TIDMCRE
RNS Number : 7829I
Creston PLC
21 June 2011
21 June 2011
Creston plc
Unaudited Preliminary Financial Results for the Year Ended 31
March 2011
Creston plc ("Creston" or "the Group") (LSE: CRE), the insight
and communications group, today announces its preliminary financial
results for the year ended 31 March 2011.
Financial Highlights*
-- Revenue increased by 11% to GBP67.8 million (2010: GBP61.3
million)
-- Revenue increased on a like-for-like ([1]) basis by 7% (2010:
-1%)
-- Headline ([2]) PBIT ([3]) margin restored to 18% in the
second half with the full year at 16% (2010:18%)
-- Headline PBT ([4]) increased by 1% to GBP10.4 million (2010:
GBP10.3 million)
-- Operating cash flow at GBP9.9 million (2010: GBP13.7 million)
and cash conversion to Headline EBITDA ([5]) of 82% (2010:
113%)
-- Net debt decreased by GBP25 million to GBP0.05 million (2010:
GBP24.9 million)
-- Total full year dividend of 3.00 pence per share (2010: 1.00
pence per share)
Operational Highlights*
-- Cash sale of advertising business DLKW Group for GBP28.0
million
-- Acquisition of the trade and assets of New York healthcare
public relations business, Cooney/Waters, and its subsidiary,
Alembic Health Communications, for an initial cash consideration of
$9.4 million (GBP5.9 million)
-- Digital and online revenues increased by 19% to represent 41%
of Group revenues (2010: 38%)
-- Continuing focus on international expansion post-period end -
Nelson Bostock opening Hong Kong office to service HTC in Asia, an
existing client in Europe
[1] A comparison of the current year performance (including
acquisitions from the relevant date of completion) compared to the
prior year performance adjusted to include the results of
acquisitions for the commensurate period in the prior year. [2]
Headline results reflect the underlying performance of the Group
and excludes acquisition and start-up related costs, restructuring
costs, amortisation of acquired intangible assets, deemed
remuneration and notional finance costs from the Reported results.
A full reconciliation is presented in note 4 to this Preliminary
Announcement. [3] Profit before Interest and Taxation (PBIT) is
defined as profit before finance income, finance cost, income from
financial assets and taxation. [4] Profit before Taxation (PBT).
[5] Earnings before finance income, finance costs, income from
financial assets, taxation, depreciation and amortisation
(EBITDA).
Financial Results
* Headline results Reported results
2011 2010 Change 2011 2010 Change
GBPm GBPm GBPm GBPm
Revenue 67.8 61.3 +11% 67.8 61.3 +11%
Pre-tax profit 10.4 10.3 +1% 8.4 5.0 +66%
Post-tax profit 7.5 7.9 -6% 5.7 2.9 +94%
Diluted EPS
(pence) 12.39 13.46 -8% 9.41 4.97 +89%
* All figures are based on continuing operations.
Commenting on today's announcement, Don Elgie, Group Chief
Executive Officer, said:
"In the last 12 months, we have transformed the shape and
balance of the Group organically and by acquisition to increase our
exposure to digital and international and delivered revenue growth
of 11 per cent. At the same time, we have continued to invest in
our people and our services to ensure our client proposition
remains innovative and current to market changes. We believe that
our strong focus on the highest growth areas within the insight and
marketing communiation sectors, coupled with a growing client list
of exceptional quality, positions us well for the next year and
beyond."
A meeting for analysts will be held today at 9.30 am at
Investec, 2 Gresham Street, London, EC2V 7QP. Please contact Sarah
Macleod on telephone: 020 7484 7159 for details.
For further information, please contact:
Creston plc Tel: 020 7930 9757
Don Elgie, Group Chief Executive Officer
Barrie Brien, COO & CFO
Sarah Macleod, Communications Director
www.creston.com
M:Communications Tel: 020 7920 2339
Elly Williamson Group Chief Executive's Statement
2011, our tenth year, has been a significant and successful one
for Creston plc. We have transformed the shape and balance of the
Group, grown revenue by 11 per cent (7 per cent on a like-for-like
basis), launched new marketing services, strengthened the balance
sheet from a position of net debt to net cash and invested in a
leadership development programme for our senior people.
In July 2010 the Group disposed of DLKW Group, its traditional
above-the-line advertising business, in order to focus investment
on faster growth opportunities. One such example is the acquisition
in December 2010 of the business and assets of New York based
Cooney/Waters and its subsidiary Alembic Health Communications
(together "Cooney/Waters"), an award winning, growing, profitable
healthcare PR group. The acquisition builds on an existing
collaboration and shared client base with our UK healthcare PR
company, Red Door Communications. We have been pleased with the
performance of the business to date.
The disposal of DLKW Group and the acquisition of Cooney/Waters
have helped to reshape the Group in two ways. Firstly, more of the
Group's profits (almost two thirds of Headline PBIT before head
office costs) are now weighted towards its higher margin and more
resilient divisions, Insight and Health, and secondly, the
Communications Division is now focused on the faster growth areas
of digital, local and mobile marketing, public relations and social
media.
During the first half of the year, we continued to invest in new
marketing services and personnel across the whole Group. As
highlighted at the time of our Interim Results, the cost of these
investments impacted on the Group's Headline PBIT margin
temporarily. We are pleased to report a return to our historical 18
per cent margin in the second half of the year, delivering a
Headline margin of 16 per cent for the full year.
In view of the strong revenue growth, margin improvement and a
much strengthened balance sheet, the Board recommends a final
dividend of 2.25 pence per share (2010: 1.00 pence per share),
which combined with the interim dividend of 0.75 pence per share
(2010: nil), represents a 200 per cent increase in dividends for
the year. Following this material increase, the Board expects to
return to a progressive dividend policy.
The evolving landscape brings opportunities
The markets in which we operate continue to evolve at a rapid
rate and across the board our clients' markets are evolving too.
Old methods of advertising, communicating a one-way message via TV,
radio or posters, are becoming less important, while the
increasingly numerous online channels and developing technology are
transforming the way people behave and consume.
To help our clients fit the array of marketing possibilities
into clearly planned, executable and media-neutral campaigns, we
launched Creston Unlimited, a creative brand and innovation
consultancy, in April 2011. It works to solve specific brand
problems such as developing new products and managing brand
portfolios, as well as developing execution strategies. In so
doing, Creston Unlimited will work closely with all Creston
companies to create new opportunities across the Group and we are
encouraged by early demand for its services.
In many ways, Creston Unlimited is a client-facing embodiment of
our "better together" ethos. Bringing complementary and relevant
skills together from across a range of agencies is central to the
way Creston operates and it has been a key part of our success in
the last year. Such synergy underpins our strategy of acquiring and
growing complementary, high-performing businesses.
Change brings opportunity and it is Creston's unique combination
of complementary insight and communications agencies and our
integrated approach that positions us to take advantage of the
evolving landscape.
Fostering innovation and collaboration
Our innovation strategy is to build capacity in new areas of
marketing whilst judiciously managing risk. We do this by focusing
investment on new service offerings and start-up ventures, and
ensuring efficiency through our Centres of Excellence, which
provide a forum for leveraging expertise across the Group.
Collaboration amongst our companies enables us to expand our
expertise into new sectors. Examples of this collaboration
include:
-- the evolution of our specialist Insight Health offer by
pooling expertise from our research and healthcare agencies;
-- a combination of our specialist healthcare expertise and our
local marketing capability to meet the changing demands expected to
result from the proposed NHS budget reforms; and
-- the launch of a new consumer healthcare proposition that
pools expertise from our Health and Communications Divisions, which
has already identified significant opportunities. An early business
win has resulted in four companies from all three divisions working
together on a UK product launch.
Creston Health's medical education business, ROCK, shows the
value of our start-up approach by delivering a year of strong
growth with revenue at almost GBP1.0 million during its first full
year of operation.
Digital media and innovation are key recurring themes in the
development of Creston's offer to clients and with a 19 per cent
absolute increase on last year, over 40 per cent of Group revenues
now come from digital-related business. Our focus on this area
reflects the strong growth we continue to expect from online
advertising and digital marketing that will outpace the recovery in
traditional above-the-line activity.
International growth
Creston's client list and success over the last decade proves
that a group of our size is a highly attractive partner for major
global brands. Today, a quarter of our revenues are derived from
international projects and this is expected to increase as we
capitalise on new client opportunities and with a full year's
contribution from Cooney/Waters.
As we respond to client demand by establishing regional hubs in
strategically important markets, we significantly increase our
potential for growth. As with Cooney/Waters and our Health
Division, growth will be achieved through the ownership of an
established business or, in cases where we believe it is important
to leverage our own expertise, we will build organically. For
example, we are in the process of opening an office in Hong Kong
for Nelson Bostock Group to support HTC, whom we currently service
across Europe, so extending our PR agency's already significant
relationship with the Taiwanese smartphone manufacturer over two
continents.
To provide coverage in other markets, we will continue to
support and develop our affiliate networks, namely the InterDirect
network in direct marketing, the Research Alliance and WIN Network
in Insight, the Health Collective network in healthcare PR and the
Compass network in B2B and consumer PR. We recently strengthened
our specialist pharmaceutical branding and creative offer by
uniting our Indigenus network of aligned creative agencies more
formally under a single LLC and expanding the network to provide
full global coverage for clients. Indigenus now comprises thirteen
agencies in major and key emerging markets.
New business growth
During the past financial year, annualised net new business wins
of GBP10.0 million (2010: GBP7.0 million) included Astellas, BP
Castrol, CA Technologies, Guinness digital, Intercontinental Hotel
Group, LighterLife, Lotus, Pfizer, Rolls Royce, Sony Ericsson, Sony
Europe, Twinings, ViiV Healthcare and a major international
financial services company. We have recently retendered for one of
our top five accounts and are currently awaiting the outcome of
that process. None of the other top twenty client accounts are
currently under tender.
Refreshing the Insight Division
Our Insight Division began the financial year facing a period of
significant challenge. The market research sector was in decline,
especially in government and social research, and there was the
departure of the founder of ICM along with a number of senior
managers. In responding, we focused investment on hiring senior
directors with the skills to synthesise rapidly emerging new
research techniques and deliver clear, actionable insights for
clients. The success of the new team at ICM is demonstrated by
there only being a small decline in ICM's turnover in line with the
market of 2 per cent, indicating there was no material reduction in
the number and value of projects commissioned by the existing
clients. However, revenue and Headline PBIT did decline because of
a lower gross margin on increased data collection costs. With the
benefit of improving budgets in government and social research,
ICM's return to growth in the final quarter and an improvement in
gross margins for the new financial year demonstrate the benefits
of the senior team changes. With strong loyalty from our client
base and major new business from Sainsbury's and BT, we are
confident of the future prospects for the agency and the
Division.
Outlook
Creston's prospects have been strengthened this last financial
year. We have transformed the business model away from traditional
advertising towards the higher growth areas of digital marketing
and the higher profit margin areas of insight and healthcare
marketing, whilst transforming our balance sheet from net debt of
GBP25 million to a net cash position.
We are benefiting firstly from the increased synergy between our
complementary businesses as they work together to develop
innovative services and win new business and, secondly, from our
blue chip client list which provides an increasing number of
international opportunities.
The anaemic recovery in UK consumer spending is well publicised
and despite a general stabilisation and improvement in clients'
marketing budgets, we remain cautious over the current year. The
Group's current net cash balance together with its unutilised
banking facility will enable Creston to continue to build its
international and domestic capabilities through strategic
acquisitions and low-risk start-up investments. We therefore
anticipate further growth in revenues during the next year from
both overseas markets and the faster growing areas of marketing
services.
Don Elgie
Group Chief Executive Officer
Financial Review
As required under International Financial Reporting Standards
(IFRS), the results of DLKW Group are treated as a discontinued
operation and are therefore eliminated from the Reported and
Headline results for the current and prior year. Any year-on-year
commentary therefore excludes the historical performance of
DLKW.
For the financial year ended 31 March 2011 (2011) the Group has
again delivered a robust set of financial results. Revenue
increased by 11 per cent (2010: 1 per cent decline) to GBP67.8
million (2010: GBP61.3 million), driven by 7 per cent like-for-like
revenue growth and the inclusion of three months' trading from the
recently acquired Cooney/Waters and Alembic Health businesses
(together "Cooney/Waters"). The Group also ended the year strongly
with like-for-like revenue growth of 10 per cent in the final
quarter of 2011. This growth has been achieved through the net new
business wins of GBP10.0 million (2010: GBP7.0 million) and the
Group's continuing shift to digital revenue streams, which grew 19
per cent to GBP27.5 million during the year. Digital revenue now
accounts for 41 per cent of Group revenue compared with 38 per cent
in the financial year ended 31 March 2010 (2010).
Headline PBIT before foreign exchange losses increased by 1 per
cent to GBP10.9 million (GBP10.8 million). Headline PBIT after
foreign exchange charges had a small decline from the prior year of
less than 0.5 per cent to GBP10.8 million (2010: GBP10.8 million)
and the Headline PBIT margin reduced to 15.9 per cent (2010: 17.6
per cent). This is as a result of the continuing investment in
start-ups, staff development programmes and a foreign exchange loss
of GBP0.2 million (2010: GBP0.03 million). Headline PBT increased 1
per cent to GBP10.4 million (2010: GBP10.3 million). Headline
Diluted Earnings Per Share (DEPS) declined by 8 per cent to 12.39
pence (2010: 13.46 pence), despite the increase in Headline PBT.
This decline was predominantly the result of a lower than usual
effective tax rate in 2010.
Reported PBIT increased 48 per cent to GBP8.7 million (2010:
GBP5.9 million) and resulted in a Reported PBIT margin of 13 per
cent (2010: 10 per cent). Reported PBT increased 66 per cent to
GBP8.4 million (2010: GBP5.0 million). Reported DEPS increased 89
per cent to 9.41 pence (2010: 4.97 pence). Note 4 to this
Preliminary Announcement presents a reconciliation between Headline
and Reported results with the principal adjustments being
exceptional acquisition-related charges.
Key performance indicators remain strong
The Group manages its operational performance through a number
of key performance indicators (KPIs) which remain in the upper
quartile for the industry.
Financial Year Financial Year
ended ended
31 March 2011 31 March 2010
------------------------ --------------- ---------------
Headline PBIT margin 15.9% 17.6%
------------------------ --------------- ---------------
Revenue per head GBP83,400 GBP83,100
------------------------ --------------- ---------------
Headline PBIT per head GBP13,200 GBP14,700
------------------------ --------------- ---------------
Cash conversion 82% 113%
------------------------ --------------- ---------------
Divisional review
Insight Division
The Insight Division accounts for 22 per cent of Group revenues
(2010: 26 per cent) and 30 per cent of Group Headline PBIT before
head office costs (2010: 37 per cent). The Division contributed
revenue of GBP14.8 million (2010: 16.0 million) and Headline PBIT
of GBP4.1 million (2010: GBP4.9 million). On a Reported basis, PBIT
was GBP3.9 million (2010: GBP0.7 million).
Financial Year Financial Year
ended ended
31 March 2011 31 March 2010
------------------------ --------------- ---------------
Headline PBIT margin 28% 31%
------------------------ --------------- ---------------
Revenue per head GBP103,800 GBP112,400
------------------------ --------------- ---------------
Headline PBIT per head GBP28,600 GBP34,400
------------------------ --------------- ---------------
The market research sector declined 2 per cent during the year
(source: Market Research Society), which, combined with the change
in senior management at ICM and the temporary increase in online
data collection costs, resulted in a difficult year for the
Division. However, the re-structure of the senior management within
ICM has proved successful and we remain confident heading into the
2012 financial year.
Communications Division
The Communications Division accounts for 61 per cent of Group
revenues (2010: 60 per cent) and 45 per cent of Group Headline PBIT
before head office costs (2010: 42 per cent). The Division
contributed revenue of GBP41.1 million (2010: GBP36.5 million) and
Headline PBIT of GBP6.2 million (2010: GBP5.5 million). On a
Reported basis, PBIT was GBP6.1 million (2010: GBP5.0 million).
Financial Year Financial Year
ended ended
31 March 2011 31 March 2010
------------------------ --------------- ---------------
Headline PBIT margin 15% 15%
------------------------ --------------- ---------------
Revenue per head GBP72,300 GBP71,600
------------------------ --------------- ---------------
Headline PBIT per head GBP10,900 GBP10,700
------------------------ --------------- ---------------
The Division performed strongly with like-for-like revenue and
Headline PBIT growth of 13 per cent and 14 per cent respectively.
This is attributed to particularly strong growth by our local
marketing and public relations companies.
Health Division
The Health Division accounts for 17 per cent of Group revenues
(2010: 14 per cent) and 25 per cent of Group Headline PBIT before
head office costs (2010: 21 per cent). The Division contributed
revenue of GBP11.8 million (2010: GBP8.8 million) and Headline PBIT
of GBP3.4 million (2010: GBP2.7 million). On a Reported basis, PBIT
was GBP1.9 million (2010: GBP2.7 million).
Financial Year Financial Year
ended ended
31 March 2011 31 March 2010
------------------------ --------------- ---------------
Headline PBIT margin 29% 30%
------------------------ --------------- ---------------
Revenue per head GBP132,600 GBP119,500
------------------------ --------------- ---------------
Headline PBIT per head GBP38,600 GBP36,600
------------------------ --------------- ---------------
The Division achieved like-for-like revenue and Headline PBIT
growth of 8 per cent and 9 per cent respectively and with the
acquisition of Cooney/Waters it has entered the new year with
positive momentum.
During the 2011 financial year we also launched Intensity
Digital, a small business focused on e-detailing and digital sales
to healthcare professionals. The start-up did not perform to our
level of satisfaction and we therefore decided not to pursue
Intensity as a separate entity but to roll the expertise into our
healthcare advertising agency, PAN.
Acquisition of Cooney/Waters
During the year the Group acquired Cooney/Waters for an initial
consideration payment of GBP5.9 million ($9.4 million). Deferred
consideration payments will become due in June 2013 and 2015 and
will be based on the trading performance of Cooney/Waters over the
period to 31 March 2015. The maximum deferred consideration payment
due is GBP13.6 million ($21.4 million). However, the fair value
recorded in the balance sheet at 31 March 2011 is GBP8.4 million
($13.4 million) (after discounting for notional interest based on
the expected consideration payable). The total consideration due
will be based on a multiple of between 5 and 5.5 times
Cooney/Waters' average PBIT. Further amounts are payable under the
terms of the sale and purchase agreement to certain key employees
of Cooney/Waters which are treated as employee costs under IFRS.
These are referred to as deemed remuneration charges. This will
become due in June 2013 and July 2016. GBP0.1m has been charged to
the income statement in 2011. The current estimated full payout for
deemed remuneration is GBP1.7 million ($2.7 million).
Continued positive cash flow performance
In 2011, the Group generated operating cash flow of GBP9.9
million (2010: GBP13.7 million). The cash conversion ratio of
operating cash flow to Headline EBITDA was 82 per cent (2010: 113
per cent). After an average three year cash conversion exceeding
100 per cent, the Group has continued to meet management's
long-term average target of 95 per cent.
Capital expenditure for 2011 was GBP1.5 million (2010: GBP1.1
million) with investment mainly in new leasehold property
improvements, system hardware and IT software.
Balance sheet strengthens and the Group is virtually debt
free
The balance sheet was strengthened significantly during the
year. As a result of the sale of DLKW, the acquisition of
Cooney/Waters and another year of positive operating cash flow, the
Group's net debt fell to GBP48,000 at 31 March 2011 (2010: GBP24.9
million). The Group also had an unutilised GBP25 million committed
bank facility and net current liabilities of GBP0.3m (2010:
GBP28.1m).
Total debt, including deferred consideration, reduced from
GBP24.9 million to GBP8.4 million. This represents a gearing level
to total equity of 9 per cent (2010: 26 per cent) and a total debt
to Headline EBITDA multiple of 0.7 (2010: 2.1).
Net finance costs minimal
Headline net finance costs reduced to GBP0.3million (2010:
GBP0.7 million). This decrease was driven by the sale of DLKW and
consequent reduction in net debt, positive cash generation during
the year and the historically low LIBOR. The Group's average
interest rate margin paid over LIBOR was 1 per cent during the
year. Headline net finance costs were covered by Headline EBITDA 39
times (2010: 18 times).
The Reported net finance cost was GBP0.4 million (2010: GBP1.1
million), which includes notional finance costs relating to the
deferred consideration payments of GBP0.1 million (2010: GBP0.4
million).
Effective tax rate increases
The Group's Headline tax rate was 29 per cent (2010: 24 per
cent). This rate is higher than the current statutory rate of 28
per cent as a result of items of expenditure that are not
deductible for tax purposes. The rate in 2010 was lower than both
the statutory rate and the 2011 Headline rate, as a result of
prior-year adjustments reflecting the resolution of discussions
with HMRC on the deductibility of goodwill in earlier periods. The
Reported effective tax rate was 32 per cent (2010: 42 per cent) and
is higher than the statutory rate of 28 per cent because of
non-deductible acquisition related costs.
Summary
The results for the year are encouraging. Despite the uncertain
economic climate, we have achieved excellent revenue growth,
transformed our balance sheet, invested in the business and its
talent, and continued to report profit margins above industry
norms. The Group is well balanced across its three divisions;
approximately two thirds of total Headline PBIT reside in our
Insight and Health Divisions and our Communications Division is now
focused on the faster growth areas of direct and digital
communication.
Barrie Brien
Chief Operating and Financial Officer
Consolidated income statement
Unaudited Headline Audited Headline
Before items Before Items
Headline (note Unaudited Headline (note Audited
items 4) Total items 4) Total
2011 2011 2011 2010 2010 2010
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------- ----- ---------- --------- ---------- --------- --------- ---------
Continuing
operations:
Turnover
(billings) 3 100,542 - 100,542 93,673 - 93,673
------------- ----- ---------- --------- ---------- --------- --------- ---------
Revenue 3 67,769 - 67,769 61,259 - 61,259
Operating
costs (57,008) (2,015) (59,023) (50,447) (4,887) (55,334)
------------- ----- ---------- --------- ---------- --------- --------- ---------
Profit before
finance
income,
finance
costs,
income from
financial
assets and
taxation 4 10,761 (2,015) 8,746 10,812 (4,887) 5,925
Finance
income 1 - 1 6 - 6
Finance costs (314) (68) (382) (676) (404) (1,080)
Income from
financial
assets - - - 195 - 195
------------- ----- ---------- --------- ---------- --------- --------- ---------
Profit before
taxation 4 10,448 (2,083) 8,365 10,337 (5,291) 5,046
Taxation (2,981) 286 (2,695) (2,425) 297 (2,128)
------------- ----- ---------- --------- ---------- --------- --------- ---------
Profit for
the
financial
year from
continuing
operations 7,467 (1,797) 5,670 7,912 (4,994) 2,918
------------- ----- ---------- --------- ---------- --------- --------- ---------
Discontinued
operations
Profit/
(loss) for
the year
from
discontinued
operations 5 125 (3,448) (3,323) 2,458 (243) 2,215
------------- ----- ---------- --------- ---------- --------- --------- ---------
Profit for
the year 7,592 (5,245) 2,347 10,370 (5,237) 5,133
------------- ----- ---------- --------- ---------- --------- --------- ---------
Basic
earnings/
(loss) per
share
(pence) 6
Continuing
operations 12.39 9.41 13.47 4.98
Discontinued
operations 0.20 (5.52) 4.19 3.77
------------- ----- ---------- --------- ---------- --------- --------- ---------
12.59 3.89 17.66 8.75
------------- ----- ---------- --------- ---------- --------- --------- ---------
Diluted
earnings/
(loss) per
share
(pence) 6
Continuing
operations 12.39 9.41 13.46 4.97
Discontinued
operations 0.20 (5.52) 4.19 3.77
------------- ----- ---------- --------- ---------- --------- --------- ---------
12.59 3.89 17.65 8.74
------------- ----- ---------- --------- ---------- --------- --------- ---------
Consolidated statement of comprehensive income
Unaudited Audited
2011 2010
Note GBP'000 GBP'000
----------------------------------------------- ------ ---------- ---------
Profit for the year 2,347 5,133
------------------------------------------------------- ---------- ---------
Other comprehensive (expenses)/income:
Exchange differences on translation of
foreign operations (190) -
Cash flow hedge:
Fair value gain/(loss) in the year 188 (188)
Tax effect of fair value (gain)/loss (53) 53
Other comprehensive expense for the year, net
of tax (55) (135)
Total comprehensive income for the year 2,292 4,998
------------------------------------------------------- ---------- ---------
Consolidated balance sheet
Unaudited Audited
As at As at
31 March 31 March
2011 2010
Note GBP'000 GBP'000
-------------------------------------------- ----- ---------- ----------
Non-current assets
Intangible assets
Goodwill 8 101,280 119,081
Other 1,379 1,551
Property, plant and equipment 2,144 2,065
Financial assets - available for sale - 550
Deferred tax asset 688 766
-------------------------------------------- ----- ---------- ----------
105,491 124,013
-------------------------------------------- ----- ---------- ----------
Current assets
Inventories and work in progress 1,444 2,937
Trade and other receivables 29,053 32,346
Cash and short term deposits 1,677 2,778
============================================ ===== ========== ==========
32,174 38,061
============================================ ===== ========== ==========
Current liabilities
Trade and other payables (27,713) (35,884)
Corporation tax payable (3,087) (2,398)
Obligations under finance leases (7) (8)
Bank overdraft, loans and loan notes (1,716) (27,687)
Derivative financial instrument - (135)
(32,523) (66,112)
-------------------------------------------- ----- ---------- ----------
Net current liabilities (349) (28,051)
Total assets less current liabilities 105,142 95,962
-------------------------------------------- ----- ---------- ----------
Non current liabilities
Provision for other liabilities and charges 9 (8,376) -
Obligations under finance leases (2) (8)
-------------------------------------------- ----- ---------- ----------
(8,378) (8)
-------------------------------------------- ----- ---------- ----------
Net assets 96,764 95,954
-------------------------------------------- ----- ---------- ----------
Equity
Called up share capital 6,134 6,134
Share premium account 35,943 35,943
Own shares (779) (801)
Shares to be issued 1,545 1,461
Other reserves 30,822 31,357
Foreign currency translation reserve (190) -
Retained earnings 23,289 21,860
-------------------------------------------- ----- ---------- ----------
Total equity 96,764 95,954
-------------------------------------------- ----- ---------- ----------
Consolidated statement of changes in equity
Foreign
Shares currency
Share Share Own to be Other translation Retained
capital premium shares issued reserves reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------- -------- -------- -------- -------- --------- ------------ --------- --------
Changes in
equity for
2011
(Unaudited)
-------------- -------- -------- -------- -------- --------- ------------ --------- --------
At 1 April
2010 6,134 35,943 (801) 1,461 31,357 - 21,860 95,954
-------------- -------- -------- -------- -------- --------- ------------ --------- --------
Profit for the
year - - - - - - 2,347 2,347
Other
comprehensive
income:
Exchange
differences
on
translation
of foreign
operations - - - - - (190) - (190)
Fair value
gain on
financial
liability - - - - - - 188 188
Tax effect of
fair value
gain - - - - - - (53) (53)
-------------- -------- -------- -------- -------- --------- ------------ --------- --------
Total
comprehensive
income for
the year - - - - - (190) 2,482 2,292
-------------- -------- -------- -------- -------- --------- ------------ --------- --------
Credit for
share-based
incentive
schemes - - - 112 - - - 112
Exercise of
share award - - 22 (28) - - - (6)
Gain on
treasury
scheme /
employee
benefit
trust - - - - - - 6 6
Fair value
adjustment of
own shares - - - - - - (4) (4)
Dividends
(note 7) - - - - - - (1,055) (1,055)
Disposal of
investment - - - - (535) - - (535)
At 31 March
2011 6,134 35,943 (779) 1,545 30,822 (190) 23,289 96,764
-------------- -------- -------- -------- -------- --------- ------------ --------- --------
Foreign
Shares currency
Share Share Own to be Other translation Retained
capital premium shares issued reserves reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------- -------- -------- -------- -------- --------- ------------ --------- --------
Changes in
equity for
2010
(Audited)
-------------- -------- -------- -------- -------- --------- ------------ --------- --------
At 1 April
2009 5,576 33,345 (1,054) 2,706 31,357 - 15,938 87,868
-------------- -------- -------- -------- -------- --------- ------------ --------- --------
Profit for the
year - - - - - - 5,133 5,133
Other
comprehensive
income:
Fair value
loss on
financial
liability - - - - - - (188) (188)
Tax effect of
fair value
loss - - - - - - 53 53
-------------- -------- -------- -------- -------- --------- ------------ --------- --------
Total
comprehensive
income for
the year - - - - - - 4,998 4,998
-------------- -------- -------- -------- -------- --------- ------------ --------- --------
Credit for
share-based
incentive
schemes - - - 11 - - - 11
Exercise of
share award - - 253 (1,202) - - - (949)
Loss on
treasury
scheme /
employee
benefit
trust - - - - - - (11) (11)
Gain on
treasury
scheme /
employee
benefit
trust - - - - - - 185 185
Fair value
adjustment of
own shares - - - - - - 696 696
Proceeds from
shares
issued 558 2,788 - - - - - 3,346
Costs
associated
with shares
issued - (190) - - - - - (190)
Transfer of
lapsed
options - - - (54) - - 54 -
At 31 March
2010 6,134 35,943 (801) 1,461 31,357 - 21,860 95,954
-------------- -------- -------- -------- -------- --------- ------------ --------- --------
Consolidated statement of cash flows
Unaudited Audited
2011 2010
Note GBP'000 GBP'000
------------------------------------------------ ----- ---------- ---------
Operating cash flow 10 9,937 13,686
------------------------------------------------ ----- ---------- ---------
Tax paid (1,593) (1,812)
Cash (outflow)/ inflow from discontinued
operating activities (1,058) 3,568
------------------------------------------------ ----- ---------- ---------
Net cash generated from operating activities 7,286 15,442
------------------------------------------------ ----- ---------- ---------
Investing activities
Finance income 1 6
Income from financial assets - 195
Purchase of subsidiary undertakings (9,010) (20,058)
Net cash acquired with subsidiaries 497 -
Purchase of property, plant and equipment (1,381) (843)
Sale of property, plant and equipment 4 12
Purchase of intangible assets (164) (227)
Decrease in restricted cash deposits - 22
Net proceeds from disposal of subsidiary 27,374 -
Cash outflow from discontinued investing
activities (1,373) (160)
Net cash inflow/(outflow) from investing
activities 15,948 (21,053)
------------------------------------------------ ----- ---------- ---------
Financing activities
Proceeds from issuance of ordinary shares (net
of issue costs) - 3,156
Finance costs (324) (766)
Net (decrease)/ increase in borrowings 11 (24,600) 3,200
Dividends paid 7 (1,055) -
Capital element of finance lease payments (7) (7)
Net cash (outflow)/ inflow from financing
activities (25,986) 5,583
------------------------------------------------ ----- ---------- ---------
Decrease in cash and cash equivalents 11 (2,752) (28)
------------------------------------------------ ----- ---------- ---------
Cash and cash equivalents at start of year 11 2,778 2,806
------------------------------------------------ ----- ---------- ---------
Effect of foreign exchange rates (45) -
------------------------------------------------ ----- ---------- ---------
Cash and cash equivalents at end of year 11 (19) 2,778
------------------------------------------------ ----- ---------- ---------
Notes:
1. Basis of Preparation
The financial information set out herein does not constitute the
company's statutory accounts for the years ended 31 March 2011 or
2010, within the meaning of section 434 of the Companies Act 2006.
Statutory accounts for 2010 have been delivered to the registrar of
companies. The auditors have reported on these 2010 accounts and
their report was (i) unqualified, (ii) did not include references
to any matters to which the auditors drew attention by way of
emphasis without qualifying their report and (iii) did not contain
statements under section 498(2) or (3) of the Companies Act 2006.
Copies of the statutory accounts for 31 March 2011 will be
distributed to shareholders in advance of the Annual General
Meeting and will be delivered to the registrar of companies upon
approval.
The information has been prepared in accordance with the
EU-adopted International Financial Reporting Standards (IFRS) and
IFRIC interpretations and with those parts of the Companies Act
2006 which are applicable to companies reporting under IFRS,
however, this preliminary announcement in itself does not contain
sufficient information to comply with IFRS.
2. Accounting policies
The preliminary results were prepared in accordance with the
policies disclosed in the prior year audited annual report subject
to the following relevant standards, amendments and interpretations
which were effective in 2011:
(i) IFRS 3 (revised 2008), 'Business combinations', and
consequential amendments to IAS 27, 'Consolidated and separate
financial statements', are applied prospectively to business
combinations from 1 April 2010. The main impact of these revised
standards was as follows:
- In the year to 31 March 2011, all acquisition-related costs
have been recognised as an operating cost in the consolidated
income statement whereas previously they were capitalised. Prior
periods have not been restated as this change in accounting is
required to be applied prospectively from 1 April 2010; and
- Deferred consideration payable is to be measured at fair value
at the acquisition date. Any subsequent movements in the fair value
of such consideration as a result of post-acquisition events must
be recognised as a gain or loss in the consolidated income
statement.
3. Segmental Analysis
The chief operating decision-maker has been identified as the
Board of Directors ('the Board') which makes the strategic
decisions. The Board has determined the operating segments in a
manner consistent with the internal reporting provided to the
Board. The Board considers the business from a divisional
perspective, that being Insight, Communications and Health.
The principal activities of the three Divisions are as
follows:
Insight
The Insight Division performs a complete range of market
research services on behalf of its clients, through both
qualitative and quantitative means, using the mediums of
face-to-face, telephone and online techniques.
Communications
The Communications Division offers clients an integrated
approach to their marketing and communication strategy, offering a
range of services which include advertising, brand strategy,
channel marketing, customer relationship marketing (CRM), digital
marketing, direct marketing, promotional marketing and public
relations.
Health
The Health Division provides an integrated communications
solution to the healthcare and pharmaceuticals sector and offers
services which include advertising, direct marketing, digital
marketing, public relations, issues management, market research and
medical education.
The Board assesses the performance of the operating segments
based on a measure of revenue and Headline PBIT. This measurement
basis excludes the effects of exceptional charges from the
operating segments, such as amortisation of acquired intangible
assets, acquisition and start-up related costs, restructuring
costs, goodwill write-off, deemed remuneration and notional finance
costs on deferred consideration.
Accounting policies are consistent across the reportable
segments.
All significant assets and liabilities are located within the UK
and US. The Board does not review the assets and liabilities of the
Group on a divisional basis and therefore has chosen to adopt the
amendments to IFRS 8 of not segmenting the assets of the Group.
Other information provided to the Board of Directors is measured
in a manner consistent with that in the financial statements.
The Group's operational framework consists of a three divisional
structure consisting of the Insight, Communications and Health
Divisions.
The analysis below has been presented on a continuing operations
basis
Segmental analysis by business
Turnover, revenue, Headline and Reported profit before finance
income, finance costs, income from financial assets and taxation
(PBIT), and profit before tax attributable to Group activities are
shown below.
Head
Insight Communications Health office Group
2011 (Unaudited) GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- --------- --------------- --------- --------- ---------
Turnover
(billings) 25,580 60,096 14,866 - 100,542
----------------- --------- --------------- --------- --------- ---------
Revenue 14,828 41,142 11,799 - 67,769
----------------- --------- --------------- --------- --------- ---------
Headline profit/
(loss) before
finance income,
finance costs,
income from
financial assets
and taxation
(segment
result) 4,094 6,197 3,437 (2,967) 10,761
Acquisition and
start-up related
costs - (144) (1,173) - (1,317)
Restructuring
costs (240) - - - (240)
Amortisation of
acquired
intangible
assets - - (219) - (219)
Future
acquisition
payments to
employees deemed
as remuneration - - (110) (129) (239)
Reported profit/
(loss) before
finance income,
finance costs,
income from
financial assets
and taxation
(segment
result) 3,854 6,053 1,935 (3,096) 8,746
Finance income - - - 1 1
Finance costs - - - (314) (314)
Notional finance
costs on future
deferred
consideration - - (68) - (68)
Profit/(loss)
before taxation 3,854 6,053 1,867 (3,409) 8,365
----------------- --------- --------------- --------- --------- ---------
Taxation (2,695)
----------------- --------- --------------- --------- --------- ---------
Profit for the
financial year 5,670
----------------- --------- --------------- --------- --------- ---------
Insight Communications Health Head office Group
2010 (Audited) GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------- --------- --------------- --------- ------------ ---------
Turnover
(billings) 27,839 54,989 10,845 - 93,673
-------------- --------- --------------- --------- ------------ ---------
Revenue 15,956 36,457 8,846 - 61,259
-------------- --------- --------------- --------- ------------ ---------
Headline
profit/
(loss) before
finance
income,
finance
costs, income
from
financial
assets and
taxation
(segment
result) 4,883 5,455 2,711 (2,237) 10,812
Restructuring
costs (354) (230) - - (584)
Goodwill
write-off (3,786) - - - (3,786)
Deemed
remuneration (36) (215) (5) (261) (517)
--------- --------------- --------- ------------ ---------
Reported
profit/
(loss) before
finance
income,
finance
costs, income
from
financial
assets and
taxation
(segment
result) 707 5,010 2,706 (2,498) 5,925
Financial
income - - - 6 6
Financial cost - - - (676) (676)
Notional
finance costs
on future
deferred
consideration (204) (193) (7) - (404)
Income from
financial
assets - 195 - - 195
-------------- --------- --------------- --------- ------------ ---------
Profit/(loss)
before
taxation 503 5,012 2,699 (3,168) 5,046
-------------- --------- --------------- --------- ------------ ---------
Taxation (2,128)
-------------- --------- --------------- --------- ------------ ---------
Profit for the
financial
year 2,918
-------------- --------- --------------- --------- ------------ ---------
Segmental analysis by geography
The following table provides an analysis of the Group's turnover
and revenue by geographical market, irrespective of the origin of
the services.
Revenue Turnover
---------------------------------------- ------------------------ ------------------------
(Unaudited) (Audited) (Unaudited) (Audited)
2011 2010 2011 2010
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------- ------------ ---------- ------------ ----------
UK 51,127 47,563 77,787 74,916
Rest of Europe 11,673 11,682 16,103 15,941
Rest of the World 4,969 2,014 6,652 2,816
---------------------------------------- ------------ ---------- ------------ ----------
67,769 61,259 100,542 93,673
---------------------------------------- ------------ ---------- ------------ ----------
4. Reconciliation of Headline profit to Reported profit
In order to enable a better understanding of the underlying
trading of the Group, the Directors refer to Headline PBIT, PBT and
PAT which eliminate certain amounts from the Reported figures.
These break down into two parts:
(i) Certain accounting policies which have a material impact and
introduce volatility to the Reported figures. These are
amortisation of acquired intangible assets, deemed remuneration and
notional finance costs on deferred consideration. These charges
will cease once all the relevant earn-out and related obligations
have been settled; and
(ii) Exceptional non-recurring operating charges, which, in
2011, consist of acquisition costs, start-up related costs and
restructuring costs. In 2010 this consisted of restructuring costs
and the write-off of goodwill.
PBIT PBT PAT
2011 (Unaudited) GBP'000 GBP'000 GBP'000
============================================= ========= ========= =========
Headline 10,761 10,448 7,467
Acquisition and start-up related costs (1,317) (1,317) (1,317)
Restructuring costs (240) (240) (240)
Amortisation of acquired intangible assets (219) (219) (219)
Future acquisition payments to employees
deemed as remuneration (239) (239) (239)
Notional finance costs on future deferred
consideration - (68) (68)
Taxation impact 286
--------------------------------------------- --------- --------- ---------
Reported 8,746 8,365 5,670
--------------------------------------------- --------- --------- ---------
PBIT PBT PAT
2010 (Audited) GBP'000 GBP'000 GBP'000
--------------------------------------------- --------- --------- ---------
Headline 10,812 10,337 7,912
Restructuring costs (584) (584) (584)
Goodwill write-off (3,786) (3,786) (3,786)
Future acquisition payments to employees
deemed as remuneration (517) (517) (517)
Notional finance costs on future deferred
consideration - (404) (404)
Taxation impact 297
--------------------------------------------- --------- --------- ---------
Reported 5,925 5,046 2,918
--------------------------------------------- --------- --------- ---------
5. Discontinued operations
(a) Description
On 28 June 2010, the Group announced the proposed sale of
Delaney Lund Knox Warren and Partners, Dialogue DLKW and The
Composing Room ('DLKW') for GBP28.0 million, which was then
approved by shareholders on 13 July 2010 with effect from 14 July
2010. DLKW is reported in the financial statements as a
discontinued operation.
(b) Financial performance
The financial performance information, for the year to 31 March
2011 below shows the results of DLKW until the effective date of
disposal (14 July 2010). The period to 31 March 2010 shows the
financial information of DLKW for the full year.
Unaudited Audited
2011 2010
GBP'000 GBP'000
------------------------------------------------ --------- --------
Turnover (billings) 9,180 43,149
Revenue 4,472 19,241
Headline operating costs (4,307) (15,796)
Headline PBIT 165 3,445
Loss on disposal (part (e)) (3,474) -
Restructuring costs - (338)
Reported (loss)/ profit before interest and tax (3,309) 3,107
--------
Reported (loss)/ profit before tax (3,309) 3,107
Taxation (14) (892)
(Loss)/ profit for the year (3,323) 2,215
------------------------------------------------ --------- --------
The table below is a reconciliation of Headline to Reported
figures for discontinued operations:
PBIT PBT PAT
2011 (Unaudited) GBP'000 GBP'000 GBP'000
================= ========= ========= =========
Headline 165 165 125
Loss on disposal (3,474) (3,474) (3,474)
Taxation impact 26
----------------- --------- --------- ---------
Reported (3,309) (3,309) (3,323)
----------------- --------- --------- ---------
PBIT PBT PAT
2010 (Audited) GBP'000 GBP'000 GBP'000
==================== ========= ========= =========
Headline 3,445 3,445 2,458
Restructuring costs (338) (338) (338)
Taxation impact 95
-------------------- --------- --------- ---------
Reported 3,107 3,107 2,215
-------------------- --------- --------- ---------
(c) Cash flow information
Refer to the statement of cash flows for the amounts related to
discontinued operations.
(d) Carrying amounts of assets and liabilities
The carrying amounts of assets and liabilities as at 14 July
2010 were:
Unaudited
As at
14 July
2010
GBP'000
--------------------------------- ---------
Property, plant and equipment 350
Trade receivables 5,919
Inventories and work in progress 471
Deferred tax asset 219
Cash and short term deposits 1,331
--------------------------------- ---------
Total assets 8,290
--------------------------------- ---------
Trade and other payables (8,200)
Corporation tax payable (40)
Total liabilities (8,240)
--------------------------------- ---------
Net assets 50
--------------------------------- ---------
(e) Financial information on the sale of DLKW
2011 (Unaudited) GBP'000
----------------------------------- --------
Proceeds from the sale 28,000
Costs associated with the sale (626)
Goodwill write-off (30,533)
Intangible asset write-off (250)
Carrying amount of net assets sold (50)
Investment write-off (15)
----------------------------------- --------
Loss on disposal of subsidiary (3,474)
----------------------------------- --------
The subsidiary disposed of (DLKW) was reportable under the
Communications Division.
6. Earnings per share
Headline Reported
Unaudited Audited Unaudited Audited
2011 2010 2011 2010
GBP'000 GBP'000 GBP'000 GBP'000
----------------------- ----------- ----------------- ----------- ----------------
Earnings
Profit for the year
from continuing
operations 7,467 7,912 5,670 2,918
Profit/ (loss) from
discontinued
operations 125 2,458 (3,323) 2,215
----------- ----------------- ----------- ----------------
7,592 10,370 2,347 5,133
----------------------- ----------- ------ --------- ----------- ----- ---------
Number of shares
Weighted average
number of shares 60,285,576 58,729,868 60,285,576 58,729,868
Dilutive effect of
shares - 32,047 - 32,047
60,285,576 58,761,915 60,285,576 58,761,915
----------------------- ----------- ------------- ----------- ---------------
Earnings per share
Basic earnings/ (loss)
per share (pence):
- Continuing operations 12.39 13.47 9.41 4.98
- Discontinued
operations 0.20 4.19 (5.52) 3.77
12.59 17.66 3.89 8.75
----------------------- ----------- ------------- ----------- ----- ---------
Diluted earnings/
(loss) per share
(pence):
- Continuing operations 12.39 13.46 9.41 4.97
- Discontinued
operations 0.20 4.19 (5.52) 3.77
12.59 17.65 3.89 8.74
----------------------- ----------- ------------- ----------- ----- ---------
Diluted earnings per share has been calculated based on the
following dilutive elements:
(i) On 31 March 2010 there were 32,047 restricted shares which
had vested but not been issued at the balance sheet date.
A reconciliation from Headline to Reported profit after tax is
provided in note 4.
7. Dividends
Unaudited Audited
2011 2010
GBP'000 GBP'000
------------------------------------------------------- ---------- ---------
Amounts recognised as distributions to shareholders in
the year
Prior year final dividend of 1.00 pence per share 603 -
(2010: nil pence per share)
Interim dividend of 0.75 pence per share (2010: nil 452 -
pence per share)
------------------------------------------------------- ---------- ---------
Total 1,055 -
------------------------------------------------------- ---------- ---------
A final dividend of 2.25 pence per share (2010: 1.00 pence per
share) equivalent to GBP1,378,911 is to be paid on 12 September
2011 to shareholders on the register on 5 August 2011. The final
dividend will be recognised in the 2012 accounts, should it be
approved by shareholders at the AGM.
8. Goodwill
Purchased Goodwill
goodwill on consolidation Total
GBP'000 GBP'000 GBP'000
----------------------------- ---------- ------------------ ---------
Cost
At 1 April 2009 (Audited) 3,786 119,070 122,856
Goodwill write-off (3,786) - (3,786)
Adjustments to consideration - 11 11
----------------------------- ---------- ------------------ ---------
At 31 March 2010 - 119,081 119,081
----------------------------- ---------- ------------------ ---------
Disposals - (30,533) (30,533)
Additions (note 9) - 12,975 12,975
Exchange differences - (243) (243)
At 31 March 2011 (Unaudited) - 101,280 101,280
============================= ========== ================== =========
Net book amount
----------------------------- ---------- ------------------ ---------
31 March 2011 (Unaudited) - 101,280 101,280
----------------------------- ---------- ------------------ ---------
31 March 2010 (Audited) - 119,081 119,081
----------------------------- ---------- ------------------ ---------
The 'adjustments to consideration' in 2010 relates to a change
in the estimated deferred consideration for agencies in the
earn-out period under the terms of the relevant sale and purchase
agreements.
The Group disposed of DLKW and acquired Cooney/Waters in the
year to 31 March 2011.
In accordance with the Group's accounting policy, the carrying
values of goodwill and other intangible assets not subject to
systematic amortisation are reviewed semi-annually for impairment.
The review assesses whether the carrying value of goodwill could be
supported by the present value of future cash flows derived from
operating activities. Future cash flows are calculated with
reference to each subsidiary's two year business plan (approved in
March 2011) which is subject to a rigorous review and challenge
process. The residual growth rate thereafter has been reduced to a
nominal rate of 3 per cent for all units and after year 5, a
terminal value with zero growth has been applied.
In assessing the discount rate applicable to the Group we have
considered the following factors:
(i) 12 month cost of debt;
(ii) The cost of equity based on a two year beta of 1.00. We
consider this to be an appropriate period since the Group is of an
acquisitive nature and therefore has changed significantly during
the last five years;
(iii) The risk free rate for a 10 year UK government bond;
and
(iv) The risk premium to reflect the increased risk of investing
in equities.
The pre-tax discount rate used to assess the carrying value of
goodwill is 8.3 per cent (2010: 9.6 per cent), which is the Group's
weighted average cost of capital (WACC). As all the cash generating
units are similar in nature, the risk profile is considered the
same across countries. As a result the same WACC is used for
each.
The review performed at the year end did not result in the
impairment of goodwill for any cash-generating unit as the
estimated recoverable amount exceeded the carrying value in all
cases.
At 31 March 2011, had the Group used an industry average beta of
1.22, the WACC would have been 9.2 per cent. At this level, no
impairment on goodwill would be recognised.
Using a WACC of 8.3 per cent, a 10 per cent decrease in
management's budgeted 2012 and 2013 PBIT at 31 March 2011 and zero
growth thereafter, no impairment on goodwill would be
recognised.
Components of goodwill at 31 March 2011 and 2010 are:
Unaudited Audited
2011 2010
GBP'000 GBP'000
Insight
ICM 19,030 19,030
MSL 7,633 7,633
26,663 26,663
===================== ========== =========
Communications
DLKW - 30,533
EMO 4,362 4,362
NBC 6,434 6,434
TMW 28,541 28,541
TRA 5,281 5,281
44,618 75,151
--------------------- ---------- ---------
Health
Cooney/Waters 12,975 -
PAN 9,599 9,599
RDC 7,668 7,668
Exchange differences (243) -
--------------------- ---------- ---------
29,999 17,267
--------------------- ---------- ---------
Total 101,280 119,081
--------------------- ---------- ---------
9. Acquisition of subsidiaries
Cooney/Waters and Alembic Health Communications
On 20 December 2010, the Group completed the acquisition of the
trade and assets of both Cooney/Waters and its sister company,
Alembic Health Communications (together known as "Cooney/Waters"),
a healthcare public relations business based in the United States
of America for consideration (including deferred consideration) as
set out below.
The acquisition complements the international drive of the
Health Division and builds on an existing collaboration and shared
client base with the Group's UK healthcare public relations
company, Red Door Communications.
Fair value Provisional
Book value adjustments fair value
2011 (Unaudited) GBP'000 GBP'000 GBP'000
------------------------------ ----------- ------------- ------------
Non-current assets
Intangible assets
Other - 540 540
Property, plant and equipment 39 - 39
39 540 579
------------------------------ ----------- ------------- ------------
Current assets
Trade and other receivables 2,540 - 2,540
Cash and short term deposits 497 - 497
------------------------------ ----------- ------------- ------------
3,037 - 3,037
------------------------------ ----------- ------------- ------------
Current liabilities (1,954) - (1,954)
------------------------------ ----------- ------------- ------------
Net current assets 1,083 - 1,083
------------------------------ ----------- ------------- ------------
Net assets 1,122 540 1,662
------------------------------ ----------- ------------- ------------
Goodwill (note 8) 12,975
------------------------------ ----------- ------------- ------------
Total 1,122 540 14,637
------------------------------ ----------- ------------- ------------
Satisfied by:
2011 (Unaudited) GBP'000
------------------------ --------
Cash 5,943
Working capital payment 386
Deferred consideration 8,308
14,637
------------------------ --------
The fair value adjustment relates to the recognition of other
intangible assets as required under IFRS as follows:
2011 (Unaudited) GBP'000
------------------ --------
Customer orders 222
Brand names 318
Intangible assets 540
------------------ --------
As part of the sale and purchase agreement, there was a minimum
working capital and cash requirement on the acquisition date. Any
excess/shortfall from the minimum would be paid/collected to/from
the seller. There was a working capital excess of GBP386,000 which
will be settled as a cash payment after the year end.
The amount of deferred consideration payable is contingent upon
the average level of PBIT achieved by Cooney/Waters in the period
from completion to 31 March 2015.
The potential undiscounted amount of deferred consideration (ie
including future notional interest charges to be made to the income
statement) that the Group could be required to make under this
arrangement is between GBPnil and GBP13,580,000 ($21,390,000).
The fair value of the deferred consideration of GBP8,308,000 was
estimated by applying the income approach. The fair value estimates
are based on a discount rate of 3.33 per cent and assumed
probability-adjusted profit in Cooney/Waters.
The fair value of the deferred consideration recognised at 31
March 2011 was GBP8,376,000. The difference between the
GBP8,308,000 shown above and the year end balance of GBP8,376,000
is the notional interest charge of GBP68,000 for the period from
acquisition to 31 March 2011.
Deferred consideration will be paid in cash, in accordance with
the associated asset and purchase agreement. These payments are due
in June 2013 and June 2015.
IFRS 3 (revised) now requires companies to expense acquisition
costs. As a consequence GBP988,000 has been charged to the income
statement in relation to the acquisition of Cooney/Waters.
Profit and cash flow
The subsidiary undertaking acquired during the year made the
following contributions to, and utilisations of, Group profit and
cash flow:
2011 (Unaudited) GBP'000
---------------------------------------------------- -------
Profit before finance income, finance costs, income
from financial assets and taxation 551
Depreciation 2
Increase in inventories and work in progress (140)
Decrease in trade and other receivables 642
Decrease in trade and other payables (900)
Purchase of property, plant and equipment (3)
---------------------------------------------------- -------
Cash flow 152
---------------------------------------------------- -------
Cooney/Waters contributed revenue of GBP2.3m and operating
profit of GBP0.6m to the results of the Group since acquisition. If
the acquisition had been completed at the beginning of the
financial year, management estimate that Group revenue for the year
would have been GBP74.7m and Group Headline PBIT would have been
GBP13.2m (note that the revenue and profit figures for
Cooney/Waters for the period before the acquisition have not been
audited due to this not being a requirement for a US incorporated
entity).
10. Reconciliation of profit for the year to operating cash
flow
Unaudited Audited
2011 2010
GBP'000 GBP'000
--------------------------------------------------------- --------- --------
Profit for the year 5,670 2,918
Taxation 2,695 2,128
--------------------------------------------------------- --------- --------
Profit before taxation 8,365 5,046
Income from financial assets - (195)
Finance costs 382 1,080
Finance income (1) (6)
--------------------------------------------------------- --------- --------
Profit before finance income, finance costs, income
from financial assets and taxation 8,746 5,925
Depreciation of property, plant and equipment 955 1,019
Amortisation of intangible assets 599 323
Share-based payments/(credits) 17 (92)
Goodwill write-off - 3,786
Deemed remuneration 239 517
Profit on disposal of property, plant and equipment (1) (1)
Loss on disposal of intangible assets 22 -
Decrease/ (increase) in inventories and work in progress 196 (719)
Increase in trade and other receivables (468) (3,293)
(Decrease)/ increase in trade and other payables (368) 6,221
--------------------------------------------------------- --------- --------
Operating cash flow 9,937 13,686
--------------------------------------------------------- --------- --------
11. Analysis of net and total debt
Audited Unaudited Unaudited Unaudited Unaudited
At At
31 March Foreign 31 March
2010 Acquisition Cash flow exchange 2011
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- ---------- ------------ ---------- ---------- ----------
Cash and short
term deposits 2,778 - (1,056) (45) 1,677
Bank overdraft - - (1,696) - (1,696)
Revolving credit
facility (13,000) - 13,000 - -
Acquisition loan
notes (3,087) - 3,067 - (20)
Bank loans (11,600) - 11,600 - -
Finance leases (16) - 7 - (9)
---------------- ---------- ------------ ---------- ---------- ----------
Net debt (24,925) - 24,922 (45) (48)
Provision for
deferred
consideration - (8,376) - - (8,376)
---------------- ---------- ------------ ---------- ---------- ----------
Total debt (24,925) (8,376) 24,922 (45) (8,424)
---------------- ---------- ------------ ---------- ---------- ----------
Included within the cash flow movement was an initial cash
consideration of GBP5.9m paid for the acquisition of
Cooney/Waters.
12. Related party transactions
Mr D C Marshall is a Director of City Group P.L.C. and Western
Selection P.L.C. which held 3,000,000 Ordinary Shares in Creston
plc at 31 March 2011. During the year total fees of GBP61,321
(2010: GBP61,435) were paid to City Group P.L.C., GBP31,321 (2010:
GBP31,435) for the provision of secretarial services and assistance
on the acquisitions and GBP30,000 (2010: GBP30,000) for the
services of Mr D C Marshall. There were no outstanding balances
with City Group P.L.C at 31 March 2011 or 31 March 2010.
13. Availability of the Annual Report and Accounts
Copies of the Annual Report and Accounts will be sent to
shareholders in due course and are available from the Company's
registered office at City Group P.L.C., 30 City Road, London, EC1Y
2AG and on the company's website www.creston.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR LLFFDRVIIFIL
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