TIDMCRE
RNS Number : 0161T
Creston PLC
30 November 2011
30 November 2011
Creston plc
('Creston' or the 'Group')
Interim results for the half-year ended 30 September 2011
Creston plc (LSE: CRE), the Insight and Communications Group,
today announces its interim results for the six months to 30
September 2011.
Financial Highlights
-- Revenue up 14 per cent to GBP36.5 million (H1 2011: GBP32.0 million)
-- Like-for-like(1) revenue up 3.3 per cent (H1 2011: 8.5 per cent)
-- Headline(2) PBIT(3) up 9 per cent to GBP4.9 million (H1 2011: GBP4.4 million)
-- Headline PBT(4) up 13 per cent to GBP4.8 million (H1 2011: GBP4.2 million)
-- Headline DEPS (5) up 11 per cent to 5.63 pence (H1 2011: 5.06 pence)
-- Dividend per share increased by 11 per cent to 0.83 pence (H1 2011: 0.75 pence) per share
Corporate and Operational Highlights
-- Good performance by the Communications division: 6 per cent
revenue growth and 24 per cent Headline PBIT growth
-- Digital and online revenue up 16 per cent and represents 42
per cent of Group revenue (H1 2011: 41 per cent)
-- Acquisition of The Corkery Group, a New York based health and
medical public relations company specialising in product and issues
communications, complementing Creston's US healthcare company
Cooney/Waters
Group Financial Results
Headline results Reported results
-------------------- ---------------------------- ----------------------------
H1 2012 H1 2011 H1 2012 H1 2011
GBP million GBP million GBP million GBP million
-------------------- ------------- ------------- ------------- -------------
Revenue 36.5 32.0 36.5 32.0
-------------------- ------------- ------------- ------------- -------------
PBIT 4.9 4.4 4.3 4.4
-------------------- ------------- ------------- ------------- -------------
PBT 4.8 4.2 4.1 4.2
-------------------- ------------- ------------- ------------- -------------
DEPS (pence) 5.63 5.06 4.67 5.02
-------------------- ------------- ------------- ------------- -------------
Dividend per share
(pence) 0.83 0.75 0.83 0.75
-------------------- ------------- ------------- ------------- -------------
1. Like-for-like compares current year performance to prior year
performance, excluding the results from any acquisitions.
2. Headline results reflect the underlying performance of the
Group and excludes acquisition, start-up and restructuring related
costs, deemed remuneration charges and notional finance costs. A
full reconciliation is presented in note 4 to this interim
announcement.
3. Profit before finance income, finance costs and taxation (PBIT).
4. Profit before taxation (PBT).
5. Diluted earnings per share (DEPS) from continuing operations.
Commenting on the results, Don Elgie, Group Chief Executive of
Creston plc, said:
"We have performed well during the first half, growing revenue
and Headline PBT by 14 per cent and 13 per cent respectively. Our
like-for-like growth has been driven by new business wins from both
new and existing clients, a growing amount of which is from
referrals across our agencies and divisions.
"During the first half we continued to diversify, through
servicing new geographies, launching new products and continuing to
grow our digital business. We are confident of seeing the first
half's positive momentum continue in the second half and believe
our diversification does afford us some protection against market
uncertainty. However, macro-economic events lead us to maintain a
cautious outlook for the remainder of our financial year."
There will be a presentation for analysts today at 09.30 at the
offices of Investec, 2 Gresham Street, London, EC2V 7QP.
For further information on the Group's interim results or about
the analyst meeting please contact:
Creston plc + 44 (0)20 7930 9757
Don Elgie, Group Chief Executive
Barrie Brien, COO/CFO
M:Communications +44 (0)20 7920 2339
Elly Williamson
About Creston plc
Creston plc (LSE: CRE) is a marketing services company focused
on insight-led communications. The Group delivers a range of
marketing services, including digital marketing, market research,
health communications, public relations, direct marketing,
advertising and brand consultancy to a broad spectrum of blue-chip
clients. All our companies share a common commitment to
understanding, influencing and inspiring consumers on behalf of our
clients and to creating value through innovative collaborative
working. www.creston.com
Chief Executive's Statement
Group Performance
The Group has delivered another solid performance over the
course of the last six months, with revenue and Headline PBT rising
14 and 13 per cent respectively, compared to the same prior year
period.
The growth drivers in the first half of the year have
predominantly been the continued increase in net new business wins,
a good performance by our Communications division and growing our
international business.
The Group continues to demonstrate steady progress in growing
its new and existing clients and won net new business of GBP2.6
million in revenue on an annualised basis during the period.
Like-for-like revenue growth rose from 2 per cent in the first
quarter to over 4 per cent in the second quarter to achieve 3.3 per
cent growth for the first half, versus a tough comparison of 8.5
per cent in the same period last year.
Creston's Communications division, which accounted for 58 per
cent of the Group's revenue at the half year, performed well
delivering 6 per cent revenue growth and an increase of 24 per cent
in Headline PBIT. This growth is being driven by our refocus in
2010 towards the faster growing areas of clients' marketing
budgets, namely the digital and online services aimed at engaging
directly with consumers, rather than mass advertising.
At the half year, enhanced by the Group's acquisition in
December 2010 of Cooney/Waters, revenue derived from services
outside of the UK increased to GBP9.6 million, to represent 26 per
cent of the Group's revenue. We continue to pursue opportunities to
further diversify the Group and minimise our reliance on any one
market or geographical area. Today's announcement of the
acquisition of The Corkery Group, more details of which are
provided later, supports this strategy.
The above growth drivers have enabled the Group to report for
the period a Headline PBT increase of 13 per cent to GBP4.8 million
(H1 2011: GBP4.2 million); and a Headline DEPS increase of 11 per
cent to 5.63 pence (H1 2011: 5.06 pence) per share. Reported PBT
decreased by 2 per cent to GBP4.1 million (H1 2011: GBP4.2
million); and Reported DEPS decreased by 7 per cent to 4.67 pence
(H1 2011: 5.02 pence) per share.
Corporate Developments
The Group has today announced the acquisition of The Corkery
Group a New York based full service health and medical public
relations company specialising in product and issues
communications. As well as being immediately earnings enhancing,
this acquisition strengthens the Health division and complements
Cooney/Waters, the Group's US healthcare communications
specialist.
The Group has also strengthened its Executive Board by the
appointment of Tim Bonnet as Chairman of the Communications
division. Tim has a wealth of experience in the communications
sector and will be responsible for the strategic direction, growth
and development of the division. Tim's considerable international
and client management experience will assist us in pursuing new
business and international growth opportunities.
In September, the Group appointed Richard Huntingford to the
Board as Non-Executive Director and Chairman of its Remuneration
Committee. Richard has over 25 years' experience in Board level
positions, the majority of which has been in the media
industry.
Business Review
Insight
H1 2012 H1 2011
GBP million GBP million
------------------------------- ------------- -------------
Revenue 7.5 7.7
------------------------------- ------------- -------------
Contribution to Group revenue
(%) 20% 24%
------------------------------- ------------- -------------
Headline PBIT 1.7 2.2
------------------------------- ------------- -------------
Reported PBIT 1.7 2.2
------------------------------- ------------- -------------
Headline PBIT margin (%) 22% 28%
------------------------------- ------------- -------------
The Insight division saw a small year-on-year revenue decline of
3 per cent for the six month period to 30 September 2011. It was a
robust performance in a market which contracted by 8 per cent in
terms of UK commissions for the six months to September according
to The Market Research Society Quarterly Trend Analysis. It is
especially encouraging to report an increase in revenue in absolute
terms in the first half of the current financial year against the
second half of the last financial year, and we anticipate this
momentum to continue into the second half of the current financial
year.
We believe that the growth potential of our Insight division
remains positive. The ESOMAR 2011 Global Report, indicates that the
UK has the highest global market research spend per capita and that
provides an excellent on-going opportunity for us. Led by the new
divisional management team, we are looking to build market share
through strategic growth initiatives including increasing our
international work and product development. The report also
highlights that 24 per cent of UK market research spend is now
online. Within our own Insight business 31 per cent of revenue is
currently derived from online research and this above market
weighting, coupled with our list of blue-chip clients, demonstrates
how we are at the forefront of capitalising on this growing market
opportunity.
The Headline PBIT decline for the division is a result of the
small reduction in revenue and our on-going investment in the
division in order to broaden our skillset to drive the future
growth opportunities we highlight above.
New business won during the period by the Insight division from
new and existing clients includes work for: Intel, Danone Dairies,
Tesco, Heineken and the BBC.
Communications
H1 2012 H1 2011
GBP million GBP million
------------------------------- ------------- -------------
Revenue 21.0 19.8
------------------------------- ------------- -------------
Contribution to Group revenue
(%) 58% 62%
------------------------------- ------------- -------------
Headline PBIT 2.9 2.3
------------------------------- ------------- -------------
Reported PBIT 2.6 2.3
------------------------------- ------------- -------------
Headline PBIT margin (%) 14% 12%
------------------------------- ------------- -------------
As highlighted earlier, the Group's Communications division had
a strong first-half, growing revenue by 6 per cent to GBP21.0
million and Headline PBIT by 24 per cent to GBP2.9 million compared
to the prior year. This is an encouraging performance by a division
that accounted for 58 per cent of revenues and 46 per cent of PBIT
for the Group as a whole at the half year.
The increase in profitability is as a result of the prior year
investments in the business to expand our offer, such as mobile
marketing and social media; a good profit conversion on the revenue
growth since last year's investment in personnel; and lastly, from
a continued focus on cost control.
Additionally, according to the IPA's latest Bellwether survey
published in October 2011, even though business confidence overall
remains low, marketing budgets were revised upwards up in Q3. This
ended three periods of quarterly decline, as companies increased
expenditure to promote new products and maintain market share amid
strong competitive pressure.
Following a re-tender process due to the client's re-location to
Paris, we have lost one contract within a top five client account.
The rest of the account remains unaffected, our relationship with
the client remains strong and for this financial year, it continues
to be a top five client of the Group in terms of revenue
contribution.
New business won by our Communications division during the
period from new and existing clients includes campaigns for: HTC
(Asia Pacific region), Brother, Red Stripe and Schweppes from
existing client Diageo, Open University, Walkers Sensations and
post the period end T-Mobile.
Health
H1 2012 H1 2011
GBP million GBP million
------------------------------- ------------- -------------
Revenue 8.0 4.5
------------------------------- ------------- -------------
Contribution to Group revenue
(%) 22% 14%
------------------------------- ------------- -------------
Headline PBIT 1.8 1.2
------------------------------- ------------- -------------
Reported PBIT 1.5 1.2
------------------------------- ------------- -------------
Headline PBIT margin (%) 22% 27%
------------------------------- ------------- -------------
Revenue for the Health division rose by 78 per cent to GBP8.0
million and Headline PBIT increased by 45 per cent to GBP1.8
million, as a result of the six month contribution from
Cooney/Waters and a small like-for-like revenue increase.
We believe that the long-term market fundamentals for the health
sector are good both in the UK and the US. Ageing patient
populations, increasing chronic diseases and the expansion of
public healthcare coverage to an additional 32 million citizens in
the US will all act as major drivers of growth. Indeed, according
to Pharmaceutical Key Trends 2011, a report by Datamonitor, the net
effect of the drivers and resisters for global sales growth of
prescription products from the top 50 pharmaceutical companies
between 2010 and 2015 will be a US$40 billion upside to the
industry. We therefore believe that further investment at this time
will allow us to take advantage of future upside both in the UK and
US and our acquisition of The Corkery Group demonstrates this
belief.
In the near-term, the market has experienced a temporary
slow-down in new business opportunities as the pharmaceutical
industry prepares for inevitable changes. These well documented
changes include a reduction in branded sales as a result of patent
expiry, a lack of blockbuster drug launches and the more general
impact of state welfare cutbacks as governments look to reduce
their overall spending. However, with these changes come
opportunities. For example, the decentralisation of purchasing
decisions in the NHS has led us to combine our specialist health
and local marketing expertise to form a unique new client offer,
Grapevine, to help clients adapt. While in the US, targeting a new
market, Cooney/Waters has last month launched a dedicated Hispanic
health communications service Cultur Health. This service is aimed
at providing more culturally resonant communications for the
Hispanic population in the US - which currently stands at more than
50 million people and is estimated to be increasing at a rate of
one million per year.
New business won during the period by the Health division from
new and existing clients includes work for: UCB, MSD, GSK, Celgene,
Novartis and Abbott RA.
New bank facility
Due to the impending decrease in March 2012 of Creston's
existing bank facility from GBP25 million to GBP5 million, a new
GBP20 million revolving credit facility expiring on 30 September
2015, plus an accordion loan facility of up to GBP10 million, has
been agreed with Barclays Corporate. This new facility offers the
Group maximum flexibility in terms of draw down and has been agreed
on terms which the Board regards as favourable. This new facility,
in addition to the Group's operating cash flow and strong balance
sheet, provides a solid financial base to continue investment in
the Group's organic and acquisitive growth.
The Group's long-term average cash conversion target remains 95
per cent. There has been a short-term increase in the Group's
working capital position from GBP2.8 million at the year-end to
GBP9.6 million (H1 2011: GBP5.3 million), which has resulted in a
cash outflow of GBP1.8 million (H1 2011: GBP1.9 million inflow)
from operating activities. This is predominantly due to a decrease
in pre-billing, however the Group is focused on improving this over
the second half of the year.
Dividend
As reported at the 2011 financial year-end, the Board has
resumed its progressive dividend policy in light of the Group's
continuing growth. Reflecting that growth in the first half, the
Board has declared an interim dividend of 0.83 pence (H1 2011: 0.75
pence) per share, representing an 11 per cent increase, that will
be paid on 10 January 2012 to shareholders registered at 9 December
2011.
Outlook
We have performed well during the first half, growing revenue
and Headline PBT by 14 per cent and 13 per cent respectively. Our
like-for-like growth has been driven by new business wins from both
new and existing clients, a growing amount of which is from
referrals across our agencies and divisions.
During the first half we continued to diversify, through
servicing new geographies, launching new products and continuing to
grow our digital business. We are confident of seeing the first
half's positive momentum continue in the second half and believe
our diversification does afford us some protection against market
uncertainty. However, macro-economic events lead us to maintain a
cautious outlook for the remainder of our financial year.
Don Elgie
Group Chief Executive
UNAUDITED CONSOLIDATED INCOME STATEMENT
for the six months ended 30 September 2011
Note Six months Six months Year ended
ended 30 September ended 30 September 31 March
2011 2010 2011
GBP'000 GBP'000 GBP'000
Continuing operations:
Turnover (billings) 55,975 45,887 100,542
-------------------- -------------------- -----------
Revenue 5 36,500 32,011 67,769
Operating costs (31,642) (27,566) (57,008)
-------------------- -------------------- -----------
Headline profit before finance
income, finance costs and
taxation 4 4,858 4,445 10,761
Headline items 4 (543) (38) (2,015)
--------------------------------------- ----- -------------------- -------------------- -----------
Profit before finance income,
finance costs and taxation 4 4,315 4,407 8,746
Finance income - 1 1
Finance costs (217) (212) (382)
-------------------- -------------------- -----------
Profit before taxation 4 4,098 4,196 8,365
Taxation 6 (1,277) (1,170) (2,695)
-------------------- -------------------- -----------
Profit for the period from
continuing operations 4 2,821 3,026 5,670
-------------------- -------------------- -----------
Discontinued operations: 7
Loss for the period from discontinued
operations - (3,159) (3,323)
-------------------- -------------------- -----------
Profit/(loss) for the period 2,821 (133) 2,347
-------------------- -------------------- -----------
Basic and diluted earnings/(loss)
per share (pence): 8
From continuing operations 4.67 5.02 9.41
From discontinued operations - (5.24) (5.52)
-------------------- -------------------- -----------
4.67 (0.22) 3.89
-------------------- -------------------- -----------
UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the
six months ended 30 September 2011
Note Six months Six months Year ended
ended 30 September ended 30 September 31 March
2011 2010 2011
GBP'000 GBP'000 GBP'000
Profit/(loss) for the period 2,821 (133) 2,347
-------------------- -------------------- -----------
Other comprehensive income/(expense)
Exchange differences on translation
of foreign operations 211 - (190)
Cash flow hedge:
Fair value gain in period 11 - 188 188
Tax effect of fair value gain - (53) (53)
-------------------- -------------------- -----------
Other comprehensive income/(expense)
for the period, net of tax 211 135 (55)
Total comprehensive income for
the period 3,032 2 2,292
-------------------- -------------------- -----------
UNAUDITED CONSOLIDATED BALANCE SHEET
as at 30 September 2011
Note As at As at As at
30 September 30 September 31 March
2011 2010 2011
GBP'000 GBP'000 GBP'000
Non-current assets
Intangible assets
Goodwill 10 101,611 88,548 101,280
Other 10 1,303 1,148 1,379
Property, plant and equipment 10 2,111 1,754 2,144
Financial assets - available - 550 -
for sale
Deferred tax assets 732 533 688
-------------- -------------- ----------
105,757 92,533 105,491
Current assets
Inventories and work in progress 1,688 1,842 1,444
Trade and other receivables 28,793 22,914 29,053
Cash and short term deposits 14 436 232 1,677
-------------- -------------- ----------
30,917 24,988 32,174
Current liabilities
Trade and other payables (20,903) (19,503) (27,713)
Corporation tax payable (2,811) (2,593) (3,087)
Obligations under finance
leases 14 (7) (7) (7)
Bank overdraft, loans and
loan notes 14 (6,258) (30) (1,716)
-------------- -------------- ----------
(29,979) (22,133) (32,523)
Net current assets/(liabilities) 938 2,855 (349)
-------------- -------------- ----------
Total assets less current
liabilities 106,695 95,388 105,142
-------------- -------------- ----------
Non-current liabilities
Deferred tax liabilities (17) - -
Provision for other liabilities
and charges 12 (8,569) - (8,376)
Obligations under finance
leases 14 (2) (8) (2)
-------------- -------------- ----------
(8,588) (8) (8,378)
Net assets 98,107 95,380 96,764
-------------- -------------- ----------
Equity
Called up share capital 6,134 6,134 6,134
Share premium account 35,943 35,943 35,943
Own shares (656) (779) (779)
Shares to be issued 1,286 1,463 1,545
Other reserves 30,822 31,357 30,822
Foreign currency translation
reserve 21 - (190)
Retained earnings 24,557 21,262 23,289
-------------- -------------- ----------
Total equity 98,107 95,380 96,764
-------------- -------------- ----------
UNAUDITED STATEMENT OF CHANGES IN EQUITY
Six months ended 30 September 2011
Called Share Own Shares Other Foreign Retained Total
up share premium shares to be reserves currency earnings
capital issued translation
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Changes in equity
for the period
At 1 April 2011 6,134 35,943 (779) 1,545 30,822 (190) 23,289 96,764
---------- --------- -------- -------- ---------- ------------- ---------- --------
Profit for the
period - - - - - - 2,821 2,821
Other comprehensive
income:
Exchange differences
on translation
of foreign operations - - - - - 211 - 211
---------- --------- -------- -------- ---------- ------------- ---------- --------
Total comprehensive
income for the
period - - - - - 211 2,821 3,032
---------- --------- -------- -------- ---------- ------------- ---------- --------
Credit for share-based
incentive schemes - - - 56 - - - 56
Exercise of share
award - - 123 (315) - - - (192)
Gain on treasury
scheme/employee
benefit trust - - - - - - 81 81
Fair value adjustment
of own shares - - - - - - (274) (274)
Dividends (note
9) - - - - - - (1,360) (1,360)
---------- --------- -------- -------- ---------- ------------- ---------- --------
At 30 September
2011 6,134 35,943 (656) 1,286 30,822 21 24,557 98,107
---------- --------- -------- -------- ---------- ------------- ---------- --------
Six months ended 30 September 2010
Called Share Own shares Shares Other Retained Total
up share premium to be reserves earnings
capital issued
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Changes in equity
for the period
At 1 April 2010 6,134 35,943 (801) 1,461 31,357 21,860 95,954
---------- --------- ----------- -------- ---------- ---------- --------
Loss for the period - - - - - (133) (133)
Other comprehensive
income:
Fair value gain on
financial liability - - - - - 188 188
Tax effect of fair
value gain - - - - - (53) (53)
---------- --------- ----------- -------- ---------- ---------- --------
Total comprehensive
income for the period - - - - - 2 2
---------- --------- ----------- -------- ---------- ---------- --------
Credit for share-based
incentive schemes - - - 30 - - 30
Exercise of share
award - - 22 (28) - - (6)
Gain on treasury scheme/
employee benefit trust - - - - - 6 6
Fair value adjustment
of own shares - - - - - (3) (3)
Dividends (note 9) - - - - - (603) (603)
---------- --------- ----------- -------- ---------- ---------- --------
At 30 September 2010 6,134 35,943 (779) 1,463 31,357 21,262 95,380
---------- --------- ----------- -------- ---------- ---------- --------
Year ended 31 March 2011
Called Share Own Shares Other Foreign Retained Total
up share premium shares to be reserves currency earnings
capital issued translation
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Changes in equity
for the year
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
9) - - - - - - (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
---------- --------- -------- -------- ---------- ------------- ---------- --------
UNAUDITED CONSOLIDATED STATEMENT OF CASHFLOWS for the six months
ended 30 September 2011
Note Six months Six months Year ended
ended 30 September ended 30 September 31 March
2011 2010 2011
GBP'000 GBP'000 GBP'000
Operating cash flow 13 (1,760) 1,869 9,937
Tax paid (1,588) (261) (1,593)
Cash outflow from discontinued
operating activities - (1,058) (1,058)
-------------------- -------------------- -----------
Net cash (outflow)/inflow
from operating activities (3,348) 550 7,286
Investing activities
Finance income - 1 1
Purchase of subsidiary undertakings (377) (3,057) (9,010)
Net cash acquired with subsidiaries - - 497
Purchase of property, plant
and equipment 10 (511) (532) (1,381)
Proceeds from sale of property,
plant and equipment - - 4
Purchase of intangible assets 10 (29) (81) (164)
Net proceeds from disposal
of subsidiary - 27,374 27,374
Cash outflow from discontinued
investing activities - (1,376) (1,373)
-------------------- -------------------- -----------
Net cash (outflow)/inflow
from investing activities (917) 22,329 15,948
Financing activities
Finance costs (66) (221) (324)
Net increase/(decrease)
in borrowings 3,000 (24,600) (24,600)
Dividends paid (1,360) (603) (1,055)
Capital element of finance
lease payments - (1) (7)
-------------------- -------------------- -----------
Net cash inflow/(outflow)
from financing activities 1,574 (25,425) (25,986)
-------------------- -------------------- -----------
Decrease in cash and cash
equivalents (2,691) (2,546) (2,752)
Cash and cash equivalents
at start of period (19) 2,778 2,778
-------------------- -------------------- -----------
Effect of foreign exchange
rates (92) - (45)
Cash and cash equivalents
at end of period 14 (2,802) 232 (19)
-------------------- -------------------- -----------
NOTES TO THE INTERIM REPORT for the six months ended 30
September 2011
1. Presentation of financial information
The financial information contained in this Interim Report does
not constitute statutory accounts within the meaning of Section 434
of the Companies Act 2006.
Statutory accounts for the year ended 31 March 2011 were
approved by the Board of Directors on 18 July 2011 and delivered to
the Registrar of Companies. The report of the auditors, by
PricewaterhouseCoopers LLP on those accounts was unqualified, did
not contain an emphasis of matter paragraph and did not contain any
statement under Section 448 of the Companies Act 2006.
The Interim Report has not been audited or reviewed by the
Group's auditors.
2. Basis of Preparation
The Interim Report of Creston plc for the six months ended 30
September 2011 has been prepared in accordance with the Disclosure
and Transparency Rules of the Financial Services Authority and with
IAS 34, "Interim financial reporting" as adopted by the European
Union.
The accounting policies applied in the preparation of the annual
financial statements are based on the European Union adopted
International Financial Reporting Standards (IFRS) and IFRIC
interpretations that are applicable at this time.
The condensed interim consolidated financial information should
be read in conjunction with the annual financial statements for the
year ended 31 March 2011 which have been prepared in accordance
with IFRS as adopted by the European Union.
3. Accounting policies
The interim consolidated financial statements of Creston plc for
the six months ended 30 September 2011 have been prepared in
accordance with the accounting policies contained in the Group's
Annual Report and Accounts 2011 and the policies as described in
note 2 above.
The following new standard has been issued, but is not effective
for the financial year beginning 1 April 2011 and has not been
early adopted:
IFRS 9, 'Financial instruments', issued in December 2009. This
addresses the classification and measurement of financial assets
and is likely to affect the Group's accounting for its financial
assets. The standard is not a mandatory requirement until 1 January
2013 but is available for early adoption.
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 include
acquisition-related charges deemed as remuneration arising on
payments made by Creston to non-shareholding employees in respect
of the consideration on the business acquisitions; and notional
finance costs on deferred consideration. In the financial year
ending 31 March 2011, there were also charges relating to the
amortisation of acquired intangible assets; and
(ii) exceptional non-recurring operating charges which include
acquisition, start-up and restructuring related costs.
Six months ended 30 September 2011
PBIT PBT PAT
GBP'000 GBP'000 GBP'000
Headline 4,858 4,779 3,398
Acquisition, start-up and restructuring
related costs (300) (300) (300)
Future acquisition payments to employees
deemed as remuneration (243) (243) (243)
Notional finance cost on future deferred
consideration - (138) (138)
Taxation impact 104
--------- --------- ---------
Reported 4,315 4,098 2,821
--------- --------- ---------
Headline Basic and Diluted EPS (pence) 5.63
Reported Basic and Diluted EPS (pence) 4.67
Six months ended 30 September 2010
PBIT PBT PAT
GBP'000 GBP'000 GBP'000
Headline 4,445 4,234 3,053
Future acquisition payments to employees
deemed as remuneration (38) (38) (38)
Taxation impact 11
--------- --------- ---------
Reported 4,407 4,196 3,026
--------- --------- ---------
Headline Basic and Diluted EPS (pence) 5.06
Reported Basic and Diluted EPS (pence) 5.02
Year ended 31 March 2011
PBIT PBT PAT
GBP'000 GBP'000 GBP'000
Headline 10,761 10,448 7,467
Acquisition, start-up and restructuring
related costs (1,557) (1,557) (1,557)
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
--------- --------- ---------
Headline Basic and Diluted EPS (pence) 12.39
Reported Basic and Diluted EPS (pence) 9.41
5. Segmental analysis
The chief operating decision-maker has been identified as the
Board of Directors ('the Board') who make 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 face-to-face, telephone
and online techniques.
Communications The Communications division offers clients an
integrated approach to their marketing and communications strategy,
offering a range of services which include advertising, brand
strategy, customer relationship marketing (CRM), data analytics,
digital marketing, events marketing, mobile marketing, local
marketing, public relations and social media.
Health The Health division provides an integrated communications
solution to the healthcare and pharmaceuticals sectors and offers
services which include advertising, direct marketing, digital
marketing, issue management, market research, medical education,
public relations and social media.
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 certain amounts from the operating
segments, such as amortisation of acquired intangible assets,
acquisition, start-up and restructuring related costs, 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 the US. The Board does not review the assets and liabilities of
the Group on a divisional basis and as such has not segmented the
assets and liabilities of the Group.
Other information provided to the Board of Directors is measured
in a manner consistent with that in the financial statements.
Divisional segmentation
Turnover, revenue, Headline and Reported profit before finance
income and finance costs (PBIT), and profit before tax attributable
to group activities are shown below.
Insight Communications Health Head Office Group
Six months ended
30 September 2011 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Turnover (billings) 13,444 31,819 10,712 - 55,975
Revenue 7,495 21,044 7,961 - 36,500
--------- --------------- --------- ------------ ---------
Headline PBIT 1,668 2,896 1,764 (1,470) 4,858
--------- --------------- --------- ------------ ---------
Acquisition, start-up
and restructuring related
costs - (300) - - (300)
Future acquisition payments
to employees deemed
as remuneration - - (221) (22) (243)
--------- --------------- --------- ------------ ---------
Reported PBIT 1,668 2,596 1,543 (1,492) 4,315
--------- --------------- --------- ------------ ---------
Finance costs - - - (79) (79)
Notional finance cost
on future deferred consideration - - (138) - (138)
--------- --------------- --------- ------------ ---------
Profit before taxation 1,668 2,596 1,405 (1,571) 4,098
--------- --------------- --------- ------------ ---------
Taxation (1,277)
--------- --------------- --------- ------------ ---------
Profit for the period 2,821
--------- --------------- --------- ------------ ---------
Insight Communications Health Head Office Group
Six months ended
30 September 2010 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Turnover (billings) 14,114 26,249 5,524 - 45,887
Revenue 7,705 19,841 4,465 - 32,011
--------- --------------- --------- ------------ ---------
Headline PBIT 2,177 2,340 1,217 (1,289) 4,445
--------- --------------- --------- ------------ ---------
Future acquisition payments
to employees deemed
as remuneration - - - (38) (38)
--------- --------------- --------- ------------ ---------
Reported PBIT 2,177 2,340 1,217 (1,327) 4,407
--------- --------------- --------- ------------ ---------
Finance income - - - 1 1
Finance costs - - - (212) (212)
--------- --------------- --------- ------------ ---------
Profit before taxation 2,177 2,340 1,217 (1,538) 4,196
--------- --------------- --------- ------------ ---------
Taxation (1,170)
--------- --------------- --------- ------------ ---------
Profit for the period 3,026
--------- --------------- --------- ------------ ---------
Insight Communications Health Head Office Group
Year ended
31 March 2011 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 PBIT 4,094 6,197 3,437 (2,967) 10,761
--------- --------------- --------- ------------ ---------
Acquisition, start-up
and restructuring related
costs (240) (144) (1,173) - (1,557)
Amortisation of acquired
intangible assets - - (219) - (219)
Future acquisition payments
to employees deemed
as remuneration - - (110) (129) (239)
--------- --------------- --------- ------------ ---------
Reported PBIT 3,854 6,053 1,935 (3,096) 8,746
--------- --------------- --------- ------------ ---------
Finance income - - - 1 1
Finance costs - - - (314) (314)
Notional finance cost
on future deferred consideration - - (68) - (68)
--------- --------------- --------- ------------ ---------
Profit before taxation 3,854 6,053 1,867 (3,409) 8,365
--------- --------------- --------- ------------ ---------
Taxation (2,695)
--------- --------------- --------- ------------ ---------
Profit for the period 5,670
--------- --------------- --------- ------------ ---------
Geographical segmentation
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
Six months Six months Year ended Six months Six months Year ended
ended 30 ended 30 31 March ended 30 ended 30 31 March
September September September September
2011 2010 2011 2011 2011 2011
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
UK 26,916 25,250 51,127 42,578 37,354 77,787
Rest of Europe 5,466 6,001 11,673 7,598 7,472 16,103
Rest of the
World 4,118 760 4,969 5,799 1,061 6,652
----------- ----------- ----------- ----------- ----------- -----------
36,500 32,011 67,769 55,975 45,887 100,542
----------- ----------- ----------- ----------- ----------- -----------
6. Taxation
The effective Reported tax rate for the period ended 30
September 2011 is 31.2 per cent (H1 2011: 27.9 per cent). The
reason for the increased rate is due to the inclusion of
Cooney/Waters, which is domiciled in the US, and has a higher
effective tax rate. The effective Headline tax rate for the period
ended 30 September 2011 is 28.9 per cent (H1 2011: 27.9 per cent).
The difference between the Headline and the Reported effective rate
is due to the effect of non-trading related tax charges.
7. Discontinued Operations
In the prior year the Group disposed of Delaney Lund Knox Warren
and Partners, Dialogue DLKW and The Composing Room ('DLKW') for
GBP28.0 million. DLKW was therefore reported as a discontinued
operation in the prior year.
Below shows the financial information of DLKW for the year
ending 31 March 2011 and the period ending 30 September 2010.
Six months ended Year ended
30 September 2010 31 March 2011
GBP'000 GBP'000
Turnover (billings) 9,180 9,180
Revenue 4,472 4,472
Headline operating costs (4,307) (4,307)
------------------- ---------------
Headline PBIT 165 165
------------------- ---------------
Loss on disposal (3,459) (3,474)
Restructuring costs - -
------------------- ---------------
Reported loss before tax (3,294) (3,309)
------------------- ---------------
Taxation 135 (14)
------------------- ---------------
Loss for the period (3,159) (3,323)
------------------- ---------------
8. Earnings per share
Headline Reported
Six months Six months Year ended Six months Six months Year ended
ended 30 ended 30 31 March ended 30 ended 30 31 March
September September 2011 September September 2011
2011 2010 2011 2010
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Earnings
Profit for
the period
from continuing
operations 3,398 3,053 7,467 2,821 3,026 5,670
Profit/(loss)
from discontinued
operations - 125 125 - (3,159) (3,323)
----------- ----------- ------------ ------------ ------------ ------------
3,398 3,178 7,592 2,821 (133) 2,347
----------- ----------- ------------ ------------ ------------ ------------
Number of
shares
Weighted
average
number of
shares 60,374,966 60,285,576 60,285,576 60,374,966 60,285,576 60,285,576
----------- ----------- ------------ ------------ ------------ ------------
Earnings
per share
Basic and
diluted
earnings/(loss)
per share
(pence):
* continuing operations 5.63 5.06 12.39 4.67 5.02 9.41
* discontinued operations - 0.21 0.20 - (5.24) (5.52)
----------- ----------- ------------ ------------ ------------ ------------
5.63 5.27 12.59 4.67 (0.22) 3.89
----------- ----------- ------------ ------------ ------------ ------------
The Headline EPS and Headline DEPS are based on the Headline PBT
analysed in note 4 less attributable tax and divided by the
weighted average number of shares and by the weighted average
number of diluted shares, respectively.
9. Dividends
The prior year final dividend of 2.25 pence (H1 2011: 1.00
pence) per share was paid to shareholders on 12 September 2011
giving a total of GBP1,360,000 (H1 2011: GBP603,000).
The Board has declared an interim dividend to be paid on 10
January 2012 of 0.83 pence (H1 2011: 0.75 pence) per share to all
ordinary shareholders on the register at 9 December 2011.
10. Non-current assets
Six months ended
30 September 2011
Property, plant Intangible assets Intangible assets
and equipment - goodwill - other Total
GBP'000 GBP'000 GBP'000 GBP'000
---------------- ------------------ ------------------- ---------
Net book amount at
1 April 2011 2,144 101,280 1,379 104,803
---------------- ------------------ ------------------- ---------
Additions 511 - 29 540
Depreciation and amortisation (546) - (111) (657)
Exchange differences 2 331 6 339
---------------- ------------------ ------------------- ---------
Net book amount at
30 September 2011 2,111 101,611 1,303 105,025
---------------- ------------------ ------------------- ---------
Six months ended
30 September 2010
Property, plant Intangible assets Intangible assets
and equipment - goodwill - other Total
GBP'000 GBP'000 GBP'000 GBP'000
---------------- ------------------ ------------------- ---------
Net book amount at
1 April 2010 2,065 119,081 1,551 122,697
---------------- ------------------ ------------------- ---------
Additions - continuing
group 532 - 81 613
Additions - discontinued
operations 44 - - 44
Disposal of subsidiary (350) (30,533) (250) (31,133)
Charge for the year
- continuing group (461) - (234) (695)
Charge for the year
- discontinued operations (76) - - (76)
---------------- ------------------ ------------------- ---------
Net book amount at
30 September 2010 1,754 88,548 1,148 91,450
---------------- ------------------ ------------------- ---------
Year ended 31 March
2011
Property, plant Intangible assets Intangible assets-
and equipment - goodwill other Total
GBP'000 GBP'000 GBP'000 GBP'000
---------------- ------------------ ------------------- ---------
Net book amount at
1 April 2010 2,065 119,081 1,551 122,697
---------------- ------------------ ------------------- ---------
Transfer to tangible
assets (4) - 4 -
Additions - continuing
group 1,381 - 164 1,545
Additions - discontinued
operations 42 - - 42
Disposals - continuing
group (3) - (22) (25)
Disposal of subsidiary (350) (30,533) (250) (31,133)
Acquisition of subsidiary 39 12,975 540 13,554
Charge for the year
- continuing group (955) - (599) (1,554)
Charge for the year
- discontinued operations (76) - - (76)
Exchange differences 5 (243) (9) (247)
---------------- ------------------ ------------------- ---------
Net book amount at
31 March 2011 2,144 101,280 1,379 104,803
---------------- ------------------ ------------------- ---------
11. Derivative financial statement
A forward contract matured in August 2010. This contract
qualified for hedge accounting and was treated as a cashflow hedge
and therefore the effective portion of the change in fair value was
recognised within the statement of comprehensive income. The
ineffective portion was recognised directly in the income
statement.
12. Provisions for other liabilities and charges
The earn-out obligations are set out below:-
As at As at As at
30 September 30 September 31 March
2011 2010 2011
GBP'000 GBP'000 GBP'000
Brought forward 8,376 - -
Acquisitions made during the
financial year - - 8,308
Income statement
- Notional finance cost on
future deferred consideration 138 - 68
Exchange differences 55 - -
-------------- -------------- ----------
Carried forward 8,569 - 8,376
-------------- -------------- ----------
As at As at As at
30 September 30 September 31 March
2011 2010 2011
GBP'000 GBP'000 GBP'000
Analysed as:
Non-current liabilities 8,569 - 8,376
-------------- -------------- ----------
The Group considers that the above liabilities approximate to
their fair value. The notional interest rate used during the year
was 3.3 per cent (31 March 2011: 3.3 per cent).
The earn-out obligations will be paid in cash, in accordance
with the associated asset purchase agreement. These payments become
due in June 2013 and June 2015.
13. Reconciliation of profit for the period to operating cash flow
Six months Six months Year ended
ended ended 31 March
30 September 30 September 2011
2011 2010
GBP'000 GBP'000 GBP'000
Profit for the period 2,821 3,026 5,670
Taxation 1,277 1,170 2,695
-------------- -------------- -----------
Profit before taxation 4,098 4,196 8,365
-------------- -------------- -----------
Finance costs 217 212 382
Finance income - (1) (1)
-------------- -------------- -----------
Profit before finance income, finance
costs and taxation 4,315 4,407 8,746
-------------- -------------- -----------
Depreciation of property, plant and
equipment 546 461 955
Amortisation of intangible assets 111 234 599
Share based payments 53 5 17
Deemed remuneration 243 38 239
Profit on disposal of property, plant
and equipment - - (1)
Loss on disposal of intangible assets - - 22
(Increase)/decrease in inventories
and work in progress (239) (260) 196
Decrease/(increase) in trade and other
receivables 301 1,187 (468)
Decrease in trade and other payables (7,090) (4,203) (368)
-------------- -------------- -----------
Operating cash flow (1,760) 1,869 9,937
-------------- -------------- -----------
14. Analysis of net and total debt
As at 30 September 2011 As at Acquisitions Cash flow Foreign As at
1 April exchange 30 September
2011 2011
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cash and short term deposits 1,677 - (1,149) (92) 436
Bank overdraft (1,696) - (1,542) - (3,238)
--------- ------------- ---------- ---------- --------------
Cash and cash equivalents (19) - (2,691) (92) (2,802)
--------- ------------- ---------- ---------- --------------
Revolving credit facility - - (3,000) - (3,000)
Acquisition loan notes (20) - - - (20)
Finance leases (9) - - - (9)
--------- ------------- ---------- ---------- --------------
Net debt (48) - (5,691) (92) (5,831)
--------- ------------- ---------- ---------- --------------
Provision for deferred consideration (8,376) (138) - (55) (8,569)
--------- ------------- ---------- ---------- --------------
Total debt (8,424) (138) (5,691) (147) (14,400)
--------- ------------- ---------- ---------- --------------
As at 30 September 2010 As at Acquisitions Cash flow Foreign As at
1 April exchange 30 September
2010 2010
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cash and cash equivalents 2,778 - (2,546) - 232
Revolving credit facility (13,000) - 13,000 - -
Acquisition loan notes (3,087) - 3,057 - (30)
Bank loans (11,600) - 11,600 - -
Finance leases (16) - 1 - (15)
--------- ------------- ---------- ---------- --------------
Net and total (debt)/cash (24,925) - 25,112 - 187
--------- ------------- ---------- ---------- --------------
Year ended 31 March 2011 As at Acquisitions Cash flow Foreign As at
1 April exchange 31 March
2010 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 - 497 (2,193) - (1,696)
--------- ------------- ---------- ---------- ----------
Cash and cash equivalents 2,778 497 (3,249) (45) (19)
--------- ------------- ---------- ---------- ----------
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)/cash (24,925) 497 24,425 (45) (48)
--------- ------------- ---------- ---------- ----------
Provision for deferred consideration - (8,376) - - (8,376)
--------- ------------- ---------- ---------- ----------
Total (debt)/cash (24,925) (7,879) 24,425 (45) (8,424)
--------- ------------- ---------- ---------- ----------
15. Related-party transactions
During the six months ended 30 September 2011 total fees of
GBP29,730 (H1 2011: GBP29,245) were paid to City Group P.L.C.,
GBP14,730 (H1 2011: GBP14,245) for the provision of company
secretarial services and GBP15,000 (H1 2011: GBP15,000) for the
services of Mr D C Marshall, a Non-Executive Director. During the
period the Group, through its wholly owned subsidiary Emery McLaven
Orr Limited, provided services to Vanessa Knox Limited, a company
owned by Vanessa Knox, the wife of Mr B C Brien, a Director of
Creston plc. The value of the services amounted to GBP25,417 (H1
2011: GBPnil). The balance due at 30 September 2011 was GBP30,500
(30 September 2010: GBPnil). All transactions were conducted on an
arm's length basis.
16. Key risks and uncertainties
As detailed on page 29 of the 2011 Annual Report and Accounts,
the Group's key risks and uncertainties are associated with the
retention of key personnel and customers. These risks are not
considered to have changed since the 2011 Annual Report and
Accounts were published.
17. Post balance sheet events
On 30 November 2011 we announced the acquisition of The Corkery
Group, a New York based full service health and medical public
relations company specialising in product and issues
communications, for an initial cash consideration payment of US$6.0
million (GBP3.8 million) payable on completion. The acquisition
will be by Cooney/Waters LLC, a 100 per cent subsidiary of Creston
plc, and as part of the acquisition David Corkery, the sole
shareholder of The Corkery Group, will become a recipient of future
consideration due under the existing Cooney/Waters asset purchase
agreement. There is no increase to the Cooney/Waters deferred
consideration cap. The acquisition is due to complete at close of
business on 30 November 2011.
On 29 November 2011 the Group entered into a new bank facility
with Barclays Corporate. This facility replaces the existing
facility (the majority of which matured on 31 March 2012) and
provides a new GBP20.0 million revolving credit facility which
remains fully available until it expires on 30 September 2015 and
an accordion loan facility of up to GBP10.0 million.
18. Statement of Directors' responsibilities
The Directors confirm that to the best of their knowledge these
condensed consolidated set of financial statements have been
prepared in accordance with IAS 34 as adopted by the European
Union. The interim management report includes a fair review of the
information required by DTR 4.2.7R and DTR 4.2.8R; namely:
-- an indication of important events that have occurred during
the first six months and their impact on the condensed set of
financial statements and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
-- material related-party transactions in the first six months
and any material changes in the related party transactions
described in the last annual report.
The Directors are responsible for the maintenance and integrity
of the Company website. Legislation in the United Kingdom governing
the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
The Directors of Creston plc are listed in the Creston Group
Annual Report and Accounts 2011. A list of current Directors is
maintained on the Creston website: www.creston.com.
By order of the Board
Don Elgie
30 November 2011
Group Chief Executive Officer
19. Forward-looking statements
Certain statements in this interim report are forward-looking.
Although the Group believes that the expectations reflected in
these forward-looking statements are reasonable, we can give no
assurance that these expectations will prove to have been correct.
Because these statements involve risks and uncertainties, actual
results may differ materially from those expressed or implied by
these forward-looking statements.
We undertake no obligation to update any forward-looking
statements whether as a result of new information, future events or
otherwise.
20. Availability of the Interim Report
Copies of the Interim Report are available on the Company's
website www.creston.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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