RNS Number:7146S
Creston PLC
02 December 2003
Date: 2 December 2003
On behalf of: Creston Plc
Embargoed until: 0700 hrs
Creston Plc
Interim Results 2003
For the six months ended 30 September 2003
HIGHLIGHTS
Unaudited Unaudited Change
six months ended six months ended
30 September 2003 30 September 2002
Turnover #12.95m #7.88m + 64%
Gross profit #4.45m #2.87m + 55%
Operating profit #948,000 #353,000 + 169%
Profit before tax #750,000 #216,000 + 247%
Earnings per share 4.59p 1.20p + 283%
Special interim dividend per share 0.60p - -
* Strong organic growth in turnover and operating profits across the
Group
* Results demonstrate Group's ability to acquire companies capable of
performing well in difficult markets
* Acquisition of Nelson Bostock Communications Limited completed on 16
October 2003 for a maximum consideration of up to #10.7m
* Placing and Open Offer, raising #4.24m net and creating a significant
institutional investor shareholder base
Commenting on today's announcement, David Marshall, Group Chairman, said:
"Despite difficult market conditions, Creston has shown excellent turnover
growth compared to the same period last year, with an increase of 19% in organic
growth in turnover and a further 45% due to the incorporation of a full six
months of EMO's trading. Profit before tax has increased over three times
reflecting the constrained central costs and the economies of scale generated by
the inclusion of a full period of EMO's profits.
"Our three initial acquisitions, Marketing Sciences Limited, The Real Adventure
Marketing Communications Limited and EMO Group Limited, have performed extremely
well and demonstrate our ability to identify and grow companies that are capable
of performing well in difficult markets and generate synergies across the Group.
"The completion of the acquisition of Nelson Bostock Communications Limited in
October is evidence of our 'buy-and-build' strategy and further broadens the
range of marketing services that Creston is able to offer. We continue to
pursue further acquisition opportunities to build a pre-eminent diversified
international marketing services group."
For further information, please contact:
Creston Plc 020 7930 9757
Don Elgie, Chief Executive
Tim Alderson, Finance Director
Redleaf Communications 020 7955 1410
Emma Kane/Nick Lambert
Notes to editors:
About Creston Plc
* Creston's strategy is to build a diversified international marketing services group through a combination of organic
growth and selective acquisitions. The Board's aim is to identify synergistic benefits between currently independent
marketing services companies offering premium services such as market research, direct marketing, customer
relationship marketing and other areas of marketing communications.
* The Board's objective is that each element of the Group will reflect the continued trend away from mass marketing
towards one-to-one marketing between clients and customers.
* Since January 2001, when the Company was repositioned as a marketing services group, Creston has made four significant
acquisitions, which have demonstrated growth despite difficult market conditions:
January 2001 Acquisition of Marketing Sciences Limited, an international quantitative and qualitative market research
company, based in Winchester
November 2001 Acquisition of The Real Adventure Marketing Communications Limited, a national marketing communications
company, based in Bath
December 2002 Acquisition of EMO Group Limited, a national channel marketing communications company, based in Swindon
and Bristol
October 2003 Acquisition of Nelson Bostock Communications Limited, a London based public relations agency
* Together these companies boast a range of blue-chip clients including Unilever, Kimberly-Clark, Tesco, BMW (UK), MINI,
Pfizer, Cow & Gate, Bacardi-Martini, Toshiba, Canon, BBC Vecta, NEC, NTL, George Wimpey, Andreas Stihl and Lloyds
Black Horse.
* In future Creston's share price will be quoted in the Telegraph, the Times and the London Evening Standard in addition
to the Financial Times.
INTERIM REPORT
For the six months ended 30 September 2003
Chairman and Chief Executive's Statement
Creston has continued to implement its 'buy and build' strategy in challenging
market conditions. Trading during the first six months of the year to 31 March
2004 by the main operating companies within the Creston Group, Marketing
Sciences Limited ("MSL"), The Real Adventure Marketing Communications Limited
("TRA") and EMO Group Limited ("EMO"), has been excellent, with increases of
12% to 22% in operating profit over the same period last year. This is
particularly gratifying given the tough market conditions that still exist and
gives testimony to our ability to identify companies that are capable of
resilient performance.
Results
Turnover grew by 64% to #12.95 million (2002: #7.88 million) and gross profit
was #4.45 million (2002: #2.87 million). The slightly lower gross margin
reflects the different business and subsidiary mix compared to the same period
last year. Operating profit grew from #353,000 to #948,000 and profit before
taxation increased by 247% to #750,000 (2002: #216,000). Basic earnings per
share were 4.59 pence (2002: 1.20 pence) and diluted earnings per share were
4.59 pence (2002: 1.20 pence).
At 30 September 2003, Creston had net cash balances of #2.0 million of which
#1.9 million are freely available for use by the Group. An amount of #2.9
million relating to convertible loan notes on the acquisition of TRA and EMO was
converted on 3 October 2003 and 3 November 2003 respectively into an aggregate
of 3,036,063 ordinary shares. As a result, after the period end, creditors due
in more than one year has been reduced by #2.9 million and the Group's gearing
has been significantly reduced.
A special interim dividend of 0.6 pence per share was paid, before publication
of this report, on 14 October 2003 to shareholders on the register on 3 October
2003. This is in line with the Board's stated strategy of implementing a
progressive dividend policy.
Review of Operations
MSL
MSL exceeded its budget in the first six months, achieving turnover of #3.5m
(2002: #3.0m), an increase of 16%. Operating profit of #562,000 (2002:
#468,000) was achieved, an increase of 20%, against a market that was forecast
to grow by no more than 2.6% in 2003 according to the British Market Research
Association. MSL's broad range of consumer goods clients, such as Tesco,
Unilever and Kimberly-Clark, have served it well during the period as has
ensuring its projects are competitively priced.
MSTS
The Board is pleased to report that the trading performance of Mobile Sensory
Testing Services ("MSTS"), has turned around compared to its weak results in the
similar half last year. The new management continues to exceed expectations and
to build on a client base which includes Bacardi-Martini, Danone, Campbell's
Grocery Products and Burger King (UK) among others.
TRA
TRA continues to be broadly unaffected by the tough market environment,
achieving a 12% growth in operating profits to #522,000 (2002: #466,000).
Turnover was #5.0 million (2002: #4.1 million), an increase of 21%. TRA's
strong performance and continued growth is testimony to its resilient business
model of working very closely with blue chip clients to provide them with
strategies particularly in direct marketing and CRM. The growth in income has
come primarily from Lloyds Black Horse, Cow & Gate and Pfizer.
EMO
EMO Group also exceeded its budget for the first six months of the year, with
turnover of #3.6 million and operating profits of #356,000. Its strong
performance was accounted for by new product launches by BMW (Z4 and 5 Series),
and continued strong performances from MINI, Andreas Stihl and George Wimpey.
The six months ended 30 September 2002 were prior to acquisition by Creston and
although EMO used a slightly different cost basis, growth in operating profits
was 22%.
Post Period Events
The acquisition of Nelson Bostock Communications Limited ("NBC"), approved at
the EGM on 15 October 2003, will add to the critical mass of Creston. NBC is a
London based public relations agency founded in 1987 and ranks as the 25th
largest UK agency and 10th largest agency in the technology sector in recent
industry league tables. NBC employs 49 people, providing a broad range of
public relations and marketing communications consultancy and services to some
40 clients. The maximum consideration payable for NBC is up to #10.7 million,
satisfied by an initial consideration of #5.25 million, the payment of #1.45
million for the net assets of NBC and a deferred consideration of #4.0 million
which is dependent on the financial performance of NBC in the period to 31 March
2007.
The Board was particularly pleased with the Placing and Open Offer in October
and would like to take this opportunity to welcome our new shareholders and
thank them for their support. The Placing and Open Offer, which was more than
twice oversubscribed, raised #4.24 million (net of expenses). #3 million of the
net proceeds of the Placing and Open Offer were used to finance part of the
initial consideration of the acquisition of NBC with the remaining #1.24 million
augmenting the Group's working capital.
As mentioned earlier, both the EMO and TRA Convertible Loan Notes have been
converted into 3,036,063 ordinary shares since 30 September 2003 which means
that #2.9m of liabilities have become equity and the Balance Sheet gearing has
been significantly reduced. This will free up cash for growth that would
otherwise have been held for the repayment of the Loan Notes.
Outlook
Since the end of September, we are pleased to report that trading in all of the
operating subsidiaries has been in line with expectations.
With the acquisition of NBC, which the Board expects to be earnings enhancing
for the Group in the current year, benefits exist through cross-selling with
Creston's three other main operating subsidiaries. New clients won since the
half year include Gerling-NCM, Broadreach, Jack Daniels, and Southern Comfort.
New projects from existing clients include those for Campbells Grocery Products,
BBC Vecta and Canon CBS.
The relatively low level of corporate activity in the marketing services sector
and the tough trading environment has meant that vendors continue to be more
reasonable with regard to valuation, which should benefit Creston's continuing
acquisition strategy.
In summary, we are pleased with the Group's performance in what is still a tough
market. The Group has demonstrated its resilience and its strategy has found a
strong following with institutional investors. This augers well for Creston's
future growth plans and the Board is confident of the future prospects of the
Group.
David Marshall Don Elgie
Chairman Chief Executive
2 December 2003
GROUP PROFIT AND LOSS ACCOUNT
Unaudited six months Restated unaudited Audited
ended 30 September six months ended 30 year ended
2003 September 2002 31 March 2003
#'000 #'000 #'000
Turnover 12,950 7,878 18,636
Cost of sales (8,505) (5,004)* (11,922)
Gross profit 4,445 2,874* 6,714
Administrative expenses (3,497) (2,521)* (5,513)
Operating profit 948 353 1,201
Share of operating loss in joint ventures (34) (57) (78)
Profit on ordinary activities before 914 296 1,123
interest
Net interest (164) (80) (211)
Profit on ordinary activities before 750 216 912
taxation
Taxation (235) (80) (197)
Profit for the period 515 136 715
Dividends (67) - (157)
Retained profit for the period 448 136 558
Basic earnings per share 4.59p 1.20p 6.38p
Diluted earnings per share 4.59p 1.20p 6.38p
*Restated, see Note 1
GROUP BALANCE SHEET
Unaudited Unaudited Audited
as at as at as at
30 September 2003 30 September 2002 31 March 2003
#'000 #'000 #'000
Fixed assets
Intangible assets 19,001 15,454 19,001
Tangible fixed assets 631 297 670
Investment in joint venture
Share of gross assets - 33 57
Share of gross liabilities - (121) (57)
- (88) -
19,632 15,663 19,671
Current assets
Stocks 597 375 474
Debtors 5,500 3,500 5,299
Cash at bank and in hand 2,066 3,800 2,424
8,163 7,675 8,197
Creditors - amounts falling due within (7,657) (6,095) (5,929)
one year
Net current assets 506 1,580 2,268
Total assets less current liabilities 20,138 17,243 21,939
Creditors - amounts falling due after (9,156) (7,129) (11,403)
more than one year
Net assets 10,982 10,114 10,536
Capital and reserves
Called up share capital 1,122 1,122 1,122
Share premium account 4,880 4,880 4,880
Special reserve 2,385 2,385 2,385
Other reserve 1,383 1,385 1,385
Capital redemption reserve 72 72 72
Profit and loss account 1,140 270 692
Shareholders' funds 10,982 10,114 10,536
GROUP CASH FLOW
Unaudited Unaudited Audited
six months ended six months ended year ended
30 September 2003 30 September 2002 31 March 2003
#'000 #'000 #'000
Net cash inflow from operating activities 544 624 1,516
Returns on investments and servicing of
finance
Net interest paid (175) (203) (225)
Taxation - - (212)
Capital expenditure and financial investment
Purchase of tangible fixed assets (147) (146) (227)
Sale of tangible fixed assets 17 - 26
Decrease in restricted cash deposits - 2,044 4,089
Net cash (outflow)/inflow from capital (130) 1,898 3,888
expenditure and financial investment
Acquisitions and disposals
Purchase of subsidiary undertakings - - (2,980)
Net cash acquired with subsidiaries - - 1,004
Net cash outflow from acquisitions and - - (1,976)
disposals
Equity dividends paid (157) (79) (79)
Net cash inflow before financing 82 2,240 2,912
Financing
Capital element of finance lease payments (64) (9) (48)
New finance leases acquired 68 - 27
Repayment of loan notes - (2,044) (4,889)
Receipt of bank loan - - 3,060
Repayment of bank loan (458) (232) (464)
Net cash outflow from financing (454) (2,285) (2,314)
(Decrease)/increase in cash (372) (45) 598
NOTES TO THE INTERIM REPORT
1. Basis of preparation
The interim financial information has been prepared in accordance with
applicable accounting standards and under the historical cost convention. The
principal accounting policies have remained unchanged from those set out in the
Group's 2003 annual report and financial statements. The comparative figures
for the six months ended 30 September 2002 have been restated to reallocate some
staff costs from administrative expenses to cost of sales in order to make the
presentation consistent with the statutory accounts.
2. Earnings per share
The calculation of the basic earnings per share is based on the profit
attributable to ordinary shareholders divided by the weighted average number of
shares in issue for each period, which was 11,215,364 for the period ended 30
September 2003 (year ended 31 March 2003 and period ended 30 September 2002:
11,215,364).
3. Goodwill
A review of the carrying value of acquisitions has been carried out using
reforecast profits. This has shown an increase in the value in use of the
subsidiaries and a corresponding increase in the surplus over the carrying value
in the accounts. No reduction in goodwill has therefore been made, as there are
no indications of impairment.
4. Reconciliation of operating profit to net cash flow from operating activities
Unaudited Unaudited Audited
six months ended six months ended year ended
30 September 2003 30 September 2002 31 March 2003
#'000 #'000 #'000
Operating profit 948 353 1,201
Depreciation 170 114 219
(Profit)/loss on disposal of fixed assets (1) -
19
(Increase)/decrease in stock (123) (24) (130)
(Increase)/decrease in debtors (201) 270 (303)
Increase/(decrease) in creditors (249) (89) 510
Net cash inflow from operating activities 544 624 1,516
5. Cash and liquid resources
As at As at 30September
1 April 2003
2003 Cash flow
#'000 #'000 #'000
Cash at bank and in hand 2,424 (358) 2,066
Overdrafts (27) (14) (41)
2,397 (372) 2,025
Less restricted cash balances (111) - (111)
Cash available for use 2,286 (372) 1,914
The restricted cash balances are maintained in a designated account as security
for the loan notes issued on the acquisition of Marketing Sciences Limited and
are, therefore, not freely available to the Group.
6. Post balance sheet events
On 16 October 2003, the Company completed its acquisition of the entire share
capital of Nelson Bostock Communications Limited. Full details are provided in
the Prospectus issued to Shareholders on 19 September 2003. As part of the
acquisition, 2,343,750 new ordinary shares at 96 pence per share were issued and
listed on the London Stock Exchange on 16 October 2003.
The acquisition was funded by a Placing and Open Offer of 5,303,841 new ordinary
shares at 86 pence per share, which raised #4.24m net of costs and which were
listed on the London Stock Exchange on 16 October 2003.
The conversion criteria for the EMO and TRA convertible loan notes were met on 3
October and 3 November respectively, and resulted in the issue of 3,036,063 new
ordinary shares at 96 pence per share.
7. Publication of non-statutory accounts
The financial information set out in this interim report does not constitute
statutory accounts as defined in Section 240 of the Companies Act 1985.
The financial information for the year ended 31 March 2003 has been extracted
from the Group's statutory accounts for that period. These contained an
unqualified audit report and have been filed with the Registrar of Companies.
8. Availability of the Interim Report
Copies of the Interim Report will be sent to shareholders in due course and are
available from the Company's registered office at City Group P.L.C., 25 City
Road, London, EC1Y 1BQ.
This information is provided by RNS
The company news service from the London Stock Exchange
This information is provided by RNS
The company news service from the London Stock Exchange
END
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