Final Results

RNS Number : 3503X

Creston PLC

24 June 2008

Creston plc

Unaudited Preliminary Financial Results for the Year Ended 31 March 2008

Creston plc (LSE: CRE), the insight and communications group, today announces its preliminary financial results for the year ended 31 March 2008.

Highlights

Excellent revenue growth of 16% and 8% on a like for like basis
Headline PBIT growth of 9% and 2% on a like for like basis
Strong growth in online and digital revenues to 19% of Group revenues (2007: 15%)
Significant investment in new initiatives, including online research panels, extra headcount in digital departments and new corporate PR and international healthcare PR operations
Significant improvement in cash with net cash inflow from operating activities up 224% (£12.3 million) and cash conversion to Headline EBITDA of 102% (2007: 55%)
Net debt reduced by 18% to £17.8 million (£49 million including deferred consideration of £31.6 million)
The ratio of net debt to Headline EBITDA improved from 1.4 to 1.0. New banking facility ensures significant headroom settling all future deferred consideration
Net new business of £9m includes the wins of AstraZeneca, Barclaycard, Britvic, Capital One, Gordons Gin, GSK, Heinz, Homeform, Merlin Entertainments (Alton Towers, Chessington World of Adventures and Thorpe Park), Nissan Infiniti, Royal Mail and Twinings.

Financial Results

	Headline results**			Reported results
	2008	2007	Change	2008	2007	Change
	£m	£m			£m
Revenue	80.5	69.7	+ 16%	80.5	69.7	+ 16%
PBIT*	15.2	14.0	+ 9%	12.7	10.3	+ 23%
Pre-tax profit	13.5	13.3	+ 2%	9.6	7.7	+ 25%
Diluted EPS (pence)	17.01	17.35	- 2%	8.64	8.41	+ 3%
Dividends per share (pence)	2.77	2.64	+ 5%	2.77	2.64	+ 5%

* Profit before Interest and Tax (PBIT) is defined as Profit before finance income, finance costs, income from financial assets and taxation. It has been restated to reflect the accounting treatment of deemed remuneration as described in Note 2.

** A reconciliation between Headline and Reported results is presented in note 4.

Commenting on today's announcement, Don Elgie, Group Chief Executive, said:

"The Board is pleased to announce another year of excellent financial and commercial results. Our strong new business record underpins the like-for-like revenue growth of 8 per cent and demonstrates our continued ability to outperform the UK marketing services sector.

In the current economic environment, we are focused on delivering exceptional results to our clients. 2008 has been a year of consolidation, investment and strategic evolution and we believe our diversified model and recent initiatives give a strong platform to continue our record of growth in 2009."

A meeting for analysts will be held today at 9.30 am at Threadneedles Hotel, 5 Threadneedle Street, London, EC2R 8AY. Please contact Jennifer Kelly at Hogarth on telephone: 020 7357 9477 for details.

For further information, please contact:

Creston plc 020 7930 9757

Don Elgie, Chief Executive

Barrie Brien, COO & CFO

www.creston.com

Hogarth Partnership Limited 020 7357 9477

Chris Matthews

Sarah Macleod

Chairman and Chief Executive Statement

Group Highlights

2008 has seen Creston produce another set of record results. Since our inception as a marketing services group in 2001 Creston has consistently delivered growth in revenue and PBIT. In 2008 we continued this record with revenue growth of 16 per cent and like-for-like revenue growth of 8 per cent, driven by net new business wins of £9 million from a range of blue chip clients. Since 2002 we have produced a compound annual revenue growth rate of 69 per cent. Clearly a large portion of this has been driven by acquisitive growth, but we pride ourselves on our ability to generate like-for-like growth that exceeds the market.

Whilst the revenue growth demonstrates our ability to attract and retain clients, we must ensure that this converts to profit. In 2008 we had a Headline PBIT margin of 19 per cent (our second highest margin achieved to date), which we believe significantly exceeds the industry average. Not only are we able to increase our market share through delivering exceptional results to our clients, we are able to convert this into increased profit for our shareholders through an efficiently managed business.

Since our companies are sharing skill sets to improve their client offering more than ever before and our resultant new business pipeline remains strong, we believe Creston, despite the economic climate, is in a strong position heading into 2009.

Online and Digital

As clients' spend is switching from traditional to new digital channels, Creston has responded to this challenge by investing in new technologies, the training of employees, the recruitment of staff to fill skills gaps and the development of a group-wide integrated digital strategy. Where the Group does not possess certain capabilities, in the areas of search optimisation and digital healthcare, for example, we have formed strategic alliances to complete our offering to clients. This strategy has borne significant fruit with a large proportion of Creston's growth in 2008 coming from digital and online, which has grown by 43 per cent and accounts for 19 per cent of Group revenue.

However, this growth came at a cost in our last financial year. Our agencies incurred substantial freelance and recruitment fees to service the growing client demand. We completed a significant recruitment drive, especially in DLKW and TMW, and are now well placed to improve our profit conversion from the digital revenue growth.

Group revenue from digital and online activities now exceeds £15 million - this ranks Creston ahead of many of the UK's leading specialist digital agencies. Complementing our growing digital revenue, we have received industry awards for the work performed by newvista research, digitaltmw, DLKW and TRA. We have an excellent digital platform and reputation, and this will help continue to develop and drive the future growth of the Group.

New Business

Creston enjoyed another excellent year of new business wins during 2008. Net new business wins were £9 million and came from a range of new clients and new business from our existing clients, for example AstraZeneca, Barclaycard, Britvic, Capital One, Gordons Gin, GSK, Heinz, Homeform, Merlin Entertainments (Alton Towers, Chessington World of Adventures and Thorpe Park), Nissan Infiniti, Royal Mail and Twinings. In 2007 our top 20 clients accounted for 57 per cent of Group revenue - this decreased to 52 per cent in 2008 as we added new clients to the portfolio.

The 2009 financial year has started strongly with a host of impressive new business wins, such as Amazon (PR), Lipton, Berry Bros (Direct Marketing) and Daily Mirror, House of Fraser, Insignia and General Motors (Advertising).

We believe that our agencies offer their clients an exceptional return on their marketing investment, and the market leading position of many of our agencies suggests that we will consistently win new business - during 2008 many of our agencies had a pitch to win ratio in excess of 50 per cent.

Group Strategy

Our Partners' Board has recently identified four areas where they feel Creston has the opportunity to develop its cross group capabilities in order to deliver superior client solutions and create substantial growth and differentiation . These 4 pillars of growth are:-

Insight & Intelligence - Creston already provides clients with exceptional market research data and analysis, however, by developing this core ability with our communications' insight and planning capabilities the Group will be able to act as advisors to its clients rather than purely as suppliers.

Digital - We have achieved significant growth in this area and we aim to stay ahead of our competition. Our strategy is to crystallise and share best practice throughout the Group in order to drive cutting edge digital delivery and maximise profitability. Our digital forum will be the place where best practice and innovation is shared.

Healthcare - we are best described as "a family of healthcare communications experts"- the current synergistic relationship that already exists between our companies is being complemented by the services of other Creston group companies, for example research, digital and CRM, to put Creston's healthcare offering ahead of its competitors.

Group - This pillar involves working with the directors of the Creston operating companies in order to identify individuals, practice areas, products/service and geographic priorities that are deemed to be strategic priorities in order to populate a compelling group or "integrated" offer. By approaching clients as a group rather than as silos, the Group is able to offer clients a full service insight and communication solution to their marketing needs.

The Partners' board is working together to develop the above initiatives, whilst also identifying and introducing new initiatives within their existing operating companies in order to help drive growth.

International Development

Although all of our companies are UK based, the proportion of our turnover and revenue generated internationally has grown to 20 per cent (2007: 18 per cent) and 17 per cent (2007: 14 per cent) respectively, due to the growth of our international client base. This continued expansion has been driven by a number of organic developments within our existing UK based agencies and further complemented by a number of new affiliations agreed with strategic partners across the US and Europe, namely ICM joining the WIN network and RDC joining the Indigenus network. As clients are looking more and more to the micro networks for their insight and communication needs, we feel we are well positioned to exploit future growth opportunities internationally.

Net Debt and Settlement of Earn Outs

At 31 March 2008, 55% of the Group's Headline PBIT was under earnout arrangements. To give an example, on average, for every £1 decline in PBIT from these companies, over £2 will be reduced from the earnout liability at 31 March 2009. This serves as an effective "hedge" against shortfalls in PBIT arising in the event of a downturn in UK marketing services.

In 2008 we generated Headline EBITDA of £17.5 million (2007: £15.9 million) and free cash flow, after finance costs, taxation and capital expenditure of £10.6 million (2007: £2 million). Our total net debt plus contingent liability of deferred consideration of £49.4 million will be settled with free cash flow, although the Group has the option to settle up to £8.3 million of these debts by the issue of equity. Therefore, the total net debt requiring cash settlement is £41.1 million, which represents 4 years of free cash flow (based on the 2008 results). The Group is also pleased to announce a new banking facility of £40 million which amortises over 4 years to 31 March 2012.

The Group's ratio of total net debt to Headline EBITDA is 2.8 which reduces to 2.3 after eliminating debt which may be settled by equity. This is well within the Group's banking covenants and is not excessive when compared to our peer group.

In March 2008 both CML and DLKW completed their earn-outs and senior management have committed to long term incentive schemes with the Group.

Outlook

Despite the current pessimism amongst economic commentators we are yet to feel any tangible effects. The tell tale signs of cut backs and delayed expenditure have yet to have a material impact at Group level, indeed in the last quarter of the year we saw revenue increase 6 per cent on a like-for-like basis.

Given Creston's record of outperforming the market and with the Group being comprised of outstanding experienced practitioners, who have excellent track records of growing their companies in tough times, we are confident that the Group is well positioned for an economic downturn.

However, we are not being complacent. We have already been reducing costs and there are opportunities for further cost reductions which are being explored. To conclude, nobody has a crystal ball with regard to future economic performance but we believe Creston is structured to weather the economic uncertainties that may face us.

David Marshall Don Elgie

Chairman Chief Executive Officer

Financial Review

Financial Highlights

In 2008 Creston's solid commercial performance delivered another set of record results. Revenue increased by 16 per cent to £80.5 million (2007: £69.7 million) and on a like-for-like basis by 8 per cent (2007: 5 per cent). This growth has been generated by a full year's consolidation of ICM, TMW and PAN plus the underlying growth achieved from a strong new business performance. Headline PBIT increased by 9 per cent to £15.2 million (2007: £14.0 million); and Headline Profit before Taxation (PBT) increased by 2 per cent to £13.5 million (2007: £13.3 million). Reported PBIT increased by 23 per cent to £12.7 million (2007: £10.3 million) and Reported PBT increased by 25 per cent to £9.6 million (2007: £7.7 million). In 2008 the investment in new ventures, increased headcount and freelance costs for digital services held back like-for-like headline PBIT growth to 2 per cent (2007: 7 per cent) pre head office.

Key Performance Indicators

The Group manages its operational performance through a number of key performance indicators (KPIs), and each of these remains strong compared to the industry average. Revenue per head increased by 3 per cent to £93,700 (2007: £90,600); Headline PBIT per head remained high at £17,800 (2007: £18,200); the Group achieved its second highest Headline PBIT margin at 19 per cent (2007: 20 per cent); and Headline DEPS fell by 2 per cent to 17.01 pence (2007: 17.35 pence). Reported DEPS grew by 3 per cent to 8.64 pence (2007: 8.41 pence).

Despite growth in the revenue KPIs, the Headline PBIT and EPS KPIs were affected by (a) the investment in the new ventures of Corporate PR, international Healthcare PR, merging the DLKW and Dialogue offering, TRA Asia, businessvista research; and (b) significant freelance costs and recruitment fees in response to the rapid growth in digital and online communications. The Board is confident that this investment in our client offering is essential and will best place the Group for continued growth.

Divisional Performance

Insight Division

The Insight Division accounts for 22 per cent of Group revenue and 29 per cent of Group Headline PBIT. It has delivered another year of growth with revenue increasing by 16 per cent to £17.9 million (2007: £15.4 million) and Headline PBIT increasing by 5 per cent to £5.3 million (2007: £5.0 million). Reported PBIT increased by 20 per cent to £5.2 million (2007: £4.3 million).

The above growth was generated by a full year consolidation of ICM (acquired in May 2006) and like-for-like revenue growth of 9 per cent. This compares favourably with the industry, which has grown by 2 per cent (Source: MRS 2007 Q4). Revenue per head increased by 10 per cent to £115,300 (2007: £104,700), whilst Headline PBIT per head remained at £34,200 (2007: £34,300). The Headline PBIT margin remained high at 30 per cent (2007: 33 per cent), although some decrease has been caused by the continued investment in online research and the recruitment of a number of senior industry experts to help facilitate future growth within the division.

Communications Division

The Communications Division, which accounts for 78 per cent of Group revenue and 71 per cent of Headline PBIT, has delivered another year of growth with revenue increasing by 15 per cent to £62.6 million (2007: £54.3 million) and Headline PBIT increasing by 9 per cent to £13.1 million (2007: £12.0 million). Reported PBIT increased by 21 per cent to £11.7 million (2007: £9.7 million). This growth was generated by a full year consolidation of TMW and PAN (acquired in May 2006 and December 2006, respectively) and like-for-like revenue growth of 7 per cent. We believe this compares favourably to the industry.

The key performance measures remain in the upper quartile for the industry averages and are largely in line with the prior year: Revenue per head increased by 2 per cent to £91,000 (2007: £88,500), whilst Headline PBIT per head decreased by 3 per cent to £19,000 (2007: £19,600). The Headline PBIT margin remains high at 21 per cent (2007: 22 per cent) - this small change is the result of the continued investment in digital infrastructure, the temporary reliance on freelance resource, especially in the high growth digital sector and the recruitment of a number of senior industry figures to lead the expansion into Consumer PR, Corporate PR and International healthcare PR.

Cash flow performance

In the current economic climate the importance of cash generation takes equal ranking alongside underlying operational performance. The Group delivered an increase in operating cash flow of 105 per cent to £17.8 million (2007: £8.7 million). The cash conversion ratio of Headline EBITDA to operating cash flow was 102 per cent (2007: 55 per cent), which is above Management's long term target of 95 per cent. Cash flow from operating activities per share increased by 207 per cent to 22.21 pence (2007: 7.24 pence).

The Group's cash from operating activities was used to settle consideration liabilities due to DLKW (£0.2 million), NBC (£0.3 million), RDC (£2.7 million), ICM (£0.4 million) and TMW (£0.3 million); bank repayments (£2.8 million); capital expenditure (£1.8 million) and dividends to shareholders (£1.5 million). The net cash flow for the Group was an inflow of £2.1 million (2007: outflow of £3.6 million), which increased the Group's cash balance to £3.8 million (2007: £1.6 million).

Banking

Despite the difficult market conditions, the Group is pleased to announce that it has converted post year-end a proportion of the fixed term debt to a revolving credit facility, whilst extending the availability of the facility until March 2012. In summary, this provides the Group with a £40 million facility, £40 million of which is amortising until 31 March 2011 and £25 million of which is available until 31 March 2012 and is a sign of confidence in the underlying performance of the Group.

The amended facility provides the Group with significant flexibility to settle all future deferred consideration liabilities in cash and loan notes, whilst also providing the capacity for further corporate investments. The Group continues to maintain significant headroom in each of its banking covenants.

Balance sheet, net debt and gearing

Total equity rose during the year by £3.7 million to £82.9 million. After dividends, earnings contributed the majority of this increase.

Under the deferred consideration arrangements Creston has the right to settle certain deferred consideration liabilities with equity rather than loan notes and the amount of the deferred consideration is amended each year to the expected amount payable. It had been agreed that the final consideration due to DLKW would be settled fully in loan notes. Accordingly, £12.8 million twelve month loan notes were issued in April 2008 in full settlement of the deferred consideration. With the new banking facility in place, the Company has the ability and the headroom to settle a larger proportion of deferred consideration in loan notes rather than equity in order to maximise shareholder value.

Creston's gearing (net debt over equity) has fallen to 21 per cent (2007: 27 per cent) and the net debt of the Group at 31 March 2008 was £17.8 million (2007: £21.7 million). After including deferred consideration to be settled by a mixture of loan notes and shares of £29.5 million (2007: £34.2 million), the Group's total debt was reduced to £47.4 million (2007: £56.0 million). On this basis the Group's gearing fell to 57 per cent (2007: 71 per cent).

Headline EBITDA cover to net debt and total debt (excluding deferred consideration which can be settled via equity at the option of the Group) has also continued to fall and at the year end was 1.0 (2007: 1.4) and 2.3 (2007: 3.0) respectively. This important ratio was significantly below the banking covenants of 2.5 and 3.5 respectively.

Creston continued to maintain its policy of managing its net debt and gearing to prudent levels, whilst maximising returns for shareholders, in order to preserve its financial stability. The Board remains confident that between the strong cash generation performance and the agreed banking facility, the long term liabilities are manageable with headroom in all banking covenants.

Settlement of Future Earn-out Liabilities

The Group's Headline total net debt position of net debt plus deferred consideration as at March 2008 was as follows:-

Net debt Net Earn-out liability Headline Adjustment	£million (17.8) (29.5) (2.1)
Total net debt	(49.4)
May be settled by equity	8.3
Total net debt requiring cash settlement	(41.1)

Headline EBITDA 2008	17.5
Free cash flow 2008	10.6

The total net debt requiring cash settlement represents 3.9 years of Free Cash Flow. The Group's banking facilities expire in four years on 31 March 2012.

The ratio of total net debt to Headline EBITDA was 2.8 which reduces to 2.3 after eliminating earn out liability which may be settled by equity. This level of debt plus contingent liability is not unusual in an acquisitive group like Creston and was comparable to our peer group.

Net finance costs

Headline net finance costs were £1.7 million (2007: £1.0 million) reflecting the full year impact of the increased term loan to fund acquisitions in the previous year and an increase in the underlying interest rate. Headline net finance costs were covered 10 times (2007: 16 times) by Headline EBITDA. The reported net finance cost was £3.1 million (2007: £2.9 million), which includes notional finance costs of £1.4 million (2007: £1.9 million) relating to the future deferred consideration payments.

Effective tax rate

The Group's effective Headline tax rate was 30 per cent (2007: 31 per cent). The reported effective tax rate was 50 per cent (2007: 42 per cent).

Dividends

The Board recommend a final dividend for the year of 1.80 pence per share (2007: 1.76 pence per share), giving a total dividend for 2008 of 2.77 pence per share (2007: 2.64 pence per share). This continues the Group's progressive dividend policy and represents an increase in dividend per share of 5 per cent. At 31 March 2008 the Group's shares offered a dividend yield of 4.8 per cent (2007: 1.5 per cent) and a dividend cover of 3.3 (2007: 3.2).

Capital Expenditure

Capital expenditure for 2008 was £1.9 million (2007: £2.2 million) with the main categories of investment being investment in IT hardware and software and leasehold improvements.

By 1 April 2008 all Group companies were live on the Group-wide operating and accounting system platform, Maconomy. This is a major step in enhancing the corporate governance and internal control procedures.

Basis of Headline results

Creston has presented Headline results as the key profit performance indicators because they eliminate the non-recurring charges associated with acquisitions and, in 2008, the terminated Creston US operation and, therefore, provide a truer picture of the underlying ongoing operational performance of the Group year-on-year. The Headline results exclude the following items (as detailed in note 4 to the preliminary results):

Notional finance costs on future deferred consideration payments;
Future acquisition payments due to employees deemed as remuneration;
Amortisation of acquired intangible assets;
Deferred tax on the above items; and
Costs associated with the terminated Creston US office.

Summary

2008 was another year of healthy financial performance for the Group, driven by a solid commercial performance. With investment in the core businesses and the launch of a number of new ventures, the Group is well positioned to continue to leverage its diversified portfolio of operating companies in 2009. Despite the uncertain economic climate, the Group has demonstrated its continued ability to grow revenue in excess of the market and with an encouraging new business pipeline the Group is well positioned to continue its record of growth. Nevertheless, the Group is cautious of a marketing services downturn and is operating prudently in maximising its cash generation, reducing costs through greater synergies between operating companies and trimming operating costs.

Barrie Brien

Chief Operating and Financial Officer

Consolidated Income Statement

	Note	Unaudited 2008 £'000	Unaudited 2007 (restated see note 2) £'000
Turnover (billings)	3	137,257	117,621
Revenue	3	80,516	69,665
Operating costs		(67,830)	(59,353)
Profit before finance income, finance costs, income from financial assets and taxation	3	12,686	10,312
Finance income		77	199
Finance costs		(3,187)	(3,095)
Income from financial assets		-	241
Profit before taxation	3	9,576	7,657
Taxation		(4,794)	(3,212)
Profit for the financial year		4,782	4,445

Basic earnings per share (pence)	5	8.65	8.50
Diluted earnings per share (pence)	5	8.64	8.41

Consolidated Balance Sheet

	Note	Unaudited As at 31 March 2008 £'000	Unaudited As at 31 March 2007 (restated see note 2) £'000
Non-current assets
Intangible assets
Goodwill	7	119,565	122,984
Other		1,440	1,290
Property, plant and equipment		3,622	4,267
Trade and other receivables		-	1,325
Financial assets - available for sale		550	550
Deferred tax asset		786	1,347
		125,963	131,763
Current assets
Inventories and work in progress		1,932	5,080
Trade and other receivables		34,583	29,454
Cash and short term deposits		3,785	1,655
		40,300	36,189
Current liabilities
Trade and other payables		(29,204)	(28,208)
Corporation tax payable		(2,069)	(1,601)
Obligations under finance leases		(39)	(61)
Bank overdraft, loans and loan notes		(7,189)	(7,309)
Short term provisions		(13,757)	(4,139)
		(52,258)	(41,318)
Net current liabilities		(11,958)	(5,129)
Total assets less current liabilities		114,005	126,634
Non current liabilities
Bank loans and loan notes		(14,400)	(16,000)
Long term provisions		(16,701)	(31,430)
		(31,101)	(47,430)
Net assets		82,904	79,204
Equity
Called up share capital		5,576	5,576
Share premium account		33,345	33,345
Own shares		(233)	(104)
Shares to be issued		2,447	1,998
Other reserves		31,357	31,357
Retained earnings		10,412	7,032
Total equity		82,904	79,204

Consolidated Statement of Changes in Equity

	Share capital £'000	Share premium £'000	Own shares £'000	Retained earnings £'000	Other reserves £'000	Shares to be issued £'000	Total (restated see note 2) £'000
Changes in equity for 2008 (Unaudited)
At 1 April 2007 (restated see note 2)	5,576	33,345	(104)	7,032	31,357	1,998	79,204
Profit for the year	-	-	-	4,782	-	-	4,782
Credit for share based incentive schemes	-	-	-	-	-	567	567
Own shares purchased	-	-	(129)	-	-	-	(129)
Transfer of lapsed option costs	-	-	-	118	-	(118)	-
Dividends (note 6)	-	-	-	(1,520)	-	-	(1,520)
At 31 March 2008	5,576	33,345	(233)	10,412	31,357	2,447	82,904

	Share capital £'000	Share premium £'000	Own shares £'000	Retained earnings £'000	Other reserves £'000	Shares to be issued £'000	Total (restated see note 2) £'000
Changes in equity for 2007 (Unaudited)
At 1 April 2006 (as previously reported)	3,759	19,734	(46)	4,429	17,682	1,836	47,394
Prior period adjustment (see note 2)	-	-	-	(473)	-	(829)	(1,302)
At 1 April 2006 (as restated see note 2)	3,759	19,734	(46)	3,956	17,682	1,007	46,092
Profit for the year	-	-	-	4,445	-	-	4,445
Shares issued	1,817	13,611	96	-	13,669	-	29,193
Credit for share based incentive schemes	-	-	-	-	-	991	991
Own shares purchased	-	-	(154)	-	-	-	(154)
Profit on Treasury Scheme	-	-	-	-	6	-	6
Dividends (note 6)	-	-	-	(1,369)	-	-	(1,369)
At 31 March 2007 (restated see note 2)	5,576	33,345	(104)	7,032	31,357	1,998	79,204

Consolidated Cash Flow Statement

	Note	Unaudited 2008 £'000	Unaudited 2007 £'000
Operating cash flow	8	17,796	8,700
Finance income		77	199
Finance costs		(1,933)	(1,180)
Income from financial assets		-	241
Tax paid		(3,661)	(4,173)
Net cash inflow from operating activities		12,279	3,787
Investing activities
Purchase of subsidiary undertakings		(3,949)	(44,501)
Net cash acquired with subsidiaries		-	10,663
Purchase of property, plant and equipment		(1,681)	(1,738)
Sale of property, plant and equipment		187	99
Purchase of intangible assets		(235)	(399)
Decrease in restricted cash deposits		-	13
Net cash outflow from investing activities		(5,678)	(35,863)
Financing activities
Issues of shares for cash		-	15,164
Share issue costs		-	(545)
Share repurchases		(129)	(154)
(Decrease)/increase in borrowings (net)		(2,800)	15,530
Dividends paid		(1,520)	(1,369)
Capital element of finance lease payments		(22)	(199)
Net cash (outflow)/inflow from financing		(4,471)	28,427
Increase/(decrease) in cash and cash equivalents	9	2,130	(3,649)
Cash and cash equivalents at start of year		1,633	5,282
Cash and cash equivalents at end of year		3,763	1,633

Notes:

1. Basis of Preparation

The unaudited results for the years ended 31 March 2008 and 2007 do not amount to the statutory accounts within the meaning of Section 240 of the Companies Act 1985.

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 1985 which are applicable to companies reporting under IFRS.

2. Accounting policies

The preliminary results were prepared in accordance with the prior year accounting policies with the exception of the following change:

Prior period adjustment

The treatment of share awards under long term incentive plans in respect of acquisitions has been amended in the year. Such awards were previously included as an acquisition cost and hence as part of goodwill, but are now recognised in the income statement (as deemed remuneration) over the related vesting period.

This change has resulted in a restatement of the comparative figures. The impact on the balance sheet at 1 April 2006 is to decrease goodwill by £1,122,000, decrease shares to be issued by £829,000, decrease deferred tax assets by £180,000 and decrease retained earnings by £473,000. The income statement charge for the year ended 31 March 2007 is £628,000. The corresponding tax effect for the year ended 31 March 2007 is £142,000.

3. Segmental Analysis

The Group has changed its operational framework to a two divisional structure consisting of the Insight and Communications divisions. The latter division now encompasses those businesses previously included within the BRANDCOM, MARCOMS and PR divisions while the former incorporates the Group's research offerings and remains unchanged.

Turnover, revenue, profit before finance income, finance costs, income from financial assets and taxation, capital expenditure, depreciation, amortisation, gross assets and gross liabilities attributable to Group activities are shown below.

Primary segmental analysis by business

2008	Insight £'000	Communications £'000	Head Office £'000	Group £'000
Turnover (billings)	30,754	106,503	-	137,257
Revenue	17,885	62,631	-	80,516
Profit before finance income, finance costs, income from financial assets and taxation (segment result)	5,192	11,723	(4,229)	12,686
Finance income	-	-	77	77
Finance costs	(291)	(1,110)	(1,786)	(3,187)
Income from financial assets	-	-	-	-
Profit before taxation	4,901	10,613	(5,938)	9,576
Taxation				(4,794)
Profit for the financial year				4,782

Other information
Capital expenditure (excluding acquisitions)
- Property, plant and equipment	214	1,444	23	1,681
- Intangible assets	-	118	117	235
Depreciation of property, plant and equipment	339	1,692	111	2,142
Amortisation of intangible assets	-	-	85	85

Balance sheet
Segment assets	41,263	118,985	5,229	165,477
Unallocated deferred tax assets				786
Total assets				166,263
Segment liabilities	(9,722)	(44,850)	(26,718)	(81,290)
Unallocated current tax liabilities				(2,069)
Total segment liabilities				(83,359)

Consolidated total assets and liabilities are split as:

	Assets £'000	Liabilities £'000
Non current	125,963	(31,101)
Current	40,300	(52,258)
	166,263	(83,359)

The Head Office costs include £586,000 (2007: £nil) relating to the New York office which was closed in February 2008. There was no revenue attributable to this office as clients are currently serviced from the UK agencies or through US based affiliates.

2007 (restated see note 2)	Insight £'000	Communications £'000	Head Office £'000	Group £'000
Turnover (billings)	27,575	90,046	-	117,621
Revenue	15,386	54,279	-	69,665
Profit before finance income, finance costs, income from financial assets and taxation (segment result)	4,306	9,704	(3,698)	10,312
Finance income	-	-	199	199
Finance costs	(244)	(1,671)	(1,180)	(3,095)
Income from financial assets	-	-	241	241
Profit before taxation	4,062	8,033	(4,438)	7,657
Taxation				(3,212)
Profit for the financial year				4,445

Other information
Capital expenditure (excluding acquisitions)
- Property, plant and equipment	359	1,418	16	1,793
- Intangible assets	-	-	399	399
Depreciation of property, plant and equipment	301	1,456	19	1,776
Amortisation of intangible assets	630	525	115	1,270

Balance sheet
Segment assets	39,978	123,640	2,987	166,605
Unallocated deferred tax asset				1,347
Total assets				167,952
Segment liabilities	(9,706)	(50,124)	(27,317)	(87,147)
Unallocated current tax liabilities				(1,601)
Total liabilities				(88,748)

Consolidated total assets and liabilities are split as:

	Assets £'000	Liabilities £'000
Non current	131,763	(47,430)
Current	36,189	(41,318)
	167,952	(88,748)

Secondary segmental analysis by geography

The following table provides an analysis of the Group's turnover and revenue by geographical market, irrespective of the origin of the services.

	Revenue		Turnover
	2008 £'000	2007 £'000	2008 £'000	2007 £'000
UK	66,770	60,230	109,800	95,994
Rest of Europe	12,663	7,968	25,546	18,628
Rest of the World	1,083	1,467	1,911	2,999
	80,516	69,665	137,257	117,621

All significant assets and liabilities are located within the UK.

4. Reconciliation of Headline profit to Reported profit

The Directors are of the opinion that as Creston is an acquisitive company certain accounting policies relating to deferred
consideration deemed as remuneration, notional finance costs on deferred consideration and amortisation of intangible assets have a material impact on the reported results and introduce volatility to the reported figures. In order to enable a better understanding of the underlying trading of the Group, Creston refer to Headline PBIT, PBT and PAT which eliminates these non-recurring non-cash charges from the reported figures plus, in 2008, the one-off costs of the US office closed during the year, as follows:

2008	PBIT £'000	PBT £'000	PAT £'000
Headline	15,248	13,539	9,418
Costs of US office	(586)	(586)	(586)
Future acquisition payments to employees deemed as remuneration	(1,976)	(1,976)	(1,976)
Notional finance costs on future deferred consideration	-	(1,401)	(1,401)
Taxation impact	-	-	(673)
Reported	12,686	9,576	4,782
2007 (restated see note 2)	PBIT £'000	PBT £'000	PAT £'000
Headline	14,003	13,263	9,173
Future acquisition payments to employees deemed as remuneration	(2,536)	(2,536)	(2,536)
Amortisation of acquired intangible assets	(1,155)	(1,155)	(1,155)
Notional finance costs on future deferred consideration	-	(1,915)	(1,915)
Taxation impact	-	-	878
Reported	10,312	7,657	4,445

Creston is unlike other marketing communications groups in its acquisition deal structure, in that it requires up to 25 per cent of any deferred consideration payable as part of an earn out, to be paid to the non-shareholders of the company. Creston believes this is an important driver in motivating employees beyond just the shareholders to grow the company and outperform the market. This contingent consideration paid by Creston to non-shareholder employees in respect of the deferred consideration is deemed as remuneration. The notional finance costs also relate to the deferred consideration. Both of these charges will cease once the relevant earn-outs have been settled.

5. Earnings per share

	2008						2007 (restated see note 2)
	Reported profit for the financial year £'000	Weighted average number of shares		Pence per share			Reported profit for the financial year £'000		Weighted average number of shares		Pence per share
Reported basis
Basic earnings per share
Earnings attributable to ordinary shareholders	4,782	55,265,027		8.65			4,445		52,294,443		8.50
Dilutive effect of securities
Options	-	91,663		(0.01)			-		573,674		(0.09)
Diluted earnings per share	4,782	55,356,690		8.64			4,445		52,868,117		8.41
	2008						2007
	Headline profit for the financial year £'000		Weighted average number of shares		Pence per share		Headline profit for the financial year £'000			Weighted average number of shares		Pence per share
Headline basis
Basic earnings per share
Earnings attributable to ordinary shareholders	9,418		55,265,027			17.04		9,173		52,294,443			17.54
Dilutive effect of securities
Options	-		91,663			(0.03)		-		573,674			(0.19)
Diluted earnings per share	9,418		55,356,690			17.01		9,173		52,868,117			17.35

DEPS has been calculated based on the following dilutive elements. An estimate of 91,663 options (2007: 573,674) remain outstanding that would have been issued based on the average share price (this includes SAYE, EMI and unapproved options).

A reconciliation of the profit after tax on a reported basis and the Headline basis is given in note 4.

6. Dividends

	2008 £'000	2007 £'000
Amounts recognised as distributions to shareholders in the year
Prior year final dividend of 1.76 pence per share (2007: 1.60 pence)	978	878
Interim dividend of 0.97 pence per share (2007: 0.88 pence per share)	542	491
	1,520	1,369

A final dividend of 1.80 pence (2007: 1.76 pence) equivalent to £994,000 is to be paid on 8 September 2008 to shareholders on the register on 8 August 2008. In accordance with IFRS the final dividend will be recognised in the 2009 accounts, should it be approved by shareholders at the AGM.

7. Goodwill

	Purchased goodwill £'000	Goodwill on consolidation (restated see note 2) £'000	Total (restated see note 2) £'000
Cost
At 1 April 2006	3,595	61,819	65,414
Additions	-	55,769	55,769
Adjustments to consideration	(163)	2,155	1,992
Fair value adjustments	-	(191)	(191)
At 1 April 2007	3,432	119,552	122,984
Adjustments to consideration	348	(3,600)	(3,252)
Fair value adjustments	-	(167)	(167)
At 31 March 2008	3,780	115,785	119,565
Net book amount
31 March 2008	3,780	115,785	119,565
31 March 2007	3,432	119,552	122,984

The adjustments to consideration relate to a change in the estimated deferred consideration for agencies in the earn-out period under the terms of the relevant sale and purchase agreements. The fair value adjustments relate to the revision of estimated trade and other payables together with revisions to other acquisition costs directly related to the deferred consideration.

At 31 March 2008 the following components of goodwill had been finalised as the earn out period had completed: MSL, CML and DLKW.

Components of goodwill at 31 March 2008 and 2007 are:

Communications DLKW	2008 £'000 30,357	2007 (restated see note 2) £'000 30,437
TMW	25,059	26,004
PAN	9,599	12,044
Other	23,923	24,401
	89,118	92,886
Insight
ICM	19,032	19,031
MSL	7,635	7,635
CML	3,780	3,432
	30,447	30,098
Total	119,565	122,984

8. Reconciliation of profit before finance income, finance costs, income from financial assets and taxation to
operating cash flow

	2008 £'000	2007 (restated see note 2) £'000
Profit for the year	4,782	4,445
Taxation	4,794	3,212
Profit before taxation	9,576	7,657
Income from financial assets	-	(241)
Finance costs	3,187	3,095
Finance income	(77)	(199)
Profit before finance income, finance costs, income from financial assets and taxation	12,686	10,312
Depreciation of property, plant and equipment	2,142	1,776
Amortisation of intangible assets	85	1,270
Share-based payments	(27)	400
Deemed remuneration	1,976	2,536
Profit on disposal of property, plant and equipment	(4)	(30)
Decrease/(increase) in inventories and work in progress	3,148	(1,042)
Increase in trade and other receivables	(4,194)	(2,080)
Increase/(decrease) in trade and other payables	1,984	(4,442)
Operating cash flow	17,796	8,700

9. Reconciliation of net cash flow to movement in net debt

	2008 £'000	2007 £'000
Increase/(decrease) in cash in the year	2,130	(3,649)
Cash outflow from movement in debt	2,865	199
Cash inflow from movement in debt	-	(15,530)
Movement in net debt in the year resulting from cash flows	4,995	(18,980)
New finance leases	-	(55)
Reduction of loan stock	2,212	7,025
Issue of acquisition loan notes	(3,335)	(7,206)
Net debt at 1 April	(21,737)	(2,521)
Net debt at 31 March	(17,865)	(21,737)

10. Analysis of net debt

	At 31 March 2007 £'000	Cash flow £'000	Acquisitions £'000	At 31 March 2008 £'000
Cash and short term deposits	1,633	2,130	-	3,763
Bank overdrafts and revolving credit facility	(3,000)	-	-	(3,000)
Acquisition loan notes	(309)	2,212	(3,335)	(1,432)
Bank loans	(20,000)	2,843	-	(17,157)
Finance leases	(61)	22	-	(39)
Net debt	(21,737)	7,207	(3,335)	(17,865)
Restricted cash deposits (note 18)	22	-	-	22
Net debt including restricted cash deposits	(21,715)	7,207	(3,335)	(17,843)