On 28th December 2023, the print and customer communication giant Communisis collapsed into administration. The Leeds based company was an industry leader, employing 1200 people and turning over nine figures, and was seen as a company that was safe to do business with and offer credit to. Now, Communisis’s creditors are facing an uncertain future as they are forced to absorb the bad debts created by its collapse.

Red Flag Alert spotted the signs of business distress at Communisis and gave our customers advanced warning of them as a potential credit risk as early as September 2023.

Who were Communisis?

Communisis were a Leeds based printing company that specialised in customer communications, regulatory communication, direct marketing and point of sale marketing. The operated across Europe and employed 1200 people, with the majority of employees and the business being based in the UK.

They counted some of the country's most recognizable brands as clients, including Procter and Gamble, LVE, British Gas, and BT; they also enjoyed a lucrative contract with Lloyds Banking Group supplying their printed statements. They printed 700 million information packets and 1.3 billion pages each year.

Communisis were amongst the leading printing companies in the nation and were turning over more than a quarter of a billion pounds in 2017. Their success and strong client book led to their acquisition by USA-based OSG Holdings in 2018 for £154 million.

What went wrong?

Despite having major contracts with prominent clients and enjoying a reputation as an industry leader, Communisis were not immune to the troubles facing the print industry and by their last set of published accounts in 2021, turnover had fallen by over £100 million to £137.5 million.

Print companies have long been struggling to exist in an increasingly digital world. Not only has advertising and marketing been moved to digital channels but companies are increasingly driving customer communications to be delivered digitally to decrease their own costs.

In more recent years, printing companies have had to contend with the same macroeconomic pressures as the rest of UK businesses but were particularly affected by rising energy costs, as a high energy consumption industry, and the steep rise in the cost of paper.

Added to these woes, Communisis recently lost several key accounts which left them with capacity that they were unable to fill, and their owners, OSG Holdings, applied for Chapter 11 bankruptcy protection in the USA.

With no chance of further investment from their parent company and an untenable financial position the company’s directors had no other choice but to appoint the administrators Interpath Advisory just before the new year.

What happens next?

In the wake of the administration Paragon Customer Communications purchased part of Communisis, chiefly to obtain the delivery of services to Lloyds Banking Company. Whilst this did save 581 jobs, unfortunately, 638 staff were left without employment.

The suppliers and lenders that had extended credit to Communisis are left having to write off the money owing as a bad debt, at a time when most companies are struggling to survive. Unfortunately, when a company of this size fails it leaves behind a large number of creditors, some with large amounts owing, across multiple industries. Those companies that are unable to absorb these losses will themselves go insolvent, with a company that has suffered a bad debt being three times more likely to fail themselves.

Red Flag Alert are the industry leaders at spotting the early warning signs of financial distress and predicting insolvency and we flagged Communisis as a risk on 21 September 2023 when we downgraded them to a one red flag rating of distress and further downgraded them to our most critical level of distress, three red flags, on 1st December 2023.

In this case, there was no singular major insolvency warning sign of failure, but rather a slow decline in financial performance and accruing of signs of business distress. It is thanks to Red Flag Alert’s cutting-edge algorithm that we were able to give our customers advanced warning that Communisis is a credit risk.

Our algorithm is based on over 20 years of insolvency data and we are constantly reviewing and refining it to be more accurate as well as pushing the boundaries of how quickly we can bring data to market. The Red Flag Alert platform boasts live data feeds and an industry-leading 92% accuracy rate at predicting insolvency.

Our platform includes:

· Cutting edge customizable monitoring tool that allows you to create individual monitoring lists, select which alerts to receive within each and share them between your organization.

· Real-time data feeds and alerts

· Understand your suppliers financial position with detailed business reports on all UK businesses

· Easy to understand business health ratings

· Find your perfect customers and suppliers with our B2B Data Tool; featuring over 100 filters to choose from, including growth score

To see how Red Flag Alert can help you do better, safer business get a  free trial today.