Final Results
Creston PLC
13 June 2002
Creston plc
Preliminary Results
for the year ended 31 March 2002
Highlights
• Profit before tax of £207,000 (2001: £1,000)
• Maiden dividend 0.7p per share in respect of full year
• Second half operating profit equates to £1.5m on an annualised basis
before central overheads and interest payable
• Net trading to date in the new financial year is maintaining the
progress of the second half of last year
• Resilient sectors cushioned group from economic downturn, endorsing
group's strategy
• Synergies are being implemented across the group
Don Elgie, Chief Executive, commented:
"These are good results at a time of difficult trading conditions in the sector.
They confirm our strategy of investing in the most resilient areas of
marketing services. We have fulfilled our initial buy-and-build objectives and
are confident that we will maintain our progress with good organic growth and
further high-quality acquisitions."
For further information:
Don Elgie, Chief Executive 020 7930 9757
Tim Alderson, Finance Director 020 7930 9757
Jonathan Rooper, Cardew & Co. 020 7930 0777
Jackie Range, Cardew & Co. 020 7930 0777
CHAIRMAN'S STATEMENT
In our first full year of trading as a marketing services group we set down the
foundations of 'new' Creston by consolidating our acquisition of Marketing
Sciences Limited ("MSL"), a quantitative market research company, and completing
our second acquisition, The Real Adventure Marketing Communications Limited ("
The Real Adventure"), a marketing communications company, in November 2001, thus
achieving our initial goal of establishing Creston as a 'buy-and-build' group.
Despite a continuing general turndown in the marketing services industry,
neither MSL nor The Real Adventure suffered a slowdown in trading.
Profit before tax for the full year is £207,000 (2001: £1,000). I am pleased to
report the start of the current financial year is maintaining the progress of
the second half of last year, when our operating subsidiaries produced £1.5
million operating profit on an annualised basis before central overheads and net
interest.
Creston's long term plan is to become a major player in marketing services by
building on its domestic base and expanding by overseas acquisitions to become
an international company within three to five years. The company has been
working hard to identify acquisitions that meet Creston's criteria (see Chief
Executive's overview). We have identified opportunities across different areas
of marketing services and have concentrated on particular companies in market
research, marketing communications and its sub-sectors, and telemarketing. We
think we are one of the few acquisitive players currently in the marketplace.
However, we are not in a position to bring specific proposals to shareholders at
this time.
I believe the outlook remains positive for Creston. We are unencumbered by the
indebtedness of the large trade groups and have avoided sectors vulnerable to
recession. Virtually all the fully listed marketing service companies are
mature businesses. We will strive to demonstrate to investors that Creston is
THE growth opportunity within the sector.
The Board feels it is appropriate to implement the progressive dividend policy
promised in our last Annual Report in this the first full year of operations as
a marketing services company. The relatively low level at which the dividend
has been set reflects the fact that our buy and build strategy requires
investment in the existing and future acquisitions.
I am therefore very pleased to report that the Board is proposing to pay a
maiden dividend of 0.70p per share in respect of the full year. The total cost
to the group of this dividend is £79,000. The dividend will be paid on 29
August 2002, subject to approval at the forthcoming Annual General Meeting of
the Company, to shareholders on the register at the close of business on 21 June
2002.
Now that Creston is in the marketing services sector, we felt it was important
to strengthen the Board in this area. I am very pleased therefore, to welcome
to our Board Peter Cunard, a senior figure within the industry with specific
expertise in public relations and communications.
Finally, I would like to thank the directors and staff for their hard work in
successfully laying the foundations of the new Creston Group, and I look forward
to building on these foundations through both organic growth and further
acquisitions in the coming year.
David Marshall
Chairman
12 June 2002
CHIEF EXECUTIVE'S OVERVIEW
The year to 31 March 2002 saw the first full year of Creston as a marketing
services group. With the improvement in performance of Marketing Sciences
Limited ("MSL") and the acquisition of The Real Adventure Marketing
Communications Limited ("The Real Adventure").
Trading in the year to March 2002
As reported in the Chairman's Statement, Creston was cushioned from the downturn
that many marketing service companies continue to experience. This is because
the two companies that Creston purchased were in relatively resilient sectors.
There have been a few teething problems, but they were promptly addressed and
are now substantially resolved. In Visualiser, new management is in place and
sales prospects look good, but have yet to be translated into firm orders.
I am pleased to report that trading to date in the new financial year is
maintaining the progress of the second half of the last financial year.
Business objective
Creston's objective is to build the company both organically and through
acquisition to become a substantial international marketing services group. Our
aim is that each element of the group will reflect the movement towards one- to-
one marketing and away from mass marketing.
During an economic slowdown some sectors are affected more than others. For
the immediate future Creston's intention is to avoid the more recession prone
sectors such as 'above the line' advertising. This strategy has worked well as
will be seen from the trading results.
We have established a small headquarters to provide strategic direction and to
fuel the growth of the Company by acquisition. This team is already providing
the strategic direction and close financial control which will be vital as the
group grows bigger. We will keep these overheads to a minimum to ensure that as
much profit as possible goes straight to the bottom line.
Acquisition criteria
As I have previously specified, our criteria for targeting prospective companies
remain:
• Good quality businesses
• In line with the move to one- to- one marketing
• Strong growth record and good growth prospects
• Management committed to the growth of the company
• Scope for synergy with existing Creston companies
Target Market Sectors
Market Research
Market Research entails exploring market trends, gathering data, views and
opinions from customers and transforming these into useful information so that
companies can act on it for the purposes of strategic planning and product
development.
The market research market has generally proved resilient in the current
downturn, with the British Market Research Association ("BMRA") forecasting
growth of some 5% in 2002.
Quantitative research has weathered well, particularly in consumer goods - the
core area of MSL's expertise, where the market grew by 7.1% in 2001 to £1.1
billion (source: BMRA).
It is Creston's intention to add complementary market research businesses to
MSL.
Marketing Communications
Marketing Communications is the umbrella name Creston uses to describe an
overall sector of business in which we are interested in building
representation. It includes:
• Direct Marketing
• CRM (Customer Relationship Marketing)
• Field Marketing
• Telemarketing
• E-Marketing
Direct Marketing
Creston's definition of direct marketing is any form of communication that
requires a direct response from the customer.
The UK market is estimated to be worth £10.9 billion in 2000 and grew at a rate
of 19.4% on 1999 (source: Euromonitor*).
CRM (Customer Relationship Marketing)
CRM, or database marketing as this sector is also called, is the development and
manipulation of customer databases to facilitate a one to one relationship with
customers.
The CRM market was estimated to be worth £757 million in 2000 and to be growing
at a rate of 10% per annum (source: Euromonitor*).
The acquisition of The Real Adventure gives us expertise in both Direct
Marketing and CRM, and it is Creston's intention to add complementary businesses
to it.
Field Marketing
Field Marketing provides a direct interface with consumers via:
• In-store promotions and demonstrations
• Auxiliary sales and distribution drives
• Point of sale management
• Merchandising
• Auditing and mystery shopping
The market is worth £350 million and grew by 35% in 2000 on 1998 (source: The
Direct Marketing Association census 2001/Advertising Association).
Field Marketing fits well into the Creston concept and synergies should exist
with both MSL and The Real Adventure.
Telemarketing
Telemarketing covers both voice and the new internet voice-callback contact with
customers - both inbound (typically sales enquiries and orders) and outbound
(typically sales). Telemarketing is today an essential part of the marketing
mix in maintaining a one to one relationship with customers.
The Telemarketing market was estimated to be worth £3.4 billion in 2000 and to
have grown by 25% on 1999 (source: Euromonitor).
Creston has identified a number of opportunities that may lead to an
acquisition.
Synergies with The Real Adventure should be beneficial both with regard to
telemarketing and marketing communication needs.
E-Marketing
Last year I said that E-Marketing was an area of interest for Creston, and so it
remains. However, because of the volatility that exists within this market, and
the fact that few E-Marketing companies are profitable, Creston has decided to
let the market establish itself before seriously considering acquisitions in
this sector.
Advertising, Public Relations and Design
Last year I reported that Creston was interested in these market sectors but was
taking a cautious view because of the downturn in their market places. This
continues to be our view.
Total UK advertising revenue dropped 2.6% to £17 billion in 2001 (Source:
Advertising Association).
Total income for the top 145 PR companies was reported at £576 million for 2001,
a rise of 4.8% on 2000. However, it is generally agreed, PR performance will be
lower in 2002 (source: Marketing Magazine).
Certain sectors within Advertising and PR have, however, proved resilient in
current market conditions, for instance:
• Dealer and store support advertising
• Consumer products and retail PR
Creating synergy benefits
Creston is very keen to generate synergy across the group. Opportunities for
synergy should enhance with scale but, even in the early days, can be created
by:
• Client referral
• Creating joint products
The Real Adventure and MSL have already referred clients to each other and joint
products are being developed.
Creston Operating Board
To harness the entrepreneurial talents of vendor management, each Creston
subsidiary has representation on the Creston Operating Board.
The Operating Board is the key forum for operational management of the Group.
It regularly meets to review strategic issues and acquisition opportunities,
each subsidiary's performance, and to create synergy opportunities.
Summary
The first full year of Creston as a marketing services company has been exciting
and challenging.
In a period of mixed economic performance, Creston benefited from its policy of
focusing on relatively recession resilient sectors, and from the more reasonable
expectations of vendors. It was also to our advantage that many of the major
players in our sector had problems from their involvement in 'above the line'
advertising and the USA.
We have coped well with the demands of establishing a group structure and
incorporating our acquisitions within it. The difficult task of creating real
momentum for our buy-and-build strategy has made significant progress.
I am confident that Creston will meet its objective of growing to a substantial
international diversified marketing services group.
Don Elgie
Chief Executive
12 June 2002
CRESTON PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Year ended 31 March Restated
Year
Note
Ended
31 March
Continuing Operations 2002 2001
£'000 £'000 £'000 £'000
Turnover 2 7,544 2,266 9,810 2,622
Cost of sales 3 (4,910) (1,466) (6,376) (1,975)
Gross profit 2,634 800 3,434 647
Administrative expenses 3 (2,590) (549) (3,139) (1,256)
Operating profit/(loss) 44 251 295 (609)
Share of operating (loss)/profit in joint (64) 16
ventures
Exceptional profits arising from disposal of - 72
property portfolio
Profit/(loss) on ordinary activities before 231 (521)
interest
Net interest receivable/(payable) (24) 522
Profit on ordinary activities before taxation 207 1
Tax charge/(credit) on profit on ordinary 4 (69) 59
activities
Profit for the financial year 138 60
Dividends 5 (79) -
Retained profit for the financial year 59 60
Earnings per share 6 1.23p 0.61p
Diluted earnings per share 6 1.23p 0.61p
CRESTON PLC
CONSOLIDATED BALANCE SHEET AT 31 MARCH 2002
Note 2002 Restated
£'000 2001
£'000
Fixed assets
Intangible assets 7 16,306 9,927
Tangible fixed assets 265 160
Investments in joint ventures
Share of gross assets 43 176
Share of gross liabilities (75) (105)
(32) 71
16,539 10,158
Current assets
Stocks 351 332
Debtors 3,771 2,612
Cash at bank and in hand 8 6,004 6,090
10,126 9,034
Creditors: amounts falling due within one year (8,437) (2,676)
Net current assets 1,689 6,358
Total assets less current liabilities 18,228 16,516
Creditors: amounts falling due after more than one year 9 (8,250) (6,599)
Net assets 9,978 9,917
Capital and reserves
Called up share capital 1,122 1,121
Share premium account 4,880 4,879
Special reserve 2,385 2,385
Other reserve 1,385 1,385
Capital redemption reserve 72 72
Profit and loss account 134 75
Total equity shareholders' funds 9,978 9,917
CRESTON PLC
CONSOLIDATED CASHFLOW STATEMENT
Restated
Note 2002 2001
£'000 £'000
Net cash outflow from operating activities 10 (241) (17)
Dividends received from associates 39 -
Returns on investments and servicing of finance
Interest received 60 522
Interest paid (75) -
Net cash (outflow)/inflow from returns on (15) 522
investments and servicing of finance
Taxation (337) -
Capital expenditure and financial investment
Purchase of tangible fixed assets (120) (14)
Sale of investment properties - 1,000
Sale of tangible fixed assets 2 -
(Increase)/decrease in restricted cash deposits 500 (4,700)
Net cash (outflow)/inflow from capital expenditure 382 (3,714)
and financial investment
Acquisitions and disposals
Purchase of subsidiary undertakings (1,767) (3,386)
Net cash acquired with subsidiaries 939 895
Disposal of subsidiary undertakings - 2,867
Net cash disposed of with subsidiaries - (3,126)
Net cash outflow from acquisitions and disposals (828) (2,750)
Equity dividends paid - (6,431)
Net cash outflow before financing (1,000) (12,390)
Financing
Issue of share capital for cash consideration 1 -
Receipt of bank loan 1,519 -
Capital element of finance lease rentals (18) (2)
Net cash inflow/(outflow) from financing 1,502 (2)
Increase/(decrease) in cash 12 502 (12,392)
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
2002 Restated
2001
£'000 £'000
Profit for the financial year 138 60
Prior year adjustment 84 -
Total gains and losses recognised since last annual report 222 60
1. ACCOUNTING POLICIES
Basis of preparation
The accounts have been prepared under the historical cost convention and in
accordance with applicable accounting standards up to and including Financial
Reporting Standard (FRS) 19. The principal accounting policies of the Group are
as set out in the Group's 2001 annual report and financial statements, and have
remained unchanged from the previous year, other than in respect of deferred tax
where a prior year adjustment has been made to reflect the adoption of the new
policy.
Goodwill arising from the acquisition of subsidiary undertakings, representing
the difference between the purchase consideration and fair value of net assets
acquired, has been capitalised in accordance with the requirements of FRS 10.
The directors are of the opinion that the intangible assets of the Group have an
indefinite economic life given the durability of MSL, MSTS, The Real Adventure
and Visualizer brand names, their historic ability to sustain long term
profitability, and the Group's commitment to continue to build branded products
with added-value. In accordance with FRS 10 and 11, the carrying value of
intangible assets will continue to be reviewed annually for impairment on the
basis stipulated in FRS 11 and adjusted should this be required. The individual
circumstances of each future acquisition will be assessed to determine the
appropriate treatment of any related goodwill.
The financial statements depart from the requirement of companies' legislation
to amortise goodwill over a finite period in order to give a true and fair view,
for the reasons outlined above. If the goodwill arising on all acquisitions had
been amortised over a period of twenty years, operating profit would have
decreased by £612,000.
Deferred taxation
The Board has fully adopted the requirements of FRS 19 Deferred Taxation. Last
year's accounts have therefore been restated, increasing results after taxation
from a loss of £(24,000) to a profit of £60,000. The previous policy was:
Provision is made for deferred tax, using the liability method, to the extent
that it is probable that a liability will crystallise in the foreseeable future.
The amended policy is:
Deferred tax is recognised on all timing differences where the transactions or
events that give the group an obligation to pay more tax in the future, or a
right to pay less tax in the future, have occurred by the balance sheet date.
Deferred tax assets are recognised when it is more likely than not that they
will be recovered. Deferred tax is measured using rates of tax that have been
enacted or substantively enacted by the balance date.
The impact of this change in accounting policy on the current year has resulted
in profit after tax being reduced by £9,000. The effect of the change in
accounting policy on the previous year resulted in profit after tax being
increased by £84,000 to £60,000 as restated, compared to a loss after tax of
£24,000 before restatement.
2. TURNOVER
£'000 £'000
Marketing services (excluding share of joint venture's turnover of £171,000; 2001 - 9,810 1,168
£41,000)
Discontinued businesses:
Rental income - 157
Property trading - 1,200
Other income - 97
9,810 2,622
All of the Group's current activities are marketing services activities based
primarily in the United Kingdom. Turnover from The Real Adventure relates only
to the four months since acquisition. The group discontinued its property
activities during the year to 31 March 2001.
3. EMPLOYEES
2002 2001
£'000 £'000
Wages and salaries 2,911 521
Social security costs 273 50
Pension costs 74 10
3,258 581
The average number of employees of the group during the year was:
2002 2001
Number Number
Directors 6 4
Marketing services 150 9
Property activities - 1
156 14
4. TAX ON PROFIT/(LOSS) ON ORDINARY ACTIVITIES
Restated
2002 2001
£'000 £'000
The tax charge/(credit) comprises:
Current tax:
Corporation tax at 30% (2000: 30%) 85 20
Overprovision of corporation tax in prior year (25) -
Share of tax charge of joint ventures - 5
Deferred tax: 60 25
Origination and reversal of timing differences 9 (84)
Tax charge/(credit) 69 (59)
5. DIVIDENDS
2002 2001
£'000 £'000
Proposed final: 0.70p per share (2001: nil per share) 79 -
6. EARNINGS PER SHARE
2002 Restated 2002 2001 2002 Restated
2001 2001
£'000 £'000 Number Number pence pence
Profit for the financial 138 60
year
Weighted average number 11,214,177 9,817,053
of shares
Earnings per share 1.23 0.61
No dilutive effects arose in relation to the options, warrants or convertible
loan notes in issue during either year.
7. INTANGIBLE ASSETS
The group Goodwill on
consolidation £'000
Cost
At 1 April 2001 9,927
Additions (see below) 6,922
Adjustment to consideration (500)
Adjustment to net assets (43)
At 31 March 2002 16,306
The adjustment to consideration relates to an amount recovered from the vendors
of Marketing Sciences Limited under the term of the Sale and Purchase agreement
warranties.
Net assets are adjusted for a prior year overprovision of tax.
Acquisitions
On 27 November 2001, the Company acquired the whole of the issued share capital
of The Real Adventure for consideration (including deferred consideration) as
set out below. This purchase has been accounted for by the acquisition method
of accounting. The profit after taxation of The Real Adventure from 1 June 2001
to the date of acquisition was £280,000. Its profit after taxation for the year
ended 31 May 2001 was £460,000.
The assets and liabilities of The Real Adventure at 27 November 2001 were as
follows:
Book value Accounting Fair value
policy
£'000 adjustments £'000
£'000
Fixed assets
Tangible 188 (92) 96
Current assets
Stocks and work in progress - 55 55
Debtors 1,115 - 1,115
Prepayments 160 - 160
Bank and cash 939 - 939
Total assets 2,402 (37) 2,365
Creditors
Trade creditors (670) - (670)
Other creditors (10) - (10)
Accruals (98) - (98)
Social security and other taxes (335) - (335)
Corporation tax (292) 12 (280)
Total liabilities (1,405) 12 (1,393)
Net assets 997 (25) 972
Purchased goodwill capitalised 6,922
7,894
Satisfied by:
£'000
Issue of convertible loan notes 1,750
Issue of loan notes 1,300
Cash 1,202
Further consideration payable 142
Deferred/contingent consideration 3,000
Acquisition costs 500
7,894
8. CASH AT BANK AND IN HAND
Cash includes £4,200,000 (2001: £4,700,000) which is maintained in a designated
account as security for the loan notes issued on the acquisition of MSL and is,
therefore, not freely available to the Group.
9. Creditors: amounts falling due after more than one year
31 March 2002 31 March 2001
£'000 £'000
Acquisition convertible loan notes 1,750 -
Acquisition loan notes 555 4,700
Bank loan 1,055 -
Acquisition deferred consideration 4,890 1,890
Amounts due under finance leases - 9
8,250 6,599
10. reconciliation of operating profit/(loss) to net cash outflow from
operating activities
2002 2001
£'000 £'000
Operating profit/(loss) 295 (609)
Depreciation 111 19
(Profit)/loss on disposal of plant, vehicles and equipment (2) 1
Decrease in stock 36 1,342
Decrease in debtors 108 2,218
Decrease in creditors (789) (2,988)
Net cash outflow from operating activities (241) (17)
11. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
2002 2001
£'000 £'000
Increase/(decrease) in cash in the year 502 (12,392)
Cash outflow from reduction in debt 18 -
Cash inflow from increase in debt (1,519) -
Movement in net debt in the year resulting from cash flows (999) (12,392)
New finance leases - (27)
Conversion of loan stock - 83
Reduction of loan stock 500 -
Issue of acquisition loan notes (3,050) (4,700)
Net (debt)/funds at start of year (3,540) 13,496
Net debt at end of year (7,089) (3,540)
12. ANALYSIS OF NET DEBT
At Cash flow Acquisitions Non-cash At
items
31 March 31 March
2001 2002
£'000 £'000 £'000 £'000 £'000
Cash at bank and in hand 1,390 (525) 939 - 1,804
Overdrafts (203) 88 - - (115)
1,187 (437) 939 - 1,689
Acquisition convertible - - (1,750) - (1,750)
loan notes
Acquisition loan notes (4,700) - (1,300) 500 (5,500)
Bank loan - (1,519) - - (1,519)
Finance leases (27) 18 - - (9)
Net debt (3,540) (1,938) (2,111) 500 (7,089)
Restricted cash deposits 4,700 (500) - - 4,200
Net debt including 1,160 (2,438) (2,111) 500 (2,889)
restricted cash deposits
13. PUBLICATION OF NON STATUTORY ACCOUNTS
The summarised balance sheet at 31 March 2002 and the summarised profit and loss
account, summarised cash flow statement and associated notes for the year then
ended have been extracted from the Group's 2002 statutory financial statements
upon which the auditors' opinion is unqualified and does not include any
statement under Section 237 of the Companies Act 1985.
The comparative financial information relating to the year ended 31 March 2001
does not constitute statutory accounts within the meaning of section 240 of the
Act and has been extracted, save in relation to the restatement of comparative
figures referred to in note 1, without material adjustment from the audited
financial statements of the Company for the year then ended which have been
delivered to the Registrar of Companies, and in respect of which the auditors
gave an unqualified report within the meaning of section 235 of the Companies
Act 1985 and which did not contain a statement under section 237(2) or (3) of
the Companies Act 1985. The auditors have agreed this preliminary statement of
final results.
* Euromonitor have changed their market definitions from those used in 1999.
This information is provided by RNS
The company news service from the London Stock Exchange
Latest directors dealings
- 27 minutes ago Mobile Streams
- 51 minutes ago Pharos Energy
- 1 hour ago Sirius Real Estate Ltd.
- 15 hours ago The Gym Group
- 16 hours ago Manchester & London Investment Trust