Final Results

RNS Number : 2371F

Creston PLC

13 June 2012

 



13 June 2012

Creston plc

('Creston' or the 'Group')

Unaudited Full Year Results for the Year Ended 31 March 2012

Creston plc (LSE: CRE), the Insight and Communications Group, today announces its full year results for the year ended 31 March 2012.

Financial Highlights

·     Revenue increased by 11 per cent to £74.9 million (2011: £67.8 million)

·     Headline¹Diluted Earnings Per Share broadly flat with prior year at 12.34 pence (2011: 12.39 pence)

·     Operating cash flow increased by 8 per cent to £10.7 million (2011: £9.9 million)

·     Broadly net debt free at year end, post initial consideration payment for The Corkery Group

·     Total full year dividend up 17 per cent to 3.50 pence per share (2011: 3.00 pence per share)

Corporate and Operational Highlights

·     Acquisition of The Corkery Group, a New York-based health and medical public relations company, complementing Creston's US healthcare company Cooney/Waters

·     Digital and online revenue increased by 13 per cent in absolute terms, to represent 41 per cent of Group revenue (2011: 41 per cent)

·     International revenue increased by 37 per cent in absolute terms, to represent 30 per cent of Group revenue (2011: 25 per cent)

·     Invested in organic growth initiatives: Vitaris Research Consultancy (healthcare) and Grapevine (healthcare local marketing)

Group Financial Results

	Headline			Reported
	2012 £ million	2011 £ million	% change	2012 £ million	2011 £ million	% change
Revenue	74.9	67.8	11%	74.9	67.8	11%
PBT	10.3	10.4	-2%	10.8	8.4	29%
Diluted EPS (pence)	12.34	12.39	0%	15.08	9.41	60%
Dividend per share (pence)	3.50	3.00	17%	3.50	3.00	17%

1.Headline results reflect the underlying performance of the Group and excludes acquisition, start-up and restructuring related costs, movement in fair value of deferred consideration, amortisation of acquired intangible assets, deemed remuneration and notional finance costs from Reported results. A full reconciliation is presented in note 4 to this statement.

Commenting on the results, Don Elgie, Group Chief Executive of Creston plc, said:

"The Group has continued with its corporate development during the year by investing in organic growth initiatives and acquiring The Corkery Group. This drove an increase in revenue of 11 per cent to £74.9 million, while the Group remained broadly net debt free at the year end.

"Naturally we remain cautious in these challenging macro-economic conditions, however we are confident in our strategy, which includes focusing on digital and other high growth areas of marketing services as well as expanding our offer to meet the international opportunities from our blue chip client base.

"With our exceptional people, cash generative businesses, a full year contribution from our recent acquisition and a good new business pipeline, the Group is positioned for profitable growth."

There will be a presentation for analysts today at 9.30am at the offices of Investec, 2 Gresham Street, London, EC2V 7QP.

For further information on the Group's preliminary results or about the analyst meeting please contact:

Creston plc	+ 44 (0)20 7930 9757
Don Elgie, Group Chief Executive
Barrie Brien, COO/CFO
M:Communications	[phone]
Elly Williamson

About Creston plc

Creston plc (LSE: CRE) is a marketing services company focused on insight-led communications. The Group delivers a range of marketing services, including advertising, brand consultancy, 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. Our insight companies give us a real edge, providing the analytic intelligence to enable us to truly understand, influence and inspire consumers and it's that insight-led intelligence that drives our creativity. www.creston.com

Group Chief Executive's Statement

Overview

The Group has continued on its growth trend, increasing revenue by 11 per cent to £74.9 million (2011: £67.8 million). Like-for-like revenue was in-line with the prior year and Headline PBT was £10.3 million (2011: £10.4 million). We are pleased with our continued corporate development during the year, including investment in organic growth initiatives and the acquisition of The Corkery Group, and remained broadly net debt free at the year end for the second year running.

Our decision to focus investment on international development and the high growth areas of marketing services such as digital resulted in the Group recording a 37 per cent increase in its international revenue to represent 30 per cent of the Group's total revenue; and a 13 per cent increase in its digital and online revenue to represent 41 per cent of the Group's total revenue. Our expertise in digital has seen us appointed to Unilever's European and Diageo's Western European roster for digital marketing and contributed to our overall net new business total of £3.4 million revenue for the year. Other major new business wins for the Group during the year included: BBC, Brother, T-Mobile, Walkers Sensations and World Hepatitis Alliance, as well as the expansion of our relationship with many existing clients.

Following good like-for-like growth of 5 per cent over the first three quarters of our financial year, the final quarter revenue performance in certain operating companies was impacted by a shortfall in new business and client budgets. Compounding this revenue shortfall versus management's expectations in the final quarter, was a cost base which reflected increased staffing levels for the revenue growth experienced earlier in the year. Consequently, where agencies were impacted by the lower sales levels, immediate actions were undertaken to re-align the cost base for improved future profitability.

This reduction in operating costs is expected to deliver savings of £3.1 million, for which there is an associated exceptional restructuring charge of £1.8 million included in the year ended 31 March 2012. The cost savings will only have a marginal positive impact on profitability in the new financial year as a result of the lower sales levels.

Operating environment and divisional review

2012	Revenue		Headline PBIT
	£m	% of Group	£m	% of Group
Communications	43.0	57%	6.3	49%
Health	18.1	24%	4.6	35%
Insight	13.8	19%	2.1	16%

Communications division

Whilst clients remain cautious in their outlook, the IPA Bellwether Report for Q1 2012 showed the third consecutive quarterly increase in marketing spend. Key sectors of activity, particularly within the digital sphere, are generating the bulk of the growth in marketing budgets and represent key areas of investment for the Group. Indeed, Internet Advertising Bureau figures for the UK show that growth in digital advertising spend has accelerated to its highest level in five years, whilst advertising budgets for mobile media rose 157 per cent year-on-year in 2011 as digital platforms play an increasingly prominent role in the marketing mix. These are areas which the Group is well placed to exploit and will continue to invest in, in order to fully capitalise on the growing opportunity.

The Group intends to continue to build on the concept of 'Insight Inside' - bringing the deep sector and consumer knowledge from our Insight division into its communications agencies. This, coupled with some unique perspectives, such as shopper behaviour and influence of store layout and packaging design, has for example allowed us to develop an unparalleled Shopper Marketing capability combining the expertise of TMW and Marketing Sciences. We have now included our unique local knowledge from EMO and are taking this to market.

Effective measurement and evaluation will be another key priority for the new financial year. The Communications division, in conjunction with the Insight division, is developing a Group-wide dashboard and methodology with a particular focus on growth areas such as social media and mobile. As pressure continues from clients to demonstrate efficiency of marketing spend and a return on investment, this potentially lucrative offering will become invaluable to our clients.

Expanding the division's international footprint remains a significant growth opportunity and one that we will continue to explore over the medium term.

The Communications division reported an increase in revenue and Headline PBIT of 5 and 2 per cent respectively. It accounts for 57 per cent of Group revenue (2011: 61 per cent) and 49 per cent of Group Headline PBIT before head office costs (2011: 45 per cent). The division contributed revenue of £43.0 million (2011: £41.1 million) and Headline PBIT of £6.3 million (2011: £6.2 million). On a Reported basis, PBIT was £4.7 million (2011: £6.1 million).

	Financial year ended 31 March 2012	Financial year ended 31 March 2011
Revenue from digital and online	57%	55%
Revenue from international	23%	25%
Revenue per head	£74,700	£72,300
Headline PBIT per head	£11,000	£10,900
Headline PBIT margin	15%	15%

Driven by our exposure to high growth areas such as digital, mobile and social media, TMW, The Real Adventure and the Nelson Bostock Group delivered strong Headline PBIT growth. During the year TMW introduced a new proposition, Intelligent Influence - a unique approach in understanding how to actively influence the way people behave, feel and purchase. This has already led to greater engagement with existing clients such as Unilever and Diageo and attracted new business from companies such as Caesars Casino, Open University and Sue Ryder.

EMO delivered an increase in revenue year-on-year, as demand continued to grow for its unique local marketing offer. However, following the decision by one of its major automotive clients to suspend its dealer marketing spend due to their sales success, the business experienced a slowdown in performance against management's expectations in the final quarter of the financial year.

As a result of the slowdown at EMO, and the co-location of the four south west offices of The Real Adventure and EMO into one shared space in Bristol, headcount was reduced and it is anticipated that these actions will improve the future profitability of the division.

Health division

The global healthcare market is still undergoing a period of transformation, including political reform in the US and UK, and a shift from blockbuster drugs to higher value medicines for specific diseases for specific sub-sets of patients. These changes are leading to emerging opportunities that the Group is taking advantage of. For example, in the UK, where the Group has launched Grapevine, its healthcare local marketing offer; and in the US, where the Group is specifically targeting the fast growing Hispanic population through its new start-up Cultúr Health.

In addition to expanding our capabilities organically into new areas, we have added complementary expertise in healthcare reputation management through the acquisition of The Corkery Group, which delivered a good performance during the four months since acquisition.

The Health division accounts for 24 per cent of Group revenue (2011: 17 per cent) and 35 per cent of Group Headline PBIT before head office costs (2011: 25 per cent). The division contributed revenue of £18.1 million (2011: £11.8 million) and Headline PBIT of £4.6 million (2011: £3.4 million). On a Reported basis, PBIT was £7.4 million (2011: £1.9 million). The material difference between Headline and Reported PBIT is due to the revaluation of the estimated deferred consideration for Cooney/Waters and the subsequent adjustment being credited to the income statement under the accounting rules of IFRS 3 (revised), as further explained in note 4 to the full year results statement.

	Financial year ended 31 March 2012	Financial year ended 31 March 2011
Revenue from digital and online	10%	3%
Revenue from international	67%	45%
Revenue per head	£136,900	£132,600
Headline PBIT per head	£34,500	£38,600
Headline PBIT margin	25%	29%

The division saw revenue and Headline PBIT grow by 53 per cent and 33 per cent respectively as a result of the acquisition of The Corkery Group in November 2011 and full year contribution from Cooney/Waters. In like-for-like terms, however, the division has declined reflecting a reduction in marketing spend in the sector in the face of the uncertainty over healthcare reform and a reduction in spend from one of our key clients. We continue to believe however, the long-term market fundamentals for the health sector are good both in the UK and the US and believe our agencies are well positioned to meet the needs of the healthcare industry, as it continues to transform.

Insight division

According to The Market Research Society Quarterly Trends Analysis, conditions for the UK market research industry remain challenging, however internationally, the report shows continued potential for growth, with turnover growing by over 5 per cent during the 12 months to March 2012.  Within the UK, specialist areas such as healthcare research remain resilient, and during the second half of the year the Group launched Vitaris Research Consultancy, a new healthcare research offer to capitalise on this opportunity.

The relative buoyancy of the international market research sector provides the Insight division with a clear opportunity for growth, building on the fact that the division already conducts fieldwork in 50 countries, for clients such as Aviva and Reckitt Benckiser. The division will continue to leverage Marketing Sciences' Research Alliance network, whilst exploring opportunities to build a physical presence in key markets such as the US and Asia.

Other key initiatives from the division during the year include the development of online qualitative research techniques, the introduction of neuro-science and eye-tracking to new areas and further growth in sensory research. Our increased expertise in the technology sector and digital platforms will help drive continued growth in these areas.

The Insight division accounts for 19 per cent of Group revenue (2011: 22 per cent) and 16 per cent of Group Headline PBIT before head office costs (2011: 30 per cent). The division contributed revenue of £13.8 million (2011: £14.8 million) and Headline PBIT of £2.1 million (2011: £4.1 million). On a Reported basis, PBIT was £1.4 million (2011: £3.9 million).

	Financial year ended 31 March 2012	Financial year ended 31 March 2011
Revenue from digital and online	35%	29%
Revenue from international	6%	7%
Revenue per head	£94,200	£103,800
Headline PBIT per head	£14,500	£28,600
Headline PBIT margin	15%	28%

The division's two major operating companies delivered contrasting performances during the year. Rebranded, and with greater embedded digital expertise, Marketing Sciences grew both revenue and Headline PBIT. ICM however, experienced a shortfall in revenue against management's expectations during the fourth quarter of the year as a result of a shortfall in new business and a decline in some client activity, which produced a drag on performance for the division as a whole.

Due to the fourth quarter revenue performance, immediate actions were taken to re-align costs at ICM. This included a review of its data collection processes, reflecting the switch in demand away from telephone based interviewing to online and mobile techniques; redundancies; and a reduction in property and infrastructure costs through co-location. The Insight division is now united under a single divisional head, encouraging greater synergies and sharing of innovative thinking across our insight companies.

Group Strategy

During the year, we made good progress against our five-point strategy to achieve our vision to be the insight and communications group that delivers intelligent creativity:

·     Adapting to change - meeting constant change with constant innovation

·     Sharing knowledge - leveraging learning across the Group to innovate through collaboration

·     Nurturing the best talent - attracting, motivating and retaining the best people in our industry

·     Investing for growth - fostering entrepreneurialism to expand the Group's offer

·     Group diversification - gaining exposure to new markets and growing with our clients.

Among the key strategic developments during the course of the year were the launch of Vitaris Research Consultancy, bringing together expertise from our Insight and Health divisions; the launch of Grapevine, a joint initiative between our Communications and Health divisions; continued investment in digital (including the expansion of social media and mobile capabilities); and the opening of Nelson Bostock Asia.

Driven by our clients' needs, international markets continue to represent a significant growth opportunity for all three of our divisions and now account for just under one third of Group revenue. To continue to serve our global clients we are focused on growing our international business further, by looking to build a physical presence in key markets, through organic and acquisitive growth.

In November 2011 Cooney/Waters acquired The Corkery Group, a New York-based, health and medical public relations company. The acquisition was immediately earnings enhancing and complements Cooney/Waters, the Group's prior-year acquisition in the US healthcare communications sector.

Alongside our wholly owned operations we will continue to leverage our existing affiliate international networks: The Health Collective (healthcare public relations), Indigenus (healthcare marketing communications), The Research Alliance (market research) and Compass (public relations).

Additionally, we have always believed that bringing our companies physically closer together can help to unlock value through winning more joint projects, referring more clients to one another and creating the ideal forum to 'innovate through collaboration'. To this end, we have recently co-located EMO and The Real Adventure to a brand new space in Bristol, creating a major marketing force outside London. This move follows the co-location of our UK healthcare businesses in Richmond-upon-Thames last year. Our US businesses will relocate to a shared space in New York this year and our London companies are looking to co-locate during 2013 as their current leases come to an end.

Our people hold the key to our Better Together ethos, providing the innovative thinking and entrepreneurial spirit that enables our strategy to succeed. I would like to thank all Creston employees for the enthusiasm, ambition and intelligence that they continue to bring to our business.

Dividend

Following another year of good cash conversion, in conjunction with the Group's outlook, the Board recommends a final dividend of 2.67 pence per share (2011: 2.25 pence per share). This, combined with the interim dividend of 0.83 pence per share (2011: 0.75 pence per share), gives a total full year dividend of 3.50 pence per share (2011: 3.00 pence per share), representing a 17 per cent increase compared to the prior year.

In light of the Group's history of strong cash generation and low gearing level, the Board intends to maintain a progressive dividend policy.

Board Change

In September 2011, the Group appointed Richard Huntingford to the Board as Non-Executive Director and Chairman of its Remuneration Committee. Richard has over 25 years' experience in Board level positions, the majority of which has been in the media industry.

Outlook

Naturally we remain cautious in these challenging macro-economic conditions, however we are confident in our strategy, which includes focusing on digital and other high growth areas of marketing services as well as expanding our offer to meet the international opportunities from our blue chip client base.

With our exceptional people, cash generative businesses, a full year contribution from The Corkery Group and a good new business pipeline, the Group is positioned for profitable growth.

Don Elgie

Group Chief Executive

Financial Review     

For the financial year ended 31 March 2012, Group revenue increased by 11 per cent (2011: 11 per cent) to £74.9 million (2011: £67.8 million), driven predominantly by a full year's contribution from Cooney/Waters and the acquisition of The Corkery Group. As a result of the Headline PBIT margin reducing two percentage points to 14 per cent (2011: 16 per cent), Headline PBIT for the year was £10.4 million (2011: £10.8 million). Headline PBT for the year was £10.3 million (2011: £10.4 million); and Headline Diluted Earnings Per Share (DEPS) was 12.34 pence (2011: 12.39 pence).

Reported PBIT increased by 27 per cent to £11.1 million (2011: £8.7 million) and resulted in a Reported PBIT margin of 15 per cent (2011: 13 per cent). Reported PBT increased 29 per cent to £10.8 million (2011: £8.4 million). Reported DEPS increased 60 per cent to 15.08 pence (2011: 9.41 pence).  The material growth in our Reported results has been caused by the revaluation of the estimated deferred consideration for Cooney/Waters and the subsequent adjustment being credited to the income statement under the new accounting rules of IFRS 3 (revised). Note 4 to the full year results statement provides further explanation of this adjustment and 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 year ended 31 March 2012	Financial year ended 31 March 2011
Revenue	£74.9 million	£67.8 million
Revenue from digital and online	41%	41%
Revenue from international	30%	25%
Revenue per head	£86,300	£83,400
Headline PBIT	£10.4 million	£10.8 million
Headline PBIT per head	£12,000	£13,200
Headline PBIT margin	14%	16%
Cash conversion	91%	82%
Net Debt	£0.1 million	£0.0 million
Total Debt : Headline EBITDA ratio	0.6	0.7

Acquisition of The Corkery Group

During the year the Group acquired The Corkery Group for an initial consideration payment to the shareholder and key employees of £3.8 million (US$6.0 million). Deferred consideration payments are due in June 2013 and June 2015 and will be based on the combined average Headline PBIT of Cooney/Waters and The Corkery Group (together known as 'The Cooney/Waters Group') over the period to 31 March 2015. The maximum deferred consideration payment is £6.1 million (US$9.7 million), however, the fair value recorded in the balance sheet at 31 March 2012 is £3.2 million (US$5.2 million) after discounting for notional interest. In addition to the deferred consideration, further acquisition related payments will be made to certain key employees of The Corkery Group, which are based on the same performance metrics as the deferred consideration. These costs are referred to as deemed remuneration charges and will become due in June 2013 and July 2016, of which £0.1 million has been charged to the income statement in 2012 (2011: £nil). The current estimated full pay-out for deemed remuneration for The Corkery Group is £1.1 million (US$1.8 million).

New Bank Facility and Balance Sheet

In November 2011 the Group agreed with Barclays Corporate a new £20 million revolving credit facility expiring on 30 September 2015, plus an accordion loan facility of up to an additional £10 million. This new facility offers the Group maximum flexibility in terms of draw down and has been agreed on terms which the Board regards as favourable. The majority of the £20 million bank facility remains unutilised.

As at 31 March 2012, the Group was virtually debt free with net debt of £0.1 million (2011: £0.0 million). Total debt, including deferred consideration, reduced from £8.4 million to £7.0 million. This represents a gearing level of 7 per cent (2011: 9 per cent) and a total debt to Headline EBITDA ratio of 0.6 times (2011: 0.7 times). 

Cash flow performance

During the financial year, the operating cash flow increased 8 per cent to £10.7 million (2011: £9.9 million). The cash conversion ratio of operating cash flow to Headline EBITDA was 91 per cent (2011: 82 per cent). 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.

Capital expenditure during the year was £2.5 million (2011: £1.5 million) with investment mainly resulting from the co-location of our four south west offices into one shared office in Bristol and continued investment in our IT and digital platforms.

Net finance costs

Headline net finance costs reduced to £0.1 million (2011: £0.3 million). This decrease was driven by the positive cash generation during the year and the historically low LIBOR. The Group's average interest rate margin paid over LIBOR was 1.3 per cent during the year. Headline net finance costs were covered by Headline EBITDA 91 times (2011: 39 times).

The Reported net finance cost was £0.2 million (2011: £0.4 million), which includes notional finance costs relating to the deferred consideration payments of £0.1 million (2011: £0.1 million).

Effective tax rate

The Group's Headline tax rate was 28 per cent (2011: 29 per cent). This rate is higher than the current UK statutory rate of 26 per cent as a result of items of expenditure that are not deductible for tax purposes. The Reported effective tax rate was 16 per cent (2011: 32 per cent) and is lower than the statutory rate of 26 per cent because of the non-taxable credit recognised on the revaluation of deferred consideration.

Barrie Brien

Chief Operating and Financial Officer

UNAUDITED CONSOLIDATED INCOME STATEMENT

for the year ended 31 March 2012

	Note	Unaudited Before Headline items 2012 £'000	Headline items (note 4) 2012 £'000	Unaudited total 2012 £'000	Audited Before Headline items 2011 £'000	Headline items (note 4) 2011 £'000	Audited total 2011 £'000
Continuing operations: Turnover (billings)	3	109,968	-	109,968	100,542	-	100,542
Revenue	3	74,924	-	74,924	67,769	-	67,769
Operating costs		(64,506)	659	(63,847)	(57,008)	(2,015)	(59,023)
Profit before finance income, finance costs and taxation		10,418	659	11,077	10,761	(2,015)	8,746
Finance income		-	-	-	1	-	1
Finance costs		(130)	(116)	(246)	(314)	(68)	(382)
Profit before taxation		10,288	543	10,831	10,448	(2,083)	8,365
Taxation		(2,833)	1,114	(1,719)	(2,981)	286	(2,695)
Profit for the financial year from continuing operations		7,455	1,657	9,112	7,467	(1,797)	5,670
Discontinued operations:
Profit/(loss) for the year from discontinued operations	5	-	-	-	125	(3,448)	(3,323)
Profit for the year		7,455	1,657	9,112	7,592	(5,245)	2,347
Basic and Diluted earnings/(loss) per share (pence)	6
Continuing operations		12.34		15.08	12.39		9.41
Discontinued operations		-		-	0.20		(5.52)
		12.34		15.08	12.59		3.89

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 March 2012

	Note	Unaudited 2012 £'000	Audited 2011 £'000
Profit for the year		9,112	2,347
Other comprehensive income/(expense)
Exchange differences on translation of foreign operations		17	(190)
Cash flow hedge:
Fair value gain in year	10	-	188
Tax effect of fair value gain		-	(53)
Other comprehensive income/(expense) for the year, net of tax		17	(55)
Total comprehensive income for the year		9,129	2,292

CONSOLIDATED BALANCE SHEET
as at 31 March 2012

	Note	Unaudited As at 31 March 2012 £'000	Audited As at 31 March 2011 £'000
Non-current assets
Intangible assets
Goodwill	8	107,050	101,280
Other		1,473	1,379
Property, plant and equipment		3,390	2,144
Deferred tax asset		592	688
		112,505	105,491
Current assets
Inventories and work in progress		1,202	1,444
Trade and other receivables		25,982	29,053
Cash	12	1,818	1,677
		29,002	32,174
Current liabilities
Trade and other payables		(27,636)	(27,713)
Corporation tax payable		(1,419)	(3,087)
Obligations under finance leases	12	(2)	(7)
Bank overdraft, loans and loan notes	12	(1,908)	(1,716)
		(30,965)	(32,523)
Net current liabilities		(1,963)	(349)
Total assets less current liabilities		110,542	105,142
Non-current liabilities
Provision for other liabilities and charges		(6,929)	(8,376)
Obligations under finance leases	12	-	(2)
Deferred tax liability		(118)	-
		(7,047)	(8,378)
Net assets		103,495	96,764
Equity
Called up share capital		6,134	6,134
Share premium account		35,943	35,943
Own shares		(656)	(779)
Shares to be issued		1,079	1,545
Other reserves		30,822	30,822
Foreign currency translation reserve		(173)	(190)
Retained earnings		30,346	23,289
Total equity		103,495	96,764

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2012

	Called up share capital	Share premium account	Own shares	Shares to be issued	Other reserves	Foreign currency translation reserve	Retained earnings	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Changes in equity for 2012 (Unaudited)
At 1 April 2011	6,134	35,943	(779)	1,545	30,822	(190)	23,289	96,764
Profit for the year	-	-	-	-	-	-	9,112	9,112
Other comprehensive income:
Exchange differences on translation of foreign operations	-	-	-	-	-	17	-	17
Total comprehensive income for the year	-	-	-	-	-	17	9,112	9,129
Debit for share-based incentive schemes	-	-	-	(151)	-	-	-	(151)
Exercise of share award	-	-	123	(315)	-	-	-	(192)
Gain on employee benefit trust	-	-	-	-	-	-	81	81
Fair value adjustment of own shares	-	-	-	-	-	-	(274)	(274)
Dividends (note 7)	-	-	-	-	-	-	(1,862)	(1,862)
At 31 March 2012	6,134	35,943	(656)	1,079	30,822	(173)	30,346	103,495

	Called up share capital	Share premium account	Own shares	Shares to be issued	Other reserves	Foreign currency translation reserve	Retained earnings	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Changes in equity for 2011 (Audited)
At 1 April 2010	6,134	35,943	(801)	1,461	31,357	-	21,860	95,954
Profit for the year	-	-	-	-	-	-	2,347	2,347
Other comprehensive income:
Exchange differences on translation of foreign operations	-	-	-	-	-	(190)	-	(190)
Fair value gain on financial liability	-	-	-	-	-	-	188	188
Tax effect of fair value gain	-	-	-	-	-	-	(53)	(53)
Total comprehensive income for the year	-	-	-	-	-	(190)	2,482	2,292
Credit for share-based incentive schemes	-	-	-	112	-	-	-	112
Exercise of share award	-	-	22	(28)	-	-	-	(6)
Gain on treasury scheme/employee benefit trust	-	-	-	-	-	-	6	6
Fair value adjustment of own shares	-	-	-	-	-	-	(4)	(4)
Dividends (note 7)	-	-	-	-	-	-	(1,055)	(1,055)
Disposal of investment	-	-	-	-	(535)	-	-	(535)
At 31 March 2011	6,134	35,943	(779)	1,545	30,822	(190)	23,289	96,764

CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 March 2012

	Note	Unaudited 2012 £'000	Audited 2011 £'000
Operating cash flow	11	10,713	9,937
Tax paid		(3,176)	(1,593)
Cash outflow from discontinued operating activities		-	(1,058)
Net cash generated from operating activities		7,537	7,286
Investing activities
Finance income		-	1
Purchase of subsidiary undertakings		(3,545)	(9,010)
Net cash acquired with subsidiaries		453	497
Purchase of property, plant and equipment		(2,296)	(1,381)
Proceeds from sale of property, plant and equipment		17	4
Purchase of intangible assets		(247)	(164)
Net proceeds from disposal of subsidiary		-	27,374
Cash outflow from discontinued investing activities		-	(1,373)
Net cash (outflow)/inflow from investing activities		(5,618)	15,948
Financing activities
Finance costs		(107)	(324)
Net decrease in borrowings		-	(24,600)
Dividends paid	7	(1,862)	(1,055)
Capital element of finance lease payments		(7)	(7)
Net cash outflow from financing activities		(1,976)	(25,986)
Decrease in cash and cash equivalents	12	(57)	(2,752)
Cash and cash equivalents at start of year	12	(19)	2,778
Effect of foreign exchange rates		(4)	(45)
Cash and cash equivalents at end of year	12	(80)	(19)

NOTES TO THE FULL YEAR RESULTS STATEMENT
for the year ended 31 March 2012

1.         Basis of Preparation

The financial information set out herein does not constitute the company's statutory accounts for the years ended 31 March 2012 or 2011, within the meaning of section 434 of the Companies Act 2006.  Statutory accounts for 2011 have been delivered to the registrar of companies.  The auditors have reported on these 2011 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 2012 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 2011 audited Annual Report and Accounts subject to the following new standards, amendments and interpretations:

Standards, amendments and interpretations not yet effective and have not been early adopted by the Group:

·      Amendment to IAS 12, 'Income taxes' (effective for periods beginning on or after 1 January 2012).  This amendment introduces an exception to the existing principle for the measurement of deferred tax assets or liabilities arising on investment property measured at fair value. As a result of the amendments, SIC 21, 'Income taxes − recovery of revalued non-depreciable assets', will no longer apply to investment properties carried at fair value. The amendments also incorporate into IAS 12 the remaining guidance previously contained in SIC 21, which is withdrawn.

·      Amendment to IAS 1, 'Financial statement presentation' (effective for periods beginning on or after 1 July 2012).  The main change resulting from these amendments is a requirement for entities to group items presented in Other comprehensive income on the basis of whether they are potentially reclassifiable to profit or loss subsequently (reclassification adjustments).

·      IFRS 10, 'Consolidated financial statements' (effective for periods beginning on or after 1 January 2013).  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.

·      IFRS 13, 'Fair value measurement' (effective for periods beginning on or after 1 January 2013).  This standard aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs.

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 amortisation of acquired intangible assets, acquisition, start-up and restructuring related costs, movement in fair value of deferred consideration, 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.

The analysis below has been presented on a continuing operations basis.

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
2012 (Unaudited)	£'000	£'000	£'000	£'000	£'000
Turnover (billings)	64,718	22,117	23,133	-	109,968
Revenue	43,009	18,066	13,849	-	74,924
Headline PBIT	6,308	4,559	2,137	(2,586)	10,418
Acquisition, start-up and restructuring related costs	(1,595)	(791)	(728)	-	(3,114)
Movement in fair value of deferred consideration	-	4,763	-	-	4,763
Amortisation of acquired intangible assets	-	(110)	-	-	(110)
Future acquisition payments to employees deemed as remuneration	-	(1,017)	-	137	(880)
Reported PBIT	4,713	7,404	1,409	(2,449)	11,077
Finance costs	-	-	-	(130)	(130)
Notional finance cost on future deferred consideration	-	(116)	-	-	(116)
Profit before taxation	4,713	7,288	1,409	(2,579)	10,831
Taxation					(1,719)
Profit for the year					9,112

2011 (Audited)	Communications £'000	Health £'000	Insight £'000	Head office £'000	Group £'000
Turnover (billings)	60,096	14,866	25,580	-	100,542
Revenue	41,142	11,799	14,828	-	67,769
Headline PBIT	6,197	3,437	4,094	(2,967)	10,761
Acquisition, start-up and restructuring related costs	(144)	(1,173)	(240)	-	(1,557)
Amortisation of acquired intangible assets	-	(219)	-	-	(219)
Future acquisition payments to employees deemed as remuneration	-	(110)	-	(129)	(239)
Reported PBIT	6,053	1,935	3,854	(3,096)	8,746
Finance income	-	-	-	1	1
Finance costs	-	-	-	(314)	(314)
Notional finance costs on future deferred consideration	-	(68)	-	-	(68)
Profit/(loss) before taxation	6,053	1,867	3,854	(3,409)	8,365
Taxation					(2,695)
Profit for the financial year					5,670

Geographical segmentation

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

	Turnover		Revenue
	(Unaudited) 2012	(Audited) 2011	(Unaudited) 2012	(Audited) 2011
	£'000	£'000	£'000	£'000
UK	79,741	77,787	52,086	51,127
Rest of Europe	15,173	16,103	11,347	11,673
Rest of the World (including USA)	15,054	6,652	11,491	4,969
	109,968	100,542	74,924	67,769

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 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 acquisition, start-up and restructuring related costs.

2012 (Unaudited)	PBIT £'000	PBT £'000	PAT £'000
Headline	10,418	10,288	7,455
Acquisition, start-up and restructuring related costs	(3,114)	(3,114)	(3,114)
Movement in fair value of deferred consideration	4,763	4,763	4,763
Amortisation of acquired intangible assets	(110)	(110)	(110)
Future acquisition payments to employees deemed as remuneration	(880)	(880)	(880)
Notional finance cost on future deferred consideration	-	(116)	(116)
Taxation impact			1,114
Reported	11,077	10,831	9,112
2011 (Audited)	PBIT £'000	PBT £'000	PAT £'000
Headline	10,761	10,448	7,467
Acquisition, start-up and restructuring related costs	(1,557)	(1,557)	(1,557)
Amortisation of acquired intangible assets	(219)	(219)	(219)
Future acquisition payments to employees deemed as remuneration	(239)	(239)	(239)
Notional finance costs on future deferred consideration	-	(68)	(68)
Taxation impact			286
Reported	8,746	8,365	5,670

The reduction in deferred consideration due to Cooney/Waters, and the resulting credit to the income statement, is due to the acquisition of The Corkery Group and management's revision of expected trading performance during the earn-out period. Under the terms of The Corkery Group acquisition a proportion of future deferred consideration previously due to Cooney/Waters has been re-assigned to The Corkery Group. Under IFRS 3 (revised) any changes in fair value of future deferred consideration is charged/credited through the comprehensive income statement.

5.         Discontinued Operations

In the prior year the Group disposed of Delaney Lund Knox Warren and Partners, Dialogue DLKW and The Composing Room ('DLKW') for £28.0 million. DLKW was therefore reported as a discontinued operation in the prior year.

Below shows the financial information of DLKW for the year ending 31 March 2011.

	Year ended 31 March 2011 £'000
Turnover (billings)	9,180
Revenue	4,472
Headline operating costs	(4,307)
Headline PBIT	165
Loss on disposal	(3,474)
Reported loss before tax	(3,309)
Taxation	(14)
Loss for the year	(3,323)

6.         Earnings per share

	Headline		Reported
	Unaudited 2012 £'000	Audited  2011 £'000	Unaudited 2012 £'000	Audited  2011 £'000
Earnings
Profit for the year from continuing operations	7,455	7,467	9,112	5,670
Profit/(loss) from discontinued operations	-	125	-	(3,323)
	7,455	7,592	9,112	2,347
Number of shares
Weighted average number of shares	60,413,845	60,285,576	60,413,845	60,285,576
Earnings per share
Basic and diluted earnings/(loss) per share (pence): -       continuing operations	12.34	12.39	15.08	9.41
-       discontinued operations	-	0.20	-	(5.52)
	12.34	12.59	15.08	3.89

A reconciliation from Headline to Reported profit after tax is provided in note 4.

7.         Dividends

	Unaudited 2012 £'000	Audited 2011 £'000
Amounts recognised as distributions to shareholders in the year
Prior year final dividend of 2.25 pence per share (2011: 1.00 pence per share)	1,360	603
Interim dividend of 0.83 pence per share (2011: 0.75 pence per share)	502	452
Total	1,862	1,055

A final dividend of 2.67 pence per share (2011: 2.25 pence per share) equivalent to £1,614,254 is recommended to be paid on 12 September 2012 to shareholders on the register on 5 August 2012.  The final dividend will be recognised in the 2013 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 £'000
Cost
At 1 April 2010 (Audited)	119,081
Disposals	(30,533)
Additions	12,975
Exchange differences	(243)
At 31 March 2011 (Audited)	101,280
Additions (note 9)	5,902
Exchange differences	(132)
At 31 March 2012 (Unaudited)	107,050
Net book amount
At 31 March 2012 (Unaudited)	107,050
At 31 March 2011 (Audited)	101,280

The Group disposed of DLKW and acquired Cooney/Waters in the year to 31 March 2011. The Corkery Group was acquired in the year to 31 March 2012.

In accordance with the Group's accounting policy, the carrying values 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 subsidiary's two year business plan (approved in March 2012) which is subject to a rigorous review and challenge process. The residual growth rate thereafter is at a nominal rate of 3 per cent for all units and after year six, a terminal value with zero growth has been applied.

For acquisitions made within the last two years, the Group uses the relevant company's current year Headline performance and applies a 3 per cent growth for the following four years with zero growth on the terminal value. This is then adjusted for any related deemed remuneration charges relevant for that cash generating unit. 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.

The pre-tax discount rate used to assess the carrying value of goodwill is 9.4 per cent (2011: 8.3 per cent). As all the cash generating units 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 cash-generating unit as the estimated recoverable amount exceeded the carrying value in all cases.

Components of goodwill at 31 March 2012 and 2011 are:

	Unaudited 2012 £'000	Audited 2011 £'000
Communications
EMO	4,362	4,362
NBC	6,434	6,434
TMW	28,541	28,541
TRA	5,281	5,281
	44,618	44,618
Health
Cooney/Waters	12,975	12,975
PAN	9,599	9,599
RDC	7,668	7,668
The Corkery Group	5,902	-
Exchange differences	(375)	(243)
	35,769	29,999
Insight
ICM	19,030	19,030
MSL	7,633	7,633
	26,663	26,663
Total	107,050	101,280

9.  Acquisitions

The Corkery Group

On 30 November 2011, the Group acquired 100 per cent of the share capital of The Corkery Group through its wholly owned subsidiary Cooney Waters LLC. The Corkery Group is a New York based health and medical public relations company specialising in product and issues communications for the world's leading health organisations.

The fair value of the net assets acquired and the consideration are detailed below.

2012 (Unaudited)	Book value £'000	Fair value adjustments £'000	Provisional fair value £'000
Non-current assets
Intangible assets
- Other	-	209	209
Property, plant and equipment	101	-	101
	101	209	310
Current assets
Trade and other receivables	787	-	787
Cash and short term deposits	453	-	453
	1,240	-	1,240
Current liabilities	(431)	(10)	(441)
Net current assets	809	(10)	799
Net assets	910	199	1,109
Goodwill (note 8)			5,902
Total			7,011

Satisfied by:

2012 (Unaudited)	£'000
Cash	3,213
Working capital payment	487
Deferred consideration	3,311
	7,011

The fair value adjustment relates to the recognition of other intangible assets and holiday pay accrual under IFRS as follows:

2012 (Unaudited)	£'000
Customer contracts	113
Brand names	96
Holiday pay adjustment	(10)
Total	199

As part of the sale and purchase agreement, there was an agreed working capital and cash threshold required on the balance sheet at the acquisition completion date. Any excess/shortfall from the threshold would be paid to/collected from the seller. At the time of completion there was a working capital excess of £487,000 which has been settled as a cash payment after the year end.

In addition to the £3.2 million (US$5.0 million) initial consideration paid to the seller, £0.6 million (US$1.0 million) was paid to key employees of The Corkery Group giving a total initial cash outflow of £3.8 million (US$6.0 million) being paid on the completion date. An additional deferred consideration payment is due which is contingent upon the average annual PBIT achieved by the Cooney/Waters Group during the period to 31 March 2015.

The maximum (undiscounted) deferred consideration payable under the amended Cooney/Waters sale and purchase agreement is £12.3 million (US$19.7 million) of which a maximum of £6.1 million (US$9.7 million) is in respect of The Corkery Group. The fair value of the deferred consideration for The Corkery Group at date of acquisition was £3.3 million (US$5.1 million) and was estimated by applying the income approach. The fair value estimates are based on a discount rate of 3.3 per cent and assumed probability-adjusted profit in The Corkery Group.

The fair value of the deferred consideration recognised at 31 March 2012 was £3.2 million (US$5.2 million). The difference between the £3.3 million shown above and the year-end balance of £3.2 million is the notional interest charge and the foreign exchange adjustment. Deferred consideration will be paid in cash, in accordance with the associated sale and purchase agreement. These payments are due in June 2013 and June 2015.

IFRS 3 (revised) now requires companies to expense acquisition costs. As a consequence £0.6 million has been charged to the income statement in relation to the acquisition of The Corkery Group.

Profit and cash flow:

The subsidiary undertaking acquired during the year made the following contributions to, and utilisations of, Group profit and cash flow:

2012 (Unaudited)	£'000
Profit before finance income, finance costs and taxation	22
Acquisition payments to the employees of The Corkery Group deemed as remuneration	641
Depreciation of property, plant and equipment	20
Increase in trade and other receivables	(25)
Decrease in trade and other payables	(226)
Tax paid	(25)
Purchase of property, plant and equipment	(2)
Cash flow	405

The Corkery Group contributed revenue of £1.8 million and Headline PBIT of £0.7 million to the results of the Group since acquisition. If the acquisition had been completed at the beginning of the financial year, management estimate that Group revenue for the year would have been £78.6 million and Group Headline PBIT would have been £11.3 million (note that the revenue and profit figures for The Corkery Group for the period before the acquisition have not been audited due to this not being a requirement for a US incorporated entity).

10.   Derivative financial instrument

A forward contract matured in August 2010.  This contract qualified for hedge accounting and was treated as a cashflow hedge and therefore the effective portion of the change in fair value was recognised within the 2011 statement of comprehensive income.  The ineffective portion was recognised directly in the income statement. 

11.   Reconciliation of profit for the year to operating cash flow

		Unaudited 2012 £'000	Audited 2011 £'000
Profit for the year		9,112	5,670
Taxation		1,719	2,695
Profit before taxation		10,831	8,365
Finance costs		246	382
Finance income		-	(1)
Profit before finance income, finance costs and taxation		11,077	8,746
Depreciation of property, plant and equipment		1,118	955
Amortisation of intangible assets		347	599
Share based (credits)/payments		(41)	17
Future acquisition payments to employees deemed as remuneration		880	239
Movement in the fair value of deferred consideration		(4,763)	-
Loss/(profit) on disposal of property, plant and equipment		11	(1)
Loss on disposal of intangible assets		14	22
Decrease in inventories and work in progress		251	196
Decrease/(increase) in trade and other receivables		3,861	(468)
Decrease in trade and other payables		(2,042)	(368)
Operating cash flow		10,713	9,937

12.   Analysis of net and total debt

	Audited As at 31 March 2011	Unaudited Acquisitions	Unaudited Cash flow	Unaudited Foreign exchange	Unaudited At 31 March 2012
	£'000	£'000	£'000	£'000	£'000
Cash	1,677	453	(310)	(2)	1,818
Bank overdraft, revolving credit facility and bank loans	(1,696)	(3,545)	3,343	-	(1,898)
Cash and cash equivalents	(19)	(3,092)	3,033	(2)	(80)
Acquisition loan notes	(20)	-	10	-	(10)
Finance leases	(9)	-	7	-	(2)
Net debt	(48)	(3,092)	3,050	(2)	(92)
Provision for deferred consideration	(8,376)	1,447	-	-	(6,929)
Total debt	(8,424)	(1,645)	3,050	(2)	(7,021)

Included within the acquisitions related movement was an initial cash consideration of £3.2 million paid for the acquisition of The Corkery Group and £0.4 million paid for the working capital payment for Cooney/Waters.

13.   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 2012.  During the year total fees of £63,069 (2011: £61,321) were paid to City Group P.L.C., £28,069 (2011: £31,321) for the provision of secretarial services and assistance on the acquisitions and £35,000 (2011: £30,000) for the services of Mr D C Marshall.  As at 31 March 2012 £17,260 (2011: £15,874) was due to City Group P.L.C..

During the year the Group, through its wholly owned subsidiary Emery McLaven Orr Limited, provided services to Vanessa Knox Limited, a company owned by Vanessa Knox, the wife of Mr B C Brien, a Director of Creston plc. The value of the services amounted to £17,500 (2011:£nil). As at 31 March 2012 £nil (31 March 2011: £nil) was due from Vanessa Knox Limited. All transactions were conducted on an arm's length basis.

14.   Availability of the Annual Report and Accounts

Copies of the Annual Report and Accounts are available on the Company's website www.creston.com.

 

END

 

 

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