TIDMCRE
RNS Number : 3153J
Creston PLC
11 June 2014
11 June 2014
Creston plc
('Creston' or the 'Group')
Unaudited Full Year Results for the Year Ended 31 March 2014
Creston plc (LSE: CRE), the international marketing
communications group, today announces its full year results for the
year ended 31 March 2014.
Financial Highlights
-- Revenue of GBP74.9 million (2013: GBP75.2 million)
-- Headline(1) EBITDA(2) of GBP11.6 million (2013: GBP12.0 million)
-- Headline PBIT(3) of GBP9.8 million (2013: GBP10.2 million)
-- Headline DEPS(4) of 11.79 pence (2013: 14.66 pence). FY13
included the GBP1.7m tax provision release
-- Total full year dividend up 6 per cent to 3.90 pence per share (2013: 3.67 pence per share)
-- Net cash of GBP7.5 million (2013: GBP11.2 million)
Corporate and Operational Highlights
-- Positive second half versus prior year with revenue and
Headline PBIT growth of 3 per cent and 7 per cent respectively
-- Digital and online revenue up 10 per cent in absolute terms
to 53 per cent of Group revenue, surpassing 50 per cent target of
Group revenue one year early (2013: 48 per cent)
-- Net new business revenue of GBP8.6 million with wins
including: Bentley, British Chambers of Commerce, GAVI Alliance,
HSBC, Novartis, Sony PlayStation and Virgin Trains
-- New Non-Executive Chairman and CEO
-- New CFO, Kathryn Herrick, to start on 1 July 2014
-- Post period acquisition of niche, market-leading neuroscience specialist, Walnut Group
Commenting on the results, Barrie Brien, Group Chief Executive
of Creston plc, said:
"It has been a year of good progress, despite challenges with
client budget volatility at the beginning of the financial year. At
full year we were slightly down in revenue and profits on the
previous year but a high level of new business pitching in the
first half translated into good revenue and profit growth for the
second half year-on-year. The increase in dividend reflects this
positive momentum.
We also completed our co-location to help drive greater shared
working, launched new service offerings and have seen significant
Board change. Having stepped up to the position of Group Chief
Executive, I look forward to realising Creston's new vision of a
more integrated and unified agency group to win more
multi-discipline business. While we are cautious regarding client
budgets for the next twelve months, we are confident that we can
capitalise on our vision over the medium term to deliver value for
shareholders."
Group Financial Results
Headline Reported
---------------- ------------------------------------------ ------------------------------------------
Unaudited Unaudited
2014 2013 % change 2014 2013 % change
GBP million GBP million GBP million GBP million
---------------- ------------- -------------- ----------- ------------- -------------- -----------
Revenue 74.9 75.2 0% 74.9 75.2 0%
---------------- ------------- -------------- ----------- ------------- -------------- -----------
PBIT 9.8 10.2 -4% 7.4 11.0 -33%*
---------------- ------------- -------------- ----------- ------------- -------------- -----------
DEPS (pence) 11.79 14.66 -20% 8.52 16.10 -47% **
---------------- ------------- -------------- ----------- ------------- -------------- -----------
Dividend per
share (pence) 3.90 3.67 6% 3.90 3.67 6%
---------------- ------------- -------------- ----------- ------------- -------------- -----------
*Prior year Reported PBIT positively impacted by the net of the
revaluation credit of estimated deferred consideration (GBP6.8
million) and the impairment of goodwill (GBP5.2 million).
**Prior year Reported DEPS positively impacted by the net of the
revaluation credit of estimated deferred consideration (GBP6.8
million), the impairment of goodwill (GBP5.2 million) and the tax
provision release (GBP1.7 million). A full reconciliation is
presented in note 4 to this full year statement.
___________ (1) Headline results reflect the underlying
performance of the Group and excludes non-recurring property
related costs, acquisition, start-up and restructuring related
costs, amortisation of acquired intangibles, deemed remuneration
charges, movement in fair value of deferred consideration,
impairment of goodwill and notional finance costs. A full
reconciliation is presented in note 4 to this full year statement.
(2) Earnings before finance costs, finance income, taxation,
depreciation and amortisation (EBITDA).
(3) Profit before finance costs, finance income and taxation (PBIT).
(4) Diluted Earnings Per Share (DEPS).
There will be a presentation for analysts today at 9.30am at the
offices of Liberum Capital Limited, Ropemaker Place, 25 Ropemaker
Street, London, EC2Y 9LY
For further information on the Group's full year results or
about the analyst meeting please contact:
Creston plc + 44 (0)20 7930 9757
Barrie Brien, Group Chief Executive
Bell Pottinger +44 (0)20 7861 3890
Elly Williamson/ Malika Shermatova
About Creston plc
Creston plc (LSE: CRE) is an international marketing
communications group that leverages the strength of its agencies'
collective expertise and knowledge across insight, technology and
creativity to drive transformational growth for its clients through
thinking and ideas that connect brands to customers. The Group
delivers a range of marketing services, including advertising, CRM,
digital and direct marketing, health communications, local
marketing, market research, PR and social media marketing to a
broad spectrum of blue-chip global clients. www.creston.com
Group Chief Executive's Statement
Overview
Much has been achieved during the course of the year, with the
completion of our co-location strategy and an excellent new
business performance providing a strong foundation for the future.
With these factors in mind, former Group Chief Executive Don Elgie
retired from the Group at the year end and Non-Executive Chairman
David Grigson will be stepping down from the Board with effect from
the AGM on 8 September 2014. Richard Huntingford, a member of the
Board since 2011, will become Non-Executive Chairman and Chairman
of the Nominations Committee. I would like to thank both Don and
David for their significant contributions in helping to build
Creston into the company it is today.
We began the year having experienced a large single client loss
in the Health division in the prior quarter, which we had to
compensate for in new business terms before we could report growth.
Very high levels of new business pitching in the first half gave us
an encouraging start but also took a short term toll as resource
was directed towards this without earning fees. Our first half
financial performance therefore fell behind our expectations;
however it did set us up for a good second half. Across all our
divisions the new business wins translated to revenue and profits
at a level which almost off-set the first half shortfall against
the prior year. The net result was a small year-on-year decline in
revenue and Headline PBIT.
The second half reported revenue and Headline PBIT growth of 3
per cent and 7 per cent respectively against the prior year; and
the year ended with revenue of GBP74.9 million (2013: GBP75.2
million), Headline EBITDA of GBP11.6 million (2013: GBP12.0
million) and Headline PBT of GBP9.6 million (2013: GBP10.0
million). At the year end, the Group had net cash of GBP7.5 million
(2013: GBP11.2 million), excluding the deferred consideration
liability of GBP1.7 million (2013: GBP1.7 million).
In addition to the improved financial performance in the second
half across all three divisions, the Group also made substantial
operational progress during the year:
Firstly, the net new business wins have been at their strongest
level for several years, with net annualised revenue of GBP8.6
million (2013: GBP3.3 million). Winning further brands and
assignments from existing clients such as Canon, Danone, Diageo,
Reckitt Benckiser, Sainsbury's and Unilever, plus adding a number
of new clients, including Bentley, HSBC, Novartis, Sony
PlayStation, United Nations WSSCC and Virgin Trains, reaffirms that
the Group's core offer remains relevant and compelling.
Secondly, a key milestone for the Group during the year was
exceeding the 50 per cent threshold in terms of revenue from
digital and online work, something originally targeted for FY15. In
total, 53 per cent of revenue was from such services and this
performance was strengthened by key account wins, such as Reckitt
Benckiser and most recently, post year-end, for McCain across all
their UK brands. The digital nature of the work we are conducting
continues to afford the Group international opportunities for the
likes of Danone, Unilever, Diageo and many more. This recognised
capability in servicing clients in a digital-first world has
certainly been a key driver in the Group's new business
opportunities and the demand continues into the new financial
year.
The completion of the co-location strategy in September 2013 was
another key strategic objective, with all London companies moving
into Creston House. Since the new office constitutes an almost 20
per cent increase in space for the relevant companies, the
incremental property cost of approximately GBP0.8 million, as
previously reported, was always expected to impact the year-on-year
Headline PBIT and margin performance. The strategy has shown to be
a real success in terms of greater synergy and collaboration
between our companies, as it has led to winning new business from
Canon (a referral for their pan-European digital advertising), the
British Chambers of Commerce and Ofgem, both involving three
companies spanning insight, PR and digital advertising. Overall,
the Group continued to work more closely than ever before under its
Better Together ethos, resulting in 36 per cent of Group revenue
from shared clients. The Board remains confident that further
synergy wins and an improved service offering, as a result of
closer working practices, will contribute to future revenue growth
and increased margin.
Finally, the Group continued to broaden and diversify its client
offer and services during the year. This included the launch of
digital healthcare agency DJM in the US, a brand and creative
agency called Loooped, a small conflict healthcare PR agency called
Liberation and the launch of our social media agency Things With
Wings as a joint venture between our PR agency Nelson Bostock Group
and our digital agency TMW.
Divisional Review
2014 Revenue Headline PBIT Headline
PBIT Margin
---------------- ------------------------ -------------------------- -------------
GBPmillion % of Group GBPmillion % of Group
(excluding
Head Office
costs)
---------------- ----------- ----------- ----------- ------------- -------------
Communications 40.7 55% 5.7 45% 14%
---------------- ----------- ----------- ----------- ------------- -------------
Health 21.3 28% 4.5 35% 21%
---------------- ----------- ----------- ----------- ------------- -------------
Insight 12.9 17% 2.6 20% 20%
---------------- ----------- ----------- ----------- ------------- -------------
Communications division
With the investment in new business activity at the beginning of
the financial year, the Communications division delivered Revenue
and Headline PBIT growth during the second half of 1 per cent and 7
per cent respectively but reported a full year 1 per cent decline
in revenue to GBP40.7 million (2013: GBP41.1 million). The decline
in Headline PBIT to GBP5.7 million (2013: GBP6.2 million) is a
result of the lower revenue, the expected increase in property
costs and the investment in new business activity during the first
half. These factors also contributed to the lower Headline PBIT
margin of 14 per cent (2013: 15 per cent). On a Reported basis,
PBIT was GBP5.6 million (2013: GBP6.2 million).
Innovation and technology were a major focus for the division
during the year. Work included the development of a new platform
for automotive dealer marketing portals and new mobile apps for
Danone, while the Group also engaged on an 'Innovation Accelerator'
programme in partnership with The Bakery. The Innovation
Accelerator programme exists to deliver innovative technology-based
solutions to brands' big challenges and enables us to tap into over
400 young technology companies around the world. We are already
well into the process of developing technology-driven brand
solutions for Danone, Unilever and Public Health England in this
way, with three other major brands at the start of the process.
Major new business wins mean the division is well-placed for the
next financial year. New additions to the client list include
Arthritis Research UK, Bentley, HSBC, Sky and Virgin Trains, along
with additional brands for Unilever and the post period win of the
Right to Buy digital contract through the Crown Commercial Service
(formerly Government Procurement Service).
Significant work included TMW's Durex Earth Hour campaign which
achieved 64 million video views across more than 50 countries, all
in the space of just a few weeks. The high profile PlayStation 4
launch, which included the PS4-branded OXO Tower stunt, and
class-leading global CRM work for Danone are also notable.
Health division
As expected, revenue for the Health division declined during the
year, driven by the previously reported loss of the US Sanofi
business in Q4 FY13. This has been partly offset by the UK Health
companies performing well with revenue growth of 5 per cent on a
like-for-like basis and the continued growth of the digital
healthcare agency DJM, acquired in the second half of last
financial year.
The division's revenue declined to GBP21.3 million (2013:
GBP21.9 million) and Headline PBIT to GBP4.5 million (2013: GBP5.1
million). Due to the US group performance, like-for-like revenue
declined by 11 per cent and Headline PBIT margin declined to 21 per
cent. These full year results mask a material difference in the
revenue and Headline PBIT growth performances between the first and
second halves of the financial year, respectively a decline of 12
per cent and 44 per cent followed by growth of 6 per cent and 22
per cent. This second half performance was enhanced by the US Group
starting to replace the lost Sanofi business and improving its
profitability.
On a Reported basis, PBIT declined to GBP4.0 million (2013:
GBP6.5 million) primarily due to the net of the revaluation credit
of the estimated deferred consideration (GBP6.8 million) and the
impairment of goodwill (GBP5.2 million) taken during FY13.
The focus for the Health division during the year was on
innovation and creativity, pushing the boundaries to create
'firsts' in the healthcare industry. The division is successfully
carving out an industry-leading end-to-end practice spanning all
marketing disciplines, both in the UK and globally.
The acquisition of DJM in November 2012 has continued to have a
positive impact on the ability of the agencies to deliver
innovative and creative campaigns for their clients and has also
driven the growth of the division's revenue from digital and online
to 30 per cent (2013: 19 per cent). The launch of DJM US in
September, based at Creston Health's Fifth Avenue offices, has
already started to contribute to revenue.
This year saw the launch of Chemia, a new multi-disciplinary
network covering creative, PR, digital and experiential, Government
relations and medical education across the globe. Other
developments in the year included the launch of conflict PR agency,
Liberation, and the creation of Loooped, a brand and creative
consultancy. Cooney/Waters and partner Russo Partners created a new
initiative called Clearpath which spans communication in investor
relations, advocacy, corporate and strategic marketing for
healthcare companies.
The health agencies have demonstrated the power and benefits of
the Group's Better Together ethos in the past 12 months. The
Creston Health agencies undertook 26 collaborative pitches,
referred 40 pieces of business to each other and currently have 34
shared brands across 23 shared clients which are worth GBP10.3
million revenue to the division. New business wins to the division
over the year included the WHO (World Health Organisation), MSD,
Takeda, Alere, GAVI Alliance, Novartis, United Nations WSSCC (Water
Supply and Sanitation Collaborative Council) and further Gilead
brands. There was also the post period win of Cow & Gate as the
result of a referral from the Communications division, which has a
long term relationship with the Danone client.
Insight division
A strong performance for the Insight division with revenue
growth of 7 per cent to GBP12.9 million (2013: GBP12.1 million) and
a significant Headline PBIT increase to GBP2.6 million (2013:
GBP1.4 million). This is a good improvement for the division, with
the revenue growth and the realignment of the cost base resulting
in a much improved margin of 20 per cent (2013: 12 per cent). On a
Reported basis, PBIT was GBP1.7 million (2013: GBP1.4 million).
For ICM, the period represented a marked recovery following the
management team and structural changes undertaken in FY13. The year
saw growth from existing clients including Vodafone and Aviva,
together with the addition of new clients including the British
Chambers of Commerce and HM Passport Office.
Marketing Sciences delivered an exceptional year of revenue and
Headline PBIT growth. This was driven by growth in key client
relationships such as Tesco, Danone, Iglo Group, Kimberly Clark,
Velux and Reckitt Benckiser.
Digital innovation will continue to affect data collection and
analysis. Online communities, real-time feedback, neuroscience (the
measurement of emotions) and the measurement of multi-channel
consumer activity will be the fundamental drivers for innovation.
The Group's proven ability to interpret big data, predict future
trends, understand the consumer and deliver actionable intelligence
for clients will be bolstered by the post period acquisition of
Walnut, a recent start-up specialising in neuroscience, for a small
sum of less than GBP0.1 million.
People
Our ability to deliver innovative, creative and technologically
relevant solutions to clients is based very much on the
capabilities and passion of our people. During 2013 our companies
won an impressive 20 awards and were shortlisted or finalists for a
further 69 awards. Five of our companies have already won awards
since the turn of the year, indicating another year of
industry-recognition for our client work. Our excellent new
business performance and the delivery of award-winning work for
clients are down to the hard work of our people and I would like to
thank all Creston employees for their contribution.
This year Best Companies, the workplace engagement specialists,
selected four Creston companies through its accreditation standard
which recognises excellence in the workplace. It was also the
second year of our Next Generation programme which is focused on
ensuring that our new joiners have a thorough understanding of the
Group and its disciplines. General training and continuous
professional development opportunities are provided to staff across
the Group and the current financial year will see a revised senior
management training programme rolled out. We remain committed to
attracting, training and retaining the best people.
Dividend
Following another year of good cash conversion and the Group's
net cash position combined with the Group's outlook, the Board
recommends a final dividend of 2.70 pence per share (2013: 2.67
pence per share). This, with the half year dividend of 1.20 pence
per share (2013: 1.00 pence per share), gives a total full year
dividend of 3.90 pence per share (2013: 3.67 pence per share),
representing a 6 per cent increase compared to the prior year.
In light of the Group's history of strong cash generation and
low gearing, the Board intends to maintain a progressive dividend
policy and will continue to work towards a one-third/two-third
allocation between the half year/final dividend payment
respectively.
Future Strategic Objectives
Industry trends
As part of the Group's strategic planning for the coming years,
it is looking to focus on three significant market shifts.
Firstly, the continued shift away from mass marketing towards
targeted, measurable and personalised marketing. This trend is a
result of the hyper-connected world we live in, the growth in
customer data and technology's impact on a customer's experience
with a brand.
Secondly, the increasing client-demand for a Group of
specialists that can collaborate to leverage their collective
expertise and knowledge to produce effective, multi-discipline
strategies and creative campaigns across multiple platforms and
channels.
Finally, as reported in the May 2014 Financial Times Connected
Business supplement, spend on technology by marketing departments
is one of the fastest growing areas of corporate investment in
today's world of convergence. This means that marketing agencies
need to be advising their clients on the best strategies for using
technology for marketing. This will create greater opportunities
for digitally focused groups, such as Creston, who can consult on
and implement marketing technology from online video platforms, to
search engine optimisation, to social media, to e-CRM and to
business intelligence platforms. Technology is changing the way
that brands collect information and engage with customers, so a
deep understanding of emerging platforms is vital.
New strategic vision
The current financial year will see the launch of a new Group
vision and strategy to meet these market shifts.
A key strategic objective will be to position Creston as a more
integrated 'agency group', rather than a group of agencies, under
the branding of Creston Unlimited towards the end of the first half
of the current financial year. This brand will have a market
proposition that allows us to provide clients with an evolved and
distinctive offer that effectively brings together our core
strengths in insight, technology and creativity. In today's world
of digital convergence, we believe that this revised approach,
supported by unified branding across the Group, will provide an
opportunity for us to pitch and win more multi-discipline business
from existing and new clients, rather than be structured for single
discipline pitches.
This new agency group structure will help drive our organic
earnings growth, as well as align some of our cost base, since the
Group will no longer be structured around three divisions but
rather around one compelling client offer. The Group's insight
capabilities will be an important part of the Group's new
consultancy offer and will also closely support our communications
companies, allowing us to develop ideas which exploit the data and
insight that will help clients to effectively understand and engage
with their customers. The Group will continue to have an important
specialism in health marketing. As the digital marketplace develops
at pace, it is important that our health marketing companies have a
competitive edge by being closely aligned with the fast paced world
of consumer marketing. This will be achieved by drawing on the
expertise and experience of our insight and communications
companies.
Looking ahead, the Group will focus on generating earnings
growth in four ways:
1. Organic growth from existing companies supported by the
improving market environment, the high levels of new business
activity and the investment in their service offerings;
2. Organic growth from cross-selling and integrated group
pitches under the Creston Unlimited brand;
3. Selective acquisitions and start-ups to complement the
Creston Unlimited client offering; and
4. A share buy-back programme in FY15 to take advantage of the
Group's positive cash position and current share valuation.
In reference to point 4, up to GBP2 million of shares will be
acquired by the Group pursuant to the buy-back programme and
subject to being able to acquire shares at an appropriate price.
Details of the buy-back programme are explained in a separate
regulatory announcement, with ongoing announcements to update the
market as and when purchases are made.
Outlook
I am proud to be able to guide the next phase of Creston's
development as Group Chief Executive, overseeing our evolution into
a more integrated and unified agency group. Through the Creston
Unlimited proposition, the Group will be better placed than ever
before to deliver on the needs of our longstanding base of
blue-chip clients against the dynamic backdrop of technological
development and digital convergence.
The revised client offer will also provide us with an
opportunity to win more multi-discipline business and the potential
to create additional organic growth over the coming years. We will
continue to look to grow the business through selected acquisitions
and start-ups and to develop our international reach through
partnerships that enhance access to key markets.
This will be a year of investment in realigning our businesses
under a unified Group offer and whilst we remain cautious about the
state of the broader macro-economic climate and its potential to
affect client budgets, we are confident that the implementation of
our new vision will enable us over the medium term to deliver
higher rates of growth and increased value for shareholders.
Financial Review
Headline results
For the financial year ended 31 March 2014, Group revenue
slightly decreased to GBP74.9 million (2013: GBP75.2 million) and
Group Headline PBIT decreased by 4 per cent to GBP9.8 million
(2013: GBP10.2 million), as Headline PBIT margin declined one
percentage point to 13 per cent (2013: 14 per cent). Group Headline
PBT for the year was GBP9.6 million (2013 GBP10.0 million) and
Headline Diluted Earnings Per Share (DEPS) decreased 20 per cent to
11.79 pence (2013: 14.66 pence), primarily due to a tax credit in
the prior year following a positive conclusion to an outstanding
HMRC enquiry (further explanation can be found in note 5).
Headline items
Headline items consist of certain items which are eliminated
from Reported results to enable a better understanding of the
underlying performance of the Group (see note 4 for further
detail), the material items of which were:
(i) Property related costs
As previously reported, there have been associated one-off costs
with the London co-location, such as double rent and rates and
onerous lease provisions, and in the year there has been a related
charge of GBP1.4 million added back to our Headline figures in
order to show the underlying operating performance. This charge is
a mixture of cash and non-cash items and was funded by the GBP7.2
million received in the previous financial year for the reverse
premium and contribution to the dilapidations obligation (see note
9 for further detail).
(ii) Acquisition, start-up and restructuring related costs
The challenging market place impacted Vitaris, our small
healthcare research consultancy, which was closed during the year.
Its lack of critical mass in the highly competitive area of
healthcare research meant that it had not performed as budgeted.
This coupled with restructuring costs in the Insight division
resulted in GBP0.4 million added back to the Headline figures.
Start-up related costs of GBP0.2 million associated with the new
brand and creative consultancy, Loooped, have also been excluded
from the Headline PBIT measure for the year.
Reported results
Group Reported PBIT decreased by 33 per cent to GBP7.4 million
(2013: GBP11.0 million), primarily due to the net of the
revaluation credit of the estimated deferred consideration and the
impairment of goodwill taken during FY13 and resulted in a Group
Reported PBIT margin of 10 per cent (2013: 15 per cent). Group
Reported PBT decreased 35 per cent to GBP7.2 million (2013: GBP11.0
million). Group Reported DEPS decreased 47 per cent to 8.52 pence
(2013: 16.10 pence). Note 4 to the full year results presents a
reconciliation between Headline and Reported results.
Key performance indicators
The Group manages its operational performance through a number
of key performance indicators (KPIs). The principal ones are as
follows:-
Financial Financial
year ended year ended
31 March 31 March
2014 2013
Revenue GBP74.9 million GBP75.2 million
Revenue from digital and online 53% 48%
Revenue from international 32% 35%
Revenue per head GBP91,900 GBP92,000
Headline EBITDA GBP11.6 million GBP12.0 million
Headline PBIT GBP9.8 million GBP10.2 million
Headline PBIT per head GBP12,000 GBP12,400
Headline PBIT margin 13% 14%
Adjusted cash conversion 65% 102%
Net cash GBP7.5 million GBP11.2 million
Net debt*: Headline EBITDA ratio - -
--------------------------------- --------------- ---------------
*Net debt including deferred consideration
Balance sheet
As at 31 March 2014, the Group was in a net cash position of
GBP7.5 million (2013: GBP11.2 million). The net cash including
deferred consideration liabilities of GBP1.7 million (GBP0.3
million for the Cooney/Waters Group and GBP1.4 million for DJM) was
GBP5.7 million (2013: GBP9.5 million).
Cash flow performance
During the financial year, the adjusted operating cash flow was
GBP7.5 million (2013: GBP12.3 million). The cash conversion ratio
of adjusted operating cash flow to Headline EBITDA was 65 per cent
(2013: 102 per cent). The lower cash conversion reflects the
reversal of the exceptional negative working capital position of
GBP1.2 million as at 31 March 2013 and the return to a more
normalised positive working capital position of GBP1.9 million.
Management continues to place significant emphasis on managing
working capital effectively and this has resulted in a five year
cumulative cash conversion of 97 per cent.
The adjusted operating cash flow of GBP7.5 million excludes
GBP3.7 million outflow of operating lease proceeds that have been
utilised to fulfil the dilapidations obligation and settle the
associated VAT liability, see note 9 for further details.
Net finance costs
Despite the Group being in a net cash position throughout the
year, Headline net finance costs were GBP0.1 million (2013: GBP0.2
million) due to the interest paid as a non-utilisation fee for the
revolving credit facility. The Group's average interest rate margin
paid over LIBOR was 1.75 per cent (2013: 1.75 per cent) in the
months the facility was drawn on. Headline net finance costs were
covered by Headline EBITDA 78 times (2013: 79 times).
The Reported net finance costs were GBP0.2 million (2013: nil),
which includes a notional finance charge relating to the deferred
consideration payments of GBP0.1 million (2013: GBP0.2 million
credit).
Effective tax rate
The Headline and Reported tax rates of 25 per cent (2013: 11 per
cent) and 27 per cent (2013: 11 per cent) respectively are slightly
higher than the UK statutory rate of 23 per cent as a result of
disallowable expenditure and higher rates of US tax incurred by the
Group's US operations. The prior year Headline and Reported tax
rates included a provision release of GBP1.7 million following
resolution of HMRC's enquiry into the tax deductibility of goodwill
that was written off when CML Research Limited ceased to trade in
2009.
In future periods we expect the Headline tax rate to reduce from
its current rate of 25 per cent in line with the falling UK
statutory tax rate.
Share buy-back
Following the launch at the end of FY13 of a new three year Save
As You Earn (SAYE) share incentive scheme for its UK employees, the
Group undertook a share buy-back programme with the objective of
meeting the obligations arising from the scheme. The programme was
completed in the year with 1 million ordinary shares purchased from
the market.
As stated above, up to GBP2 million of shares will be acquired
by the Group pursuant to the new buy-back programme. A separate
announcement has been made today with the details of the buy-back
programme.
Barrie Brien
Group Chief Executive
UNAUDITED CONSOLIDATED INCOME STATEMENT
for the year ended 31 March 2014
Unaudited Unaudited Unaudited Audited Headline Audited
Before total Before items total
Headline Headline (note
items items 4)
2014 Headline 2013
items
(note
4)
GBP'000 2014 GBP'000 2013
GBP'000 2014 GBP'000 2013
GBP'000 GBP'000
Note
---------------------------- ------ ---------- ---------- ---------- ---------- --------- ---------
Turnover (billings) 3 101,850 - 101,850 107,088 - 107,088
---------------------------- ------ ---------- ---------- ---------- ---------- --------- ---------
Revenue 3 74,878 - 74,878 75,189 - 75,189
Operating costs (65,112) (2,359) (67,471) (65,024) 841 (64,183)
---------------------------- ------ ---------- ---------- ---------- ---------- --------- ---------
Profit before finance
income, finance costs
and taxation 9,766 (2,359) 7,407 10,165 841 11,006
Finance costs (149) (54) (203) (154) 154 -
---------------------------- ------ ---------- ---------- ---------- ---------- --------- ---------
Profit before taxation 9,617 (2,413) 7,204 10,011 995 11,006
Taxation 5 (2,410) 441 (1,969) (1,087) (125) (1,212)
---------------------------- ------ ---------- ---------- ---------- ---------- --------- ---------
Profit for the year 7,207 (1,972) 5,235 8,924 870 9,794
---------------------------- ------ ---------- ---------- ---------- ---------- --------- ---------
Attributable to:
Equity holders of the
parent 7,100 (1,972) 5,128 8,866 870 9,736
Non-controlling interest 107 - 107 58 - 58
---------------------------- ------ ---------- ---------- ---------- ---------- --------- ---------
7,207 (1,972) 5,235 8,924 870 9,794
---------------------------- ------ ---------- ---------- ---------- ---------- --------- ---------
Earnings per share (pence)
---------------------------- ------ ---------- ---------- ---------- ---------- --------- ---------
Basic 6 11.84 8.55 14.66 16.10
---------------------------- ------ ---------- ---------- ---------- ---------- --------- ---------
Diluted 6 11.79 8.52 14.66 16.10
---------------------------- ------ ---------- ---------- ---------- ---------- --------- ---------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 March 2014
Unaudited Audited
2014 2013
GBP'000 GBP'000
Profit for the year 5,235 9,794
------------------------------------------------- ---------- ---------
Other comprehensive (expense)/income:
Items that may be reclassified subsequently to
profit or loss
Exchange differences on translation of foreign
operations (1,007) 450
Other comprehensive (expense)/income for the
year (1,007) 450
------------------------------------------------- ---------- ---------
Total comprehensive income for the year 4,228 10,244
------------------------------------------------- ---------- ---------
Attributable to:
Equity holders of the parent 4,121 10,186
Non-controlling interest 107 58
------------------------------------------------- ---------- ---------
4,228 10,244
------------------------------------------------- ---------- ---------
CONSOLIDATED BALANCE SHEET
as at 31 March 2014
Unaudited Audited
As at As at
31 March 31 March
Note 2014 2013
GBP'000 GBP'000
---------------------------------------------- ------- ------------ -----------
Non-current assets
Intangible assets
Goodwill 8 103,792 105,022
Other 1,193 1,359
Property, plant and equipment 4,619 4,442
Deferred tax asset 987 582
---------------------------------------------- ------- ------------ -----------
110,591 111,405
---------------------------------------------- ------- ------------ -----------
Current assets
Inventories and work in progress 905 1,070
Trade and other receivables 28,948 25,373
Cash and cash equivalents 10 7,452 11,208
---------------------------------------------- ------- ------------ -----------
37,305 37,651
---------------------------------------------- ------- ------------ -----------
Current liabilities
Trade and other payables (28,519) (28,519)
Corporation tax payable (1,147) (1,549)
Bank overdraft, loans and loan notes 10 - (10)
---------------------------------------------- ------- ------------ -----------
(29,666) (30,078)
---------------------------------------------- ------- ------------ -----------
Net current assets 7,639 7,573
Total assets less current liabilities 118,230 118,978
---------------------------------------------- ------- ------------ -----------
Non-current liabilities
Trade and other payables 9 (2,674) (5,160)
Provision for deferred consideration (1,711) (1,714)
Provision for other liabilities and charges (782) (128)
Deferred tax liability (505) (368)
---------------------------------------------- ------- ------------ -----------
(5,672) (7,370)
---------------------------------------------- ------- ------------ -----------
Net assets 112,558 111,608
---------------------------------------------- ------- ------------ -----------
Equity
Called up share capital 6,134 6,134
Share premium account 35,943 35,943
Own shares (1,679) (656)
Shares to be issued 929 1,167
Other reserves 30,822 30,822
Foreign currency translation reserve (730) 277
Retained earnings 41,032 37,863
---------------------------------------------- ------- ------------ -----------
Equity attributable to equity holders of the
parent 112,451 111,550
---------------------------------------------- ------- ------------ -----------
Non-controlling interest 107 58
---------------------------------------------- ------- ------------ -----------
Total equity 112,558 111,608
---------------------------------------------- ------- ------------ -----------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2014
Called Share Own Shares Other Foreign Retained Total Non-controlling Total
up share premium shares to be reserves currency earnings attributable interest equity
capital account issued translation to equity
reserve holders
of parent
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- ------------ -------- -------- -------- --------- ------------ --------- --------------- ------------------ --------
Changes in equity for
2014 (Unaudited)
---------------------------------------- -------- -------- --------- ------------ --------- -------- ---------------- -----------------
At 1 April
2013 6,134 35,943 (656) 1,167 30,822 277 37,863 111,550 58 111,608
---------------- ------------ -------- -------- -------- --------- ------------ --------- --------------- ------------------ --------
Profit for
the year - - - - - - 5,128 5,128 107 5,235
Other
comprehensive
expense:
Exchange
differences
on
translation
of foreign
operations - - - - - (1,007) - (1,007) - (1,007)
---------------- ------------ -------- -------- -------- --------- ------------ --------- --------------- ------------------ --------
Total comprehensive
(expense)/income
for the year - - - - - (1,007) 5,128 4,121 107 4,228
-------------------- -------- -------- -------- -------- --------- ------------ --------- --------------- ------------------ --------
Credit for
share-based
incentive
schemes - - - 126 - - - 126 - 126
Transfer
between
reserves
in
respect
of lapsed
share options - - - (364) - - 364 - - -
Purchase
of
treasury
shares - - (1,023) - - - - (1,023) - (1,023)
Dividends
(note 7) - - - - - - (2,323) (2,323) (58) (2,381)
---------------- ------------ -------- -------- -------- --------- ------------ --------- --------------- ------------------ --------
At 31 March
2014 6,134 35,943 (1,679) 929 30,822 (730) 41,032 112,451 107 112,558
---------------- ------------ -------- -------- -------- --------- ------------ --------- --------------- ------------------ --------
Called Share Own Shares Other Foreign Retained Total Non-controlling Total
up premium shares to be reserves currency earnings attributable interest equity
share account issued translation to equity
capital reserve holders
of parent
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- -------- -------- -------- -------- --------- ------------ --------- --------------- ------------------ --------
Changes in equity for
2013 (Audited)
------------------------------------ -------- -------- --------- ------------ --------- -------- ---------------- -----------------
At 1 April
2012 6,134 35,943 (656) 1,079 30,822 (173) 30,346 103,495 - 103,495
---------------- -------- -------- -------- -------- --------- ------------ --------- --------------- ------------------ --------
Profit for
the year - - - - - - 9,736 9,736 58 9,794
Other
comprehensive
income:
Exchange
differences
on
translation
of foreign
operations - - - - - 450 - 450 - 450
---------------- -------- -------- -------- -------- --------- ------------ --------- --------------- ------------------ --------
Total
comprehensive
income for
the year - - - - - 450 9,736 10,186 58 10,244
---------------- -------- -------- -------- -------- --------- ------------ --------- --------------- ------------------ --------
Credit for
share-based
incentive
schemes - - - 88 - - - 88 - 88
Dividends
(note 7) - - - - - - (2,219) (2,219) - (2,219)
---------------- -------- -------- -------- -------- --------- ------------ --------- --------------- ------------------ --------
At 31 March
2013 6,134 35,943 (656) 1,167 30,822 277 37,863 111,550 58 111,608
---------------- -------- -------- -------- -------- --------- ------------ --------- --------------- ------------------ --------
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 March 2014
Note Unaudited Audited
2014 2013
GBP'000 GBP'000
Profit for the year 5,235 9,794
------------------------------------------------- -------- ---------- ---------
Taxation 1,969 1,212
------------------------------------------------- -------- ---------- ---------
Profit before taxation 7,204 11,006
------------------------------------------------- -------- ---------- ---------
Finance costs 203 -
Profit before finance income, finance
costs and taxation 7,407 11,006
------------------------------------------------- -------- ---------- ---------
Depreciation of property, plant and equipment 1,657 1,615
Amortisation of intangible assets 282 263
Share based payment charge 267 88
Charge/(credit) for future acquisition
payments to employees deemed as remuneration 252 (299)
Movement in the fair value of deferred
consideration (29) (6,799)
Impairment of goodwill - 5,161
Loss on disposal of property, plant and
equipment 56 15
Loss on disposal of intangible assets 2 13
Decrease in inventories and work in progress 160 149
(Increase)/decrease in trade and other
receivables (3,617) 1,002
Increase in trade and other payables 1,080 48
------------------------------------------------- -------- ---------- ---------
Adjusted operating cash flow 9 7,517 12,262
------------------------------------------------- -------- ---------- ---------
Movement in net proceeds on operating lease 9 (3,688) 6,529
Operating cash flow 3,829 18,791
-------------------------------------------------- ------- ---------- ---------
Tax paid (2,647) (926)
-------------------------------------------------- ------- ---------- ---------
Net cash inflow from operating activities 1,182 17,865
-------------------------------------------------- ------- ---------- ---------
Investing activities
Purchase of subsidiary undertakings - (1,648)
Net cash acquired with subsidiaries - 413
Purchase of property, plant and equipment (1,513) (2,598)
Proceeds from sale of property, plant and
equipment - 9
Purchase of intangible assets (152) (143)
Net cash outflow from investing activities (1,665) (3,967)
-------------------------------------------------- ------- ---------- ---------
Financing activities
Finance costs (112) (176)
Net decrease in borrowings (10) -
Dividends paid 7 (2,323) (2,219)
Dividends paid to non-controlling interest (58) -
Purchase of treasury shares (1,023) -
Capital element of finance lease payments - (2)
-------------------------------------------------- ------- ---------- ---------
Net cash outflow from financing activities (3,526) (2,397)
-------------------------------------------------- ------- ---------- ---------
(Decrease)/increase in cash and cash equivalents 10 (4,009) 11,501
-------------------------------------------------- ------- ---------- ---------
Cash and cash equivalents at start of year 10 11,208 (80)
-------------------------------------------------- ------- ---------- ---------
Effect of foreign exchange rates 253 (213)
Cash and cash equivalents at end of year 10 7,452 11,208
-------------------------------------------------- ------- ---------- ---------
NOTES TO THE FULL YEAR RESULTS STATEMENT
for the year ended 31 March 2014
1. Basis of Preparation
The financial information set out herein does not constitute the
company's statutory accounts for the years ended 31 March 2014 or
2013, within the meaning of section 434 of the Companies Act 2006.
Statutory accounts for 2013 have been delivered to the Registrar of
Companies. The auditors have reported on these 2013 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 2014 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 full year statement in itself does not contain
sufficient information to comply with IFRS.
2. Accounting policies
The full year results were prepared in accordance with the
policies disclosed in the 2013 audited Annual Report and
Accounts.
The following standards, amendments and interpretations are
relevant to the Group, but not yet effective and have not
been early adopted by the Group:
IFRS 10, 'Consolidated financial statements' (effective for
periods beginning on or after 1 January 2014). This standard builds
on existing principles by identifying the concept of control as the
determining factor in whether an entity should be included within
the consolidated financial statements. The standard provides
additional guidance to assist in determining control where this is
difficult to assess. This new standard might impact the entities
that a group consolidates as its subsidiaries.
Amendment to IAS 32, 'Financial instruments: Presentation'
(effective for periods beginning on or after 1 January 2014). This
amendment updates the application guidance in IAS 32, 'Financial
instruments: Presentation', to clarify some of the requirements for
offsetting financial assets and financial liabilities on the
balance sheet.
IFRS 9 'Financial instruments' (effective for periods beginning
on or after 1 January 2015). This standard on classification and
measurement of financial assets and financial liabilities will
replace IAS 39, 'Financial instruments: Recognition and
measurement'. IFRS 9 has two measurement categories: amortised cost
and fair value. All equity instruments are measured at fair value.
A debt instrument is measured at amortised cost only if the entity
is holding it to collect contractual cash flows and the cash flows
represent principal and interest. For liabilities, the standard
retains most of the IAS 39 requirements.
3. Segmental Analysis
The chief operating decision-maker has been identified as the
Executive 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 Communications, Health and
Insight.
The principal activities of the three divisions are as
follows:
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, local marketing, social media
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, advocacy, digital and direct
marketing, public relations, issues and reputation management and
medical education.
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 data collection techniques.
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 property related costs, acquisition,
start-up and restructuring related costs, amortisation of acquired
intangible assets, movement in fair value of deferred
consideration, impairment of goodwill, future acquisition payments
to employees deemed as 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.
With the launch of a new Group vision and strategy in FY15 a new
agency group structure is set to evolve. The Board is therefore
likely to reconsider how it reviews the performance of the Group
and as a result there may be a change in the Group's operating
segments as defined under IFRS 8.
Segmental analysis by business
Turnover, revenue, Headline and Reported profit before finance
income, finance costs and taxation (PBIT) and profit before tax
attributable to Group activities are shown below.
Communications Health Insight Head Office Group
2014 (Uaudited) GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- --------------- ---------- ---------- ------------ ----------
Turnover (billings) 54,702 24,021 23,127 - 101,850
----------------------------------- --------------- ---------- ---------- ------------ ----------
Revenue 40,656 21,286 12,936 - 74,878
----------------------------------- --------------- ---------- ---------- ------------ ----------
Headline PBIT 5,709 4,497 2,559 (2,999) 9,766
----------------------------------- --------------- ---------- ---------- ------------ ----------
Property related costs (94) - (440) (912) (1,446)
Acquisition, start up
and restructuring related
costs (195) (435) (630)
Amortisation of acquired
intangibles - (60) - - (60)
Movement in fair value
of deferred consideration - 29 - - 29
Future acquisition payments
to employees deemed
as remuneration - (252) - - (252)
----------------------------------- --------------- ---------- ---------- ------------ ----------
Reported PBIT 5,615 4,019 1,684 (3,911) 7,407
----------------------------------- --------------- ---------- ---------- ------------ ----------
Finance costs - - - (149) (149)
Notional finance charge
on future deferred consideration - (54) - - (54)
----------------------------------- --------------- ---------- ---------- ------------ ----------
Profit before taxation 5,615 3,965 1,684 (4,060) 7,204
----------------------------------- --------------- ---------- ---------- ------------ ----------
Taxation (1,969)
----------------------------------- --------------- ---------- ---------- ------------ ----------
Profit for the year 5,235
----------------------------------- --------------- ---------- ---------- ------------ ----------
Property related costs of GBP1.4 million have been excluded from
the Headline PBIT measure for the year ended 31 March 2014. These
costs include GBP0.9 million recognised within the Head Office
result, relating to the costs incurred during the vacant period of
Creston House, including double rent, rates and service charge. A
further GBP0.6 million in relation to the vacant period of Creston
House was recognised within the Head Office result in the year
ended 31 March 2013. As at 31 March 2013 a provision for the GBP0.9
million costs was not made with the economic benefit to be obtained
under the new Creston House lease due to exceed these costs and the
additional costs over the lease term.
The remaining GBP0.5 million included within the total GBP1.4
million of property related costs for the year relate to move costs
and double rent, rates and service charge on existing leases; these
have been recognised within the respective divisional result. With
the economic benefit obtained during the year ended 31 March 2014
in excess of the GBP0.5 million incurred under the existing leases,
a provision for these costs was not made as at 31 March 2013.
Acquisition, start up and restructuring related costs of GBP0.6
million have been excluded from the Headline PBIT measure for the
year ended 31 March 2014. These consist of GBP0.4 million in
closure costs and trading losses for Vitaris and restructuring
costs within the Insight division, and GBP0.2 million in start-up
costs associated with the new brand and creative consultancy,
Loooped.
Communications Health Insight Head Office Group
2013 (Audited) GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- --------------- ---------- ---------- ------------ ----------
Turnover (billings) 58,511 26,426 22,151 - 107,088
----------------------------------- --------------- ---------- ---------- ------------ ----------
Revenue 41,142 21,949 12,098 - 75,189
----------------------------------- --------------- ---------- ---------- ------------ ----------
Headline PBIT 6,164 5,081 1,404 (2,484) 10,165
----------------------------------- --------------- ---------- ---------- ------------ ----------
Property related costs - (361) - (583) (944)
Acquisition related
costs - (152) - - (152)
Movement in fair value
of deferred consideration - 6,799 - - 6,799
Impairment of goodwill - (5,161) - - (5,161)
Credit for future acquisition
payments to employees
deemed as remuneration - 299 - - 299
----------------------------------- --------------- ---------- ---------- ------------ ----------
Reported PBIT 6,164 6,505 1,404 (3,067) 11,006
----------------------------------- --------------- ---------- ---------- ------------ ----------
Finance costs - - - (154) (154)
Notional finance credit
on future deferred consideration - 154 - - 154
----------------------------------- --------------- ---------- ---------- ------------ ----------
Profit before taxation 6,164 6,659 1,404 (3,221) 11,006
----------------------------------- --------------- ---------- ---------- ------------ ----------
Taxation (1,212)
----------------------------------- --------------- ---------- ---------- ------------ ----------
Profit for the year 9,794
----------------------------------- --------------- ---------- ---------- ------------ ----------
Due to management's revision of expected trading performance of
Cooney/Waters during the earn-out period there was a reduction of
deferred consideration during FY13 resulting in a credit to the
income statement of GBP6.8 million. An impairment charge of GBP5.2
million was also recognised for the Cooney/Waters goodwill with the
revision in expected trading performance no longer supporting the
carrying value of goodwill. Both items were treated as Headline
items in FY13 and excluded from the Group's Headline
performance.
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.
Turnover Revenue
----------------------------------- ------------------------ ------------------------
(Unaudited) (Audited) (Unaudited) (Audited)
2014 2014
2013 2013
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- ------------ ---------- ------------ ----------
UK 70,376 73,922 50,949 48,951
Rest of Europe 18,471 15,508 12,779 12,278
Rest of the World (including USA) 13,003 17,658 11,150 13,960
----------------------------------- ------------ ---------- ------------ ----------
101,850 107,088 74,878 75,189
----------------------------------- ------------ ---------- ------------ ----------
4. Reconciliation of Headline profit to Reported profit
In order to enable a better understanding of the underlying
trading of the Group, the Board 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 acquisition
related costs, amortisation of acquired intangible assets, movement
in the fair value of deferred consideration, future acquisition
payments to employees deemed as remuneration and notional finance
costs on future 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 consist
of start-up and restructuring related costs, property related costs
and the impairment of goodwill.
PBIT PBT PAT
2014 (Unaudited) GBP'000 GBP'000 GBP'000
-------------------------------------------------- --------- --------- ---------
Headline 9,766 9,617 7,207
-------------------------------------------------- --------- --------- ---------
Property related costs (1,446) (1,446) (1,446)
Acquisition, start up and restructuring
related costs (630) (630) (630)
Amortisation of acquired intangibles (60) (60) (60)
Movement in fair value of deferred consideration 29 29 29
Future acquisition payments to employees
deemed as remuneration (252) (252) (252)
Notional finance charge on future deferred
consideration - (54) (54)
Deferred tax charge on amortisation of
goodwill - - (147)
Taxation impact - - 588
-------------------------------------------------- --------- --------- ---------
Reported 7,407 7,204 5,235
-------------------------------------------------- --------- --------- ---------
PBIT PBT PAT
2013 (Audited) GBP'000 GBP'000 GBP'000
-------------------------------------------------- --------- --------- ---------
Headline 10,165 10,011 8,924
-------------------------------------------------- --------- --------- ---------
Property related costs (944) (944) (944)
Acquisition related costs (152) (152) (152)
Movement in fair value of deferred consideration 6,799 6,799 6,799
Impairment of goodwill (5,161) (5,161) (5,161)
Credit for future acquisition payments
to employees deemed as remuneration 299 299 299
Notional finance credit on future deferred
consideration - 154 154
Deferred tax charge on amortisation of
goodwill - - (268)
Taxation impact - - 143
-------------------------------------------------- --------- --------- ---------
Reported 11,006 11,006 9,794
-------------------------------------------------- --------- --------- ---------
During FY13 an income tax provision of GBP1.7 million was
released following the conclusion of an HMRC enquiry into the
deductibility of goodwill that was written off when CML Research
Limited ceased to trade in 2009. This provision release was
included within the Group's Headline profit after tax result of
GBP8.9 million for the year ended 31 March 2013 to ensure
consistent treatment with the annual tax relief obtained in prior
periods.
5. Taxation
The Headline and Reported tax rates of 25 per cent (2013: 11 per
cent) and 27 per cent (2013: 11 per cent) respectively are slightly
higher than the UK statutory rate of 23 per cent as a result of
disallowable expenditure and higher rates of US tax incurred by the
Group's US operations. The prior year Headline and Reported tax
rates included a provision release of GBP1.7 million following
resolution of HMRC's enquiry into the tax deductibility of goodwill
that was written off when CML Research Limited ceased to trade in
2009.
In future periods we expect the Headline tax rate to reduce from
its current rate of 25 per cent in line with the falling UK
statutory tax rate.
6. Earnings per share
Headline Reported
Unaudited Audited Unaudited Audited
2014 2013 2014 2013
GBP'000 GBP'000 GBP'000 GBP'000
Earnings
Profit for the year (GBP'000) 7,207 8,924 5,235 9,794
------------------------------------------- ----------- ----------- ----------- -----------
Attributable to:
------------------------------------------- ----------- ----------- ----------- -----------
Non-controlling interest (GBP'000) 107 58 107 58
Equity holders of the parent (GBP'000) 7,100 8,866 5,128 9,736
Number of shares
------------------------------------------- ----------- ----------- ----------- -----------
Weighted average number of shares 59,951,901 60,458,946 59,951,901 60,458,946
Dilutive effect of shares 244,459 - 244,459 -
Diluted weighted average number
of shares 60,196,360 60,458,946 60,196,360 60,458,946
Earnings per share
Basic earnings per share (pence) 11.84 14.66 8.55 16.10
------------------------------------------- ----------- ----------- ----------- -----------
Diluted earnings per share (pence) 11.79 14.66 8.52 16.10
------------------------------------------- ----------- ----------- ----------- -----------
A reconciliation from Headline to Reported profit after tax is
provided in note 4.
7. Dividends
Unaudited Audited
2014 2013
GBP'000 GBP'000
Amounts recognised as distributions to shareholders
in the year:
Prior year final dividend of 2.67 pence per
share (2013: 2.67 pence per share) 1,610 1,614
Interim dividend of 1.20 pence per share
(2013: 1.00 pence per share) 713 605
----------------------------------------------------- ---------- ---------
Total 2,323 2,219
----------------------------------------------------- ---------- ---------
A final dividend of 2.70 pence per share (2013: 2.67 pence per
share) equivalent to GBP1,605,392 is recommended to be paid on 12
September 2014 to shareholders on the register on 8 August 2014.
The final dividend will be recognised in the FY15 accounts, should
it be approved by shareholders at the AGM.
8. Goodwill
Goodwill represents the excess of cost of acquisition over the
fair value of the Group's share of the net identifiable assets of
the acquired subsidiary at the date of acquisition.
Goodwill on
consolidation
GBP'000
------------------------------ ---------------
Cost
At 1 April 2012 (Audited) 107,050
Additions 2,183
Impairment (5,161)
Exchange differences 950
------------------------------ ---------------
At 31 March 2013 (Audited) 105,022
------------------------------ ---------------
Exchange differences (1,230)
------------------------------ ---------------
At 31 March 2014 (Unaudited) 103,792
------------------------------ ---------------
Net book amount
------------------------------ ---------------
At 31 March 2014 (Unaudited) 103,792
------------------------------ ---------------
At 31 March 2013 (Audited) 105,022
------------------------------ ---------------
The Group acquired DJM Digital Solutions Limited and also
recognised an impairment to Cooney/Waters in the year to 31 March
2013.
In accordance with the Group's accounting policy, the carrying
value of goodwill and other intangible assets are not subject to
systematic amortisation but are reviewed 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 cash generating unit's ('CGU's') two year
business plan (approved in March 2014) which is subject to a
rigorous review and challenge process. The residual growth rate
thereafter is at a nominal rate of 3 per cent (2013: 3 per cent)
for all units and after year five, a terminal value with 2.5 per
cent (2013: 2.5 per cent) growth has been applied.
For acquisitions made within the last two years, the Group uses
the relevant CGU's current year Headline performance and applies a
3 per cent growth (2013: 3 per cent) for the following four years
with 2.5 per cent (2013: 2.5 per cent) growth on the terminal
value. This is then adjusted for any related deemed remuneration
charges relevant for that CGU. Management believe this method to be
more appropriate as it allows them to work with any new
acquisitions through one complete budgeting and performance cycle.
Where a specific business issue such as the loss of a key client,
as experienced by Cooney/Waters in 2013, means that the expected
cash flows in the following three-year period are expected to be
materially different to the residual growth rate of 3 per cent, the
expected cash flows are used instead. Expected cash flows have been
used in determining the recoverable amount at CWG and ICM instead
of a residual growth rate of 3 per cent.
The pre-tax discount rate used to assess the carrying value of
goodwill is 9.9 per cent (2013: 9.7 per cent). As all the CGUs are
similar in nature, the risk profile is considered the same across
countries. As a result the same discount rate is used for each.
The review performed at the year end did not result in the
impairment of goodwill for any CGU with the estimated recoverable
amount exceeding the carrying value in all cases.
Management also tested the sensitivity of key assumptions by
increasing the discount rate by 10 per cent to 10.9 per cent, and
maintaining the discount rate at 9.9 per cent whilst applying a 10
per cent decrease to the projected future cash flows, with neither
scenario resulting in an impairment.
Through further sensitivity analysis management determined that
the cash generating unit that is most sensitive to a change in key
assumptions used in the calculation of the recoverable amount is
ICM, with its value in use exceeding its carrying value by GBP3.4
million. The key assumption that is subject to possible change, on
which management has based its determination of the CGU's
recoverable amount, is the projected future cash flows over the 5
year period. If the discount rate remained at 9.9 per cent then in
order for the CGU's recoverable amount to be equal to its carrying
value a decrease in the 5 year projected future cash flows of 15
per cent would be required.
Components of goodwill at 31 March 2014 and 2013 are:
Unaudited Audited
2014 2013
GBP'000 GBP'000
Communications
EMO 4,362 4,362
NBG 6,434 6,434
TMW 28,541 28,541
TRA 5,281 5,281
---------------------- ---------- ---------
44,618 44,618
---------------------- ---------- ---------
Health
CWG 13,716 13,716
DJM 2,183 2,183
PAN 9,599 9,599
RDC 7,668 7,668
Exchange differences (655) 575
---------------------- ---------- ---------
32,511 33,741
---------------------- ---------- ---------
Insight
ICM 19,030 19,030
MSL 7,633 7,633
---------------------- ---------- ---------
26,663 26,663
---------------------- ---------- ---------
Total 103,792 105,022
---------------------- ---------- ---------
The US Health companies; Cooney/Waters and The Corkery Group,
have evolved significantly since their respective acquisition by
the Group and it has therefore been considered appropriate to
reassess the composition of the cash generating units in the US as
defined under IAS 36 'Impairment of Assets'. With the cash flows of
Cooney/Waters and The Corkery Group now no longer independent from
one another the companies have been combined into one single cash
generating unit: Cooney Waters Group ('CWG'). This is considered to
be the smallest identifiable group of assets operating in the US
that generate cash inflows that are largely independent of the cash
inflows from other assets or groups of assets.
9. Net proceeds on operating lease
On 7 January 2013 the Group entered into an operating lease for
the new London office. On signing the lease, the Group received a
one-off cash payment of GBP7.2 million (including VAT) in relation
to a reverse premium and agreed dilapidations obligation. As at 31
March 2013 net proceeds of GBP6.5 million on the operating lease
remained and were recognised as part of the Group's operating cash
flow. Excluding the GBP6.5 million from the Group's operating cash
flow of GBP18.8 million for the year ending 31 March 2013 resulted
in an adjusted operating cash flow of GBP12.3 million.
During the year to 31 March 2014 GBP3.7 million of the operating
lease proceeds have been utilised to fulfil the dilapidations
obligation and settle the associated VAT liability. Excluding the
GBP3.7 million from the Group's operating cash flow of GBP3.8
million results in an adjusted operating cash flow of GBP7.5
million.
The remaining liability for the reverse premium has been
recognised within trade and other payables in the
Consolidated balance sheet, with GBP2.7 million being due in
more than one year.
10. Analysis of net cash
Audited Unaudited Unaudited Unaudited Unaudited
As at As at
31 March Acquisition Foreign 31 March
2013 related Cash flow exchange 2014
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cash 11,208 - (4,009) 253 7,452
Bank overdraft - - - - -
-------------------------------------- ---------- ------------- ----------- ---------- ----------
Cash and cash equivalents 11,208 - (4,009) 253 7,452
Revolving credit facility - - - - -
and bank loans
Acquisition loan notes (10) - 10 - -
-------------------------------------- ---------- ------------- ----------- ---------- ----------
Net cash 11,198 - (3,999) 253 7,452
-------------------------------------- ---------- ------------- ----------- ---------- ----------
Provision for deferred consideration (1,714) 3 - - (1,711)
-------------------------------------- ---------- ------------- ----------- ---------- ----------
Net cash including deferred
consideration 9,484 3 (3,999) 253 5,741
-------------------------------------- ---------- ------------- ----------- ---------- ----------
11. Related-party transactions
Mr D C Marshall, a Non-Executive Director of Creston plc 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 2014.
During the year total fees of GBP63,960 (2013: GBP64,160) were paid
to City Group P.L.C., GBP28,960 (2013: GBP29,160) for the provision
of secretarial services and GBP35,000 (2013: GBP35,000) for the
services of Mr D C Marshall. As at 31 March 2014 GBP19,323 (2013:
GBP8,667) was due to City Group P.L.C.
12. Availability of the Annual Report and Accounts
Copies of the Annual Report and Accounts 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
FR LLFVTRIIILIS
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