last updated in October 2008, and supported by ourH,S&E Manuals.

Our Policy and Manuals are regularly reviewed by the H,S&Eteam, with the next revision scheduled for April 2009. TheManuals contain details on organisational arrangements(including roles and responsibilities), management andoperational procedures, together with best practice guidance,which enables us to meet the requirements of current H,S&Elegislation applicable to our business activities.

Through audit, inspection and arranged visits the H,S&E teammonitor and report on how relevant policies and procedures areimplemented by our operating businesses. Collectively, weensure that employees are appropriately trained to understandthe working procedures they must follow.

In line with Group procedures each operating site has beenaudited by the HREM with a view to benchmarkingperformance across the Group, helping sites to identify andprioritise issues for improvement and ensuring legal andregulatory compliance.

The results of these audits are presented directly to the ChiefExecutive, the Company Secretary and to all relevant membersof the Leadership Team, and appropriate action is taken.

H,S&E issues are discussed at various levels within the Groupincluding at quarterly Group H,S&E Study Days which arechaired by the HREM and attended by the Company Secretary.This process operates to allow the cross-fertilisation of ideasand to monitor the H,S&E performance of the operatingbusinesses, and allows them to set site-specific targets forimprovement, which may exceed the requirements set out inthe Group objectives.

Environmental performanceIn our 2007 CSR Report we highlighted a major change inemphasis in relation to environmental impact reduction, awayfrom localisedmanagement to a Group strategy encompassinga combined series of challenges and objectives which wehoped to achieve in the period from 2008 to 2010. This focushas not changed and we are pleased to report that wehave made significant progress towards achieving ourenvironmental targets.

We have defined 2007 as the baseline year for comparison ofthe current objectives and as such we have reviewed ourbaseline data in line with the current organisational structure.As a result we have made the following amendments:

we have amended our energy conversion factors in line withDefra Voluntary Reporting Guidelines 2008, and

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Communisis plc 2008

11

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following the sale of the Bath Business Forms business wehave deleted the related emissions data from our baselineyear. This ensures that we measure progress against ourobjectives resulting from efficiencies at our remaining sites,and do not account for any reduction as a result of the sale.

Progress during 2008Managing our systemsWe have retained certification to the internationalEnvironmental Management Standard ISO 14001:2004 at allof our UK operations. We have also retained our multisitecertification to the Forest Stewardship Council (‘FSC’) and theProgramme for the Endorsement of Forest Certificationschemes (‘PEFC’) chain of custody standards.

In 2007 we purchased 83,000 tonnes of paper of which 1.8%was FSC certified. During 2008 we have decreased thetonnage of purchased paper due to efficiencies and the saleof Bath and so our total paper purchased was 60,000 tonnes,of which 11.2% was FSC/PEFC certified, an increase of9.4 percentage points.

During 2008 we have suffered no prosecutions as a resultof breaches of environmental legislation.

Working to reduce carbonIn the 2007 CSR Report we explained how we had engagedwith the Carbon Trust to identify areas in which we couldreduce our carbon impact. We have worked throughout theyear to implement a number of the actions identified by thatexercise. In particular, and with funding from the Carbon Trust,we have conducted a series of energy awareness sessionswith our employees to help establish better understanding ofhow we can all help to reduce our individual impacts.

Operationally we have reviewed the recommendations aroundlighting, heating, compressed air and machine shut-downsand are actively working towards the implementation of allcost effective projects.

Our amended carbon footprint for the 2007 baseline year is15,059 carbon tonnes (Ct) and we are pleased to report ourcarbon impact for 2008 was 14,359 Ct, a reduction of 5%.

Purchase of energyDuring 2007 and the first half of 2008 Communisis purchased23% of its electricity from Combined Heat and Powergenerated sources. In 2008 we changed our sourcing toinclude renewable energy (i.e. wind generated). Therenewable energy contract runs until the end of 2009, and weanticipate the proportion of electricity purchased from

renewable sources to be approximately 51% of our totalelectricity supplied.

We have reduced our gas consumption by 9% and increasedour electricity consumption by 3%; however, this additionalusage of electricity is a direct consequence of increasedproduction at our centre of excellence in Speke. ExcludingSpeke we have reduced electricity consumption by 7%during 2008.

Production volumes at our Speke site have increased by 150%since 2007, whilst carbon intensity has reduced by 25% from0.0055 kg of carbon (kg/C) per mailed item to 0.0041 kg/C permailed item, demonstrating that, although consumption isgrowing, efficiencies are demonstrable and ongoing.

Our Leeds operation achieved an 80% reduction in itsClimate Change Levy as a result of the existing ClimateChange Agreement and has demonstrated a 6.5% reductionin carbon intensity since 2007.

Producing less wasteWe are very pleased to report that in 2008 we have reduced ourwaste sent to landfill by 37%, significantly exceeding our targetof 20% by 2010. Our amended tonnage for 2007 was 439tonnes, in comparison with 276 tonnes in 2008. We also takepride in reporting that since 2005 Communisis has reduced itswaste to landfill by 85%, from 1877 tonnes in 2005 to 276tonnes in 2008.

We have achieved these successes through a combination ofincreased recycling and working closely with our wastecontractors to ensure we receive all available recycling servicesand accurate tonnage data. Where possible, and whereenvironmentally friendly alternatives exist, we will alwaysconsider as a first option reducing the amount of waste wecreate by removing the stream altogether.

Influencing our supply chainDuring 2008, the Communisis Sourcing team has reviewedand reissued our pre-qualification criteria for print suppliers,which now include a requirement for ISO 14001 compliance.We are pleased to report that as of December 2008 85%of our print suppliers had achieved ISO 14001 certification.The remaining 15% are working towards certificationand will have achieved this by the end of the second quarterof 2009. These statistics have been verified by our Sourcingteam during supplier audits. The 85% who have alreadyachieved ISO 14001 represent 82% of our total spend withprint suppliers. In the course of this initiative we haveremoved from our approved supplier list ten printers who


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Communisis plc 2008

12

were unable to comply with our requirement that theyachieve ISO 14001.

The Sourcing team has also made excellent progress with ouramended criteria for paper suppliers. We are able to reportthat 95% of our paper tonnage is supplied by mills whichhave FSC or PEFC certification; in 2007 this was 90%. Weare confident that we will achieve our target of 100% of papertonnage supplied by mills with FSC or PEFC certification bythe end of 2010. In addition we can report that 98% of ourpaper supply chain is conforming to our definition ofsustainability, which we have specifically designed tomeasure sustainability within the paper and print industry withits related impacts and emissions.

We have extended the deadline for our recyclable productstarget until the end of 2009. During 2008 we have reviewedthe recyclable proportion of the products we manufactureand have identified the envelope window as the main

non-recyclable element. Due to the volume of envelopes weuse this has the effect of making approximately 2% of ourproducts non-recyclable. We have tested a number ofrecyclable windowed envelopes through both internalproduction and mailing processes. These tests have beensuccessful. During 2009 we shall be working with our supplypartners to agree a cost effective range of options to satisfyour requirements in this area. We also intend to engage withthe Waste & Resources Action Programme during 2009 tohelp us capture and target the non-recyclable elements of ourproduct range.

Financial resourceIn our 2007 CSR Report we stated that our financialcommitment to environmental initiatives in 2008 would total atleast 10% of our capital expenditure budget with a minimumof £1m. During 2008 we have invested £1,026,680 inenvironmental projects of which 97% has been spent on siteenvironmental improvement projects. These include avariety of initiatives including wastage audits, the expansionof environmentally friendly digital print capabilities, energyefficient lighting systems and building efficiencyimprovements as identified by the Carbon Trust.

During 2009 we will review the commitment to investment inline with the current Group structure and we shall continueour efforts to improve our environmental performance.

GreenprintOur Greenprint document, which explains the challenges wehave identified whilst addressing our environmental impact, isstill relevant twelve months after its first issue. However, weintend to update this document during the first half of 2009 toensure that our stakeholders are kept up to date with ouradditional services and case studies on our environmentalachievements, investment and commitment.

Greenprint can be found at www.communisis.com

Health and safety performanceOur objective remains to prevent any harm befalling anyperson on our sites, be they employees, contractors orvisitors. We are pleased to report further progress towards thisgoal, with accident frequency rates down on 2006 and 2007.

In 2008 we achieved an Accident Incidence Rate per 100employees of 8.40, a significant reduction on the 2007figure of 12.11, having reduced the number of accidents inthe year from 232 to 143. We have also reduced the numberof RIDDORs (Reporting of Diseases and DangerousOccurrences Regulations) from 13 to 9. For the purpose of

Corporate Social Responsibility Report continued

350

300

250

200

150

100

150

100

Number o

20

No.

30

2

Current Status of Group Environmental Objectives

Maintain our certification Achieved/to ISO 14001:2004 Ongoing

Measure our carbon footprintby the end of 2007 Achieved

Reduce our carbon footprint by 15%by the end of 2010 On Track

Reduce our energy intensity by 20%by the end of 2010 On Track

Reduce our use of landfill by 20% Exceededby end of 2010 Target

Reduce our paper wastage by 20%by the end of 2010 On Track

99.5% of what we produce or supplywill be recyclable by the end of 2008 Extended(unless instructed otherwise by deadlinecustomer) (see below)

Achieve and maintain our certificationto FSC/PEFC Chain of Custody Achieved/standards Ongoing

Migrate our paper supply to FSC orPEFC compliance by the end of 2010 On Track

Expand our supplier qualificationcriteria for external printers to comply Extendedwith ISO 14001 by the end of 2008 deadline


this report RIDDOR is defined as an absence from work ofthree days or more caused by industrial injury. The graphbelow shows our accident and RIDDOR totals during theperiod 2004-2008.

It is also very important that all near misses are formallyreported and action taken in terms of investigation, recordingand analysis. This again enables suitable remedial orpreventative action to be taken.

In 2007 there were 302 recorded cases of near misses, whichfell to 125 cases during 2008. This is again a significantreduction, which we believe is a direct result of continuingstrong H&S management in all our operations. We continue toencourage employees to report near misses.

We are pleased with the successes achieved in 2008 inreducing the incidence of accidents, the number of RIDDORsand the number of reported near misses. In part at least thishas been a result of line managers taking a much more

proactive role in the management of H&S in the areas forwhich they are responsible. In turn, we believe this has beenencouraged by more active participation in training in thisarea; during the year 98 managers attended our internal‘Managing Safely’ course.

During the past year we have suffered no prosecutionsresulting from breaches of health and safety regulations.

In addition each of our major operational sites is certificatedto the international standard Occupational Health and SafetyAssessment Series (‘OHSAS’) 18001:1999.

Business Continuity Management (‘BCM’)During 2008 we continued our initiatives, begun in 2007, tooverhaul our BCM plans. This involved extensive training, andforced the Group’s operations to review and assess theeffectiveness of their procedures for handling emergenciesand subsequent disaster recovery.

Test scenarios were conducted across the Group using sitespecific ‘emergencies’ identified in the site risk register asbeing reasonably foreseeable. The lessons from these testswere then used to update and improve the existing BCMplans. Regular site testing of BCM plans is now a part ofstandard Group operating procedures.

We believe that our current BCM plans, which are subject tosix-monthly reviews, are industry-leading.

PeopleOur people are the most important elements in our efforts toachieve improvement in our performance. We havestrengthened our team with the skills which should enable usto deliver business growth.

We offer competitive remuneration, including long-termincentives, to ensure we attract the best, and we remaincommitted to the personal development of our employees.Individual training, tailored to specific needs, is offeredthroughout Communisis via the use of internal and externalcourses.

During 2008 our training efforts have been focused principallyon further developing the skills of our sales accountmanagers, while our regular training on H,S&E matters hascontinued in a similar vein to earlier years, although withhigher levels of participation. In 2008 we have also introduceda graduate development programme and considerabletraining effort has been directed in this area duringthe year.



Communisis plc 2008

13

lopes we% of ourmber ofinternal

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Communisis plc 2008

14

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Corporate Social Responsibility Report continuedWe have also reintroduced print apprenticeships to ourrecruitment plans at the Direct Mail operation in Leeds andhave also started a programme to increase significantly thenumber of our staff in Leeds working towards NVQs. In all,during 2008 we have again undertaken more than 900 man-days of staff training.

The external perception of the Group is also given carefulconsideration in order to maintain a reputation for honesty andintegrity. We actively encourage an open culture, and stronglybelieve that this is a significant factor in helping to achieve ourbusiness objectives.

Community relationsWe recognise our responsibilities to the communities in whichwe operate and encourage our businesses and employees tosupport the development and wellbeing of their localcommunities through a variety of activities. We recognise,however, that at a time when profits and dividends havebeen under pressure we must be sensitive in the area ofcorporate giving, and we continue to monitor carefully ourcharitable donations; during the year the Group contributed£21,600 (2007 £32,191) for charitable purposes, principally toorganisations promoting the protection and enhancement ofthe environment.

No contributions were made for political purposes duringthe year.




Communisis plc 2008

15

Risks and UncertaintiesThe operation of a public company involves a series of risksand uncertainties across a range of strategic, commercial,operational and financial areas. Communisis has a robustinternal control and risk management process, outlined in theCorporate Governance Report. This process is designed toprovide assurance but cannot seek to avoid all risks.

The more significant risks and uncertainties faced bythe Group which could cause the Group’s actual results tovary materially from historical and expected results are setout below.

Economic environmentOur business depends upon the level of marketing spendfrom our customers. In an economic environment ofdepressed spending levels and defensive marketingstrategies, there is a risk that marketing spend amongst ourcustomers will be severely constrained. Our plans make anassumption that this will occur to a certain extent, and long-term contractual relationships also give some insulation.However, the level of fixed cost in some of our operationsmakes it difficult to respond rapidly to large falls in demand.Therefore, Group profit levels would be materially affected ifa prolonged, widespread and significant marketing spendreduction in excess of our expectations were to occur.

CompetitionCommunisis operates in highly competitive markets and theGroup’s products and services are characterised bycontinually evolving industry standards and changingtechnology driven by the demands of the Group’s customers.We invest in product development to sustain competitiveadvantage. However, if we fail to keep pace withtechnological, product and process change, the Group mayexperience delay or fail in introducing new or enhancedservices. We review our pricing and take action to control ourcost base to ensure that we remain competitive and protectour margins. Failure to do either of the above may result inmaterially lower margins and loss of market share.

Operational disruptionGiven the nature of our products and services, disruption ofour manufacturing and distribution facilities could impact ourrevenues and profits. This risk is managed through a processincluding systems of standard operating procedures,regulatory compliance, monitoring, audit, multiple sourcingand business continuity management.

A failure of the Group’s information systems platform wouldaffect all our sites. The Group therefore maintains back-upand disaster recovery plans.

While the Group maintains insurance at appropriate levels,some of these operational risks could result in losses andliabilities in excess of our insurance coverage or in uninsuredlosses and liabilities.

Pensions liabilitiesThe interaction of, amongst other things, increased lifeexpectancy, equity market performance and low interest ratesover the past several years has had a significant negativeimpact on the funding levels of the Group’s pension plan.This has materially and adversely affected the pension planfunding obligations of the Group and action has been takenin previous years to mitigate the effects of these factors bymeans of the closure to new entrants of the defined benefitsections of the Group’s pension plan and increased pensioncontributions from our employees. In addition, with effectfrom 30 November 2007, the defined benefit sections of theGroup’s pension plan were closed to future benefit accruals,and replaced by a new defined contribution section.

Market movements in 2008 have clearly more than offsetimprovements during 2006 and 2007 and are expected tohave significantly increased the funding deficit as measuredby the triennial valuation of the plan. Any further decline inequity markets, improvement in life expectancy or adversemovement in interest rates could further increase that deficit.This matter is discussed at greater length, together with theplanned mitigation, in the Chief Executive’s Report and theFinancial Performance Report.

Liabilities arising from past disposalsOver the past few years the Group has made a number ofdisposals. In many cases the Group has agreed to retain thecontingent risk, as guarantor, of known or pre-sale liabilities.Any material changes in known or potential pre-sale liabilitiescould result in a cash outflow from the Group and have amaterial adverse effect on the Group’s business, financialcondition and results.

In particular, the recent serious deterioration in the economicclimate has significantly increased the risk that the currenttenants of leasehold properties previously occupied by theGroup may fail, and that the financial obligations attaching tothose properties could, therefore, fall to be met by Communisis.

Environmental riskThe Group seeks to conduct its activities in such a mannerthat there is no or minimal damage to the environment.Financial and/or reputational risk could arise if we do notapply our resources in such a way as to achieve theprotection or improvement of the natural environment.




Communisis plc 2008

16

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Network and systemsThe Group’s operations depend crucially on complex networksand systems and on the ability to access similar networksbelonging to other parties. Failures in these networks orsystems may mean that we cannot serve our customers,exposing us to potential claims and loss of those customersand to costs of repair or modification of the systems.

High dependency on few high value customersThe Group is dependent upon a small number of high valuecustomers; 70% of the Group’s turnover is derived from itstop ten customers. If we were to lose one or more ofthese customers without replacing them this could result in amaterial adverse effect on the Group’s business andoperations. Please refer to Note 27 to the Financial Statementsfor comment on related credit risk issues.

Off-shoringWe continue to see a trend towards sourcing print and print-related products from manufacturers outside the UnitedKingdom. Whilst our product range and customer basenormally imply time-critical delivery, making overseas sourcingmore difficult, there is a risk that increasing sophistication inoverseas suppliers may impact on our ability to retain turnoverlevels within the United Kingdom. To the extent that businessis lost to this lower cost competition there is a risk that theGroup’s activities could be adversely affected.

Technological change and declining marketsAs outlined above in the context of competition risk,the Group’s activities are subject to constant technologicaldevelopment and change. Certain of our businesses operatein market sectors where there is a strong risk that electronictechnology will supersede paper-based communications.The Group fully recognises this risk and is actively involved indeveloping, often in tandem with our customers, newmethods of providing information which will, in due course,replace existing products.

In addition, the Group maintains an active programme toincrease efficiency in areas of operation facing decliningmarkets in order to maintain profitability. The success of thiswork should protect us from loss of market share andturnover, but there is a clear risk that if we fail to meet theevolving requirements of our customers there will be amaterial adverse effect on the Group’s results.

Risks and Uncertainties continued




Communisis plc 2008

17

GOVERNANCEStatement of Directors’ ResponsibilitiesConsolidated Financial Statements preparedunder IFRS

The directors are responsible for preparing the Annual Reportand the Consolidated Financial Statements in accordancewith applicable United Kingdom law and those InternationalFinancial Reporting Standards (‘IFRS’) as adopted by theEuropean Union.

The directors are required to prepare financial statements foreach financial year which present fairly the financial positionof the Group and the financial performance and cash flowsof the Group for that period. In preparing these financialstatements, the directors are required to:

select suitable accounting policies and then applythem consistently;

present information, including accounting policies, in amanner that provides relevant, reliable, comparable andunderstandable information;

provide additional disclosures when compliance with thespecific requirements in IFRS is insufficient to enable usersto understand the impact of particular transactions, otherevents and conditions on the entity’s financial position andfinancial performance; and

state that the Group has complied with IFRS, subject toany material departures disclosed and explained in thefinancial statements.

The directors are responsible for keeping proper accountingrecords which disclose with reasonable accuracy at any timethe financial position of the Group and enable them to ensurethat the financial statements comply with the Companies Act1985 and Article 4 of the IAS Regulation. They are alsoresponsible for safeguarding the assets of the Group andhence for taking reasonable steps for the prevention anddetection of fraud and other irregularities.

Parent Company Financial Statements preparedunder UK GAAP

The directors are responsible for preparing the parentcompany Financial Statements in accordance with applicableUnited Kingdom law and United Kingdom Generally AcceptedAccounting Practice (‘GAAP’).

Company law requires the directors to prepare financialstatements for each financial year which give a true and fairview of the state of affairs of the Company for that period.In preparing these financial statements, the directors arerequired to:

select suitable accounting policies and then applythem consistently;

make judgements and estimates that are reasonable andprudent;

state whether applicable accounting standards have beenfollowed, subject to any material departures disclosed andexplained in the financial statements; and

prepare the financial statements on the going concernbasis unless it is inappropriate to presume that theCompany will continue in business.

The directors are responsible for keeping proper accountingrecords that disclose with reasonable accuracy at anytime the financial position of the Company and enablethem to ensure that the financial statements comply withthe Companies Act 1985. They are also responsible forsafeguarding the assets of the Company and hence for takingreasonable steps for the prevention and detection of fraudand other irregularities.




Communisis plc 2008

18

1 2 3 4

5 6 7

1. Peter Hickson Chairman Age 63Appointed to the Board as Chairman in December 2007. Chairman of the Nominations Committee and a member of the Remuneration Committee.Mr Hickson is the Senior Independent Director of London and Continental Railways Ltd, and a non-executive director of Kazakhmys PLC. He was Chairmanof Anglian Water Group from 2003 to 2009, and served as Finance Director of Powergen plc between 1996 and 2002. He was a non-executive director ofScottish Power plc from 2006 to 2007, Marconi Corporation plc from 2004 to 2007, and RAC plc from 1994 to 2002.

2. Steve Vaughan Chief Executive Age 48Appointed to the Board in October 2006 as Chief Executive. He was Group Chief Executive of Synstar PLC from 2001 to 2005. From 1996 he held a numberof senior roles at EDS (UK) Ltd, latterly as Managing Director of its UK industry division.

3. Peter King Group Finance Director Age 46Appointed to the Board in September 2006 as Finance Director. He joined Communisis in June 2005 as Group Financial Controller and was formerly Directorof Finance for Norwich Union Life, a subsidiary of Aviva plc, for four years. Prior to working at Norwich Union, he spent 11 years with KPMG.

4. Alistair Blaxill Executive Director Age 47Responsible for all GroupMajor Accounts and Technology businesses. JoinedCommunisis inMarch 2007 andwas appointed to the Board on 1May 2008.Mr Blaxillwas formerly Director of Technology Services (UK and Ireland) for Hewlett Packard. Prior to this he was Managing Director and a member of the Operational Boardat Synstar plc between 2003 and 2004 and also spent three years from 2000 to 2003 at XKO Group plc as Managing Director.

5. Michael Firth Non-executive Director Age 66Appointed to the Board in December 2002. Senior Independent Director, Chairman of the Remuneration Committee and a member of the Audit andNominations Committees. Also a non-executive director of Network Rail Limited and Gartmore European Investment Trust plc; formerly a non-executivedirector of Somerfield plc and First Technology PLC. Retired in 2002 from his role as Head of Corporate Banking at HSBC Bank plc.

6. Nigel Howes Non-executive Director Age 58Appointed to the Board in December 2007. Chairman of the Audit Committee and a member of the Remuneration and Nominations Committees. Mr Howesis a Chartered Accountant and served as an Audit and Advisory partner at Arthur Andersen from 1984 to 2002 and then at Deloitte from 2002 to 2004.Previous roles include non-executive director of Wraith plc and ScS Upholstery plc.

7. Roger Jennings Non-executive Director Age 59Appointed to the Board in June 2002. He is a member of the Remuneration, Audit and Nominations Committees. Also non-executive Chairman of LimelightPR Ltd. Formerly he has held senior management positions in consumer products companies and international consultancy including Managing Directorof Sevenoaks Sound and Vision Ltd and Chief Executive of Austin Reed Group PLC.

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Andy Blundell Group Sales Director

Tony Commons Group Human Resources Director

David Monks Head of Acquisitions

Dave Rushton Group Operations Director

John Wells Group Commercial Director

Martin Young Company Secretary

* Main Board Director

The Leadership Team is the operating board of Communisis plc and comprises the following key peoplefrom across the Communisis Group:

Leadership Team




Communisis plc 2008

20

DirectorsBiographon page

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ResearcExpendit£98,000product din Note 52008 focResourceinclude dtime manchangingproducts

Directors’ ReportThe directors present their Annual Report on the affairs of theGroup and the Company, together with the FinancialStatements and independent auditors’ reports for the yearended 31 December 2008.

Principal activitiesThe principal activities of the Group during the year underreview were the manufacture of printed products for directmarketing (such as direct mail) and critical transactionalproducts (such as statements, invoices and cheques) and theprovision of print sourcing services. In addition our technology-based products and services have played an increasing partin helping our clients to manage and reduce risk, improvecompliance, increase efficiency and reduce costs.

Results and dividendsThe results for the year are shown on page 34. An interimdividend of 0.860p per ordinary share was paid in the financialyear ended 31 December 2008. The directors are proposinga final dividend of 1.635p per ordinary share, taking theproposed full year dividend to 2.495p per share (20072.453p). The final dividend is payable on 1 May 2009 toshareholders on the register at close of business on 3 April2009. This will be put to the shareholders at the AnnualGeneral Meeting on 28 April 2009.

Business reviewA review of the performance of the Group’s businesses is set outon pages 2 to 16. This review also includes details of expectedfuture developments in the Group. The principal risks anduncertainties facing the Group are set out on pages 15 to 16.

The Group’s Key Performance Indicators (‘KPIs’) are as setout in the table on the right.

Financial KPIsProfit measuresProfit after taxation is calculated after all exceptional itemsand taxation.

Profit from operations before exceptional items is calculatedby excluding exceptional items such as the gain on disposalof the Bath Business Forms business and legacy propertycosts from Profit from operations.

Adjusted dividend cover is the ratio of interim dividends paidand final dividends proposed to Profit before exceptionalitems after tax.

Cash flow and net debt measuresNet debt is calculated as total loans and borrowings,including overdrafts, net of cash and cash equivalents.

Debt outside credit terms is gross overdue trade debt, as apercentage of total trade debtors.

All profit, cash flow and net debt performance measures aredescribed in the Financial Performance Report on pages 6 to 9.

Non-financial KPIsEnvironmental measuresCarbon footprint is the total CO2 emissions, in tonnes,resulting from our purchased gas and electricity.

Health and safety measuresAccident incidence rate is the total number of accidentsreported in the year per 100 employees.

Performance against health, safety and environmental KPIsis described in the Corporate Social Responsibility Report onpages 10 to 14.

Other measuresThe number of our top one hundred customers to whom theGroup sells more than one service is discussed in the ChiefExecutive’s Report on page 3.

Key Performance Indicators2008 2007

Financial

Profit after taxation (£million) 8.6 6.6

Profit from operations beforeexceptional items (£million) 15.0 10.5

Adjusted dividend cover 2.54 2.16

Net debt (£million) 13.1 26.3

Debt outside credit terms (%) 7.0 13.0

Non-financial

Carbon footprint (tonnes) 14,359 15,059

Accident incidence rate (per 100 employees) 8.40 12.11

Number of our top 100 customersto whomwe sell multiple services 32 24




Communisis plc 2008

21

DirectorsBiographical details of the present directors are set outon page 18.

The directors who served during the year are shown below:

P C F Hickson (Non-executive Chairman)S W Vaughan (Chief Executive)A J C Blaxill (Executive Director)

(appointed 1 May 2008)M G Firth (Non-executive)N G Howes (Non-executive)R W Jennings (Non-executive)P R King (Finance Director)

Additional information relating to directors’ remuneration,service contracts and interests in the share capital of theCompany is given in the Directors’ Remuneration Report onpages 28 to 33.

The directors retiring by rotation under Article 92 of theCompany’s Articles of Association are Mr RW Jennings and MrP R King who, being eligible, offer themselves for re-election.

Mr A J C Blaxill, having been appointed during the year, retiresin accordance with Article 97 of the Company’s Articles ofAssociation and offers himself for election.

Group structureThe UK activities of the Group are directed under a singleoperating company, Communisis UK Limited, comprising fourseparate divisions: Technology & Services, Print Sourcing,Direct Mail, and Transactional. This clearly demonstrates tocustomers and suppliers the nature of the businesses and theclose alignment between them. In addition, the Communisisname provides a powerful and clearly identifiable brand in acompetitive market place.

Research and developmentExpenditure on research and development in the year was£98,000 (2007 £241,000). This represents the Group’sproduct development expenditure and is separately disclosedin Note 5.7 to the Financial Statements. Our investment in2008 focused on expanding our core capabilities in MarketingResource management and Digital Asset Management toinclude document composition and e-mail delivery of real-time management information. This investment reflects thechanging shape of the Group away from commodity-basedproducts to value-added services.

Property, plant and equipmentDetails of the movements in property, plant and equipmentare given in Note 11 to the Financial Statements. Thedirectors are of the opinion that the market value of theGroup’s land and buildings is in excess of the book value,although the difference is not significant.

Share capitalMovements in the authorised, allotted and fully paid sharecapital are set out in Note 21 to the Financial Statements.

Purchase of own sharesThe directors will be asking shareholders to renew theauthority granted to them at last year’s Annual GeneralMeeting to purchase the Company’s own shares. The existingauthority is for the purchase of up to 14.99% of theCompany’s issued ordinary share capital at a minimum priceper share of 25p. There is, however, no present intention toexercise this authority in the foreseeable future. Furtherdetails of this resolution are set out in the Notice of AnnualGeneral Meeting, enclosed with this Report.

No share buy-backs were undertaken during 2007 or 2008.

Share option schemesFurther options were granted during the year under theGroup’s share option schemes. Details of the optionsoutstanding at the year end are given in Note 14 to theFinancial Statements.

Corporate social responsibilityCommunisis takes its corporate social responsibilitiesseriously and the report on pages 10 to 14 sets out theGroup’s approach in this area.

EmployeesThe Group gives full and fair consideration to applications foremployment by disabled persons having regard to their particularaptitudes and abilities. Every effort is made to continue theemployment of and arrange appropriate training for employeeswho have become disabled during their employment with theGroup. Depending on their skills and abilities, disabledemployees have the same career prospects and opportunitiesfor promotion as other employees.

The Group’s practice is to keep all its employees informed onmatters affecting them, through consultation and information onthe general financial and economic factors affecting the Group’sperformance.

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Communisis plc 2008

22

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Major interests in sharesAs of 25 February 2009, the Company had been informed ofinterests of 3%ormore in the Company’s issued ordinary sharesas detailed in the table below.

Policy in respect of payment of suppliersThe Group’s policy is to agree terms of payment whenengaging a new supplier.

The number of days’ purchases in creditors at the year-endwas 70 days (2007 47 days).

Treasury policyThe Group takes a centralised approach to the managementof debt, liquid resources and interest rate risk. It financesits activities with a combination of bank loans, financeand operating leases, cash and short-term deposits.Uncommitted overdraft facilities are used to satisfy short-termcash flow requirements. The Group’s facilities are all onvariable interest terms and therefore the Group is exposed tointerest rate movement.

The Board continues to monitor whether it can economicallyreduce its exposure to interest rate and foreign currencymovements. Please refer to management’s policy on treasuryin Note 27.

Charitable and political donationsDetails of the Group’s charitable and political donationsare given in the Corporate Social Responsibility Report onpage 14.

Going concernThe Group’s business activities, together with the factorslikely to affect its future development, performance andposition are set out in the Chief Executive’s Report onpages 3 to 5. The financial position of the Group, its cash

flows, liquidity position and borrowing facilities are describedin the Financial Performance Report on pages 6 to 9.

The Group has considerable financial resources together withlong-term contracts with a number of customers andsuppliers across different geographic areas and industries.As a consequence, the directors believe that the Group is wellplaced to manage its business risks successfully despite thecurrent uncertain economic outlook.

After making enquiries, the directors have a reasonableexpectation that the Company and the Group have adequateresources to continue in operational existence for theforeseeable future. Accordingly, they continue to adoptthe going concern basis in preparing the FinancialStatements.

Annual General MeetingNotice of the Annual General Meeting to be held on 28 April2009 is contained in the document addressed to shareholdersand enclosed with this Report. That document also containsdetails of the special business to be proposed at the AnnualGeneral Meeting.

Disclosure of information to auditorsIn accordance with section 234 ZA (2) of the Companies Act1985 the directors confirmed that, so far as each is aware,there is no relevant audit information of which the auditorsare unaware, and each director has taken all steps that heought to have taken as a director to make himself aware of,and to establish that the auditors are aware of, any relevantaudit information.

Additional information for shareholdersThe following provides the additional information required forshareholders as a result of the implementation of theTakeovers Directive into UK law.

At 31 December 2008, the Company’s issued share capitalcomprised:

The Company is not aware of any agreements betweenshareholders that may result in restrictions in the transfer ofshares or voting rights.

% of totalNumber £000 Share Capital

Ordinary sharesof 25p each 138,602,981 34,651 100

Directors’ Report continued

Major interests No. of ordinaryshares %

Aberforth Partners’ Clients 28,830,000 20.80

JO Hambro Capital Management 14,320,000 10.33

Insight Investment 13,958,713 10.07

SVG Capital Plc 10,495,928 7.57

Legal & General Investment Management 8,513,496 6.14

AXA Rosenberg 5,997,885 4.33

LSV Asset Management 5,203,258 3.75

Artemis Investment Management 4,800,910 3.46

Gartmore Investment Management 4,744,761 3.42




Communisis plc 2008

23

Ordinary sharesOn a show of hands in a general meeting of the Company everyholder of ordinary shares present in person or by proxy andentitled to vote shall have one vote and, on a poll, everymember present in person or by proxy and entitled to vote shallhave one vote for every ordinary share held. The Notice of theAnnual General Meeting specifies deadlines for exercisingvoting rights either in person or by proxy in relation toresolutions to be passed at that meeting. All proxy votes arecounted and the numbers for, against or withheld in relation toeach resolution are announced at the Annual General Meetingand published on the Company’s website after the meeting.

There are no restrictions on the transfer of ordinary shares inthe Company other than:

the registration of transfers of shares may be suspendedat such times and for such periods (not exceeding 30 daysin any year) as the directors may determine;certain restrictions may from time to time be imposed bylaws and regulations (for example, insider trading laws andmarket requirements relating to close periods); andpursuant to the Listing Rules of the Financial ServicesAuthority whereby certain employees of the Companyrequire the approval of the Company to deal in theCompany’s securities.

The Company’s Articles of Association may only beamended by a special resolution at a general meeting of theshareholders. Directors are reappointed by ordinary resolutionat a general meeting of the shareholders. The Board canappoint a director but anyone so appointed must be electedby an ordinary resolution at the next Annual General Meeting.Any director who has held office for more than three yearssince his election or re-election must offer himself up for re-election at the next following Annual General Meeting.

Directors’ authoritiesThe directors are authorised under the terms of Section 80 ofthe Companies Act 1985 to issue ordinary shares up to amaximum of the remaining unissued share capital. In addition,pursuant to Section 89 of the Companies Act 1985, thedirectors are authorised to allot shares for cash, without firstoffering them to existing shareholders, up to a limit of 5% ofthe Company’s issued ordinary share capital. This authorityalso extends to give the directors the power to allot sharesfor cash in connection with a rights issue.

Both these authorities will expire at the Annual GeneralMeeting on 28 April 2009, and the directors will be seeking tohave them renewed at that meeting.

Significant interestsDirectors’ interests in the share capital of the Company areshown in the table on page 32. Major interests (i.e. those of3% or more) of which the Company has been notified areshown above.

Significant share schemesThe Communisis Employee Benefit Trust holds 0.2% of theissued share capital of the Company in trust for the benefit ofemployees of the Group and their dependants. The votingrights in relation to these shares are exercised by the Trustees.

Change of controlAs is not uncommon, the Company is party to a number ofcontracts which may be terminated by the other party in theevent of a change of control of the Company.

There are no agreements between the Company and itsdirectors or employees providing for compensation for lossof office or employment (whether through resignation,redundancy or otherwise) that occurs because of a takeoverbid. The Company is party to a number of bankingagreements which upon a change of control of the Companyare terminable by the banks upon provision of written notice.

AuditorsThe directors will place a resolution before the Annual GeneralMeeting to reappoint Ernst & Young LLP as auditors for theensuing year.

Responsibility StatementThe directors confirm that to the best of their knowledge:

the Financial Statements, prepared in accordance withIFRS as adopted by the European Union, give a true andfair review of the assets, liabilities, financial position andprofit of the Company and its subsidiaries included in theconsolidation taken as a whole, andthe Directors’ Report and the Business Review include afair review of the development and performance of thebusiness and the position of the Company and itssubsidiaries included in the consolidation taken as awhole, together with a description of the principal risks anduncertainties that they face.

By order of the Board

Martin YoungSecretary26 February 2009

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Communisis plc 2008

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Corporate Governance ReportThe Board continues to be committed to high standardsof corporate governance. The adoption and maintenanceof good governance is the responsibility of the Boardas a whole. This report, together with the Directors’Remuneration Report on pages 28 to 33, describes how theBoard applies the principles of good governance and bestpractice as set out in the Combined Code on CorporateGovernance issued by the Financial Reporting Council.A statement of compliance may be found at the end ofthis report.

BoardThe Board currently comprises the non-executive Chairman,three executive directors and three further independent non-executive directors.

The Chairman has primary responsibility for the running of theBoard and for ensuring effective communication withshareholders. The Chief Executive is responsible foroperations and for the development of strategic plans andinitiatives for consideration by the Board. The division ofresponsibilities between the Chairman and the ChiefExecutive has been clearly established, set out in writing andagreed by the Board. In addition, Mr M G Firth is the SeniorIndependent Director of the Company.

The other significant commitments of the Chairman aredetailed in his biography on page 18.

Prior to his appointment to the Company’s Board inDecember 2002 Mr Firth was Head of Corporate Bankingat HSBC Bank plc, one of the Company’s principal banks.The Company considers Mr Firth to be independent asa) it maintains strong relationships with several other banks,b) he has displayed clear independence of thought and actionin his Board activities and c) he retired from HSBC Bank plcmore than six years ago.

The Board schedules eight meetings each year, and alsoarranges to meet at other times as appropriate. Six of theeight scheduled meetings were fully attended. Mr Firth andMr R W Jennings were both unable to attend one meetingdue to other commitments.

The Board has a schedule of matters specifically reserved forits decision and approval. These include key publicannouncements (such as financial statements), acquisitionsand disposals, major capital expenditure, capital raising andaccounting and other Group policies.

The Company seeks to ensure that the Board is supplied withappropriate and timely information to enable it to discharge itsduties and a pack of financial and other information isprovided for each Board meeting. There is also a procedurefor directors to seek independent professional advice whennecessary. All directors have access to the advice andservices of the Company Secretary.

All directors receive an induction on joining the Board. Boardand Committee agenda items together with other Boardactivities and external training assist the directors incontinually updating their skills and knowledge of andfamiliarity with the Company. The Company provides thenecessary resource and assistance to develop and updatethe directors’ knowledge and capabilities.

During 2008 an appraisal interview procedure was followed inorder to assess Board performance. This entailed theChairman conducting consultation meetings with eachdirector individually, in order to assess the effectiveness ofthe existing structure, composition and performance of theBoard. The Chairman also assessed the Board’s alignmentwith the Company’s strategic goals. The 2008 evaluationconcluded that the Board composition and operation wassatisfactory and that it supported the Group’s strategicobjectives.

Given the small Board the directors have decided that aprocedure for individual performance evaluation is notnecessary; the need for such a procedure will be reviewedannually.

The Senior Independent Director, after consultation with theother directors, conducts an appraisal interview with theChairman.

The Chairman also meets periodically with the othernon-executive directors, without the executive directorspresent, to discuss a range of issues including strategy,financial performance, progress towards targets and theperformance of the executive directors. One such meetingtook place in 2008.

The Company’s Articles of Association provide that one-thirdof the directors retire (rounded down if the number ofdirectors is not divisible by three) at each Annual GeneralMeeting. However, all directors will submit themselves forre-election at least once every three years. Details on thedirectors submitting themselves for re-election are given onpage 21 and on page 7 of the Notice of Meeting.




Communisis plc 2008

25

The proposed re-election at the 2008 Annual General Meetingof Mr Jennings and Mr P R King, who retire by rotation, hasbeen considered by the Nominations Committee. In theCommittee’s view Mr Jennings and Mr King continue todemonstrate the expected level of commitment to beeffective members of the Board.

The Chairman and non-executive directors are appointed fora specified term of three years, subject to re-election.

The Company Secretary is responsible for advisingthe Board, through the Chairman, on all corporategovernance matters.

Board CommitteesThe Board has three Committees, Audit, Remuneration andNominations, all of which have terms of reference which dealspecifically with their authorities and duties. The terms ofreference may be viewed on the Company’s website(www.communisis.com).

No additional fees are paid for membership of theCommittees other than the Chairmen of the Audit andRemuneration Committees, who each receive an additionalfee of £5,000 per annum.

Audit CommitteeThe Audit Committee comprises Mr Jennings, Mr Firth andMr N G Howes, who also is the Chairman of the Committee.Appointments to the Committee are made by the Board.

The Board considers that the membership of the AuditCommittee as a whole has sufficient recent and relevantfinancial experience to fulfil its duties.

The Committee is provided with sufficient resources toundertake its duties. It has access to the services of theCompany Secretary (who acts as secretary to the Committee)and all other employees. The Committee may takeindependent legal or professional advice when it believes itis necessary to do so.

The Committee meets as required, but not less thanthree times a year. Three meetings were held in 2008. MrJennings was unable to attend one meeting due to othercommitments. Other directors may also attend Committeemeetings by invitation. The Committee also meets privatelyfor discussions with the external auditor, who attends all ofits meetings.

The main roles and responsibilities of the Committee are to:

monitor the integrity of the Company’s Financial Statements;review the Company’s internal financial control and riskmanagement systems;monitor and review the effectiveness of the internal auditfunction; andoversee the Company’s relationship with the externalauditor.

If any material cause for concern or scope for improvement isrevealed the Committee will recommend to the Board anyaction required.

The main activities of the Committee in 2008 were:

assessing the implications of the significant financialreporting issues related to the preparation of theCompany’s Financial Statements;assessing the effectiveness of the systems establishedto identify, assess, manage and monitor financial andnon-financial risks;monitoring the integrity of the Company’s internal financialcontrols;monitoring and reviewing the plans, work andeffectiveness of the internal audit function, including actiontaken following any significant failure in internal control;monitoring the Company’s implementation of any newaccounting policies;reviewing with the external auditor the findings of its workand the effectiveness of the external audit process; andreviewing the independence and objectivity of the externalauditor.

The Committee also has an agreed policy on the engagementof the external auditor for the supply of non-audit services.The policy specifies services which may not be provided anddetails a cost threshold above which engagement will becarefully considered. This allows the Committee to satisfyitself that auditor objectivity and independence aresafeguarded.

Nominations CommitteeThe Nominations Committee comprises the non-executivedirectors and is chaired by Mr P C F Hickson. Appointmentsto the Committee are made by the Board.

The Committee is provided with sufficient resources toundertake its duties. It has access to the services of theCompany Secretary (who acts as secretary to the Committee)

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Communisis plc 2008

26

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and all other employees. The Committee may takeindependent legal or professional advice when it believes itnecessary to do so.

The Committee meets as required and during 2008 mettwice; Mr Firth was unable to attend one meeting due toother commitments.

The main roles and responsibilities of the Committee are to:

consider, at the request of the Board or the Chairman, themaking of any appointment or reappointment to the Board;identify and nominate, for the approval of the Board,candidates to fill Board vacancies as they arise;evaluate the skills, knowledge and experience of the Boardand, in the light of this, prepare a description of the roleand capabilities required for a particular appointment; andkeep the composition of the Board under review and makerecommendations to the Board.

Remuneration CommitteeDetails of the Remuneration Committee are set out in theDirectors’ Remuneration Report on page 28. That Reportshould be read in conjunction with this section of theCorporate Governance Report. The Committee met fourtimes during 2008; three meetings were fully attended. MrHickson was unable to attend one meeting due to othercommitments.

Internal controlThe Board is responsible for the Group’s system of internalcontrol and for reviewing its effectiveness annually. The Boardperformed such a review during 2008. Such a system isdesigned to manage, rather than eliminate, the risk of failureto achieve the Group’s strategic objectives and can onlyprovide reasonable and not absolute assurance againstmaterial misstatement or loss.

An ongoing process for identifying, evaluating and managingthe Group’s significant risks has been established. Theseprocedures have been in place throughout the financial yearand up to the date of approval of the Annual Report andFinancial Statements. The effectiveness of the process isreviewed twice yearly by the Board in accordance with theguidance, Internal control: Guidance for Directors on theCombined Code.

The principal elements of the Group’s system of internalcontrol are:

(i) Control environmentThe Board sets the overall policy for the Group which includesa well-defined organisational structure with clear operatingprocedures, lines of responsibility and delegated authority.Control procedures exist to identify and control businessrisks, safeguard the Group’s assets and to ensure thatfinancial transactions are properly recorded.

(ii) Assessment of business riskA system of risk assessment and evaluation of controls isembedded within the management process. Risk assessmentand evaluation take place within each operating unitwhereby management completes a structured review of risksto business objectives, which are evaluated in terms of theirindividual significance and set out in the Key Risk Register.Strategic risks and opportunities arising from changes in theGroup’s business environment are regularly reviewed by theBoard. Appropriate control procedures are identified for eachkey risk, and responsibility for control is allocated toappropriate managers.

(iii) Monitoring processThe control procedures are regularly reviewed by executivemanagement. The Board, in addition to its review of internalfinancial controls, reviews the Key Risk Register twice yearly.

The Board also reviews other reports setting out the mainperformance and risk indicators and considers possiblecontrol issues brought to its attention by these and other earlywarning mechanisms which are embedded within theoperations. Representations that control procedures havebeen operating effectively throughout the year are receivedfrom each business unit.

The agenda for Board meetings includes twice each year anitem for consideration of business risks and controls and theBoard receives regular reports which discuss how effectivelycontrol procedures are operating. The Board uses thesereports as a basis to assess risks material to the achievementof the Group’s strategic objectives.

Internal financial controlIn addition to the general internal controls discussed abovethe directors of the Company acknowledge their responsibilityfor the Group’s system of internal financial control.

Corporate Governance Report continued




Communisis plc 2008

27

The key features of the internal financial control system thatoperated throughout the period covered by the FinancialStatements are described below:

(i) Operating controlsThe purposes of the key financial and operating controlprocedures in place throughout the Group are:

the safeguarding of assets against unauthorised use ordisposition, andthe maintenance of proper accounting records and reliablefinancial information for use within the business or forpublication.

(ii) Financial reporting and information systemsThere is a comprehensive budgeting and strategic reviewsystem with an annual budget and revised forecasts for theyear, which are continuously updated and compared to actualresults on a regular basis.

(iii) Functional reportingThe Board has identified specific areas and transactionswhich require full Board approval. These include matters suchas acquisitions and disposals over certain pre-agreedfinancial limits and the establishment of banking facilities.

(iv) Investment appraisalThe Group has clearly defined guidelines for capitalexpenditure. These include detailed appraisal and reviewprocedures, levels of authority and due diligence requirements.

(v) Internal auditThere is a rolling programme of internal audit reviews ofoperating divisions which are documented and reported. TheGroup also has a self-assessment package, which facilitatesthe measurement and appraisal of the principal financialcontrols across the Group.

In the Board’s view no significant failings or weaknesses inthe system of internal control were identified during the year.

Relations with shareholdersThere is a programme of regular meetings with majorinstitutional shareholders to consider the Group’s performance,strategy and governance. Also, presentations are made twiceyearly after the results announcements.

In addition to the results presentations and the AnnualGeneral Meeting, the Chairman, Chief Executive and FinanceDirector met during 2008 with a number of major institutionalinvestors. The views of the shareholders expressed duringsuch meetings are also communicated to the Board as awhole, and through this process of communication the Boardis able to gain a sound understanding of the views andconcerns of major shareholders. The other directors alsomeet with the Company’s major shareholders at periodicintervals.

The Senior Independent Director is available to shareholdersif they have concerns which contact through the Chairman,Chief Executive and Finance Director has failed to resolve orfor which such contact is inappropriate.

The Board receives weekly and monthly market reports fromthe Company’s brokers. In addition, principles of corporategovernance and voting guidelines issued by the Company’sinstitutional shareholders and their representative bodies arecirculated to and considered by the Board.

The Board also welcomes the attendance and questionsof shareholders at the Annual General Meeting which isattended by the Chairmen of the Audit, Remuneration andNominations Committees. Shareholders are invited to askquestions and are able to meet the directors informally.Separate resolutions are proposed for each substantiallyseparate issue and the number of proxy votes cast for andagainst each resolution, as well as the number of voteswithheld, are announced to the meeting following voting by ashow of hands. A poll would be called on any resolutionwhere it was appropriate or required.

Compliance with the 2006 Combined CodeThe directors consider that the Company has, during theyear ended 31 December 2008, complied with all therequirements of the 2006 Combined Code.

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Communisis plc 2008

28

5. ShareThree shended 31

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For these(‘TSR’)performaof the FT

Directors’ Remuneration ReportThis report is presented to shareholders by the Board andsets out the Board’s remuneration policy and details ofthe remuneration of each director. The RemunerationCommittee is responsible for developing policy onexecutive remuneration and for approving the remunerationpackages of individual executive directors. No executivedirector may participate in decisions regarding his ownremuneration.

The aim of the Board is to attract, motivate and retain highcalibre executives by rewarding them with competitive salaryand benefit packages, which reflect their level of responsibilityand performance. For guidance the Board’s RemunerationCommittee has regard to published remuneration informationon similar companies and appoints external advisers as itsees fit. During the year professional advice was sought fromAllen & Overy, who are also one of the Group’s legal advisers,and from Pinsent Masons, who also advise the Trustees ofthe Communisis Pension Plan. Base salary and benefits arereviewed each year to ensure that they are supportive of theCompany’s business objectives and the creation ofshareholder value. The Board believes in performance relatedawards that both incentivise executive directors and seniorexecutives to generate exceptional performance and providea clear and direct alignment of their interests with thoseof shareholders.

During 2008 the Remuneration Committee comprised:

M G Firth ChairmanP C F HicksonN G HowesR W Jennings

The main components of the remuneration package areas follows:

1. Basic salarySalaries for directors and certain key employees are reviewedannually by the Remuneration Committee. It is theCommittee’s policy to ensure that the basic salary isappropriate and competitive for the responsibilitiesinvolved.

2. Performance related bonusThe Company operated an annual performance bonus planduring 2008 for Mr S W Vaughan, Mr P R King and Mr A J CBlaxill. The performance targets and bonus were based onthe achievement of specified levels of operating profit andworking capital improvement. The operating profit component

represented 80% of the available bonus, and has beencalculated on a linear basis between 40% and 120% of basicsalary. The working capital component represented 20% ofthe available bonus, and has been calculated on a linear basisbetween 10% and 30% of basic salary.

For 2009 an operating profit andworking capital related incentivescheme will again be in operation for the executive directors.The performance targets and bonus will be based on theachievement of specified levels of operating profit and workingcapital. The bonus will pay out up to 100% of basic salarydepending on the levels of operating profit and workingcapital achieved.

3. Pension benefitsDetails of the individual directors’ pension arrangements areas follows:

Mr Vaughan has an arrangement under which the Companypays a salary supplement of 20% of basic salary in lieu of hismembership of the Company’s pension plan. Mr Vaughan’snormal retirement age is 60.

The Company also provides life assurance cover of four timesbasic salary.

Mr King is a member of the defined contribution section ofthe Communisis Pension Plan. He also benefits from a salarysupplement of £10,000 per annum, which is not pensionableand is not eligible for the purpose of bonus calculation.Mr King’s normal retirement age is 60.

The Company also provides life assurance cover of amaximum of four times basic salary.

Mr Blaxill has an arrangement under which the Companymakes a payment of 15% of basic salary into hispersonal pension plan; Mr Blaxill is not a member of theCompany’s pension plan. Mr Blaxill’s normal retirementage is 65.

The Company also provides life assurance cover of four timesbasic salary.

4. Benefits in kindThe main elements are the provision of, or a monthlymonetary allowance for, a motor car and medical insurance.These benefits are in line with those offered by comparablecompanies and are valued for the purposes of remunerationat the amount assessed to income tax on the director.




Communisis plc 2008

29

5. Share option plansThree share option plans have operated during the yearended 31 December 2008:

the Sharesave Scheme;the Executive Share Option Scheme 2000; andthe Long Term Incentive Plan 2007.

(i) Sharesave SchemeThe Company operates a savings-related share optionscheme in which all UK-based employees of the Groupare entitled to participate. The exercise price of theoptions is equal to the market price of the shares at the dateof invitation to participate less a maximum discount of 20%.The options vest on either the third or fifth anniversary ofthe commencement of the savings period.

Any options which have not been exercised within six monthsof the vesting date lapse.

(ii) Executive Share Option Scheme 2000 (‘the Scheme’)The executive directors and senior management are eligibleto participate in the above scheme at the discretion of theCommittee. The exercise price of the options is equal to themarket value of the shares on the date of grant. In respect ofoptions granted prior to 1 January 2005, the options vest ifthe percentage increase in normalised earnings (i.e. beforeintangibles amortisation, restructuring costs and otherexceptional items) per share over any three consecutivefinancial years, commencing on or after the beginning of thefinancial year in which the date of grant fell, exceeds thepercentage increase in the Retail Prices Index over that periodby an average of at least 3% per annum. The contractual lifeof each option granted is ten years.

In respect of options granted since 1 January 2005, if theperformance condition is not met in the three years from theyear in which the date of grant fell, the options lapse.

Options under the Scheme were granted to Mr Vaughan on15 December 2006 (over shares having a value of two timeshis basic salary as at that date), and on each of 2 October2007 and 1 October 2008 (over shares having a value of onetimes his basic salary on those dates). In addition, optionsunder the Scheme were granted to Mr Blaxill on 22 March2007. Those options were granted over shares having a valueof one times his basic salary as at that date.

For these options 50% vest if the Total Shareholder Return(‘TSR’) of the Company, as compared to the TSRperformance of all companies in the Support Services sectorof the FTSE All Share Index (excluding FTSE 100 companies),

is at or above the median level over the three-year periodfollowing the date of grant. The other 50% of the options vestif the TSR of the Company, as compared to the TSRperformance of all companies in the FTSE SmallCap Index(excluding investment trusts), is at or above the median levelover the same three-year period. If the performance conditionis not fulfilled within the three-year period from the date ofgrant the options lapse.

(iii) Long Term Incentive Plan 2007 (‘the LTIP’)The LTIP was approved by shareholders at the 2007 AGM.The LTIP was developed by the Remuneration Committeeand is compliant with guidelines published by the institutionalinvestor protection committees.

It is intended that the LTIP will replace the Scheme for keyexecutives and employees. While the Scheme will be retainedand may be operated again in the future for certainemployees, any employee who participates in the LTIP in anyyear will not also participate in the Scheme in that year. It iscurrently intended that the LTIP will be operated annually.

The key features of the LTIP are:nil or nominal cost options are awarded with a three-yearvesting period;award levels will not normally exceed 150% of basic salaryin any year;the initial grants of options have performance conditionsbased on the TSR of the Company’s shares measuredover the three-year period from the date of grant; 30% ofthe awards will vest for median performance, rising to100% vesting for upper decile performance. None of theawards will vest if performance is below the median; andoptions, once vested, will remain exercisable for twoyears only.

6. The Communisis Matched Award Plan (‘the MatchedAward Plan’)

The Matched Award Plan, for which shareholders’ approvalwas given at the 2003 AGM, was established to encourageselected senior employees of the Company to invest up to50% of any amount paid to them under any performancerelated incentive plan (or any other amount of such paymentwhich the Remuneration Committee may decide in respect ofof any individual) in the Company’s shares. Under theMatched Award Plan, the Company would match theinvestment made by participants on a share-for-share basis.Participants would normally have become entitled to thematched shares at the end of a three-year holding periodprovided that they remained employed by the Company atthat time and pro-rata to the extent that they had continuedto hold their invested shares.

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Communisis plc 2008

30

The Remuneration Committee does not intend to issue anyshares under the Matched Award Plan in its present format.

7. Service agreementsThe Company’s policy is for all executive directors to haveservice agreements which terminate on the attainment ofretirement age. In order to mitigate its liability on earlytermination the Company’s policy is that it should be ableto terminate such agreements on no more than twelvemonths’ notice.

Details of the directors’ service agreements are as follows:Date of NoticeContract Period

S W Vaughan 4/10/06 One YearP R King 15/6/06 One YearA J C Blaxill 17/3/07 One Year

8. Non-executive directorsThe fees payable to the non-executive directors are proposedby the Remuneration Committee and approved by the fullBoard. At present the basic fee is £35,000 per annum with afurther £5,000 payable in respect of Board committeechairmanships. Mr Firth is paid a further £5,000 for his roleas Senior Independent Director.

The Chairman’s fee is set at £75,000 per annum, and issubject to annual review by the Board. In addition, on19 December 2007, shortly after his appointment, Mr Hicksonwas awarded 250,000 nil cost share options in the Companyand, on 20 December 2007, he entered a contract with RBCTrust Company (Jersey) Limited (‘RBC’) for these options, onexercise, to be satisfied by the transfer of ordinary sharesalready held by the Company’s Employee Benefit Trust,of which RBC is the Trustee. The options were granted underan arrangement established specifically in relation toMr Hickson’s recruitment. The grant of these options wasconditional upon the purchase by Mr Hickson of 250,000ordinary shares in the Company (‘the Matching Shares’); thispurchase was executed on 18 December 2007. TheCommittee believes that Mr. Hickson’s significant personalinvestment demonstrates his commitment to the Companyand his determination to align his interests with thoseof shareholders.

The principal conditions for the exercise of these optionsare:

(i) the options will not normally vest until the thirdanniversary of the date of grant (‘the Vesting Date’);

(ii) if Mr Hickson ceases before the Vesting Date to be thebeneficial owner of some or all of the Matching Sharesthe extent of the vesting will be reduced accordingly;

(iii) exercise may normally take place only between theVesting Date and the fifth anniversary of the date of grant;

(iv) if Mr Hickson ceases to be an employee of the Groupbefore the Vesting Date, his options will normally vest ona time pro-rata basis;

(v) in the event of a takeover, Mr Hickson’s options willnormally vest on a time pro-rata basis; and

(vi) benefits under this arrangement are not pensionable.

The non-executive directors are engaged for initial andsubsequent periods of three years. Mr Hickson, Mr Firth andMr Howes are engaged under letters of appointment, whileMr Jennings is engaged via a consultancy agreementbetween the Company and Argen UK Limited. Theengagements of Mr Firth, Mr Jennings and Mr Howes areterminable at the discretion of either party; Mr Hickson’s isterminable on six months’ notice from either party.

Other than as outlined above, the non-executive directorscannot participate in the Company’s share option schemes,are not entitled to any pension benefit and are not entitled toany payment in compensation for early termination oftheir appointment.

The commencement dates for the current appointments ofthe non-executive directors are:

M G Firth 21 October 2008P C F Hickson 10 December 2007N G Howes 10 December 2007R W Jennings 1 April 2008

9. Directors’ remunerationDetailed information concerning directors’ remuneration,pension entitlements and, save as disclosed above, interestsin the ordinary shares of the Company (including options), asrequired by the Companies Act and the Rules of the FinancialServices Authority, are set out on pages 32 to 33.

By order of the Board

Martin YoungSecretary

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Communisis plc 2008

31

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2004 2005 2006 2007 2008

Communisis FTSE All Share

Comparative Total Shareholder ReturnThe graph below shows Communisis’ TSR performance compared with the FTSE All ShareIndex over the past five years. The graph provides a basis for comparison with a relevantequity index of which Communisis is a constituent.

THIS GR

PLEASE




Communisis plc 2008

32

Share OpThe num2007 hav

ExecutivS W Vaug

P R King

A J C Bla

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A J C Bla

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Directors’ Remunerationfor the year ended 31 December 2008

Moneypurchase

Salary/ pension 2008 2007fees Bonus contributions Total Total£000 £000 £000 £000 £000

Executive directorsSW Vaughan 437 245 – 682 642P R King 224 140 12 376 366A J C Blaxill (Appointed 1 May 2008) 148 79 – 227 –

Non-executive directorsP C F Hickson 75 – – 75 4M G Firth 45 – – 45 31N G Howes 40 – – 40 2RW Jennings 37 – – 37 31

M E Smith (Resigned 10 December 2007) – – – – 100

1,006 464 12 1,482 1,176

The Company made money purchase pension contributions of £11,000 in 2007 on behalf of Mr King.

Directors’ Pension EntitlementNone of the directors earned defined benefits through the Group’s pension arrangements during the year ended 31 December2008 (2007 none).

At 31 December 2008 At 31 December 2007 (Note 1)Ordinary Share Ordinary ShareShares Options Shares Options

A J C Blaxill 59,615 468,062 22,789 368,062

M G Firth 115,954 – 115,954 –

P C F Hickson 450,000 250,000 250,000 250,000

N G Howes – – – –

R W Jennings 30,000 – 30,000 –

P R King 23,177 414,105 23,177 314,105

S W Vaughan 98,805 1,980,224 48,805 1,239,484

Notes1. The comparative figures are for 31 December 2007, or at date of appointment if later.2. The directors and their families had no interest in the shares of any other company within the Group.3. Current directors’ shareholdings had not changed between the year-end and the date of this report.

Directors’ Remuneration Report continued

Directors’ InterestsThe interests (all being beneficial) of the directors in the Company’s securities are set out below:




Communisis plc 2008

33

Share OptionsThe number of, and prices at which, options under the Executive Share Option Scheme 2000 and Long Term Incentive Plan2007 have been granted to directors are set out below. The options granted to the Chairman are also detailed below.

Optionsheld at Options Options1 Jan granted held at Earliest Latest2008 Options during 31 Dec Option exercise exercise

(Note 1) lapsed the year 2008 price date dateExecutiveS W Vaughan 821,917 – – 821,917 73.00 15/12/2009 15/12/2016

417,567 – – 417,567 74.00 02/10/2010 02/10/2017– – 740,740 740,740 47.25 01/10/2011 01/10/2018

P R King 43,835 – – 43,835 91.25 16/03/2009 16/03/2016

A J C Blaxill 248,062 – – 248,062 64.50 22/03/2010 22/03/2017

Long Term Incentive PlanP R King 270,270 – – 270,270 Nil 02/10/2010 02/10/2012

– – 100,000 100,000 Nil 01/10/2011 01/10/2013

A J C Blaxill 120,000 – – 120,000 Nil 02/10/2010 02/10/2012– – 100,000 100,000 Nil 01/10/2011 01/10/2013

ChairmanP C F Hickson 250,000 – – 250,000 Nil 20/12/2010 20/12/2012

Notes1. Options held at 1 January 2008 or at date of appointment if later.2. No options were exercised by directors during the year and consequently the amount of gains made on exercise was £nil (2007 £nil).3. The range of market price of shares in Communisis plc during the year ended 31 December 2008 was 29.00p to 72.50p. The closing price

on 31 December 2008 was 46.00p.4. None of the directors paid for the award of options.5. Details of the performance conditions attached to the share options are given on pages 29 and 30.6. The market price of shares on the date when options were granted under the LTIP was 52p.

Of the above information on pages 32 to 33 the following have been audited: directors’ remuneration, directors’ pension entitlements and share options.

2007Total£000

642366–

431231

100

1,176

ecember

Note 1)Share

Options

68,062

–

50,000

–

–

14,105

39,484



Financial StatementsCommunisis plc 2008

34

Consolidated Income Statementfor the year ended 31 December 2008

Conso31 Decem

2008 2007Note £000 £000

Revenue 4 257,730 290,590Changes in inventories of finished goods and work in progress 106 (246)Raw materials and consumables used (138,645) (157,968)Employee benefits expense 5.3 (65,316) (77,999)Other operating expenses (32,464) (37,169)Depreciation and amortisation expense (6,435) (6,700)Gains arising on disposal of Bath business 5.4 1,380 –Exceptional property provisions 5.4 (1,969) –

Profit from operations 14,387 10,508

Analysed as:Profit from operations before exceptional items 14,976 10,508Gains arising on disposal of Bath business 5.4 1,380 –Exceptional property provisions 5.4 (1,969) –

Profit from operations 14,387 10,508

Finance revenue 4 731 894Finance costs 5.1 (2,392) (3,531)

(1,661) (2,637)

Profit before taxation 12,726 7,871

Income tax expense 6 (4,095) (1,320)

Profit for the year attributable to equity holders of the parent 8,631 6,551

Earnings per share 9On profit for the year attributable to equity holders and from continuing operations

– basic 6.24p 4.74p– diluted 6.15p 4.69p

Dividend per share 10– paid 2.495p 1.318p– proposed 1.635p 1.635p

Dividends paid and proposed during the year were £3.5 million and £2.3 million respectively (2007 £1.8 million and £2.3 million respectively).

The accompanying notes are an integral part of these Consolidated Financial Statements.

All income and expenses relate to continuing operations.

ASSETSNon-currProperty,IntangibleTrade andDeferred t

Current aInventorieTrade andCash and

Non-curr

TOTAL A

EQUITY AEquity atEquity shaShare preMerger reCapital reESOP resCumulativRetained

Total equ

Non-currInterest-bRetiremenDeferred tProvisionsFinancial l

Current lInterest-bTrade andIncome taProvisionsFinancial l

Total liab

TOTAL E

The Cons

S W VaugP R King

Directors

The accom




35

Consolidated Balance Sheet31 December 2008

2007£000

90,590(246)

57,968)77,999)37,169)(6,700)

––

10,508

10,508––

10,508

894(3,531)

(2,637)

7,871

(1,320)

6,551

4.74p4.69p

1.318p1.635p

pectively).

2008 2007Note £000 £000

ASSETSNon-current assetsProperty, plant and equipment 11 23,752 27,473Intangible assets 12 157,170 151,022Trade and other receivables 17 4,965 1,865Deferred tax assets 6 – 2,521

185,887 182,881

Current assetsInventories 16 7,248 10,970Trade and other receivables 17 28,234 40,977Cash and cash equivalents 19 17,940 13,628

53,422 65,575

Non-current assets classified as held for sale 20 – 350

TOTAL ASSETS 239,309 248,806

EQUITY AND LIABILITIESEquity attributable to the equity holders of the parentEquity share capital 21 34,651 34,636Share premium 22 4Merger reserve 11,427 11,427Capital redemption reserve 1,375 1,375ESOP reserve (338) (338)Cumulative translation adjustment (143) (76)Retained earnings 87,773 81,470

Total equity 33 134,767 128,498

Non-current liabilitiesInterest-bearing loans and borrowings 22 6,000 22,000Retirement benefit obligations 15 11,100 14,730Deferred tax liability 6 353 –Provisions 23 1,323 68Financial liability 25 81 –

18,857 36,798

Current liabilitiesInterest-bearing loans and borrowings 22 25,000 17,907Trade and other payables 24 53,650 60,548Income tax payable 4,213 3,568Provisions 23 2,664 1,487Financial liability 25 158 –

85,685 83,510

Total liabilities 104,542 120,308

TOTAL EQUITY AND LIABILITIES 239,309 248,806

The Consolidated Financial Statements on pages 34 to 73 were approved by the Board on 26 February 2009 and signed on its behalf by:

S W VaughanP R King

Directors


PMS 1795

PMS 281

PMS ???

C MY K








36

Consofor the y

Consolidated Cash Flow Statementfor the year ended 31 December 2008

2008 2007Note £000 £000

Cash flows from operating activitiesCash generated from operations 32 23,385 32,937

Interest paid (2,764) (3,696)Interest received 358 266Income tax paid (1,423) (1,584)

Net cash flows from operating activities 19,556 27,923

Cash flows from investing activitiesAcquisition of subsidiary undertakings including overdraft acquired 7 (4,459) –Receipt of consideration from sale of Bath business 8 8,200 –Receipt of deferred consideration from the sale of subsidiary undertakings – 1,164Purchase of property, plant and equipment (5,444) (7,667)Proceeds from the sale of property, plant and equipment 705 260Purchase of intangible assets (2,111) (1,074)

Net cash flows from investing activities (3,109) (7,317)

Cash flows from financing activitiesReceipt from sharesave options exercised 30 7New borrowings 800 6,000Repayment of borrowings (4,300) (18,500)Dividends paid (3,450) (1,822)

Net cash flows from financing activities (6,920) (14,315)

Net increase in cash and cash equivalents 9,527 6,291Cash and cash equivalents at 1 January 8,221 2,085Exchange rate effects 192 (155)

Cash and cash equivalents at 31 December 17,940 8,221

Cash and cash equivalents consist of:Cash and cash equivalents 19 17,940 13,628Overdrafts 22 – (5,407)

17,940 8,221


ExchangeActuarial gLoss on cTax on ite

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Total rec

AttributabEquity hol

The accom




37

Consolidated Statement of Recognised Income and Expensefor the year ended 31 December 2008

2007£000

32,937

(3,696)266

(1,584)

27,923

––

1,164(7,667)

260(1,074)

(7,317)

76,000

18,500)(1,822)

14,315)

6,2912,085

(155)

8,221

13,628(5,407)

8,221

2008 2007£000 £000

Exchange losses on translation of foreign operations (67) (43)Actuarial gains on defined benefit pension plans 1,240 511Loss on cash flow hedges taken to equity (239) –Tax on items taken directly to equity 6 (280) (489)

Net profit/(loss) recognised directly in equity 654 (21)Profit for the year 8,631 6,551

Total recognised income and expense for the year 9,285 6,530

Attributable to:Equity holders of the parent 9,285 6,530





38

Notesfor the y

Notes to the Consolidated Financial Statementsfor the year ended 31 December 2008

1 Authorisation of Financial StatementsThe Consolidated Financial Statements of Communisis plc (‘theGroup’) for the year ended 31 December 2008 were authorised forissue in accordance with a resolution of the directors on 26 February2009. Communisis plc is a public limited company incorporatedand domiciled in England whose shares are traded on the LondonStock Exchange.

2 Accounting policies2.1 Basis of preparationThese Consolidated Financial Statements of Communisis plc are forthe year ended 31 December 2008. They have been prepared inaccordance with International Financial Reporting Standards (IFRS)as adopted by the European Union.

The Consolidated Financial Statements are presented in sterling andall values are rounded to the nearest thousand British pounds (£000)except where otherwise indicated.

The principal accounting policies adopted are set out below andhave been consistently applied to all years presented with theexception of the disclosure of restructuring costs. In previous years,non-exceptional restructuring costs were separately disclosed onthe face of the Income Statement. Management has now includedthese costs in their relevant headings under IAS 1 as they are notconsidered to be exceptional by either their size or nature. Theimpact of this change has been to increase employee benefitsexpenses by £949,000 (2007 £2,257,000) and other operatingexpenses by £169,000 (2007 £68,000).

2.2 Basis of consolidationThe Consolidated Financial Statements comprise the FinancialStatements of Communisis plc and its subsidiaries as at31 December each year. The results of subsidiaries prepared for thesame reporting year as the parent company are included in theseConsolidated Financial Statements, using consistent accountingpolicies. All intra-group balances and transactions, includingunrealised profits arising from intra-group transactions, have beeneliminated in full.

Subsidiaries are fully consolidated from the date on which control istransferred to the Group and cease to be consolidated from the dateon which control is transferred out of the Group. Where there is achange of control of a subsidiary, the Consolidated FinancialStatements include the results for the part of the reporting yearduring which Communisis plc has control.

2.3 Significant accounting judgements and estimatesEstimation uncertaintyThe key assumptions concerning the future and other key sourcesof estimation uncertainty at the balance sheet date that have asignificant risk of causing a material adjustment to the carryingamounts of assets and liabilities within the next financial year arediscussed below.

Impairment of goodwillThe Group determines whether goodwill is impaired at least on an

annual basis. This requires an estimation of the value in use of thecash-generating units to which the goodwill is allocated. Estimatingthe value in use requires the Group to make an estimate of theexpected future cash flows from the cash-generating unit and alsoto choose a suitable discount rate in order to calculate the presentvalue of those cash flows. The carrying amount of goodwill at31 December 2008 was £149,068,000 (2007 £146,228,000).Additional information is included in Note 13.

Business combinationsUpon acquisition of another entity the Group evaluates intangiblesarising using methodologies recognised under IFRS 3 BusinessCombinations. Judgement is required as to which intangibles meetthe recognition criteria of separable or contractual, and estimatesinvolving cash flow forecasts are performed to quantify the value ofthese assets arising. Intangibles arising are assessed for indicatorsof impairment annually. Information on intangibles arising in businesscombinations is disclosed in Note 7.

PensionsThe actuarial valuation involves making assumptions about discountrates, expected rates of return on assets, future salary increases,mortality rates and future pension increases. Due to the long-termnature of these plans, such estimates are subject to significantuncertainty. Additional information is included in Note 15.

ProvisionsThe measure of surplus property provisions requires estimation of asuitable discount rate and future costs to be incurred (see Note 23).This requires judgement in estimating the likely outcomes ofnegotiations and timeframes for settlement.

2.4 Summary of significant accounting policiesForeign currency transactionsTransactions in foreign currencies are recorded in the functionalcurrency at the rate ruling at the date of the transaction. Monetaryassets and liabilities denominated in foreign currencies are retranslatedat the rate of exchange ruling at the balance sheet date and exchangedifferences arising are recognised in the Income Statement.

Non-monetary items that are measured in terms of historical cost ina foreign currency are translated using the exchange rate as at thedate of the initial transaction. Non-monetary items measured at fairvalue in a foreign currency are translated using the exchange ratesat the date when the fair value was determined.

The functional currency of the overseas subsidiaries is the Euro.The assets and liabilities of these overseas subsidiaries aretranslated into sterling at the rate of exchange ruling at the balancesheet date and their Income Statements are translated at theweighted average exchange rates for the year where this is areasonable approximation to actual translation rates. The exchangedifferences arising on the retranslation are taken directly to aseparate component of equity described as the ‘cumulativetranslation adjustment’. On disposal of a foreign entity, thecumulative amount recognised in equity relating to that particularforeign operation is recognised in the Income Statement.

The cumu1 January

Property,Property,depreciatdepreciate

Depreciatuseful life

Freehold pLong leasShort leasPlant, equ

The carrreviewedindicate tindicationestimatedto their replant andsell and vacash flowdiscount rvalue of mlives, depannually. Fcash inflogeneratinare recog

BorrowingBorrowingcosts incucost; anycosts) anStatemeninterest m

Borrowingan uncontwelve mo

Borrowing

GoodwillGoodwillexcess ofattributabfair value oFollowingaccumulaunamortisIFRS, was




39

Notes to the Consolidated Financial Statements continuedfor the year ended 31 December 2008

use of theEstimatingate of thet and alsoe present

oodwill at228,000).

ntangiblesBusinessbles meetestimatese value ofindicators

n business

t discountncreases,long-termsignificant

mation of aNote 23).

comes of

functionalMonetary

etranslatedexchange.

cal cost ine as at thered at fair

ange rates

the Euro.aries aree balanceed at the

this is aexchange

ectly to aumulativentity, theparticular

t.

The cumulative translation adjustment reserve was set to zero on1 January 2004, the date of transition to IFRS.

Property, plant and equipmentProperty, plant and equipment is stated at cost less accumulateddepreciation and accumulated impairment in value. Land is notdepreciated.

Depreciation is calculated on a straight-line basis over the estimateduseful life of the asset as follows:

Freehold property 25 to 50 yearsLong leasehold property 25 to 50 yearsShort leasehold property 10 to 20 yearsPlant, equipment and motor vehicles 4 to 10 years

The carrying values of property, plant and equipment arereviewed for impairment when events or changes in circumstancesindicate the carrying value may not be recoverable. If any suchindication exists, and where the carrying values exceed theestimated recoverable amount, the assets are written downto their recoverable amount. The recoverable amount of property,plant and equipment is the greater of fair value less costs tosell and value in use. In assessing value in use, the estimated futurecash flows are discounted to their present value using a pre-taxdiscount rate that reflects current market assessments of the timevalue of money and the risks specific to the asset. Useful economiclives, depreciation methods and residual values are reviewedannually. For an asset that does not generate largely independentcash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Impairment lossesare recognised in the Income Statement.

Borrowings and borrowing costsBorrowings are recognised initially at fair value, net of transactioncosts incurred. Borrowings are subsequently stated at amortisedcost; any difference between the proceeds (net of transactioncosts) and the redemption value is recognised in the IncomeStatement over the period of the borrowings using the effectiveinterest method.

Borrowings are classified as current liabilities unless the Group hasan unconditional right to defer settlement of the liability for at leasttwelve months after the balance sheet date.

Borrowing costs are expensed as incurred.

GoodwillGoodwill on acquisitions is initially measured at cost being theexcess of the cost of the business combination, including directlyattributable transaction costs, over the acquirer’s interest in the netfair value of the identifiable assets, liabilities and contingent liabilities.Following initial recognition, goodwill is measured at cost less anyaccumulated impairment losses. Goodwill is not amortised. Anyunamortised goodwill on 1 January 2004, the date of transition toIFRS, was frozen from that date.

Goodwill is reviewed for impairment annually or more frequently ifevents or changes in circumstances indicate that its carrying valuemay be impaired. Goodwill is allocated to the related cash-generating units monitored by management for the purpose ofimpairment testing.

Where goodwill has been allocated to a cash-generating unit (orgroup of cash-generating units) and an operation within that unit (orgroup of units) is disposed of, the goodwill associated with theoperation disposed of is included in the carrying amount of theoperation when determining the gain or loss on disposal of theoperation. Goodwill disposed of in this circumstance is measuredbased on the relative values of the operations disposed of and theportion of the cash-generating unit (or group of units) retained.

Intangible assetsIntangible assets are carried at cost less accumulated amortisationand accumulated impairment losses. Intangible assets created withinthe business are not capitalised and expenditure is charged to theIncome Statement in the year in which the expenditure is incurred.

(a) Acquired from a business combinationIntangibles arising from a business combination are capitalised at fairvalue as at the date of acquisition, where it can be measured reliably.Following initial recognition, the cost model is applied to the class ofintangible assets. The useful lives of these intangible assets areassessed to be either finite or indefinite. Amortisation charged on assetswith a finite life is recognised in amortisation expense in the IncomeStatement over the expected life of the asset. Intangible assets currentlyrecognised are being amortised over between five and ten years.

(b) Research and development costsResearch costs are expensed as incurred. Expenditure on adevelopment project, such as computer software, which is reliablymeasurable, is capitalised when the technical feasibility andcommercial viability of the project is demonstrated. The Group mustintend to and have available the resources to complete theproject and be satisfied that the intangible asset arising fromthe development project will generate probable futureeconomic benefits. Capitalisation ceases when the product isready for launch.

Following the initial recognition of the development expenditure, thecost model is applied requiring the asset to be carried at cost lessany accumulated amortisation and accumulated impairment losses.Any expenditure carried forward is amortised over the period ofexpected future sales from the related project, from the date theasset is available for use.

The carrying value of development costs is reviewed when there isan indicator of impairment. In addition it is reviewed annually whenthe asset is not yet in use.

(c) Computer software costsAcquired computer software and licenses are capitalised.These costs are amortised over their estimated useful lives (three tofive years).




40

Notesfor the y


Costs associated with maintaining computer software programs arerecognised as an expense as incurred. Costs that are directlyassociated with the production of identifiable and unique softwareproducts controlled by the Group, and that will generate probableeconomic benefits exceeding costs beyond one year, arerecognised as intangible assets. Direct costs include the costs ofsoftware development employees. These costs are amortised overtheir estimated useful lives (three to five years).

Useful lives are also examined on an annual basis and adjustments,where applicable, are made on a prospective basis.

InventoriesInventories are stated at the lower of cost and net realisable value.

Raw materials are stated at purchase cost on a first-in, first-outbasis. For finished goods and work in progress, costs includedirectly attributable material and labour costs and certain overheadcosts that contribute in bringing the inventories to their presentlocation and condition. Selling expenses and other administrativeoverhead expenses are excluded.

Net realisable value is the estimated selling price in the ordinarycourse of business, less estimated costs of completion and theestimated costs necessary to make the sale.

Provision is made for items of stock that are damaged, obsolete orslow moving.

Trade and other receivablesTrade and other receivables, which generally have 30-90 dayscredit terms, are recognised and carried at original invoiceamount less an allowance for any uncollectable amounts. Anestimate for doubtful debts is made. Bad debts are written offwhen identified.

Trade and other receivables include contract prepayments made tosecure the five-year contract and three-year extension with BarclaysBank PLC. The premium is being amortised on a straight line basisover the life of the contract.

Non-current assets held for saleNon-current assets (and disposal groups) classified as held for saleare measured at the lower of carrying amount and fair value lesscosts to sell. Upon reclassification as non-current assets held forsale depreciation ceases to be charged.

Non-current assets (and disposal groups) are classified as heldfor sale if their carrying amount will be recovered through asale transaction rather than through continuing use. Thiscondition is regarded as met only when the sale is highlyprobable and the asset (or disposal group) is available forimmediate sale in its present condition. Management must becommitted to the sale which should be expected to qualify forrecognition as a completed sale within one year from thedate of classification.

Impairment of assetsAt each reporting date, the Group assesses whether there is anyindication that an asset may be impaired. Where an indicator ofimpairment exists, the Group makes a formal estimate of recoverableamount. Where the carrying amount of an asset exceeds itsrecoverable amount the asset is considered impaired and is writtendown to its recoverable amount. Recoverable amount is the higher ofan asset’s, or cash-generating unit’s, fair value less costs to selland its value in use and is determined for an individual asset,unless the asset does not generate cash inflows that are largelyindependent of those from other assets or groups of assets, inwhich case impairment is determined at the cash-generating unitlevel. The carrying amounts of the cash-generating units to whichgoodwill is allocated and intangible assets not yet available for useare reviewed annually, or more frequently when there is an indicationof impairment.

Value in use is determined by the estimated future post-tax cashflows, discounted to their present values using a post-tax discountrate that reflects current market assessments of the time value ofmoney and the risk specific to the asset.

Cash and cash equivalentsCash and cash equivalents in the Balance Sheet comprise cash atbank and in hand and short term deposits with an original maturityof three months or less.

For the purpose of the Consolidated Cash Flow Statement,cash and cash equivalents consist of cash and cash equivalents asdefined above, net of outstanding bank overdrafts.

Trade and other payablesTrade and other payables, which generally have 30-90 days creditterms, are recognised and carried at original invoice amount.

Financial instrumentsFinancial assets and financial liabilities are recognised in the Group’sBalance Sheet when the Group becomes a party to the contractualprovisions of the instrument.

Financial assetsThe Group’s financial assets can all be classified as ‘loans andreceivables’.

Loans and receivablesTrade receivables, loans, and other receivables that have fixed ordeterminable payments that are not quoted in an active market areclassified as loans and receivables. Loans and receivablesare measured at amortised cost, less any impairment. Interestincome is recognised by applying the effective interest rate, except forshort-term receivables when the recognition of interest would beimmaterial.

Impairment of financial assetsThe Group assesses at each balance sheet date whether a financialasset or group of financial assets is impaired.

Assets caIf there iscarried atis measurand the prcredit lossasset’s orcomputedreduced,the loss is

If, in a sudecreasesoccurringrecognisean impairmextent thaamortised

In relationwhen theinsolvencyGroup wiloriginal teis reducedderecogn

DerecognThe Grouprights to tfinancialownershipnor retainscontinuesretainedinvolvemeIf the Groownershiprecogniseborrowingnor retainsthe transfe

FinancialThe Grouand otheliabilities’.value, nesubsequeinterest myield basisthe amortexpense orate that ethe expecshorter pe




41


ere is anydicator ofcoverableceeds itsis written

e higher ofsts to sellual asset,are largelyassets, inrating units to whichble for useindication

-tax cashx discounte value of

se cash atal maturity

tatement,valents as

ays creditunt.

e Group’sontractual

oans and

e fixed ormarket areeceivablest. Interestexcept forwould be

a financial

Assets carried at amortised costIf there is objective evidence that an impairment loss on assetscarried at amortised cost has been incurred, the amount of the lossis measured as the difference between the asset’s carrying amountand the present value of estimated future cash flows (excluding futurecredit losses that have not been incurred) discounted at the financialasset’s original effective interest rate (i.e. the effective interest ratecomputed at initial recognition). The carrying amount of the asset isreduced, through the use of an allowance account. The amount ofthe loss is recognised in other operating expenses.

If, in a subsequent period, the amount of the impairment lossdecreases and the decrease can be related objectively to an eventoccurring after the impairment was recognised, the previouslyrecognised impairment loss is reversed. Any subsequent reversal ofan impairment loss is recognised in the Income Statement, to theextent that the carrying value of the asset does not exceed itsamortised cost at the reversal date.

In relation to trade receivables, a provision for impairment is madewhen there is objective evidence (such as the probability ofinsolvency or significant financial difficulties of the debtor) that theGroup will not be able to collect all of the amounts due under theoriginal terms of the invoice. The carrying amount of the receivableis reduced through use of an allowance account. Impaired debts arederecognised when they are assessed as irrecoverable.

Derecognition of financial assetsThe Group derecognises a financial asset only when the contractualrights to the cash flows from the asset expire; or it transfers thefinancial asset and substantially all the risks and rewards ofownership of the asset to another entity. If the Group neither transfersnor retains substantially all the risks and rewards of ownership andcontinues to control the transferred asset, the Group recognises itsretained interest in the asset to the extent of its continuinginvolvement and an associated liability reflecting obligations retained.If the Group retains substantially all the risks and rewards ofownership of a transferred financial asset, the Group continues torecognise the financial asset and also recognises a collateralisedborrowing for the proceeds received. If the Group neither transfersnor retains substantially all risks and rewards and does not controlthe transferred asset, then it derecognises the asset.

Financial liabilitiesThe Group’s financial liabilities include borrowings and tradeand other payables, which are all classified as ‘other financialliabilities’. Other financial liabilities are initially measured at fairvalue, net of transaction costs. Other financial liabilities aresubsequently measured at amortised cost using the effectiveinterest method, with interest expense recognised on an effectiveyield basis. The effective interest method is a method of calculatingthe amortised cost of a financial liability and of allocating interestexpense over the relevant period. The effective interest rate is therate that exactly discounts estimated future cash payments throughthe expected life of the financial liability, or, where appropriate, ashorter period.

Derecognition of financial liabilitiesThe Group derecognises financial liabilities when, and only when,the Group’s obligations are discharged, cancelled, or they expire.

Derivative financial instruments and hedge accountingInitial recognition and subsequent measurementThe Group uses derivative financial instruments such as forwardcurrency contracts to hedge its foreign currency risks. Suchderivative financial instruments are initially recognised at fair valueon the date on which a derivative contract is entered into and aresubsequently remeasured at fair value. Derivatives are carried asfinancial assets when the fair value is positive and as financialliabilities when the fair value is negative.

Any gains or losses arising from changes in fair value on derivativesduring the year that do not qualify for hedge accounting and theineffective portion of an effective hedge, are taken directly to theIncome Statement.

The fair value of forward currency contracts is the differencebetween the forward exchange rate and the contract rate. Theforward exchange rate is referenced to current forward exchangerates for contracts with similar maturity profiles.

For the purpose of hedge accounting, hedges are classified as cashflow hedges when hedging exposure to variability in cash flows, thatis either attributable to a particular risk associated with a recognisedasset or liability or a highly probable forecast transaction, or whenhedging the foreign currency risk in an unrecognised firm commitment.

At the inception of a hedge relationship, the Group formallydesignates and documents the hedge relationship to which the Groupwishes to apply hedge accounting and the risk management objectiveand strategy for undertaking the hedge. The documentation includesidentification of the hedging instrument, the hedged item ortransaction, the nature of the risk being hedged and how the entity willassess the hedging instrument’s effectiveness in offsetting theexposure to changes in the hedged item’s fair value or cash flowsattributable to the hedged risk. Such hedges are expected to behighly effective in offsetting changes in fair value or cash flows and areassessed on an ongoing basis to determine that they actually havebeen highly effective throughout the financial reporting periods forwhich they were designated.

Cash flow hedgesThe effective portion of the gain or loss on the hedging instrumentis recognised directly in equity, while any ineffective portion isrecognised immediately in the Income Statement.

Amounts taken to equity are transferred to the Income Statementwhen the hedged transaction affects profit or loss, such as whenthe hedged financial income or financial expense is recognised orwhen a forecast sale occurs. Where the hedged item is the costof a non-financial asset or non-financial liability, the amountstaken to equity are transferred to the initial carrying amount ofthe non-financial asset or liability.




42

Notesfor the y


If the forecast transaction or firm commitment is no longer expectedto occur, amounts previously recognised in equity are transferred tothe Income Statement. If the hedging instrument expires or is sold,terminated or exercised without replacement or rollover, or if itsdesignation as a hedge is revoked, amounts previously recognisedin equity remain in equity until the forecast transaction or firmcommitment occurs.

The Group uses forward exchange contracts as hedges of itsexposure to foreign currency risk in forecasted transactions andfirm commitments.

ProvisionsProvisions are recognised when the Group has a present obligation(legal or constructive) as a result of a past event, it is probable thatan outflow of resources embodying economic benefits will berequired to settle the obligation and a reliable estimate can be madeof the amount of the obligation. If the effect of the time value ofmoney is material, provisions are determined by discountingthe expected future cash flows at a pre-tax rate that reflectscurrent market assessments of the time value of money and,where appropriate, the risks specific to the liability. Wherediscounting is used, the increase in the provision due to the passageof time is recognised as a finance cost.

Pensions and similar obligationsGroup companies operate defined contribution and defined benefitpension plans.

Payments to defined contribution pension plans are charged as anexpense to the Income Statement as incurred when the relatedemployee service is rendered. The Group has no further legal orconstructive payment obligations once the contributions havebeen made.

For defined benefit pension plans, the cost of providing benefits isdetermined using the Projected Unit Method and the service costrelating to the benefit earned in the period is recognised in employeebenefits expense in the Income Statement. An interest costrepresenting the unwinding of the discount rate on the scheme’sliabilities, net of the expected return on scheme assets, is chargedto the Income Statement. The liability recognised in the BalanceSheet in respect of defined benefit pension plans is the present valueof the defined benefit obligation at the balance sheet date less thefair value of the plan assets. The defined benefit obligation iscalculated annually by independent actuaries. The present value ofthe defined benefit obligation is determined by discounting theestimated future cash outflows using interest rates of AA ratedcorporate bonds that have terms of maturity approximating to theterms of the relevant pension liability.

All actuarial gains and losses that arise in calculating the presentvalue of the defined benefit obligation and the fair value of planassets are recognised immediately in the Statement of RecognisedIncome and Expense.

Share-based payment transactionsCertain directors and management are eligible to participate inshare-based payment schemes, all of which are equity settled.

The cost of equity-settled transactions with employees is measuredby reference to their fair value at the date at which they are granted.The fair value is determined by an external valuer using an appropriatemodel. In valuing equity-settled transactions, no account is taken ofany vesting conditions, other than conditions linked to the price ofthe shares of Communisis plc (‘market conditions’).

The cost of equity-settled transactions is recognised, together with acorresponding increase in equity, over the period in which theperformance conditions are fulfilled, ending on the date on which therelevant employees become fully entitled to the award (‘vesting date’).The cumulative expense recognised for equity-settled transactions ateach reporting date reflects the extent to which the vesting periodhas expired and the Group’s best estimate of the number of equityinstruments that will ultimately vest, based on the achievement orotherwise of non-market-based performance conditions.

No expense is recognised for awards that do not ultimately vest,except for awards where vesting is conditional upon a marketcondition, which are treated as vesting irrespective of whether ornot the market condition is satisfied, provided that all otherperformance conditions are satisfied.

The Group has an employee share ownership plan (‘ESOP’) for thegranting of non-transferable options. Shares in the Group held bythe ESOP are accounted for in the same way as treasury sharesand presented in the Balance Sheet as a deduction from equitydescribed as the ‘ESOP reserve’.

The Group took advantage, on transition to IFRS, to apply IFRS 2 toequity-settled awards granted after 7 November 2002 not vestedby 31 December 2004.

Where an equity-settled award is cancelled, it is treated as if it hadvested on the date of cancellation, and any cost not yet recognised inthe Income Statement for the award is expensed immediately. Anycompensation paid up to the fair value of the award at the cancellationor settlement date is deducted from equity, with any excess over fairvalue being treated as an expense in the Income Statement.

ESOP reserveCommunisis plc shares held by the Group are classified inshareholders’ equity as the ‘ESOP reserve’ and are recognised atcost. Consideration received for the sale of such shares is alsorecognised in equity, with any difference between the proceeds fromsale and the original cost being taken to retained earnings. No gainor loss is recognised in the Income Statement on the purchase, sale,issue or cancellation of equity shares.

LeasesOperating lease payments are recognised as an expense in theIncome Statement on a straight-line basis over the lease term.

RevenueRevenueservices pthe year.

Revenue ior receivabenefits wmeasuredmet befor

Sale of goRevenueownershipof revenuethe Group

ProvisionThe provand supplywhen thematerial habe measur

Technologsoftware,is recognisoftware l

InterestFinance reffective iestimatedfinancial in

ExceptionThe GrouStatemenbecause orise to theunderstanso as to fatrends in f

Income taCurrent taCurrent taat the amoAuthoritiesare thosesheet date

Deferred tDeferredtemporarybases of areporting




43


icipate inettled.

measurede granted.ppropriates taken ofe price of

her with awhich thewhich theing date’).

sactions atng periodr of equityvement or

ately vest,a market

whether orall other

P’) for thep held by

ury sharesom equity

IFRS 2 toot vested

as if it hadognised inately. Any

ancellations over fair

nt.

ssified inognised ates is alsoeeds froms. No gainhase, sale,

nse in theterm.

RevenueRevenue represents the turnover, net of discounts, derived fromservices provided to customers and sales of products applicable tothe year.

Revenue is recognised at the fair value of the consideration receivedor receivable to the extent that it is probable that the economicbenefits will flow to the Group and the revenue can be reliablymeasured. The following specific recognition criteria must also bemet before revenue is recognised:

Sale of goodsRevenue is recognised when the significant risks and rewards ofownership of the goods have passed to the buyer and the amountof revenue can be measured reliably; this is usually on despatch bythe Group.

Provision of servicesThe provision of print sourcing services includes the sourcingand supply of printed material. Revenue from such services is recognisedwhen the significant risks and rewards of ownership of the printedmaterial have passed to the customer and the amount of revenue canbe measured reliably; this is usually on despatch by the print supplier.

Technology & Services revenue includes sale of consultancy services,software, management fees and digital asset management. Revenueis recognised when the service has been provided. Revenue fromsoftware licences is recognised in the period in which it is earned.

InterestFinance revenue is recognised as the interest accrues using theeffective interest method, which is the rate that exactly discountsestimated future cash receipts through the expected life of thefinancial instrument to the net carrying amount.

Exceptional itemsThe Group presents separately, on the face of the IncomeStatement, those material items of income and expense which,because of the nature and expected infrequency of the events givingrise to them, merit separate presentation to allow shareholders tounderstand better the elements of financial performance in the year,so as to facilitate comparison with prior periods and to better assesstrends in financial performance.

Income taxCurrent taxCurrent tax assets and liabilities for the current year are measuredat the amount expected to be recovered from or paid to the TaxationAuthorities. The tax rates and tax laws used to compute the amountare those that are enacted or substantively enacted by the balancesheet date.

Deferred taxDeferred income tax is provided, using the liability method, on alltemporary differences at the balance sheet date between the taxbases of assets and liabilities and their carrying amounts for financialreporting purposes.

Deferred income tax liabilities are recognised for all taxabletemporary differences except in respect of taxable temporarydifferences associated with investments in subsidiaries, where thetiming of the reversal of the temporary differences can be controlledand it is probable that the temporary differences will not reverse inthe foreseeable future.

Deferred tax assets and liabilities are not recognised if the temporarydifferences arise from the initial recognition of goodwill, or from theinitial recognition (other than in a business combination) of otherassets and liabilities in a transaction that affects neither the taxableprofit nor the accounting profit.

Deferred income tax assets are recognised for all deductibletemporary differences, carry-forward of unused tax assets andunused tax losses, to the extent that it is probable that taxableprofit will be available against which the deductible temporarydifferences and the carry-forward of unused tax assets and unusedtax losses can be utilised. In respect of deductible temporarydifferences associated with investments in subsidiaries, deferred taxassets are only recognised to the extent that it is probable that thetemporary differences will reverse in the foreseeable future andtaxable profit will be available against which the temporarydifferences can be utilised.

The carrying amount of deferred income tax assets is reviewed ateach balance sheet date and reduced to the extent that it is nolonger probable that sufficient taxable profit will be available to allowall or part of the deferred income tax asset to be utilised.

Deferred income tax assets and liabilities are measured at the taxrates that are expected to apply to the year when the asset isrealised or the liability is settled, based on tax rates (and tax laws)that have been enacted or substantively enacted at the balancesheet date.

Income tax relating to items recognised directly in equity is alsorecognised in equity.

Sales taxRevenues, expenses and assets are recognised net of the amountof sales tax except:

where the sales tax incurred on a purchase of goods and servicesis not recoverable from the Taxation Authority, in which case thesales tax is recognised as part of the cost of acquisition of the assetor as part of the expense item as applicable; and

receivables and payables which are stated with the amount of salestax included.

The net amount of sales tax recoverable from, or payable to,the Taxation Authority is included as part of receivables or payablesin the Balance Sheet.




44

Notesfor the y


Dividend distributionThe final dividend distribution to the Company’s shareholders isrecognised as a liability in the Group’s Financial Statements in theyear in which the dividend is approved by the Company’sshareholders. Interim dividends are recognised in the year in whichthey are paid.

2.5 Adoption of new and revised standardsDuring the year, the IASB and IFRIC have issued the followingstandards and interpretations with an effective date after 1 January2008:

International Accounting Standards(IAS/IFRS/IFRIC) Effective date

IFRS 2 Amendment to IFRS 2 – Vesting 1 January 2009Conditions and Cancellations

IFRS 3 Business Combination 1 July 2009(revised January 2008)

IFRS 8 Operating Segments 1 January 2009

IAS 1 Presentation of Financial Statements 1 January 2009(revised September 2007)

IAS 23 Borrowing Costs (revised March 2007) 1 January 2009

IAS 27 Consolidated and Separate Financial 1 July 2009Statements (revised January 2008)

IAS 32 & Amendment – Puttable Financial 1 January 2009IAS 1 Instruments and Obligations Arising

on Liquidation

IAS 39 Financial Instruments: Recognition and 1 July 2009Measurement – Eligible Hedged Items

IFRS 1 & Amendment – Cost of Investment in 1 January 2009IAS 27 Separate Financial Statements

IFRIC 11 IFRS 2 – Group and Treasury 1 January 2009Share Transactions

IFRIC 13 Customer Loyalty Programmes 1 July 2008

IFRIC 16 Hedges of a Net Investment in a 1 October 2008Foreign Operation

IFRIC 17 Distributions of Non-cash Assets to Owners 1 July 2009

The Group has not early adopted these amended standards andinterpretations.

The directors do not anticipate that the adoption of these standardsand interpretations will have a material impact on the Group’sFinancial Statements in the period of initial application.

Adoption of IFRS 8 will require the Group to disclose more detailedfinancial and descriptive information about its reportable segments,and, in particular, the revenues derived from services, the countriesin which the Group holds assets, and information on reliance onmajor customers.

3 Segmental informationThe Group is organised into four main business segments:Technology & Services, Print Sourcing, Direct Mail & Business Formsand Transactional.

The ‘Technology & Services’ segment includes ‘new model’ printmanagement contracts and all profits made from selling added-valuecommunication-enhancing services and print or communicationrelated consultancy.

Customers who have signed up to a ‘new model’ print managementcontract have full access to the Group’s print supply chain and areable to source print at the cost the Group buys it. The revenue andcost associated with the print element of the Group’s offering tothese customers is included in the ‘Print Sourcing’ segment. ‘PrintSourcing’ also includes ‘old model’ print management contracts thatrely for profit on marking up print sourced elsewhere.

The Group’s ‘Direct Mail & Business Forms’ segment includesactivities in both these market sectors.

The ‘Transactional’ segment includes all cheque and cheque mailingactivity along with statement and billing operations.

Transfer pricing between business segments is set on an arm’slength basis in a manner similar to transactions with third parties.Segment revenue, segment expense and segment profitsinclude sales between business segments. Those sales areeliminated on consolidation and are not included in the revenuefigures opposite.

The Group’s geographical segments are based on the location of theGroup’s assets. Sales to external customers disclosed in geographicalsegments are based on the geographical location of its customers.

3 SegmBusinessThe segm

Revenue

Profit froexceptioGains arisException

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Profit for

Assets aSegmentGoodwill

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45


egments:ess Forms

odel’ printded-value

munication

nagementn and are

venue andoffering toent. ‘Printtracts that

includes

ue mailing

an arm’sd parties.

nt profitssales aree revenue

tion of theographicalstomers.

3 Segmental information (continued)

Business segmentsThe segment results for the year ended 31 December 2008 are as follows:

Continuing operations

Direct MailTechnology Print & Business Central& Services Sourcing Forms Transactional Cost Total

£000 £000 £000 £000 £000 £000

Revenue 11,851 96,727 91,816 57,336 – 257,730

Profit from operations beforeexceptional items 5,127 1,308 5,445 13,329 (10,233) 14,976Gains arising on disposal of Bath business – – 1,380 – – 1,380Exceptional property provisions – – – – (1,969) (1,969)

Profit from operations 5,127 1,308 6,825 13,329 (12,202) 14,387

Net finance costs (1,661)

Profit before tax 12,726Income tax expense (4,095)

Profit for the year 8,631

Assets and liabilitiesSegment assets excluding goodwill 8,075 11,304 29,686 20,346 2,890 72,301Goodwill 48,138 20,433 52,377 28,120 – 149,068

56,213 31,737 82,063 48,466 2,890 221,369Unallocated assets 17,940

Total assets 239,309

Segment liabilities 1,564 16,934 13,005 12,772 13,601 57,876Unallocated liabilities 46,666

Total liabilities 104,542

Other segment informationCapital expenditure

Property, plant & equipment 331 242 2,964 1,512 251 5,300Intangible assets 1,945 40 30 1,004 200 3,219Acquired assets 76 – – – – 76

2,352 282 2,994 2,516 451 8,595

Depreciation 40 520 3,322 1,392 120 5,394Amortisation 591 62 173 169 46 1,041

Inter-segment sales amounting to £29.1m, £6.5m and £3.1m were made to Print Sourcing from Direct Mail & Business Forms, Transactional,and Technology & Services respectively. Inter-segment sales amounting to £0.3m and £0.9m were made to Direct Mail & Business Formsfrom Transactional and Technology & Services respectively. Inter-segment sales amounting to £5.1m, £0.2m and £0.2m were made toTransactional from Direct Mail & Business Forms, Print Sourcing and Technology & Services respectively.

The unallocated assets and liabilities figures include current and deferred tax, pension deficit, cash and borrowings.




46


Notesfor the y


Business segments (continued)The segment results for the year ended 31 December 2007 were as follows:

Continuing operations

Direct MailTechnology Print & Business Central& Services Sourcing Forms Transactional Cost Total

£000 £000 £000 £000 £000 £000

Revenue 12,373 107,457 115,670 55,090 – 290,590

Profit from operations 4,031 859 3,511 11,150 (9,043) 10,508

Net finance costs (2,637)

Profit before tax 7,871Income tax expense (1,320)

Profit for the year 6,551

Assets and liabilitiesSegment assets excluding goodwill 3,074 21,313 38,759 20,213 3,153 86,512Goodwill 41,778 20,433 54,871 29,146 – 146,228

44,852 41,746 93,630 49,359 3,153 232,740Unallocated assets 16,066


Segment liabilities 26 25,119 17,057 10,446 9,455 62,103Unallocated liabilities 58,205

Total liabilities 120,308

Other segment informationCapital expenditure

Property, plant and equipment 3 77 2,232 3,553 175 6,040Intangible assets 117 848 26 83 – 1,074

120 925 2,258 3,636 175 7,114

Depreciation 206 108 3,710 1,272 170 5,466Amortisation 464 400 137 160 73 1,234

Inter-segment sales amounting to £30.4m and £7.7m were made to Print Sourcing from Direct Mail & Business Forms and Transactionalrespectively. Inter-segment sales amounting to £0.4m and £0.5m were made to Direct Mail & Business Forms from Transactional andTechnology & Services respectively. Inter-segment sales amounting to £10.1m were made to Transactional from Direct Mail & Business Forms.

The unallocated assets and liabilities figures include current and deferred tax, pension deficit, cash and borrowings.

3 SegmGeograpThe followended 31

Year end

Revenue

Other seSegmentUnallocate

Total ass

Capital exPropertIntangibAcquire

Year end

Revenue

Other seSegmentUnallocate

Total ass

Capital exPropertIntangib

Unallocate

Central as




47


Total£000

90,590

10,508

(2,637)

7,871(1,320)

6,551

86,51246,228

32,74016,066

48,806

62,10358,205

20,308

6,0401,074

7,114

5,4661,234

nsactionaltional andss Forms.


Geographical segmentsThe following table presents revenue, expenditure and certain asset information regarding the Group’s geographical segments for the yearsended 31 December 2008 and 2007.

Year ended 31 December 2008 UnitedKingdom Other Total

£000 £000 £000Revenue 249,661 8,069 257,730

Other segment informationSegment assets 220,775 594 221,369Unallocated assets 17,940


Capital expenditureProperty, plant and equipment 5,300 – 5,300Intangible assets 3,219 – 3,219Acquired property, plant and equipment 76 – 76

Year ended 31 December 2007 UnitedKingdom Other Total

£000 £000 £000Revenue 282,641 7,949 290,590

Other segment informationSegment assets 230,799 1,941 232,740Unallocated assets 16,066


Capital expenditureProperty, plant and equipment 6,039 1 6,040Intangible assets 1,074 – 1,074

Unallocated assets comprise deferred tax and cash.

Central assets and liabilities are recognised in the United Kingdom segment.


4 RevenueRevenue disclosed in the Income Statement is analysed as follows:

2008 2007£000 £000

Sale of goods 149,152 170,760Provision of services:Technology & Services and Print Sourcing 108,578 119,830

Sales revenue 257,730 290,590

Interest income on financial assets carried at amortised cost 419 266Employee defined benefit scheme interest income 250 628Gain on foreign currency financial liabilities 62 –

Finance revenue 731 894

Total revenue 258,461 291,484

No revenue was derived from exchanges of goods and services (2007 £nil).

5 Other expenses5.1 Finance costs

2008 2007£000 £000

Interest expense for borrowings at amortised cost 2,392 3,350Loss on foreign currency financial liabilities – 181

Finance costs 2,392 3,531

5.2 Finance costs and finance revenue by category of financial instruments2008 2007£000 £000

Interest on receivables measured at amortised cost 419 266Interest on financial liabilities measured at amortised cost (2,392) (3,350)

Net interest from financial assets and financial liabilities not at fair value through Income Statement (1,973) (3,084)Gain/(loss) on foreign currency financial liabilities 62 (181)Retirement benefit related income (Note 15) 250 628

(1,661) (2,637)

5.3 Employee benefits expense2008 2007£000 £000

Wages and salaries 56,334 64,055Social security costs 5,090 5,202Pension costs 2,539 5,695Expense of share-based payments 404 172Redundancy costs 949 2,875

65,316 77,999

5 Other5.3 Empl

The averaUnited KinContinent

CompensShort-termShare-bas

Total com

Key manaand intereprovided i

Details ofpages 28

5.4 Excep

Profit fromGains arisException

Exception

On 30 Jubusinesse

The exceppremises wthat weresize and ttherefore tthe remainover the r

5.5 AuditThe remu

Audit of thOther fees



48

Notesfor the y



2007£000

70,760

19,830

90,590

266628

–

894

91,484

2007£0003,350

181

3,531

2007£000266

(3,350)

(3,084)(181)628

(2,637)

2007£000

64,0555,2025,695

1722,875

77,999

5 Other expenses (continued)

5.3 Employee benefits expense (continued)2008 2007£000 £000

The average monthly number of employees during the year was made up as follows:United Kingdom 1,694 1,900Continental Europe 9 16

1,703 1,916

Compensation of key management personnelShort-term employee benefits 1,482 1,176Share-based payments (equity-settled) 191 48

Total compensation paid to key management personnel 1,673 1,224

Key management personnel consist of directors of the Company only. Details of individual directors’ remuneration, pension entitlementsand interests are provided within the Directors’ Remuneration Report on pages 28 to 33. Details of the Group’s pension commitments areprovided in Note 15 to these Financial Statements.

Details of the directors’ interests in employee share incentive plans are provided within the Directors’ Remuneration Report onpages 28 to 33.

5.4 Exceptional items2008 2007£000 £000

Profit from operations is arrived at after charging/(crediting) the following items:Gains arising on disposal of Bath business (1,380) –Exceptional property provisions 1,969 –

Exceptional items 589 –

On 30 June 2008, the Group disposed of the Bath operation which comprised Communisis’ Bath Business Forms and Economailerbusinesses, both of which were part of the Direct Mail & Business Forms segment. See Note 8 for further details.

The exceptional property provisions relate primarily to the estimated costs for the rental obligations, dilapidations and other costs of surpluspremises which are long-term in nature. A provision has been established following the failure of two businesses previously sold by the Groupthat were occupying properties under leases guaranteed by Communisis. This provision has been classified as exceptional by virtue of itssize and the fact that the liabilities arise from businesses that ceased to be part of Communisis’ trading activities some years ago andtherefore the costs are not related to current operating activities. The provisions reflect the estimated discounted net cost to the Group overthe remainder of the lease periods (maximum 7 years). The final outcome depends upon the ability of the Group to sublet or assign the leaseover the related properties.

5.5 Auditors’ remunerationThe remuneration of the auditors is analysed as follows:

2008 2007£000 £000

Audit of the Group Financial Statements 62 60Other fees to the auditors – local statutory audits for subsidiaries 136 170

– taxation services 79 30– other services 40 5

317 265



49



6 IncomReconcilThe tax exof 28.5%

Profit befo

At UK staWrite off oExpensesUnrelievedShare-basChange inAdjustme

Tax charg

UnrecogThe Grouthat are arecognisein the Gro

Deferred

Deferred

Deferred tAccelerOther sHeld-ovCapitalShare-bPensionFinanciaCustom

Deferred t

The realisdeferred t

The defer

AccelerateOther shoLosses avHeld-overCapital gaShare-basPensionsCustomer

Deferred t



50

Notesfor the y

5 Other expenses (continued)

5.6 Operating lease payments2008 2007£000 £000

Minimum lease payments 3,521 3,804Sub-lease receipts (449) (556)

3,072 3,248

5.7 Research and development2008 2007£000 £000

Research and development expenditure expensed during the year 98 241

6 Income taxThe major components of income tax expense for the years ended 31 December 2008 and 2007 are:

2008 2007£000 £000

Tax charged in the Income StatementCurrent income tax

UK Corporation Tax 3,543 1,659Adjustments in respect of prior years (1,723) (1,284)

Total current income tax charge 1,820 375

Deferred income taxOrigination and reversal of temporary differences 1,699 1,091Adjustments in respect of prior years (232) (73)Changes in tax rates and laws 808 (73)

Total deferred tax charge 2,275 945

Tax charge in the Consolidated Income Statement 4,095 1,320

Tax relating to items charged or credited to equity2008 2007£000 £000

Deferred income tax related to items charged or credited directly to equityActuarial gains on pension scheme:

Current year charge 347 143Adjustments in respect of prior years – due to change in tax rate – 346

Tax on financial liability (67) –

Income tax expense reported in Statement of Recognised Income and Expense 280 489

Current tax adjustments in respect of prior years relate to the release of provisions created in respect of prior years’ tax submissions, agreedin the current year.



6 Income tax (continued)

Reconciliation of the total tax chargeThe tax expense in the Income Statement for the year is higher (2007 lower) than the average standard rate of corporation tax in the UKof 28.5% (2007 30%). The differences are reconciled below:

2008 2007£000 £000

Profit before income tax 12,726 7,871

At UK statutory income tax rate of 28.5% (2007 30%) 3,627 2,361Write off of goodwill on disposal, not deductible for tax purposes 1,003 –Expenses not deductible for tax purposes 347 335Unrelieved overseas losses 171 100Share-based payments 134 3Change in deferred tax in respect of rolled over capital gains (40) (49)Adjustments in respect of prior years (1,147) (1,430)

Tax charge in the Consolidated Income Statement 4,095 1,320

Unrecognised tax lossesThe Group has unrecognised losses, which arose outside of the UK, for which there is no expiry date, of £3,659,000 (2007 £2,227,000)that are available for offset against future taxable profits of the companies in which the losses arose. No deferred tax assets have beenrecognised in respect of any of these losses as their future utilisation is uncertain and they may not be used to offset taxable profits elsewherein the Group.

Deferred tax

Deferred tax included in the Consolidated Balance Sheet is as follows:2008 2007£000 £000

Deferred tax liability/(asset)Accelerated capital allowances 2,335 1,253Other short-term timing differences (1,675) (1,149)Held-over capital gains 1,430 990Capital gains rolled over into replacement assets 983 1,023Share-based payments (87) (75)Pensions (3,109) (4,825)Financial liability (67) –Customer relationships intangible assets 543 262

Deferred tax liability/(asset) 353 (2,521)

The realisation of the above prior year deferred tax asset was dependant upon the anticipated continuing profitability of the Group. Thedeferred tax asset was recognised as the directors foresaw future profits adequate to assume recovery.

The deferred tax charge included in the Consolidated Income Statement is as follows:2008 2007£000 £000

Accelerated capital allowances 1,083 248Other short-term timing differences (526) (184)Losses available for offset against future taxable income – 405Held-over capital gains/(losses) 440 (263)Capital gains rolled over into replacement assets (40) (125)Share-based payments (13) (49)Pensions 1,367 1,378Customer relationships intangible assets (36) (465)

Deferred tax charge 2,275 945



51


2007£0003,804

(556)

3,248

2007£000241

2007£000

1,659(1,284)

375

1,091(73)(73)

945

1,320

2007£000

143346

–

489

ns, agreed


7 Acquisition of businessOn 22 December 2008 the Group acquired the whole issued share capital of Absolute Intuistic Ltd. Details of the consideration paid andbook values of assets and liabilities acquired are set out below. This transaction has been accounted for by the purchase methodof accounting.

ProvisionalBook Fair valuevalues to Group£000 £000

Intangible assets 841 1,139Property, plant and equipment 76 76Bank overdraft (215) (215)Cash at bank 1 1Trade and other receivables 1,375 1,375Trade and other payables (796) (796)Deferred tax – (319)Income tax payable (248) (248)

Fair value of net assets acquired 1,034 1,013

Goodwill (Note 12) 6,360

Consideration 7,373

Satisfied by:Cash 4,230Contingent consideration 2,323Adjusted initial consideration 284Costs associated with the acquisition – paid 15Costs associated with the acquisition – year end creditors 521

Total consideration 7,373

The net cash outflow arising from the acquisition was as follows:

Cash consideration, as above 4,245Net bank overdraft acquired, as above 214

Net outflow of cash 4,459

The fair values above have been calculated on a provisional basis due to the proximity of the acquisition to the year end. In determining theprovisional fair value of net assets acquired, a full review for intangible assets was performed. The provisional goodwill recognised aboveincludes certain intangible assets that cannot be individually separated and reliably measured due to their nature. These items include anassembled workforce, and value of expected synergies through future earnings capacity and cost savings.

The maximum amount of contingent consideration that may be payable is £8 million and is dependant on the business achieving growthtargets for EBITDA during the period to 31 August 2010.

Absolute Intuistic Ltd contributed a loss of £17,000 from the date of acquisition (22 December 2008) to 31 December 2008 to the profitfrom operations of the Group. If the combination had taken place at the beginning of the year, the profit after tax for the Group for 2008would have been £9,103,000 and the revenue would have been £264,415,000, excluding the impact of intangibles amortisation andemployee retention bonuses.

The results of this business are included within the Technology & Services business segment.



52

Notesfor the y


8 DispoOn 30 Jubusinessewill continas a discoteam of th

The Bathnear Bath

The excep

Disposal pCashDeferre

Less tangPropertInventoTrade aTrade a

Less disp

Profit on dLess intanPension re

Gains aris

Tax:ChargeCharge

Profit afte

The defer

No later thAfter one

The pensmemberscurtailmen

The tax ch


paid ande method

sionalr valueGroup

£0001,139

76(215)

11,375(796)(319)(248)

1,013

6,360

7,373

4,2302,323

28415

521

7,373

4,245214

4,459

mining thesed abovenclude an

ng growth

the profitp for 2008ation and



53


8 Disposal of business included within continuing operationsOn 30 June 2008, the Group disposed of the Bath operation which comprised Communisis’ Bath Business Forms and Economailerbusinesses, both of which were part of the Direct Mail & Business Forms segment of the Group’s divisions. Printing activity in this segmentwill continue and therefore the disposal of the Bath operation is not regarded as a separate major line of business that would merit treatmentas a discontinued operation. The Purchaser is wholly owned by MCAARP Holdings Ltd, which in turn is owned by the former managementteam of the Bath operation, as notified to shareholders in a circular dated 13 June 2008.

The Bath Business Forms business manufactures business forms stationery for a number of clients from its factory in Midsomer Norton,near Bath, Somerset. The Economailer business is a small sales force for specialised payroll products, largely manufactured at the Bath plant.

The exceptional profit arising on the disposal of the Bath Business Forms operation is calculated as follows:

2008£000 £000

Disposal proceeds:Cash 8,200Deferred consideration 4,600

12,800Less tangible net assets disposed of:

Property, plant and equipment (3,670)Inventories (3,320)Trade and other receivables (6,837)Trade and other payables 5,577

(8,250)Less disposal costs (400)

Profit on disposal chargeable to tax 4,150Less intangible assets written off (3,520)Pension related curtailment gain (see note below) 750

Gains arising on disposal (included in profit from operations) 1,380

Tax:Chargeable against profit on disposal (1,162)Chargeable against curtailment gain (210)

(1,372)

Profit after tax attributable to disposal of Bath Business Forms operation 8

The deferred consideration is due to Communisis as follows:

2008£000

No later than one year 500After one year but no more than five years 4,100

4,600

The pension related curtailment gain arises because, on leaving the Group, employees of the Bath operation became deferredmembers of the Communisis Pension Plan. This, in turn, results in a reduction in the Group pension related deficit which is treated as acurtailment gain.

The tax charge arising on the sale of the Bath operation is £1,372,000, all of which is treated as deferred.




54

9 Earnings per share2008 2007000 000

Weighted average number of ordinary shares (excluding ESOP shares) for basic earnings per share 138,285 138,254Effect of dilution:Share options 2,060 1,468

Weighted average number of ordinary shares (excluding ESOP shares) adjusted for the effect of dilution 140,345 139,722

279,628 (2007 279,628) shares were held in trust at 31 December 2008.

Share options in issue for which exercise is currently unlikely (as the option price is higher than the average market price) total 3,390,064(2007 2,472,681) options. As a consequence, these options have not been included in the diluted earnings per share in the current year.The inclusion of these options would have been anti-dilutive in the prior year and so had no impact on diluted earnings per share for theyear ended 31 December 2007.

2008 2007£000 £000

Basic and diluted earnings per share is calculated as follows:Profit attributable to equity holders of the parent 8,631 6,551

Earnings per shareBasic 6.24p 4.74pDiluted 6.15p 4.69p

Earnings per share from continuing operations before exceptional items

Net profit from continuing operations before exceptional items and attributable to equity holdersof the parent is derived as follows:

2008 2007£000 £000

Profit after taxation from continuing operations 8,631 6,551Exceptional items (Note 5.4):

Gains arising on disposal of Bath business (1,380) –Exceptional property provisions 1,969 –

9,220 6,551

Taxation on exceptional items 821 –Taxation – adjustments in respect of prior years (Note 6) (1,147) (1,430)

Profit after taxation from continuing operations excluding exceptional items 8,894 5,121

Adjusted earnings per share

Basic 6.43p 3.70pDiluted 6.34p 3.67p

Adjusted earnings per share uses the same weighted average number of ordinary shares as reported above.

10 Dividends paid and proposed2008 2007

Declared and paid during the year £000 £000Amounts recognised as distributions to equity holders in the year:Final dividend of the year ended 31 December 2006 of 0.500p per share – 691Interim dividend of the year ended 31 December 2007 of 0.818p per share – 1,131Final dividend of the year ended 31 December 2007 of 1.635p per share 2,261 –Interim dividend of the year ended 31 December 2008 of 0.860p per share 1,189 –

3,450 1,822

Proposed for approval at AGM (not recognised as a liability as at 31 December)Final equity dividend on ordinary shares for 2008 of 1.635p (2007 1.635p) per share 2,261 2,261

11 Prop

CostAt 1 JanuAdditionsDisposals

At 31 DecAdditionsAcquisitioDisposalsDisposal oAdjustme

At 31 Dec

DepreciaAt 1 JanuDepreciatDisposals

At 31 DecDepreciatDisposalsDisposal oAdjustme

At 31 Dec

Net book

Net book

Net book

There is n

Notesfor the y





55

2007000

38,254

1,468

39,722

3,390,064rrent year.are for the

2007£000

6,551

4.74p4.69p

2007£0006,551

––

6,551

–(1,430)

5,121

3.70p3.67p

2007£000

6911,131

––

1,822

2,261

11 Property, plant and equipment

Plant,Long Short equipment

Freehold leasehold leasehold and motorproperty property property vehicles Total

£000 £000 £000 £000 £000CostAt 1 January 2007 7,695 2,253 230 65,145 75,323Additions 200 – 1,450 4,390 6,040Disposals – (738) – (6,468) (7,206)

At 31 December 2007 7,895 1,515 1,680 63,067 74,157Additions 19 – 5 5,276 5,300Acquisition of business – – – 76 76Disposals – (11) – (846) (857)Disposal of business – (61) – (12,407) (12,468)Adjustment to prior year disposals 1,014 4 (135) 2,849 3,732

At 31 December 2008 8,928 1,447 1,550 58,015 69,940

DepreciationAt 1 January 2007 298 484 160 47,301 48,243Depreciation charge for the year 156 222 33 5,055 5,466Disposals – (12) – (7,013) (7,025)

At 31 December 2007 454 694 193 45,343 46,684Depreciation charge for the year 324 54 141 4,875 5,394Disposals – (12) – (797) (809)Disposal of business – (61) – (8,737) (8,798)Adjustment to prior year disposals 1,253 (70) (155) 2,689 3,717

At 31 December 2008 2,031 605 179 43,373 46,188

Net book value at 31 December 2008 6,897 842 1,371 14,642 23,752

Net book value at 31 December 2007 7,441 821 1,487 17,724 27,473

Net book value at 31 December 2006 7,397 1,769 70 17,844 27,080

There is no security, nor any restriction on title. There are no assets under construction.





56

12 Intangible assetsSoftware Customer

assets Goodwill relationships Total£000 £000 £000 £000

CostAt 1 January 2007 7,253 208,139 3,330 218,722Additions 1,074 – – 1,074

At 31 December 2007 8,327 208,139 3,330 219,796Additions 2,866 – 353 3,219Acquisition of business 196 6,360 943 7,499Disposals (498) – – (498)Disposal of business (753) (10,254) – (11,007)

At 31 December 2008 10,138 204,245 4,626 219,009

Amortisation and impairmentAt 1 January 2007 3,359 61,911 2,270 67,540Amortisation during the year 1,108 – 126 1,234

At 31 December 2007 4,467 61,911 2,396 68,774Amortisation during the year 915 – 126 1,041Disposals (491) – – (491)Disposal of business (751) (6,734) – (7,485)

At 31 December 2008 4,140 55,177 2,522 61,839

Net book value at 31 December 2008 5,998 149,068 2,104 157,170

Net book value at 31 December 2007 3,860 146,228 934 151,022

Net book value at 31 December 2006 3,894 146,228 1,060 151,182

As from 1 January 2004, the date of transition to IFRS, goodwill is no longer amortised but is now subject to annual impairment testing(Note 13). The cumulative impairment loss is £30.2m (2007 £30.2m).

The customer relationship asset arising on the acquisition of the whole of the issued share capital of Absolute Intuistic Ltd was £943,000.This will be amortised evenly over the expected duration of the customer relationship, estimated at five years.

Software assets are amortised evenly over their useful economic lives of between three and five years and have between one and fiveyears left to be amortised. Included in software assets is £1,734,570 (2007 £2,440,440) currently in development. Amortisation willcommence in 2009. Software assets currently in development have been assessed for impairment, and management are satisfied that theirvalue is fully recoverable through their value in use.

13 ImpaGoodwill areportable

TechPrintDirecTran

These rep

The recovbased onthat used

There is n

The carryi

TechnologPrint SourDirect MaTransactio

There are

Key assu

Discount

The pre-taadjusted t

Period ov

The periorespect of

Profit gro

The profitlong-termare dedica

Profit growrates rang& Busines2% (2007

SensitivitIn 2008 nsegment i

All other itimpairmen

On averag

Disclosure

Notesfor the y





57

Total£000

18,7221,074

19,7963,2197,499

(498)11,007)

19,009

67,5401,234

68,7741,041

(491)(7,485)

61,839

57,170

51,022

51,182

ent testing

£943,000.

e and fivesation willd that their

13 Impairment of goodwillGoodwill acquired through business combinations is allocated for impairment testing purposes to four cash-generating units, which arereportable segments, as follows:

Technology & Services;Print Sourcing;Direct Mail & Business Forms; andTransactional.

These represent the lowest level within the Group at which goodwill is monitored for internal management purposes.

The recoverable amount of all four units has been determined based on a value in use calculation using risk-adjusted cash flow projectionsbased on financial budgets, influenced by historical experience and market trends, approved by the Board. The approach is consistent withthat used in prior years, however assumptions have been updated to reflect current economic conditions.

There is no impairment charge in the current year (2007 £nil).

The carrying amount of goodwill allocated to cash-generating units, is as follows;

2008£000

Technology & Services 48,138Print Sourcing 20,433Direct Mail & Business Forms 52,377Transactional 28,120

149,068

There are no other intangible assets with indefinite useful lives.

Key assumptions used in value in use calculations

Discount rates

The pre-tax discount rate applied to the cash flow projections is 8.75% (2007 10.40%). This is the Group’s weighted average cost of capitaladjusted to a pre-tax rate and adjusted to reflect market assessment of specific risks associated with the projected cash flows.

Period over which projected cash flows are based on approved financial budgets

The period over which cash flows are projected based on financial budgets approved by the Board is three years (2007 three years) inrespect of all cash-generating units. The financial budgets include the estimated financial effects of the decline in the economy.

Profit growth rate used to extrapolate cash flows beyond the budget period

The profit growth rate used to extrapolate cash flow projections beyond the budget period for all cash-generating units is below thelong-term average growth rate for the UK and is considered to be a representative rate for the markets to which these segmentsare dedicated.

Profit growth rates have been assessed individually for each cash-generating unit (primary segment). Technology & Services profit growthrates range between 0% and 2.5% (2007 2% and 2.5%), Print Sourcing profit growth rates are 2% (2007 between 1% and 2%), Direct Mail& Business Forms profit growth rates are 2.5% (2007 between -2% and 2.5%) and Transactional growth rates range between -2% and2% (2007 -2% and 2%).

Sensitivity to changes in assumptionsIn 2008 no impairment charge has been made against goodwill for any of the cash-generating units. The headroom in the Print Sourcingsegment is £3,131,000 (2007 £1,073,000).

All other items remaining equal, the discount rate would need to increase by 0.9% to 9.7% to remove all headroom within the Print Sourcingimpairment test.

On average, growth rates would need to be reduced 1.2% to remove all headroom on the Print Sourcing impairment test.

Disclosures in this section relate to the Print Sourcing sector, as this sector has the lowest amount of headroom available.



14 SharOptions aOn 19 De20 Decemby the traoptions wwas execuntil the thShares bethe eventonly betw

No further

The SharAll UK emis equal tothe third othe vestin

No option

The dilutiv

The followthe year.

OutstandiGranted dForfeited dExercisedExpired d

Outstandi

Exercisab

1 Included woptions win accord

2 The weigh

The weigh

The weigh

The rangeoptions fo



58

14 Share-based paymentsThe Executive Share Option Scheme 2000Certain directors and management are eligible to participate in the above scheme at the discretion of the Remuneration Committee.The exercise price of the options is equal to the market value of the shares on the date of grant. In respect of options granted prior to1 January 2005, except those granted to the former Chief Executive which have since lapsed, the options vest if the percentage increasein normalised earnings (i.e. before intangibles amortisation, restructuring costs and other exceptional items) per share over any threeconsecutive financial years exceeds the percentage increase in the Retail Prices Index over that period by an average of at least 3% perannum. The contractual life of each option granted is ten years. There are no cash settlement alternatives.

In respect of options granted since 1 January 2005 if the performance condition is not met within three years from the date of grant,the options lapse.

For options granted to the Chief Executive in 2006 and all options granted under this scheme in 2007 and 2008, 50% of the options vestif the Total Shareholder Return (‘TSR’) of the Company, as compared to the TSR performance of all companies in the Support Services sectorof the FTSE All Share Index (excluding FTSE 100 companies), is at or above the median level over a three year period. The other 50% ofthe options vest if the TSR of the Company, as compared to the TSR performance of all companies in the FTSE Small Cap Index(excluding investment trusts), is at or above the median level over a three year period. If the performance condition is not fulfilled within thethree year period from the date of grant, the options lapse. The contractual life of each option granted is ten years. There are no cashsettlement alternatives.

The fair value of options granted under the Executive Share Option Scheme 2000 in the year to 31 December 2008 has been estimatedon the date of grant using a hybrid simulation and binomial option pricing model, taking into account the terms and conditions upon whichthe options were granted. The following weighted average assumptions were used in that model: an expected life extending six monthslater than the exercise date; share price at the date of grant of £0.52 (2007 £0.705); estimated annualised dividend yield of approximately6.0% (2007 3.73%); risk-free interest rate of approximately 4.5% (2007 5.0%) and expected volatility of 38.0% (2007 35.7%). Volatility hasbeen determined by reference to Communisis plc’s and comparator companies’ historical volatility over a three-year period, which isexpected to reflect the share price of Communisis plc in the future. The weighted average fair value of the share options granted in the yearended 31 December 2008 was £0.117 (2007 £0.161).

The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns which may occur.The expected volatility reflects historical volatility adjusted for future trends, which may also not necessarily be the actual outcome.Both the historical and expected volatilities reflect the volatility of the share prices of Communisis plc and comparator companies.

The Communisis Long Term Incentive Plan 2007Certain directors and management are eligible to participate in this plan at the discretion of the Remuneration Committee. In respect ofoptions granted under the scheme the exercise price is £nil. For all options granted in 2008 and 2007, 50% of the options becomeexercisable if the TSR of the Company, as compared to the TSR performance of all companies in the Support Services sector of the FTSEAll Share Index (excluding FTSE 100 companies), is at or above the median level over a three-year period. The other 50% of the optionsbecome exercisable if the TSR of the Company, as compared to the TSR performance of all companies in the FTSE Small Cap Index(excluding investment trusts), is at or above the median level over a three-year period. 30% of each tranche of options will vest forperformance at the median of the comparator group rising, on a straight-line basis, to 100% vesting for performance in the top decile ofthe comparator group. If the performance conditions are not fulfilled within the three-year period from the date of grant, the options lapse.The contractual life of each option granted is five years. There are no cash settlement alternatives.

The fair value of options granted under the Long Term Incentive Plan 2007 in the year to 31 December 2008 has been estimated on thedate of grant using a simulation option pricing model, taking into account the terms and conditions upon which the options were granted.The following weighted average assumptions were used in that model: an expected life extending six months later than the exercise date;share price at the date of grant of £0.529 (2007 £0.785); estimated annualised dividend yield of approximately 6.0% (2007 3.79%);risk-free interest rate of approximately 4.2% (2007 5.0%) and expected volatility of 38.0% (2007 35.8%).

Volatility has been determined by reference to Communisis plc’s and comparator companies’ historical volatility over a three-year period,which is expected to reflect the share price of Communisis plc in the future. The weighted average fair value of the share options grantedin the year ended 31 December 2008 under this plan was £0.27155 (2007 £0.411).

The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns which may occur.The expected volatility reflects historical volatility adjusted for future trends, which may also not necessarily be the actual outcome. Boththe historical and expected volatilities reflect the volatility of the share prices of Communisis plc and comparator companies.

Notesfor the y



14 Share-based payments (continued)

Options awarded to the ChairmanOn 19 December 2007, shortly after his appointment, Mr Hickson was awarded 250,000 nil cost share options in the Company, and on20 December 2007, he entered a contract with RBC Trust Company (Jersey) Limited (‘RBC’) for these options, on exercise, to be satisfiedby the transfer of ordinary shares already held by the Company’s Employee Benefit Trust, of which RBC is the Trustee. The grant of thoseoptions was conditional upon the purchase by Mr Hickson of 250,000 ordinary shares in the Company (‘the Matching Shares’); this purchasewas executed on 18 December 2007. The principal conditions for the exercise of these options are that the options will not normally vestuntil the third anniversary of the date of grant (‘the Vesting Date’); if he ceases to be the beneficial owner of some or all of the MatchingShares before the Vesting Date the extent of the vesting will be reduced accordingly; if he ceases to be an employee of the Group, or inthe event of a takeover, before the Vesting Date, his options will normally vest on a time pro-rata basis; exercise may normally take placeonly between the Vesting Date and the fifth anniversary of the date of grant.

No further options have been awarded to Mr Hickson in 2008.

The Sharesave SchemeAll UK employees (including directors) are eligible to participate in the Communisis Sharesave Scheme. The exercise price of the optionsis equal to the market price of the shares at the date of invitation to participate less a maximum discount of 20%. The options vest on eitherthe third or fifth anniversary of the commencement of the savings period. Any options which have not been exercised within six months ofthe vesting date lapse.

No options were granted under the Sharesave Scheme in the year ended 31 December 2008 (2007 nil).

The dilutive effect of outstanding options is reflected as additional share dilution in the computation of earnings per share.

The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options duringthe year.

2008 2008 2007 2007Number WAEP £ Number WAEP £

Outstanding at the beginning of the year 1 8,767,532 0.76873 10,933,121 0.97776Granted during the year 1,755,740 0.19935 1,970,899 0.23796Forfeited during the year (1,888,525) 0.74482 (4,099,165) 1.06648Exercised during the year 2 (59,321) 0.46476 (11,583) 0.60000Expired during the year (51,480) 1.76675 (25,740) 1.41025

Outstanding at the end of the year 1 8,523,946 0.65284 8,767,532 0.76873

Exercisable at the end of the year 605,260 1.56250 693,906 1.57765

1 Included within this balance are options over 1,137,229 shares (2007 1,316,385 shares) that have not been recognised in accordance with IFRS 2 as theoptions were granted on or before 7 November 2002. These options have not been subsequently modified and therefore do not need to be accounted forin accordance with IFRS 2.

2 The weighted average share price at the date of exercise for the options exercised in the year ended 31 December 2008 was £0.59992 (2007 £0.78937).

The weighted average remaining contractual life for the share options outstanding as at 31 December 2008 is 4.97 years (2007 5.03 years).

The weighted average fair value of all options granted during the year was £0.20635 (2007 £0.3715).

The range of exercise prices for options outstanding at the end of the year was £nil – £1.765 (2007 £nil – £1.76675). The number of shareoptions for which the exercise price is £nil total 2,160,270 (2007 1,305,270).



59

ommittee.ed prior toe increaseany threest 3% per

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60

15 Retirement benefit plansThe Group operates defined contribution and defined benefit pension plans.

Defined contribution schemesThe Group operates a UK defined contribution arrangement within two UK Group Companies, Communisis plc and Communisis UKLimited. The assets of the arrangements are held separately from those of the Group.

Group Companies are required to contribute a specified percentage of payroll costs to the retirement benefit scheme to fund the benefits.The only obligation of the Group with respect to the retirement benefit scheme is to make the specified contributions.

The total cost charged to income of £1,832,666 (2007 £479,000) represents contributions payable to these arrangements by the Groupat specified rates. As at 31 December 2008, contributions of £nil (2007 £nil) due in respect of the current reporting period have not beenpaid over to the arrangements. The Group expects to contribute £2.0m to the defined contribution pension arrangements in 2009.

Defined benefit schemeThe defined benefit pension scheme closed to new members on 6 April 2005 (with the exception of ex-HSBC members).

Following the statutory consultation period, the defined benefit pension plan closed to future service accruals from 1 December 2007.The scheme was closed for all members with the exception of the ex-HSBC members. As the final salary link is to be preserved, thepension calculation will continue to be based on the final salary, and not the salary when the closure took effect.

The defined benefit schemes are as follows:

Final salaryThe final salary section provides a pension of one sixtieth or one eightieth (depending on the level of employee contribution) of final salaryat normal retirement age for each year of pensionable service. This is subject to the benefit not exceeding one thirtieth of the schemespecific earnings cap for each year of pensionable service, which applies to members who joined the Plan on or after 1 June 1989. Normalretirement age is sixty-five (sixty for ex-HSBC members).

Career average revalued earningsThe career average revalued earnings section provides an accrual each year of a unit of one forty-fifth, one sixtieth or one eightieth(depending on the level of employee contribution) of pensionable salary for that year. The unit is then revalued in each subsequent year bythe rate of growth in the Retail Prices Index until normal retirement age. The normal retirement age under this section is sixty-five exceptfor certain executives whose normal retirement age is set at sixty-two, where the accrual rate is one forty-fifth.

The amounts recognised in the Consolidated Income Statement and in the Consolidated Statement of Recognised Income and Expensefor the year are analysed as follows:

2008 2007£000 £000

Recognised in the Income StatementCurrent service cost (386) (5,216)

Recognised in arriving at profit from operations (386) (5,216)

Pension curtailment gain 750 –

Recognised in exceptional items 750 –

Expected return on scheme assets 9,348 8,807Interest cost on scheme liabilities (9,098) (8,179)

Other finance cost 250 628

Taken to the Statement of Recognised Income and ExpenseActual return on scheme assets (22,507) 7,830Less: expected return on scheme assets (9,348) (8,807)

(31,855) (977)Other actuarial gains 33,095 1,488

Actuarial gains recognised in the Statement of Recognised Income and Expense 1,240 511

The cumulative amount of actuarial gains and losses recognised since 1 January 2004 in the Consolidated Statement of RecognisedIncome and Expense is a gain of £16,717,000 (2007 gain of £15,477,000). The directors are unable to determine how much of the pensionscheme deficit recognised on transition to IFRS and taken directly to equity of £38,240,000 is attributable to actuarial gains and losses sinceinception of the Group’s pension scheme. Consequently, the directors are unable to determine the amount of actuarial gains and lossesthat would have been recognised in the Group Statement of Recognised Income and Expense before 1 January 2004.

Notesfor the y


15 RetirThe followstatus and

Net bene

Current seInterest coExpectedPension c

Net benef

Actual ret

Benefit a

Defined bFair value

Net pensi

The define

Present vChanges

Opening dInterest coCurrent sePlan particBenefits pActuarial gPension c

Closing d

Fair valueChanges

Opening fExpectedContributiPlan particBenefits pActuarial l

Closing fa

The Grouemployer




61

unisis UK

e benefits.

he Groupnot been

09.

ber 2007.erved, the

inal salarye scheme9. Normal

eightiethnt year byve except

d Expense

2007£000

(5,216)

(5,216)

–

–

8,807(8,179)

628

7,830(8,807)

(977)1,488

511

ecognisede pensionsses sincend losses


15 Retirement benefit plans (continued)

The following tables summarise the components of net benefit expense recognised in the Consolidated Income Statement and the fundedstatus and amounts recognised in the Consolidated Balance Sheet for the defined benefit pension plan.

Net benefit expense (recognised in employee benefits expense/finance costs)2008 2007£000 £000

Current service cost (386) (5,216)Interest cost on scheme liabilities (9,098) (8,179)Expected return on scheme assets 9,348 8,807Pension curtailment gain 750 –

Net benefit income/(expense) 614 (4,588)

Actual return on plan assets (22,507) 7,830

Benefit asset/(liability)2008 2007£000 £000

Defined benefit obligation (135,200) (165,600)Fair value of plan assets 124,100 150,870

Net pension deficit (11,100) (14,730)

The defined benefit obligation comprises £135 million (2006 £166 million) arising from a partly funded plan.

Present value of the defined benefit obligationChanges in the present value of the defined benefit obligation are as follows:

2008 2007£000 £000

Opening defined benefit obligation 165,600 158,925Interest cost 9,098 8,179Current service cost 386 5,216Plan participants’ contributions – 2,128Benefits paid (6,039) (7,360)Actuarial gains on obligations (33,095) (1,488)Pension curtailment gain (750) –

Closing defined benefit obligation 135,200 165,600

Fair value of plan assetsChanges in the fair value of plan assets are as follows:

2008 2007£000 £000

Opening fair value of plan assets 150,870 141,619Expected return on plan assets 9,348 8,807Contributions by employer 1,776 6,653Plan participants’ contributions – 2,128Benefits paid (6,039) (7,360)Actuarial losses on assets (31,855) (977)

Closing fair value of plan assets 124,100 150,870

The Group expects to contribute £2.7 million to the defined benefit pension scheme in 2009 (2008 £2.2 million). Contributions by theemployer in 2008 include special contributions of £1.2 million (2007 £3.1 million).



The major categories of plan assets as a percentage of the fair value of total plan assets are as follows:

2008 2007Asset category % %Equities 51 54Bonds/Gilts/Cash 28 36Property 7 8Other 14 2

100 100

None of the above represents equities or bonds issued by the Group, nor properties owned by the Group.

To develop the expected long-term rate of return on assets assumption for the year ended 31 December 2008, the Group considered thecurrent level of expected return on risk-free investments (primarily government bonds), the historical level of the risk premium associatedwith the other asset classes in which the portfolio is invested and the expectations for future returns of each asset class. The expected returnfor each asset class was then weighted, based on the asset allocation, to develop the assumed expected long-term rate of return onassets of 7.0% for the portfolio for the year ended 31 December 2008 (2007 6.5%).

The principal weighted average assumptions used to determine benefit obligations for the Group’s plan are shown below:

2008 2007% %

Discount rate 6.6 5.6Rate of compensation increase 3.9 4.3Inflation assumption 2.9 3.3

Mortality ratesAssumed life expectancy for a member aged 65 is as follows: Years YearsCurrent pensioners:

Male 19.4 19.3Female 22.3 21.7

Future pensioners:Male 20.4 20.3Female 23.1 23.5

A one percentage point change in the factors below would have the following effects:Increase Decrease

Discount rate £000 £000Effect on current service cost and interest cost (20) 20Effect on defined benefit obligation (2,200) 2,300

Real salary growthEffect on current service cost and interest cost 30 (30)Effect on defined benefit obligation 300 (300)

InflationEffect on current service cost and interest cost 100 (100)Effect on defined benefit obligation 1,800 (1,800)

2008 2007 2006 2005 2004Five-year history £000 £000 £000 £000 £000Present value of defined benefit obligation (135,200) (165,600) (158,925) (164,402) (139,195)Fair value of plan assets 124,100 150,870 141,619 126,665 96,531

Deficit (11,100) (14,730) (17,306) (37,737) (42,664)



62

Notesfor the y


15 Retir

History oExperiencExperiencChanges

16 Inven

Raw mateWork in pFinished g

17 Trad

Trade recePrepayme

CurrentNon-curre

Included w(2007 £2,

Prepaymeof the Bat

Trade recea reasonaCertain trTrade rece

The doub

At 1 JanuProvisionsAmountsReleasedReleasedExchange

At 31 Dec


2007%543682

100

dered thessociatedted returnreturn on

2007%

5.64.33.3

Years

19.321.7

20.323.5

crease£000

202,300

(30)(300)

(100)(1,800)

2004£000

39,195)96,531

42,664)



63



2008 2007 2006 2005 2004History of experience gains and losses £000 £000 £000 £000 £000Experience adjustments on plan assets 31,855 977 (2,808) 11,332 3,778Experience gains on plan liabilities (1,239) – (10,384) – –Changes in actuarial assumptions (33,095) (1,488) (5,984) (14,375) (4,945)

16 Inventories2008 2007£000 £000

Raw materials 2,518 2,555Work in progress 2,279 4,221Finished goods 2,451 4,194

7,248 10,970

17 Trade and other receivables2008 2007£000 £000

Trade receivables 18,477 28,727Prepayments, accrued income and contract premium 14,722 14,115

33,199 42,842

Current 28,234 40,977Non-current 4,965 1,865

33,199 42,842

Included within prepayments, accrued income and contract premium are unamortised elements of contract prepayments of £1,865,000(2007 £2,865,000).

Prepayments, accrued income and contract premium also includes £4,600,000 of deferred consideration due to the Group on the disposalof the Bath business.

Trade receivables are non-interest bearing and generally on 30-90 days’ credit terms. The carrying value of trade receivables is considereda reasonable approximation of fair value. All of the Group’s trade and other receivables have been reviewed for indicators of impairment.Certain trade receivables were found to be impaired and a provision of £597,000 (2007 £1,099,000) is carried at the year end.Trade receivables are shown net of this doubtful debt provision.

The doubtful debt provision has moved as follows:

2008 2007£000 £000

At 1 January 1,099 1,401Provisions made during the year 132 179Amounts written off as uncollectable (84) (221)Released during year (370) (260)Released on disposal of Bath business (189) –Exchange adjustment 9 –

At 31 December 597 1,099




64

Notesfor the y


19 Cash

Cash at b

Cash at b(2007 £13repaying c

For the pu

Cash at bBank ove

The bank

20 Non-

Properties

During thein a £233has been

21 Equi

AuthoriseOrdinary s

Allotted aOrdinary s

Shares aOn exerci

The Group

The Grou(Note 14).

17 Trade and other receivables (continued)

In determining the recoverability of a trade receivable the Group considers any change in the credit quality of the trade receivable from thedate credit was initially granted up to the reporting date. The Group trades only with recognised, creditworthy third parties. The top 10customers make up 59% of the receivables balance. Generally, customers who wish to trade on credit terms are subject to credit verificationprocedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts isnot significant. The concentration of credit risk is limited to the carrying value of trade debtors. Accordingly the directors believe that thereis no further credit provision required in excess of the allowance for doubtful debts.

In addition, some of the unimpaired trade receivables are past due as at the reporting date. The age of financial assets past due but notimpaired is as follows:

2008 2007£000 £000

Overdue by less than 30 days 698 2,29330 – 60 days overdue 208 35760 – 90 days overdue 23 150More than 90 days overdue – 228

929 3,028

18 Financial assets and liabilities18.1 Financial assets by category

The IAS 39 categories of financial asset included in the Balance Sheet and the headings in which they are included are as follows:

2008 2007£000 £000

Non-current assetsTrade and other receivables – Loans and receivables 4,100 –

Current assetsTrade and other receivables – Loans and receivables 24,180 32,918Cash and cash equivalents 17,940 13,628

42,120 46,546

18.2 Financial liabilities by category

The IAS 39 categories of financial liability included in the Balance Sheet and the headings in which they are included are as follows:

2008 2007£000 £000

Non-current liabilitiesInterest-bearing loans and borrowings – Financial liabilities measured at amortised cost 6,000 22,000Forward currency contract – cash flow hedge 81 –

6,081 22,000

Current liabilitiesInterest-bearing loans and borrowings – Financial liabilities measured at amortised cost 25,000 17,907Trade and other payables – Financial liabilities measured at amortised cost 52,143 57,024Forward currency contract – cash flow hedge 158 –

77,301 74,931




65


19 Cash and cash equivalents2008 2007£000 £000

Cash at bank and in hand 17,940 13,628

Cash at bank earns interest at floating rates based on daily bank deposit rates. The fair value of cash and cash equivalents is £17,940,000(2007 £13,628,000). Cash at bank includes an amount of £76,500 (2007 £295,654) held in a separate bank account for the purposes ofrepaying certain creditors following the cancellation of the share premium account.

For the purpose of the Consolidated Cash Flow Statement, cash and cash equivalents comprise the following at 31 December:

2008 2007£000 £000

Cash at bank and in hand 17,940 13,628Bank overdrafts – (5,407)

17,940 8,221

The bank overdrafts are secured by cross guarantee arrangements.

20 Non-current assets classified as held for sale2008 2007£000 £000

Properties held for sale – 350

During the year, a property previously held for sale was sold on an arm’s length basis for consideration of £691,000 to a third party, resultingin a £233,000 profit on disposal (after disposal costs of £108,000). The property was held in the Print Sourcing segment and so the profithas been recognised through this segment (Note 3).

21 Equity share capital2008 2007

Number of Number ofshares £000 shares £000

AuthorisedOrdinary shares of 25p each 180,000,000 45,000 180,000,000 45,000

Allotted and fully paidOrdinary shares of 25p each 138,602,981 34,651 138,543,660 34,636

2008 2007Nominal Net Nominal Net

value Consideration value ConsiderationNumber £000 £000 Number £000 £000

Shares allotted during the yearOn exercise of options 59,321 15 30 11,583 3 7

The Group has one class of ordinary shares which carry no right to fixed income.

The Group has four share option schemes under which options to subscribe for the Company’s shares have been granted to employees(Note 14).

e from thehe top 10verificationd debts isthat there

ue but not

2007£0002,293

357150228

3,028

ws:

2007£000

–

32,91813,628

46,546

ws:

2007£000

22,000–

22,000

17,90757,026

–

74,933




66

Notesfor the y


22 Interest-bearing loans and borrowings2008 2007

Interest rate % Maturity £000 £000CurrentBank overdrafts Base rate + 1 On demand – 5,407Other loans:£15,000,000 bank loan (2007 £17,500,000) LIBOR + 0.5 September 2009 15,000 2,500£7,000,000 bank loan (2007 £8,000,000) LIBOR + 0.55 March 2009 1,000 1,000£9,000,000 bank loan (2007 £9,000,000) LIBOR + 0.6 January 2009 9,000 9,000

25,000 17,907

Non-current£15,000,000 bank loan (2007 £17,500,000) LIBOR + 0.5 September 2009 – 15,000£7,000,000 bank loan (2007 £8,000,000) LIBOR + 0.55 March 2010 6,000 7,000

6,000 22,000

Bank overdraftsThe bank overdrafts are principally denominated in sterling and bear interest at rates set by reference to the UK Base Rate. The overdraftsare secured by cross guarantee arrangements with the relevant banks.

£15,000,000 bank loanThis loan is secured by a guarantee from certain Group companies and the balance is payable on 9 September 2009.

£7,000,000 bank loanThis loan is secured by a cross guarantee arrangement and is repayable in annual instalments of £1,000,000 to 21 March 2009 with thebalance due on 21 March 2010.

£9,000,000 bank loanThis loan is secured by a cross guarantee arrangement and is repayable in one instalment on 7 January 2009. The repayment date on thisloan was extended by one month from December 2008.

£5,000,000 bank loanThis loan is secured by a cross guarantee arrangement and is repayable in one instalment on 21 June 2009. At the year end £nil has beendrawn down under this facility (2007 £nil).

€9,000,000 multicurrency bank facilityThis facility is secured by a cross guarantee arrangement and is repayable in one instalment on 3 May 2010. At the year end €nil and £nilhave been drawn down under this facility (2007 €nil and £nil).

£10,000,000 bank loanThis loan is secured by a cross guarantee arrangement and is repayable on 27 February 2009 unless a term-out option is exercised in whichcase it is repayable on 27 February 2010. During the year, £800,000 was drawn down under this facility, and this was also repaid withinthe year. At the year end £nil has been drawn down under this facility.

£20,000,000 bank loanThis loan is secured by a cross guarantee arrangement and is repayable in one instalment on 9 December 2011. At the year end £nil hasbeen drawn down under this facility. This facility will replace the £9,000,000 bank loan, £5,000,000 bank loan and £7,000,000 bank loan,described above, in 2009.

At 31 December 2008, the Group had available £22,700,000 (2007 £11,610,000) of undrawn committed borrowing facilities in respect ofwhich all conditions precedent had been met.

Early repayment is possible under the terms of all the borrowing facilities listed above at no cost by giving more than 5 days’ notice.

23 Prov

At 1 JanuArising duUtilised

At 31 Dec

Current 20Non-curre

At 31 Dec

Current 20Non-curre

At 1 Janu

BusinessThe provisoffice, and

OnerousThe excepin nature,

LitigationThe litigatupon neg

24 Trad

Trade payOther payTaxation aAccruals aInterest pa

Trade anda reasona

25 Fina

Non-currForward cCurrent lForward c




67


2007£000

5,407

2,5001,0009,000

17,907

15,0007,000

22,000

overdrafts

9 with the

ate on this

has been

il and £nil

d in whichaid within

d £nil hasbank loan,

respect of

tice.

23 ProvisionsBusiness Onerous Litigation

restructuring leases provisions Total£000 £000 £000 £000

At 1 January 2008 125 1,124 306 1,555Arising during the year 953 3,832 – 4,785Utilised (528) (1,702) (123) (2,353)

At 31 December 2008 550 3,254 183 3,987

Current 2008 550 1,931 183 2,664Non-current 2008 – 1,323 – 1,323

At 31 December 2008 550 3,254 183 3,987

Current 2007 125 1,056 306 1,487Non-current 2007 – 68 – 68

At 1 January 2008 125 1,124 306 1,555

Business restructuringThe provision for business restructuring represents management’s best estimate of the Group’s expected costs on closure of the Spanishoffice, and other restructuring.

Onerous leasesThe exceptional property provisions relate primarily to the estimated costs for the rental obligations of surplus premises which are long termin nature, see Note 5.4 for further details.

Litigation provisionsThe litigation provision represents management’s best estimate of the outcome of unsettled litigation cases. The final outcome dependsupon negotiations with claimants and final court decisions.

24 Trade and other payables (current)2008 2007£000 £000

Trade payables 31,229 32,398Other payables 8,111 4,636Taxation and social security 1,507 3,524Accruals and deferred income 12,626 19,858Interest payable 177 132

53,650 60,548

Trade and other payables are non-interest bearing and generally on 30-90 days’ credit terms. The carrying values are considered tobe a reasonable approximation of fair value.

25 Financial liability2008 2007£000 £000

Non-current liability:Forward currency contract 81 –Current liability:Forward currency contract 158 –


25 Financial liability (continued)

Forward currency contract – cash flow hedgeAt 31 December 2008, the Group held forward exchange contracts designated as hedges of expected future sales to customers in theUnited States for which the Group has highly probable forecasted transactions. The fair value of these forward currency contracts at31 December 2008 was £239,000 (2007 £nil). These mature on various dates between 2009 and 2011.

The forward exchange contracts are being used to hedge the foreign currency risk of the firm commitments.

26 Obligations under operating leasesOperating lease commitments – Group as lessee

Motor vehicles and machinery leasesThe Group has entered into commercial leases on motor vehicles and items of machinery. These leases have a remaining life of betweenone and five years.

Future minimum rentals payable under non-cancellable operating leases as at 31 December are as follows:

2008 2007£000 £000

No later than one year 888 996After one year but no more than five years 1,505 1,752

2,393 2,748

Land and building leasesThe Group has entered into commercial land and building leases. These leases have a remaining life of between one and seventy-threeyears.

Future minimum rentals payable under non-cancellable operating leases as at 31 December are as follows:

2008 2007£000 £000

No later than one year 3,113 2,535After one year but no more than five years 10,397 8,887After five years 16,959 13,281

30,469 24,703

Operating lease commitments – Group as lessorThe Group has entered into commercial land and building leases consisting of the Group’s surplus office and manufacturing buildings.These leases have a remaining life of between two and sixty-three years.

Surplus land and building leasesFuture minimum rentals receivable under non-cancellable operating leases as at 31 December are as follows:

2008 2007£000 £000

No later than one year 1,142 117After one year but no more than five years 4,236 314After five years 7,395 18

12,773 449



68

Notesfor the y


27 FinaThe Grouforward cGroup has

It is, and h

The main

Cash flowThe Groupfloating in

All borrow

During 20

The followof the Gro

SterlingSterlingEuroEuro

LiquidityThe Grouthe projec

The Groucommittedmature inbalance snumber o

The direct

The matu

Foreign cThe Groucurrenciesinflows cothe Group

Credit risThe Groucredit verito bad dearises fromagainst anbalance s


mers in thentracts at

f between

2007£000996

1,752

2,748

enty-three

2007£0002,5358,887

13,281

24,703

buildings.

2007£00011731418

449



69


27 Financial risk management objectives and policiesThe Group’s principal financial instruments comprise bank loans and overdrafts (Note 28), cash and short-term deposits (Note 19) andforward currency contracts (Note 25). The main purpose of these financial instruments is to raise finance for the Group’s operations. TheGroup has various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations.

It is, and has been throughout the year under review, the Group’s policy that no trading in financial instruments shall be undertaken.

The main risks arising from the Group’s financial instruments are cash flow interest rate risk, liquidity risk, foreign currency risk and credit risk.

Cash flow interest rate riskThe Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s medium-term debt obligations with afloating interest rate.

All borrowings are held on floating rate terms and so the Group is exposed to interest rate movements on these borrowings.

During 2008 no instruments were entered into to mitigate the impact of interest rates although this is reviewed regularly.

The following table demonstrates the sensitivity to reasonably possible changes in interest rates, with all other variables held constant,of the Group’s profit before tax (through the impact of floating rate borrowings).

Increase/ Effect on Effect ondecrease profit profit

in basis before tax before taxpoints £000 £000

2008 2007Sterling +25 (112) (99)Sterling -50 225 198Euro +25 (22) (17)Euro -25 22 17

Liquidity riskThe Group regularly monitors its risk to a shortage of funds taking account of the maturity profile of its financial assets and liabilities andthe projected cash flows from operations.

The Group’s objective is to maintain a balance between continuity of funding and flexibility through a mix of medium-term funding ofcommitted floating rate facilities supplemented by uncommitted bank overdraft facilities. 27.9% of the Group’s medium-term debt shouldmature in less than twelve months at 31 December 2008 (2007 27.1%). A further 34.8% will mature between one and two years from thebalance sheet date (2007 34.7%). These percentages have been calculated taking account of the new £20m bank loan which replaces anumber of earlier facilities (Note 22).

The directors consider this funding structure to be adequate for the Group’s current requirements.

The maturity profile of the Group’s financial liabilities at 31 December 2008 is shown at Note 28.

Foreign currency riskThe Group operates principally in the UK with approximately 1.5% (2007 2.6%) of sales arising from companies operating with functionalcurrencies other than sterling. The value of currency exposure is not significant to the Group. Where there are known material future currencyinflows consideration will be given to hedging these receipts. During 2008 forward currency contracts over US $1.6m were entered into bythe Group – these mature on various dates in 2009-2011 (Note 25).

Credit riskThe Group trades only with recognised, creditworthy third parties. Generally, customers who wish to trade on credit terms are subject tocredit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposureto bad debts is not significant. The maximum exposure is the carrying amount as disclosed in Note 17. The Group’s exposure to credit riskarises from the default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments. Provision is madeagainst any doubtful debts and this policy has been strengthened in the year in light of the decline in the economy (Note 17). As at thebalance sheet date there are no significant concentrations of credit risk within the Group.


27 Financial risk management objectives and policies (continued)Credit risk (continued)The credit risk arising from the other financial assets of the Group, which comprise cash and cash equivalents, is managed by Grouptreasury in accordance with Group policy. Investments of surplus funds are only made with established banks and are approved by theBoard. The Group’s exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amountof these instruments.

Capital managementThe primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios inorder to support the business and maximise shareholder value.

The Group monitors capital using a gearing ratio, being net debt divided by equity plus net debt. The policy is to maintain the gearing ratiobelow 50%. Within net debt the Group includes all interest-bearing loans and borrowings, less cash and cash equivalents.

2008 2007£000 £000

Interest-bearing loans and borrowings 31,000 39,907Less cash and cash equivalents (17,940) (13,628)

Net debt 13,060 26,279

Equity 134,767 128,498Capital and net debt 147,827 154,777Gearing ratio 9% 17%

Further details of the Group’s treasury management process is provided within the Financial Performance Report on pages 6 to 9.

28 Financial instrumentsThe following table sets out the carrying amount, by maturity, of the Group’s financial instruments that are exposed to interest rate risk, basedon contractual undiscounted payments.

Year end 31 December 2008Floating rate More Book Fair

Within 1-2 2-3 3-4 4-5 than 5 Value Value1 year years years years years years Total Total

£000 £000 £000 £000 £000 £000 £000 £000Cash assets 17,940 – – – – – 17,940 17,940£15,000,000 bank loan (15,368) – – – – – (15,368) (15,000)£7,000,000 bank loan (1,207) (6,050) – – – – (7,257) (7,000)£9,000,000 bank loan (9,006) – – – – – (9,006) (9,000)

Forward foreign currencycontract – cash flow hedge

Outflow (822) (242) (242) – – – (1,306) (1,306)Inflow 664 200 203 – – – 1,067 1,067

Year end 31 December 2007Floating rate More Book Fair

Within 1-2 2-3 3-4 4-5 than 5 Value Value1 year years years years years years Total Total

£000 £000 £000 £000 £000 £000 £000 £000Cash assets 13,628 – – – – – 13,628 13,628Bank overdrafts (5,407) – – – – – (5,407) (5,407)£17,500,000 bank loan (3,596) (15,730) – – – – (19,326) (17,500)£8,000,000 bank loan (1,474) (1,408) (6,098) – – – (8,980) (8,000)£9,000,000 bank loan (9,544) – – – – – (9,544) (9,000)



70

Notesfor the y


29 CapiAt 31 Decto £2,761

30 ContIn the pasof. In somyears andthese gua

31 EvenThere hav

32 Cash

ContinuinProfit befoAdjustme

DeprecAmortisExcessGains aExceptiProfit oShare-bNet fina

Additiona

ChangesDecreaDecrea(Decrea

Cash gen


by Grouped by theg amount

al ratios in

aring ratio

2007£000

39,90713,628)

26,279

28,49854,77717%

9.

sk, based

FairValueTotal£000

17,940(15,000)(7,000)(9,000)

(1,306)1,067

FairValueTotal£000

13,628(5,407)(17,500)(8,000)(9,000)



71


29 Capital commitmentsAt 31 December 2008, the Group had entered into contractual commitments for the acquisition of property, plant and equipment amountingto £2,761,000 (2007 £540,000).

30 Contingent liabilitiesCommunisis plc has provided rental guarantees to landlords in respect of certain leasehold properties occupied by subsidiaries that havesubsequently been sold. To the extent that they have not already been called, these guarantees represent contingent liabilities of the Group.Other than those leases for which the liability is considered to be remote, the Group has guaranteed rentals on leases with remaining termsthat vary from three months to eight years and with annual rentals that range from £6,000 to £453,000. No provision for these guaranteeshas been made in the financial statements because, at the balance sheet date, the directors believe that it is not probable that any furtherguarantees will be called.

31 Events after the balance sheet dateThere have been no events after the balance sheet date that require adjustment to, or disclosure in, these Financial Statements.

32 Cash generated from operations2008 2007£000 £000

Continuing operationsProfit before tax 12,726 7,871Adjustments for:Depreciation and amortisation 6,438 6,700Amortisation of contract premium payment 1,000 1,000Excess of Income Statement pension charge over normal contributions paid 85 1,513Gains arising on disposal of Bath business (1,380) –Exceptional property provisions 1,969 –Profit on sale of property, plant and equipment 55 (97)Share-based payment charge 404 172Net finance costs 1,661 2,637

Additional contribution to the defined benefit pension plan (1,200) (3,100)

Changes in working capital:Decrease in inventories 447 2,307Decrease in trade and other receivables 7,801 9,412(Decrease)/increase in trade and other payables (6,621) 4,522

Cash generated from operations 23,385 32,937




72

33 Consolidated changes in equityCapital Cumulative

Issued Share Merger ESOP redemption translation Retained Totalcapital premium reserve reserve reserve adjustment earnings equity

£000 £000 £000 £000 £000 £000 £000 £000Balance as at 1 January 2007 34,633 – 11,427 (338) 1,375 (33) 76,547 123,611Currency translation losses in year – – – – – (43) – (43)Actuarial gains immediately

recognised – – – – – – 511 511Deferred tax recognised due to

change in tax rates – – – – – – (346) (346)Deferred tax recognised on

actuarial gains in year – – – – – – (143) (143)

Net loss recognised directlyin equity – – – – – (43) 22 (21)

Profit for the year – – – – – – 6,551 6,551

Total recognised profit for the year – – – – – (43) 6,573 6,530Employee share option schemes:

– value of services provided – – – – – – 172 172Dividends paid – – – – – – (1,822) (1,822)Shares issued 3 4 – – – – – 7

Balance as at 31 December 2007 34,636 4 11,427 (338) 1,375 (76) 81,470 128,498Currency translation losses in year – – – – – (67) – (67)Actuarial gains immediately

recognised – – – – – – 1,240 1,240Loss on financial liability – – – – – – (239) (239)Tax on items taken directly to equity – – – – – – (280) (280)

Net profit recognised directly in equity – – – – – (67) 721 654Profit for the year – – – – – – 8,631 8,631

Total recognised profit for the year – – – – – (67) 9,352 9,285Employee share option schemes:– value of services provided – – – – – – 404 404Dividends paid – – – – – – (3,450) (3,450)Shares issued 15 18 – – – – (3) 30

Balance as at 31 December 2008 34,651 22 11,427 (338) 1,375 (143) 87,773 134,767

Notesfor the y


33 ConsCapital reThe capitashare cap

ESOP resThe ESOPThe ESOPholds 279

Merger rThis repre

CumulatiThe cumuof foreign

34 RelaDuring theThe direct

There wer

For details

35 InvesThe Conssubsidiary

Name

CommuniCommuniCommuniCommuniCommuniAbsoluteCommuni

The Compthose und




73

Totalequity

£00023,611

(43)

511

(346)

(143)

(21)6,551

6,530

172(1,822)

7

28,498(67)

1,240(239)(280)

6548,631

9,285

404(3,450)

30

34,767


33 Consolidated changes in equity (continued)

Capital redemption reserveThe capital redemption reserve is used to record the effect of share capital buy-backs made by the Company where the nominal value ofshare capital acquired is transferred to this reserve.

ESOP reserveThe ESOP reserve is used to record the investment in Communisis plc shares held by the employee share ownership plan (‘ESOP’).The ESOP is for the benefit of all employees and can be used in conjunction with any of the Group’s share schemes. The ESOP reserveholds 279,628 shares at 31 December 2008 (2007 279,628) and the market value of these shares is £128,629 (2007 £202,730).

Merger reserveThis represents the share premium attaching to those shares issued upon the acquisition of subsidiaries.

Cumulative translation adjustmentThe cumulative translation adjustment reserve is used to record exchange differences arising from the translation of the financial statementsof foreign subsidiaries. This reserve was reset to zero on 1 January 2004, the date of transition to IFRS.

34 Related party transactionsDuring the year the directors were remunerated for services provided to the Group. This is disclosed in the Directors’ Remuneration Report.The directors are considered to be key management personnel.

There were no other related party transactions in the year.

For details of compensation of key management personnel, see Note 5.3.

35 InvestmentsThe Consolidated Financial Statements include the Financial Statements of Communisis plc, the ultimate parent undertaking, and allsubsidiary undertakings. The Group’s trading subsidiary operations are listed in the following table.

Country of % equity % equityName incorporation interest 2008 interest 2007 Immediate parent

Communisis UK Limited United Kingdom 100 100 Communisis plcCommunisis Europe Limited United Kingdom 100 100 Communisis plcCommunisis France SARL France 100 100 Communisis Europe LimitedCommunisis Nederland BV Netherlands 100 100 Communisis Europe LimitedCommunisis Spain SL Spain 100 100 Communisis Europe LimitedAbsolute Intuistic Limited United Kingdom 100 – Communisis UK LimitedCommunisis Ireland Limited Ireland 100 100 Communisis UK Limited

The Company has taken advantage of the exemption available under section 231(5) of the Companies Act 1985 to only disclose abovethose undertakings that principally affect the results or financial position of the Group.




74

Independent Auditors’ Report to theShareholders of Communisis plcWe have audited the Consolidated Financial Statements ofCommunisis plc for the year ended 31 December 2008 whichcomprise the Consolidated Income Statement, the ConsolidatedBalance Sheet, the Consolidated Cash Flow Statement, theConsolidated Statement of Recognised Income and Expense andthe related notes 1 to 35. These Consolidated Financial Statementshave been prepared under the accounting policies set out therein.

We have reported separately on the parent company FinancialStatements of Communisis plc for the year ended 31 December2008 and on the information in the Directors’ Remuneration Reportthat is described as having been audited.

This report is made solely to the Company’s members, as a body, inaccordance with Section 235 of the Companies Act 1985. Our auditwork has been undertaken so that we might state to the Company’smembers those matters we are required to state to them in anauditors’ report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyoneother than the Company and the Company’s members as a body,for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditorsThe directors’ responsibilities for preparing the Annual Report andthe Consolidated Financial Statements in accordance withapplicable United Kingdom law and International Financial ReportingStandards (IFRSs) as adopted by the European Union are set out inthe Statement of Directors’ Responsibilities.

Our responsibility is to audit the Consolidated Financial Statementsin accordance with relevant legal and regulatory requirements andInternational Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the ConsolidatedFinancial Statements give a true and fair view and whether theConsolidated Financial Statements have been properly prepared inaccordance with the Companies Act 1985 and Article 4 of the IASRegulation. We also report to you whether, in our opinion,the information given in the Directors’ Report is consistent with theConsolidated Financial Statements. The information given in theDirectors’ Report includes that specific information presented in theChairman’s Statement and Business Review that is cross-referredfrom the Directors’ Report.

In addition we report to you if, in our opinion, we have not receivedall the information and explanations we require for our audit, or ifinformation specified by law regarding directors’ remuneration andother transactions is not disclosed.

We review whether the Corporate Governance Statement reflectsthe Company’s compliance with the nine provisions of the 2006Combined Code specified for our review by the Listing Rules of theFinancial Services Authority, and we report if it does not. We are not

required to consider whether the Board’s statements on internalcontrol cover all risks and controls, or form an opinion on theeffectiveness of the Group’s corporate governance procedures orits risk and control procedures.

We read other information contained in the Annual Report andconsider whether it is consistent with the audited ConsolidatedFinancial Statements. The other information comprises only theFinancial Highlights, Chairman’s Statement, Business Review,Directors’ Report, Corporate Governance Report, and Directors’Remuneration Report. We consider the implications for our report ifwe become aware of any apparent misstatements or materialinconsistencies with the Consolidated Financial Statements.Our responsibilities do not extend to any other information.

Basis of audit opinionWe conducted our audit in accordance with International Standardson Auditing (UK and Ireland) issued by the Auditing Practices Board.An audit includes examination, on a test basis, of evidence relevantto the amounts and disclosures in the Consolidated FinancialStatements. It also includes an assessment of the significantestimates and judgements made by the directors in the preparationof the Consolidated Financial Statements, and of whether theaccounting policies are appropriate to the Group’s circumstances,consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all theinformation and explanations which we considered necessary in orderto provide us with sufficient evidence to give reasonable assurancethat the Consolidated Financial Statements are free from materialmisstatement, whether caused by fraud or other irregularity or error.In forming our opinion we also evaluated the overall adequacy of thepresentation of information in the Consolidated Financial Statements.

OpinionIn our opinion:

the Consolidated Financial Statements give a true and fair view,in accordance with IFRSs as adopted by the European Union, ofthe state of the Group’s affairs as at 31 December 2008 and ofits profit for the year then ended;the Consolidated Financial Statements have been properlyprepared in accordance with the Companies Act 1985 andArticle 4 of the IAS Regulation; andthe information given in the Director’s Report is consistent withthe Consolidated Financial Statements.

Ernst & Young LLPRegistered auditorLeeds26 February 2009

Compa31 Decem

Report of the Auditors on the Consolidated Financial Statements

Fixed assTangible aInvestmen

Current aDebtorsCash at b

CreditorsBorrowingOther cred

Net curre

Total ass

CreditorsBorrowingFinancial lLoans due

Provision

Net asset

Net pensi

Net asse

Capital aCalled upShare preCapital reMerger reESOP resProfit and

Equity sh

The Finan

S W VaugP R King

Directors

The accom




75

n internalon on theedures or

eport andnsolidateds only thes Review,Directors’ur report ifr materialatements.n.

Standardses Board.e relevantFinancial

significantreparationether the

mstances,

in all thery in orderassurancem materialty or error.acy of theatements.

d fair view,Union, of

08 and of

properly1985 and

stent with

Company Balance Sheet31 December 2008

Note 2008 2007£000 £000

Fixed assetsTangible assets 5 820 855Investments 6 256,047 260,187

256,867 261,042

Current assetsDebtors 7 2,006 1,533Cash at bank and in hand 8 12,530 12,561

14,536 14,094

Creditors (amounts due within one year)Borrowings 9 (76,094) (45,379)Other creditors 10 (8,530) (5,140)

(84,624) (50,519)

Net current liabilities (70,088) (36,425)

Total assets less current liabilities 186,779 224,617

Creditors (amounts due after one year)Borrowings 9 (6,000) (22,000)Financial liabilities 11 (81) –Loans due to group undertakings (48,600) (68,895)

Provisions for liabilities 12 (1,924) (68)

Net assets excluding net pension liability 130,174 133,654

Net pension liability 17 (748) (1,018)

Net assets 129,426 132,636

Capital and reservesCalled up share capital 13 34,651 34,636Share premium account 15 22 4Capital redemption reserve 15 1,375 1,375Merger reserve 15 10,908 10,908ESOP reserve 15 (338) (338)Profit and loss account 16 82,808 86,051

Equity shareholders’ funds 129,426 132,636

The Financial Statements on pages 75 to 91 were approved by the Board on 26 February 2009 and signed on its behalf by:

S W VaughanP R King

Directors

The accompanying notes are an integral part of these Financial Statements.




76

Reconciliation of Movements in Equity Shareholders’ Fundsfor the year ended 31 December 2008

2008 2007£000 £000

Profit attributable to shareholders 159 4,333Ordinary dividends paid (3,450) (1,822)New share capital issued 15 3Share premium on new share capital issued 18 4Share options exercised (3) –Loss on cash flow hedges taken to equity (239) –Actuarial gains on defined benefit pension plan 153 63Deferred tax on items taken directly to equity 24 (18)Employee share option schemes – value of services provided 113 80

(3,210) 2,643

Equity shareholders’ funds at start of year 132,636 129,993

Equity shareholders’ funds at end of year 129,426 132,636

The accompanying notes are an integral part of these Financial Statements.

Notesfor the y

1 Accou1.1 BasisThe Comwith appland unde31 Decem

The Compsection 23Profit and

The Com£36,425,0policies apotential eNote 27 in

The Comconsequeto managuncertain

After makthat the Cexistenceadopt the

1.2 SummTangible fTangible fare statedfor impairm

DepreciatThe chargless residoperationeconomic

Freehold bPlant, equFreehold l

Fixed assFixed assimpairmen

ImpairmeIn accordgoodwill’,circumstamay not bthe carryinthe higherealisableobtaineddetermine




77

2007£000

4,333(1,822)

34––

63(18)80

2,643

29,993

32,636

Notes to the Company Financial Statementsfor the year ended 31 December 2008

1 Accounting policies1.1 Basis of preparationThe Company Financial Statements are prepared in accordancewith applicable United Kingdom law and accounting standardsand under the historical cost convention and are made up to31 December each year.

The Company has taken advantage of the exemption provided bysection 230 of the Companies Act 1985 not to publish its individualProfit and Loss Account and related notes.

The Company has net current liabilities of £70,088,000 (2007£36,425,000) as at 31 December 2008. The Company’s objectives,policies and processes for managing its liquidity risk, as well aspotential exposure to cash flow interest rate risk, are described inNote 27 in the Group Financial Statements.

The Company has considerable financial resources and as aconsequence, the directors believe that the Company is well placedto manage its business risks successfully despite the currentuncertain economic outlook.

After making enquiries, the directors have a reasonable expectationthat the Company has adequate resources to continue in operationalexistence for the foreseeable future. Accordingly, they continue toadopt the going concern basis in preparing the Financial Statements.

1.2 Summary of significant accounting policiesTangible fixed assetsTangible fixed assets in the Financial Statements of the Companyare stated at cost, less aggregate depreciation and any provisionfor impairment.

DepreciationThe charge is calculated at rates appropriate to write off the costless residual value of individual assets from the time they becomeoperational by equal annual instalments over their estimated usefuleconomic lives which are principally as follows:

Freehold buildings 25 to 50 yearsPlant, equipment and motor vehicles 4 to 10 yearsFreehold land is not depreciated.

Fixed asset investmentsFixed asset investments are shown at cost less provision forimpairment.

ImpairmentIn accordance with FRS 11 ‘Impairment of fixed assets andgoodwill’, fixed assets are subject to an impairment review ifcircumstances or events change to indicate that the carrying valuemay not be fully recoverable. The review is performed by comparingthe carrying value of the fixed asset to its recoverable amount, beingthe higher of the net realisable value and value in use. The netrealisable value is considered to be the amount that could beobtained on disposal of the asset. The value in use of the asset isdetermined by discounting, at a market-based pre-tax discount rate,

the expected future cash flows resulting from its continued use,including those arising from its ultimate disposal.

When the carrying values of fixed assets are written down by anyimpairment amount, the loss is recognised in the Profit and Lossaccount in the period in which it occurred. Should circumstancesor events change and give rise to a reversal of a previous impairmentloss, the reversal is recognised in the Profit and Loss Account in theperiod in which it occurs and the carrying value of the asset isincreased. The increase in the carrying value of the asset will only beup to the amount that it would have been had the originalimpairment not occurred.

For the purpose of conducting impairment reviews, incomegenerating units are considered to be groups of assets and liabilitiesthat generate income, and are largely independent of other incomestreams. They also include those assets and liabilities directlyinvolved in producing the income and a suitable proportion of thosecentral assets used to produce more than one income stream.

TaxationCurrent tax, being UK corporation tax, is provided at amountsexpected to be paid (or recovered) using the tax rates and lawsthat have been enacted or substantively enacted by the balancesheet date.

Deferred tax is recognised as a liability or asset in respect of alltiming differences that have originated but not reversed if thetransactions or events that give rise to an obligation to pay more taxin future, or a right to pay less tax in future, have occurred by thebalance sheet date, with the following exceptions:

Provision is made for tax on gains arising from the revaluation(and similar fair value adjustments) of fixed assets, and gains ondisposal of fixed assets that have been rolled over intoreplacements assets, only to the extent that, at the balance sheetdate, there is a binding agreement to dispose of the assetsconcerned. However, no provision is made where, on thebasis of all available evidence at the balance sheet date, it ismore likely than not that the taxable gain will be rolled overinto replacement assets and charged to tax only where thereplacement assets are sold;Provision is made for deferred tax that would arise on remittanceof the retained earnings of overseas subsidiaries, associates andjoint ventures only to the extent that, at the balance sheet date,dividends have been accrued as receivable.

Deferred tax assets are recognised only to the extent that thedirectors consider that it is more likely than not that there will besuitable taxable profits from which the underlying timing differencescan be deducted. Deferred tax is measured on an undiscountedbasis at the tax rates that are expected to apply in the periods inwhich timing differences reverse, based on tax rates and lawsenacted or substantively enacted at the balance sheet date.

Income tax relating to items recognised directly in equity is alsorecognised in equity.




78

Notes to the Company Financial Statements continuedfor the year ended 31 December 2008

Foreign currenciesThe Company’s functional currency and presentation currency ispounds sterling. Transactions in foreign currencies are recorded atthe rate ruling at the date of the transaction. Monetary assets andliabilities denominated in foreign currencies are retranslated at therate of exchange ruling at the balance sheet date. All differences aretaken to the Profit and Loss Account. Non-monetary items that aremeasured in terms of historical cost in a foreign currency aretranslated using the exchange rates as at the dates of the initialtransactions. Non-monetary items measured at fair value in a foreigncurrency are translated using the exchange rates at the date whenthe fair value was determined.

TreasuryThe directors have taken advantage of the exemption in FRS 29 andhave excluded disclosures relating to financial instruments fromthese Financial Statements as disclosures are included in theConsolidated Financial Statements of the Group.

Pension costsThe Company operates defined contribution and defined benefitpension plans.

Payments to defined contribution pension plans are charged as anexpense to the Profit and Loss Account as incurred when the relatedemployee service is rendered. The Company has no further legalor constructive payment obligations once the contributions havebeen made.

The defined benefit pension plan is a Group scheme. The Company’sshare of the assets and liabilities of the scheme has been allocatedon a reasonable and consistent basis.

For the defined benefit pension plan, the cost of providing benefits isdetermined using the Projected Unit Method and the service costrelating to the benefit earned in the period is recognised in staff costsin the Profit and Loss Account. An interest cost representing theunwinding of the discount rate on the scheme’s liabilities, net of theexpected return on scheme assets, is charged to the Profit and LossAccount. The liability recognised in the Balance Sheet in respect ofthe plan is the present value of the defined benefit obligation at thebalance sheet date less the fair value of the plan assets net of deferredtax. The defined benefit obligation is calculated annually byindependent actuaries. The present value of the defined benefitobligation is determined by discounting the estimated future cashoutflows using interest rates of AA rated corporate bonds that haveterms of maturity approximating to the terms of the relevantpension liability.

All actuarial gains and losses that arise in calculating the presentvalue of the defined benefit obligation and the fair value of planassets are recognised immediately in the Statement of TotalRecognised Gains and Losses.

LeasesOperating lease payments are recognised as an expensein the Profit and Loss Account on a straight-line basis over thelease term.

Employee Share Ownership PlanThe Company maintains an Employee Share Ownership Plan(‘ESOP’). All assets and liabilities of the ESOP are accounted forin accordance with UITF 38 ‘Accounting for ESOP Trusts’.The investment in Communisis plc shares held by the ESOPtrust is classified at original cost as a deduction from share-holders’ funds.

BorrowingsBorrowings are recognised initially at fair value, net of transactioncosts incurred. Borrowings are subsequently stated at amortisedcost; any difference between the proceeds (net of transaction costs)and the redemption value is recognised in the Profit and LossAccount over the period of the borrowings using the effectiveinterest method.

Borrowings are classified as current liabilities unless the Companyhas an unconditional right to defer settlement of the liability for atleast twelve months after the balance sheet date.

Borrowing costs are expensed as incurred.

ProvisionsProvisions are recognised when the Company has a presentobligation (legal or constructive) as a result of a past event, it isprobable that an outflow of resources embodying economic benefitswill be required to settle the obligation and a reliable estimate can bemade of the amount of the obligation. If the effect of the time valueof money is material, provisions are determined by discounting theexpected future cash flows at a pre-tax rate that reflects currentmarket assessments of the time value of money and, whereappropriate, the risks specific to the liability. Where discounting isused, the increase in the provision due to the passage of time isrecognised as an interest expense.

Share-based payment transactionsCertain directors and management are eligible to participate inshare-based payment schemes all of which are equity-settled,in return for services provided to Communisis plc.

The cost of equity-settled transactions with employees is measuredby reference to the fair value at the date on which they are granted.The fair value is determined by an external valuer using anappropriate model. In valuing equity-settled transactions, no accountis taken of any vesting conditions, other than conditions linked to theprice of the shares of Communisis plc (‘market conditions’).

The cost of equity-settled transactions is recognised, together witha corresponding increase in equity, over the period in which theperformance conditions are fulfilled, ending on the date on whichthe relevant employees become fully entitled to the award (‘vestingdate’). The cumulative expense recognised for equity-settled

transactiothe vestinof the nubased onperforman

No expenexcept focondition,not the mperforman

The CompFRS 20 inonly to eqhad not ve

Where anvested onin the Pimmediateaward at twith any eProfit and

Cash flowThe effectis recognrecognise

AmountsAccount wwhen theor when aof a non-fto equitynon-financ

If the forecto occur, athe Profitsold, termdesignatioin equitycommitm

The Comits exposufirm comm

The directhave excluFinancialthe ComStatemen

Notesfor the y




79

expenseover the

ship Planounted forP Trusts’.he ESOPm share-

ansactionamortisedion costs)and Loss

effective

Companybility for at

a presentvent, it isc benefits

ate can beime valueunting thets currentd, whereounting isof time is

icipate iny-settled,

measurede granted.using ano accountked to the’).

ether withwhich theon which

d (‘vestingty-settled

transactions at each reporting date reflects the extent to whichthe vesting period has expired and the Company’s best estimateof the number of equity instruments that will ultimately vest,based on the achievement or otherwise of non-market-basedperformance conditions.

No expense is recognised for awards that do not ultimately vest,except for awards where vesting is conditional upon a marketcondition, which are treated as vesting irrespective of whether ornot the market condition is satisfied, provided that all otherperformance conditions are satisfied.

The Company has taken advantage of the transitional provisions ofFRS 20 in respect of equity-settled awards and has applied FRS 20only to equity-settled awards granted after 7 November 2002 thathad not vested on or before 31 December 2004.

Where an equity-settled award is cancelled, it is treated as if it hadvested on the date of cancellation, and any cost not yet recognisedin the Profit and Loss Account for the award is expensedimmediately. Any compensation paid up to the fair value of theaward at the cancellation or settlement date is deducted from equity,with any excess over fair value being treated as an expense in theProfit and Loss Account.

Cash flow hedgesThe effective portion of the gain or loss on the hedging instrumentis recognised directly in equity, while any ineffective portion isrecognised immediately in the Profit and Loss Account.

Amounts taken to equity are transferred to the Profit and LossAccount when the hedged transaction affects profit or loss, such aswhen the hedged financial income or financial expense is recognisedor when a forecast sale occurs. Where the hedged item is the costof a non-financial asset or non-financial liability, the amounts takento equity are transferred to the initial carrying amount of thenon-financial asset or liability.

If the forecast transaction or firm commitment is no longer expectedto occur, amounts previously recognised in equity are transferred tothe Profit and Loss Account. If the hedging instrument expires or issold, terminated or exercised without replacement or rollover, or if itsdesignation as a hedge is revoked, amounts previously recognisedin equity remain in equity until the forecast transaction or firmcommitment occurs.

The Company uses forward exchange contracts as hedges ofits exposure to foreign currency risk in forecasted transactions andfirm commitments.

The directors have taken advantage of the exemption in FRS 25 andhave excluded disclosures relating to financial instruments from theFinancial Statements on the basis that the financial instruments ofthe Company are included within the Consolidated FinancialStatements of the Group.



2 Operating costs and incomeAuditors’ remunerationThe auditors’ remuneration charged relating to the year was £10,000 (2007 £10,000).

The parent company is exempt from disclosing remuneration for non-audit services as the Group accounts are required to include theinformation required by Regulation 4(1)(b) of the Companies Regulations 2005 in respect of the Group.

Employee numbersThe average number of persons employed by the Company during the year was: 2008 2007United Kingdom 31 24

Directors’ remunerationDetails of individual directors’ remuneration, pension entitlements and interests of the directors in Communisis plc are provided within theDirectors’ Remuneration Report on pages 28 to 33.

Profit attributable to members of the parent companyThe profit for the year attributable to members of the parent company was £159,000 (2007 £4,333,000) and is stated after a fixed assetinvestment impairment loss of £4,140,000 (2007 £nil).

3 Dividends paid and proposed2008 2007

Declared and paid during the year £000 £000Amounts recognised as distributions to equity holders in the year:Final dividend of the year ended 31 December 2006 of 0.500p per share – 691Interim dividend of the year ended 31 December 2007 of 0.818p per share – 1,131Final dividend of the year ended 31 December 2007 of 1.635p per share 2,261 –Interim dividend of the year ended 31 December 2008 of 0.860p per share 1,189 –

3,450 1,822

Proposed for approval at AGM (not recognised as a liability as at 31 December)Final equity dividend on ordinary shares for 2008 of 1.635p (2007 1.635p) per share 2,261 2,261

4 Deferred taxation2008 2007£000 £000

The asset at 28% (2007 28%) for deferred taxation is as follows:Accelerated capital allowances 51 80Other short-term timing differences 828 390Share-based payments 59 24Financial liability 67 –

Total deferred tax 1,005 494



80

Notesfor the y


5 Tangib

Cost1 JanuaryAdditions

31 Decem

Accumul1 JanuaryCharge fo

31 Decem

Net book

1 January

6 Invest

Subsidia1 JanuaryImpairmen

31 Decem

The recovin subsidiassumptioresults for

The pre-tacapital adon financirisks asso

The Comp

Name

CommuniCommuni

7 Debto

Trade debAmountsOther debPrepaymeDeferred tVAT recov


clude the

200724

within the

xed asset

2007£000

6911,131

––

1,822

2,261

2007£000

8039024

–

494



81


5 Tangible fixed assetsFreehold PlantLand and and OtherBuildings Vehicles Equipment Total

£000 £000 £000 £000Cost1 January 2008 1,100 109 602 1,811Additions – – 23 23

31 December 2008 1,100 109 625 1,834

Accumulated depreciation1 January 2008 325 92 539 956Charge for year 20 8 30 58

31 December 2008 345 100 569 1,014

Net book value 31 December 2008 755 9 56 820

1 January 2008 775 17 63 855

6 Investments Shares Provisions Total£000 £000 £000

Subsidiaries1 January 2008 377,233 (117,046) 260,187Impairment loss – (4,140) (4,140)

31 December 2008 377,233 (121,186) 256,047

The recoverable amount of investments has been determined based on the value in use of assets comprising the Company’s investmentin subsidiaries, using risk-adjusted cash flow projections based on financial budgets approved by the Board. The approach and keyassumptions are consistent with those used in prior years. The 2007 impairment calculation has been re-performed to include the actualresults for the year ended 31 December 2008. This exercise confirmed that no further impairment is necessary.

The pre-tax discount rate applied to the cash flow projections is 8.75% (2007 10.40%). This is the Company’s weighted average cost ofcapital adjusted to reflect market assessment of specific risks associated with the projected cash flows. Cash flows are projected basedon financial budgets approved by the Board and have been subject to review and risk adjustment. Adjustments have been made to reflectrisks associated with expense inflation, new business growth and market price movements.

The Company’s main subsidiary operations are listed in the following table:% equity

Country of interest 2008Name incorporation and 2007 Immediate parent

Communisis UK Limited United Kingdom 100 Communisis plcCommunisis Europe Limited United Kingdom 100 Communisis plc

7 Debtors 2008 2007£000 £000

Trade debtors 26 –Amounts owed by group undertakings 143 86Other debtors 755 824Prepayments and accrued income 77 72Deferred tax asset (Note 4) 1,005 494VAT recoverable – 57

2,006 1,533




82

Notesfor the y


8 Cash at bank and in hand

2008 2007£000 £000

Cash and bank balances 12,530 12,561

9 Borrowings 2008 2007Interest rate % Maturity £000 £000

CurrentBank overdrafts Base rate + 1 On demand 51,094 32,879Other loans:£15,000,000 bank loan (2007 £17,500,000) LIBOR + 0.5 September 2009 15,000 2,500£7,000,000 bank loan (2007 £8,000,000) LIBOR + 0.55 March 2009 1,000 1,000£9,000,000 bank loan (2007 £9,000,000) LIBOR + 0.6 January 2009 9,000 9,000

76,094 45,379

Non-current£15,000,000 bank loan (2007 £17,500,000) LIBOR + 0.5 September 2009 – 15,000£7,000,000 bank loan (2007 £8,000,000) LIBOR + 0.55 March 2010 6,000 7,000

6,000 22,000

Bank overdraftsThe bank overdrafts are principally denominated in sterling and bear interest at rates set by reference to the UK Base Rate. The overdraftsare secured by cross guarantee arrangements with the relevant banks.

£15,000,000 bank loanThis loan is secured by a guarantee from certain Group companies and the balance is payable on 9 September 2009.

£7,000,000 bank loanThis loan is secured by a cross guarantee arrangement and is repayable in annual instalments of £1,000,000 to 21 March 2009 with thebalance due on 21 March 2010.

£9,000,000 bank loanThis loan is secured by a cross guarantee arrangement and is repayable in one instalment on 7 January 2009. The repayment date on thisloan was extended by one month from December 2008.

£5,000,000 bank loanThis loan is secured by a cross guarantee arrangement and is repayable in one instalment on 21 June 2009. At the year end £nil has beendrawn down under this facility (2007 £nil).

€9,000,000 multicurrency bank facilityThis facility is secured by a cross guarantee arrangement and is repayable in one instalment on 3 May 2010. At the year end €nil and £nilhave been drawn down under this facility (2007 €nil and £nil).

£10,000,000 bank loanThis loan is secured by a cross guarantee arrangement and is repayable on 27 February 2009 unless a term-out option is exercised in whichcase it is repayable on 27 February 2010. During the year, £800,000 was drawn down under this facility, and this was also repaid withinthe year. At the year end £nil has been drawn down under this facility.

£20,000,000 bank loanThis loan is secured by a cross guarantee arrangement and is repayable in one instalment on 9 December 2011. At the year end £nil hasbeen drawn down under this facility. This facility will replace the £9,000,000 bank loan, £5,000,000 bank loan and £7,000,000 bank loan,described above, in 2009.

At 31 December 2008, the Company had available £22,700,000 (2007 £11,610,000) of undrawn committed borrowing facilities in respectof which all conditions precedent had been met.Early repayment is possible under the terms of all the borrowing facilities listed above at no cost by giving more than 5 days notice.

10 Othe

Trade credAmountsOther credCorporatioTaxation aAccruals aVAT payabFinancial l

11 Fina

Non-currForward c

Current lForward c

ForwardAt 31 DecUnited Sta31 Decem

The forwa

12 Prov

1 JanuaryArising duUtilised in

31 Decem

OnerousThe exceppremises wthat weresize and ttherefore tover the rethe lease




83


2007£000

12,561

2007£000

32,879

2,5001,0009,000

45,379

15,0007,000

22,000

overdrafts

9 with the

ate on this

has been

il and £nil

d in whichaid within

d £nil hasbank loan,

in respect

ice.

10 Other creditors (amounts due within one year)2008 2007£000 £000

Trade creditors 768 120Amounts due to group companies 29 47Other creditors 431 629Corporation tax payable 3,555 680Taxation and social security 1,205 1,719Accruals and deferred income 1,970 1,945VAT payable 414 –Financial liability 158 –

8,530 5,140

11 Financial liability2008 2007£000 £000

Non-current liability:Forward currency contract 81 –

Current liability:Forward currency contract 158 –

Forward currency contract – cash flow hedgeAt 31 December 2008, the Company held forward exchange contracts designated as hedges of expected future sales to customers in theUnited States for which the Company has highly probable forecasted transactions. The fair value of these forward currency contracts at31 December 2008 was £239,000 (2007 £nil). These mature on various dates between 2009 and 2011.

The forward exchange contracts are being used to hedge the foreign currency risk of the firm commitments.

12 Provisions for liabilitiesOnerous

leases£000

1 January 2008 68Arising during the year 1,969Utilised in year (113)

31 December 2008 1,924

Onerous leasesThe exceptional property provisions relate primarily to the estimated costs for the rental obligations, dilapidations and other costs of surpluspremises which are long term in nature. A provision has been established following the failure of two businesses previously sold by the Groupthat were occupying properties under leases guaranteed by Communisis. This provision has been classified as exceptional by virtue of itssize and the fact that the liabilities arise from businesses that ceased to be part of Communisis’ trading activities some years ago andtherefore the costs are not related to current operating activities. The provisions reflect the estimated discounted net cost to the Companyover the remainder of the lease periods (maximum 7 years). The final outcome depends upon the ability of the Company to sublet or assignthe lease over the related properties.




84

13 Called up share capital2008 2007

Number of Number ofshares £000 shares £000

AuthorisedOrdinary shares of 25p each 180,000,000 45,000 180,000,000 45,000

Allotted and fully paidOrdinary shares of 25p each 138,602,981 34,651 138,543,660 34,636

2008 2007Nominal Net Nominal Net

value Consideration value ConsiderationNumber £000 £000 Number £000 £000

Shares allotted during the yearOn exercise of options 59,321 15 30 11,583 3 7

The Company has one class of ordinary shares which carry no right to fixed income.

The Company has four share option schemes under which options to subscribe for the Company’s shares have been granted to employees(Note 18).

14 ESOP reserveThe ESOP reserve is used to record the investment in Communisis plc shares held by the employee share ownership plan (‘ESOP’).The plan is for the benefit of all employees and can be used in conjunction with any of the Group’s share schemes. The ESOP reserve holds279,628 shares at 31 December 2008 (2007 279,628) and the market value of these shares is £128,629 (2007 £202,730).

Consideration received for the sale of such shares is also recognised in equity, with any difference between the proceeds from sale and theoriginal cost being taken to retained earnings. No gain or loss is recognised in the Profit and Loss Account on the purchase, sale, issue orcancellation of equity shares.

15 Reserves Share Capitalpremium redemption Merger ESOPaccount reserve reserve reserve

£000 £000 £000 £000As at 1 January 2007 – 1,375 10,908 (338)Premium arising on exercise of options in year 4 – – –

As at 31 December 2007 4 1,375 10,908 (338)Premium arising on exercise of options in year 18 – – –

As at 31 December 2008 22 1,375 10,908 (338)

16 Profit and Loss Account 2008 2007£000 £000

As at 1 January 86,051 83,415Profit for the financial year 159 4,333Ordinary dividends paid (3,450) (1,822)Loss on cash flow hedges taken to equity (239) –Actuarial gains recognised in the pension scheme 153 63Deferred tax on items taken directly to equity 24 (18)Share options exercised (3) –Employee share option schemes – value of services provided 113 80

As at 31 December 82,808 86,051

Notesfor the y


17 Pens

Pension liDeferred t

Net pens

The Compproportion

The Comp

Defined cThe Comp

The ComThe only o

The total cspecifiedover to th

The Comp

Defined bThe define

Followingwas closeand not th

The define

Final salaThe final sat normalspecific earetirement

Career avThe caree(dependinthe rate ofor certain

The major

Asset caEquitiesBonds/GiPropertyOther

None of th




85

£000

45,000

34,636

Neteration

£000

7

mployees

(‘ESOP’).erve holds

le and thee, issue or

ESOPeserve

£000(338)

–

(338)–

(338)

2007£000

83,4154,333(1,822)

–63(18)

–80

86,051


17 Pensions and other post-employment benefit schemes2008 2007£000 £000

Pension liability (1,039) (1,414)Deferred tax 291 396

Net pension liability (748) (1,018)

The Company has complied with the requirements of FRS 17 in the current and preceding period. These Financial Statements include aproportion of the Group pension deficit and charge which has been allocated to the Company.

The Company operates defined contribution and defined benefit pension plans.

Defined contribution schemesThe Company operates UK defined contribution arrangements. The assets of the arrangements are held separately from those of the Company.

The Company is required to contribute a specified percentage of payroll costs to the retirement benefit scheme to fund the benefits.The only obligation of the Company with respect to the retirement benefit scheme is to make the specified contributions.

The total cost charged to income of £91,000 (2007 £26,000) represents contributions payable to these arrangements by the Company atspecified rates. As at 31 December 2008, contributions of £nil (2007 £nil) due in respect of the current reporting period have not been paidover to the arrangements.

The Company expects to contribute £120,000 to the defined contribution pension arrangements in 2009.

Defined benefit schemeThe defined benefit pension scheme closed to new members on 6 April 2005.

Following the statutory consultation period, the defined benefit pension plan closed to future accrual from 1 December 2007. The schemewas closed for all members. As the final salary link is to be preserved, the pension calculation will continue to be based on the final salary,and not the salary when the closure took effect.

The defined benefit schemes are as follows:

Final salaryThe final salary section provides a pension of one sixtieth or one eightieth (depending on the level of employee contribution) of final salaryat normal retirement age for each year of pensionable service. This is subject to the benefit not exceeding one thirtieth of the schemespecific earnings cap, which applies to members who joined the Plan on or after 1 June 1989, for each year of pensionable service. Normalretirement age is sixty-five.

Career average revalued earningsThe career average revalued earnings section provides an accrual each year of a unit of one forty-fifth, one sixtieth or one eightieth(depending on the level of employee contribution) of pensionable salary for that year. The unit is then revalued in each subsequent year bythe rate of growth in the Retail Prices Index until normal retirement age. The normal retirement age under this section is sixty-five exceptfor certain executives, where the accrual rate is one forty-fifth, whose normal retirement age is set at sixty-two.

The major categories of plan assets as a percentage of the fair value of total plan assets are as follows:

2008 2007Asset category % %Equities 51 54Bonds/Gilts/Cash 28 36Property 7 8Other 14 2

100 100

None of the above represents equities or bonds issued by the Company, nor properties owned by the Company.




86

Notesfor the y


17 Pens

Benefit a

Defined bFair value

Net pensi

The define

Present vChanges

Opening dInterest coCurrent sePlan particBenefits pActuarial g

Closing d

Fair valueChanges

Opening fExpectedContributiPlan particBenefits pActuarial l

Closing fa

17 Pensions and other post-employment benefit schemes (continued)

To develop the expected long-term rate of return on assets assumption for the year ended 31 December 2008, the Company consideredthe current level of expected return on risk-free investments (primarily government bonds), the historical level of the risk premium associatedwith the other asset classes in which the portfolio is invested and the expectations for future returns of each asset class. The expected returnfor each asset class was then weighted, based on the asset allocation, to develop the assumed expected long-term rate of return onassets of 7.0% for the portfolio for the year ended 31 December 2008 (2007 6.5%).

The principal weighted average assumptions used to determine benefit obligations for the Company’s plan are shown below:

2008 2007% %

Discount rate 6.6 5.6Rate of compensation increase 3.9 4.3Inflation assumption 2.9 3.3

Mortality ratesAssumed life expectancy for a member aged 65 is as follows: Years YearsCurrent pensioners:

Male 19.4 19.3Female 22.3 21.7

Future pensioners:Male 20.4 20.3Female 23.1 23.5

Deferred pensions are revalued to retirement age in line with the plan’s rules and statutory requirements.

The Company expects to contribute £600,000 to the defined benefit pension scheme in 2009.

The amounts which have been recognised in the Company Profit and Loss Account and in the Statement of Total Recognised Gainsand Losses for the year are analysed as follows:

2008 2007£000 £000

Analysis of the amount charged to operating profitCurrent service cost – (261)

Recognised in arriving at operating profit – (261)

Analysis of net return on pension schemeExpected return on scheme assets 1,150 1,083Interest cost on scheme liabilities (1,119) (1,006)

Interest income 31 77

Analysis of amount recognised in Statement of Total Recognised Gains and LossesActual return less expected return on scheme assets (3,918) (120)Experience gains on liabilities 4,071 183

Actuarial gains recognised in the Statement of Total Recognised Gains and Losses 153 63




87


17 Pensions and other post-employment benefit schemes (continued)

Benefit asset/(liability)2008 2007£000 £000

Defined benefit obligation (15,994) (19,689)Fair value of plan assets 14,955 18,275

Net pension deficit (1,039) (1,414)

The defined benefit obligation comprises £16 million (2007 £20 million) arising from a partly funded plan.

Present value of the defined benefit obligationChanges in the present value of the defined benefit obligation are as follows:

2008 2007£000 £000

Opening defined benefit obligation 19,689 19,248Interest cost 1,119 1,006Current service cost – 261Plan participants’ contributions – 262Benefits paid (743) (905)Actuarial gains on obligations (4,071) (183)

Closing defined benefit obligation 15,994 19,689

Fair value of plan assetsChanges in the fair value of plan assets are as follows:

2008 2007£000 £000

Opening fair value of plan assets 18,275 17,419Expected return on plan assets 1,150 1,083Contributions by employer 191 536Plan participants’ contributions – 262Benefits paid (743) (905)Actuarial losses on assets (3,918) (120)

Closing fair value of plan assets 14,955 18,275

onsideredssociatedted returnreturn on

2007%

5.64.33.3

Years

19.321.7

20.323.5

sed Gains

2007£000

(261)

(261)

1,083(1,006)

77

(120)183

63




88


17 Pensions and other post-employment benefit plans (continued)

2008 2007 2006 2005 2004Five-year history £000 £000 £000 £000 £000Present value of defined benefit obligation (15,994) (19,689) (19,248) (20,173) (17,080)Fair value of plan assets 14,955 18,275 17,419 15,578 11,861

Deficit (1,039) (1,414) (1,829) (4,595) (5,219)

History of experience gains and losses2008 2007 2006 2005 2004

Experience adjustments on plan assets (£000) (3,918) (120) 345 1,409 458Percentage of scheme assets 26% 1% 2% 9% 4%Experience adjustments on plan liabilities (£000) 4,071 183 1,955 – –Percentage of scheme liabilities 25% 1% 7% 0% 0%Total amount recognised in Statement of Total Recognised

Gains and Losses (£000) 153 63 2,917 (359) (144)Percentage of scheme liabilities 1% 1% 11% (2%) (1%)

18 Share-based paymentsUnder share option schemes, share options to subscribe for ordinary shares of 25p each outstanding at 31 December 2008 wereas follows:

Sharesave Scheme

Options Options Options Optionsheld at granted lapsed/exercised held at Option

1 Jan 2008 during the year in the year 31 Dec 2008 price Exercisable

Number Number Number Number (p)264,435 – (131,663) 132,772 91.000 2009

2,556,918 – (1,075,725) 1,481,193 60.000 2009-2010

2,821,353 – (1,207,388) 1,613,965

Notesfor the y

18 Shar

O

1 Ja

N

2848721631

4,6

O

1 Ja

N1,0

1,0

O

1 Ja

N2

2

The ExecCertain dThe exerc1 Januaryin normalconsecutiannum. T

In respectoptions la




89

2004£000

17,080)11,861

(5,219)

2004

4584%

–0%

(144)(1%)

008 were



Executive Share Option SchemesOptions Options Options Optionsheld at granted lapsed/exercised held at Option


Number Number Number Number (p)– 740,740 – 740,740 47.250 2011-2018

248,062 – – 248,062 64.500 2010-2017821,917 – – 821,917 73.000 2009-2016417,567 – – 417,567 74.000 2010-2017861,475 – (94,246) 767,229 91.250 2009-2016713,495 – (96,528) 616,967 105.500 2006-2013262,008 – (262,008) – 114.500 2008-2015160,274 – (64,274) 96,000 125.000 2006-2012642,426 – (37,166) 605,260 156.250 2006-2010357,413 – (26,236) 331,177 162.670 2006-2012104,792 – – 104,792 176.500 2006-201151,480 – (51,480) – 176.675 2006-2008

4,640,909 740,740 (631,938) 4,749,711

Long Term Incentive PlanOptions Options Options Optionsheld at granted lapsed/exercised held at Option


Number Number Number Number (p)1,055,270 - (145,000) 910,270 0.000 2010-2012

– 1,015,000 (15,000) 1,000,000 0.000 2011-2013

1,055,270 1,015,000 (160,000) 1,910,270

Options awarded to the ChairmanOptions Options Options Optionsheld at granted lapsed/exercised held at Option


Number Number Number Number (p)250,000 – – 250,000 0.000 2010-2012

250,000 – – 250,000

The Executive Share Option Scheme 2000Certain directors and management are eligible to participate in the above scheme at the discretion of the Remuneration Committee.The exercise price of the options is equal to the market value of the shares on the date of grant. In respect of options granted prior to1 January 2005, except those granted to the former Chief Executive, which have since lapsed, the options vest if the percentage increasein normalised earnings (i.e. before intangibles amortisation, restructuring costs and other exceptional items) per share over any threeconsecutive financial years exceeds the percentage increase in the Retail Prices Index over that period by an average of at least 3% perannum. The contractual life of each option granted is ten years. There are no cash settlement alternatives.

In respect of options granted since 1 January 2005 if the performance condition is not met within three years from the date of grant, theoptions lapse.


18 SharThe SharAll UK emis equal tothe third othe vestin

No option

The dilutiv

The follow

OutstandiGranted dForfeited dExpired d

Outstandi

Exercisab

1 Included woptions wfor in acco

The weigh

The weigh

The rangeoptions fo

19 OtheAt 31 Dec

Operating– within o– in two to– over five

Operating– within o– in two to– over five



90



For options granted to the Chief Executive in 2006 and all options granted under this scheme in 2007 and 2008, 50% of the options vest if theTotal Shareholder Return (‘TSR’) of the Company, as compared to the TSR performance of all companies in the Support Services sector of theFTSE All Share Index (excluding FTSE 100 companies), is at or above the median level over a three-year period. The other 50% of the optionsvest if the TSR of the Company, as compared to the TSR performance of all companies in the FTSE Small Cap Index (excluding investmenttrusts), is at or above the median level over the same three-year period. If the performance condition is not fulfilled within the three-year periodfrom the date of grant, the options lapse. The contractual life of each option granted is ten years. There are no cash settlement alternatives.

The fair value of options granted under the Executive Share Option Scheme 2000 in the year to 31 December 2008 has been estimatedon the date of grant using a hybrid simulation and binomial option pricing model, taking into account the terms and conditions upon whichthe options were granted. The following weighted average assumptions were used in that model: an expected life extending six monthslater than the exercise date; share price at the date of grant of £0.52 (2007 £0.705); estimated annualised dividend yield of approximately6.0% (2007 3.73%); risk free interest rate of approximately 4.5% (2007 5.0%) and expected volatility of 38.0% (2007 35.7%). Volatility hasbeen determined by reference to Communisis plc’s and comparator companies’ historical volatility over a three-year period, which isexpected to reflect the share price of Communisis plc in the future. The weighted average fair value of the share options granted in the yearended 31 December 2008 was £0.117 (2007 £0.161).


The Long Term Incentive Plan 2007Certain directors and management are eligible to participate in this plan at the discretion of the Remuneration Committee. In respect ofoptions granted under the scheme the exercise price is £nil. For all options granted in 2007 and 2008 50% of the options becomeexercisable if the TSR of the Company, as compared to the TSR performance of all companies in the Support Services sector of the FTSEAll Share Index (excluding FTSE 100 companies), is at or above the median level over a three-year period. The other 50% of the optionsbecome exercisable if the TSR of the Company, as compared to the TSR performance of all companies in the FTSE Small Cap Index(excluding investment trusts), is at or above the median level over a three-year period. 30% of each tranche of options will vest forperformance at the median of the comparator group rising, on a straight-line basis, to 100% vesting for performance in the top decile ofthe comparator group. If the performance conditions are not fulfilled within the three-year period from the date of grant, the options lapse.The contractual life of each option granted is five years. There are no cash settlement alternatives.

The fair value of options granted under the Long Term Incentive Plan 2007 in the year to 31 December 2008 has been estimated on thedate of grant using a simulation option pricing model, taking into account the terms and conditions upon which the options were granted.The following weighted average assumptions were used in that model: an expected life extending six months later than the exercise date;share price at the date of grant of £0.529 (2007 £0.785); estimated annualised dividend yield of approximately 6.0% (2007 3.79%); risk-free interest rate of approximately 4.2% (2007 5.0%) and expected volatility of 38.0% (2007 35.8%).

Volatility has been determined by reference to Communisis plc’s and comparator companies’ historical volatility over a three-year period,which is expected to reflect the share price of Communisis plc in the future. The weighted average fair value of the share options grantedin the year ended 31 December 2008 under this plan was £0.27155 (2007 £0.441).


Options awarded to the ChairmanOn 19 December 2007, shortly after his appointment, Mr Hickson was awarded 250,000 nil cost share options in the Company, and on20 December 2007, he entered a contract with RBC Trust Company (Jersey) Limited (‘RBC’) for these options, on exercise, to be satisfiedby the transfer of ordinary shares already held by the Company’s Employee Benefit Trust, of which RBC is the Trustee. The grant of thoseoptions was conditional upon the purchase by Mr Hickson of 250,000 ordinary shares in the Company (‘the Matching Shares’); this purchasewas executed on 18 December 2007. The principal conditions for the exercise of these options are that the options will not normally vestuntil the third anniversary of the date of grant (‘the Vesting Date’); if he ceases to be the beneficial owner of some or all of the MatchingShares before the Vesting Date the extent of the vesting will be reduced accordingly; if he ceases to be an employee of the Group, or inthe event of a takeover, before the Vesting Date, his options will normally vest on a time pro-rata basis; exercise may normally take placeonly between the Vesting Date and the fifth anniversary of the date of grant.

No further options have been awarded to Mr Hickson in 2008.

Notesfor the y



The Sharesave SchemeAll UK employees (including directors) are eligible to participate in the Communisis Sharesave Scheme. The exercise price of the optionsis equal to the market price of the shares at the date of invitation to participate less a maximum discount of 20%. The options vest on eitherthe third or fifth anniversary of the commencement of the savings period. Any options which have not been exercised within six months ofthe vesting date lapse.

No options were granted under the Sharesave Scheme in the year ended 31 December 2008 (2007 nil).

The dilutive effect of outstanding options is reflected as additional share dilution in the computation of earnings per share.

The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options during the year.

2008 2008 2007 2007Number WAEP £ Number WAEP £

Outstanding at the beginning of the year 1 3,863,734 0.74310 3,587,487 1.05463Granted during the year 1,310,740 0.26702 1,525,899 0.30736Forfeited during the year (177,822) 1.13535 (1,223,912) 1.09555Expired during the year (51,480) 1.76675 (25,740) 1.41025

Outstanding at the end of the year 1 4,945,172 0.63073 3,863,734 0.74310

Exercisable at the end of the year 462,175 1.56250 513,655 1.58297

1 Included within this balance are options over 514,647 shares (2007 566,127 shares) that have not been recognised in accordance with FRS 20 as theoptions were granted on or before 7 November 2002. These options have not been subsequently modified and therefore do not need to be accountedfor in accordance with FRS 20.

The weighted average remaining contractual life for the share options outstanding as at 31 December 2008 is 6.17 years (2007 6.52 years).

The weighted average fair value of all options granted during the year was £0.18197 (2007 £0.3481).

The range of exercise prices for options outstanding at the end of the year was £nil – £1.765 (2007 £nil - £1.76675). The number of shareoptions for which the share price is £nil total 1,430,270 (2007 860,270).

19 Other financial commitmentsAt 31 December 2008 the Company had annual commitments under non-cancellable operating leases for assets as set out below:

Land and buildings2008 2007£000 £000

Operating leases which expire:– within one year 45 –– in two to five years 518 88– over five years 9 9

572 97

Other2008 2007£000 £000

Operating leases which expire:– within one year 8 22– in two to five years 40 20– over five years – –

48 42



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92

Report of the Auditors on the Company Financial Statements Share

Independent Auditors’ Report to theShareholders of Communisis plcWe have audited the parent company Financial Statements ofCommunisis plc for the year ended 31 December 2008 whichcomprise the Balance Sheet, the Reconciliation of Movements inEquity Shareholders’ Funds and the related notes 1 to 19. Theseparent company Financial Statements have been prepared underthe accounting policies set out therein. We have also audited theinformation in the Directors’ Remuneration Report that is describedas having been audited.

We have reported separately on the Consolidated FinancialStatements of Communisis plc for the year ended 31 December 2008.

This report is made solely to the Company's members, as a body, inaccordance with Section 235 of the Companies Act 1985. Our auditwork has been undertaken so that we might state to the Company’smembers those matters we are required to state to them in anauditors’ report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyoneother than the Company and the Company’s members as a body, forour audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditorsThe directors’ responsibilities for preparing the Annual Report, theDirectors’ Remuneration Report and the parent company FinancialStatements in accordance with applicable United Kingdom law andAccounting Standards (United Kingdom Generally AcceptedAccounting Practice) are set out in the Statement of Directors’Responsibilities.

Our responsibility is to audit the parent company Financial Statementsand the part of the Directors’ Remuneration Report to be audited inaccordance with relevant legal and regulatory requirements andInternational Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the parent companyFinancial Statements give a true and fair view and whether theparent company Financial Statements and the part of the Directors’Remuneration Report to be audited have been properly prepared inaccordance with the Companies Act 1985. We also report to youwhether in our opinion the information given in the Directors’ Reportis consistent with the Financial Statements. The information given inthe Directors’ Report includes that specific information presentedin the Chairman’s Statement and Business Review that is cross-referred from the Directors’ Report.

In addition we report to you if, in our opinion, the Company has notkept proper accounting records, if we have not received all theinformation and explanations we require for our audit, or ifinformation specified by law regarding directors’ remuneration andother transactions is not disclosed.

We read other information contained in the Annual Report andconsider whether it is consistent with the audited parent company

Financial Statements. The other information comprises only theFinancial Highlights, Chairman’s Statement, Business Review,Directors’ Report, Corporate Governance Report and unauditedpart of the Directors’ Remuneration Report. We consider theimplications for our report if we become aware of any apparentmisstatements or material inconsistencies with the parent companyFinancial Statements. Our responsibilities do not extend to any otherinformation.

Basis of audit opinionWe conducted our audit in accordance with International Standardson Auditing (UK and Ireland) issued by the Auditing Practices Board.An audit includes examination, on a test basis, of evidence relevantto the amounts and disclosures in the parent company FinancialStatements and the part of the Directors’ Remuneration Report tobe audited. It also includes an assessment of the significantestimates and judgments made by the directors in the preparationof the parent company Financial Statements, and of whetherthe accounting policies are appropriate to the Company’scircumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all theinformation and explanations which we considered necessary inorder to provide us with sufficient evidence to give reasonableassurance that the parent company Financial Statements and thepart of the Directors’ Remuneration Report to be audited are freefrom material misstatement, whether caused by fraud or otherirregularity or error. In forming our opinion we also evaluated theoverall adequacy of the presentation of information in the parentcompany Financial Statements and the part of the Directors’Remuneration Report to be audited.

OpinionIn our opinion:

the parent company Financial Statements give a true and fairview, in accordance with United Kingdom Generally AcceptedAccounting Practice, of the state of the Company’s affairs asat 31 December 2008;the parent company Financial Statements and the part of theDirectors’ Remuneration Report to be audited have beenproperly prepared in accordance with the Companies Act1985; andthe information given in the Directors’ Report is consistentwith the parent company Financial Statements.

Ernst & Young LLPRegistered auditorLeeds26 February 2009

Company

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Other InformationCommunisis plc 2008

93

Shareholder Information

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Company Secretary Martin Young

Registered Office Communisis plcWakefield RoadLeedsLS10 1DUTel: +44 (0) 113 277 0202Fax: +44 (0) 113 271 3503Registered in England Number 2916113Visit our website at www.communisis.com

Auditors Ernst & Young LLPBridgewater PlaceWater LaneLeedsLS11 5QR

Principal Bankers HSBC Bank plcLloyds TSB Group plcBarclays Bank PLCHBOS plcKBC Bank NVFortis Bank SA/NV

Solicitors Eversheds LLPBridgewater PlaceWater LaneLeedsLS11 5DR

Allen & Overy LLPOne Bishops SquareLondonE1 6AO

Registrars Capita RegistrarsNorthern HouseWoodsome ParkFenay BridgeHuddersfieldHD8 0LATel: 0871 664 0300Tel: +44 20 8639 3399 (for overseas shareholders)Fax: +44 (0) 1484 600911www.capitaregistrars.co.uk

For all shareholder enquiries and changes of name and addressplease contact Capita Registrars direct.




94

Shareholder Information continued Summ

Stockbrokers Investec Securities2 Gresham StreetLondonEC2V 7QP

Stock Exchange Listing The Company’s ordinary shares are listed on the London Stock Exchange.

Electronic communications Shareholders can register to receive shareholder information electronically by visiting theCompany’s registrars’ website and registering their details online.

Financial calendar Financial year end 2008 31 December 2008Results for 2008 announced 26 February 2009Ex-dividend date 1 April 2009Record date 3 April 2009Annual General Meeting 28 April 2009Payment date for 2008 final dividend 1 May 2009Interim results for 2009 announced expected August 2009Results for 2009 announced expected February 2010

Final dates and any changes will be announced and notified as appropriate.

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Proxy form




95

Summary Notice of Annual General Meeting

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mber 2008uary 2009April 2009April 2009April 2009May 2009gust 2009uary 2010

Summary of business to be transacted at the 2009 AGM

The full text of the Notice of Meeting, together with the explanatory notes, is set out in a separate document, enclosed withthis Report and Financial Statements.

The Annual General Meeting of the Company will be held at 10.30 a.m. on 28 April 2009, at the offices of Eversheds LLP, Bridgewater Place,Water Lane, Leeds LS11 5DR.

Business to be transacted at the AGM

1. To receive and adopt the Company’s Annual Report and Financial Statements for the financial year ended 31 December 2008.

2. To approve the Directors’ Remuneration Report.

3. To approve and confirm the payment of a dividend.

4. To re-elect Mr R W Jennings as a director of the Company.

5. To re-elect Mr P R King as a director of the Company.

6. To elect Mr A J C Blaxill as a director of the Company.

7. To re-appoint Ernst & Young LLP as auditors and to authorise the directors to fix their remuneration.

8. To authorise changes to the Company’s Articles of Association.

9. To authorise the Board to maintain a 14 days’ notice period for calling general meetings of the Company.

10. To authorise the directors to allot securities generally.

11. To authorise the directors to allot securities for cash.

12. To authorise the directors to purchase the Company’s own shares.

Proxy forms for use in connection with the business to be transacted at the AGM are enclosed with the Notice of Meeting.




96

Contact Details

Communisis plc

Head OfficeWakefield RoadLeedsLS10 1DUTel: +44 (0) 113 277 0202

London OfficeDevonshire House146 BishopsgateLondonEC2M 4JXTel: +44 (0) 20 7426 4690

UK Locations

Crewe – ChequesFrances StreetCreweCheshireCW2 6HGTel: +44 (0) 1270 502600

Leeds – Direct MailManston LaneCross GatesLeedsLS15 8AHTel: +44 (0) 113 225 5000

Leeds – Technology & ServicesManston LaneCross GatesLeedsLS15 8AHTel: +44 (0) 113 225 2555

Leicester – Print SourcingCenturion WayMeridian Business ParkLeicesterLE19 1PZTel: +44 (0) 116 240 6700

Lisburn – ChequesP.O. Box 22Altona RoadLisburnCounty AntrimBT27 5QUTel: +44 (0) 2892 606800

Liverpool – StatementsEstuary Commerce Park1 Hercules DriveSpekeMerseysideL24 8ADTel: +44 (0) 151 728 5100

Manchester – Cheques and Direct MailTrafford Wharf RoadManchesterM17 1HETel: +44 (0) 161 869 1000

Newcastle – Print SourcingBalliol Business Park WestBenton LaneNewcastle Upon TyneNE12 8EWTel: +44 (0) 191 201 5000

Rickmansworth – Print Sourcing34/36 High StreetRickmansworthHertfordshireWD3 1ERTel: +44 (0) 1923 891000

Richmond – Absolute IntuisticAi HouseHolbrooke PlaceHill RiseRichmondSurreyTW10 6UDTel:+44 (0) 208 614 7333

Europe

France – Print Sourcing19 bis, rue de la Tourelle95170 Deuil La BarreParisFranceTel: +33 (0) 1 34 05 05 30

Spain – Print SourcingAlberto Alcocer 5 2° C28006 MadridSpainTel: +34 (0) 913 431 710


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