27 January 2012
Creston plc Interim Management StatementCreston plc ('Creston' or the 'Group') (LSE: CRE), the Insight and Communications Group, announces its interim management statement for the period 1 October 2011 to date.
Trading update
For the three months to 31 December 2011 (the 'Period'), the
Group reported revenue growth of over 22 per cent compared to
the same period last year. Like-for-like1
revenue growth for the third quarter was 7 per cent, compared
to the same period in the prior year. Year to date, like-
for-like revenue growth of 5 per cent has been achieved.
Despite this revenue growth, the Board's expectation for
Headline2 PBIT3 for the full year
is lowered to be slightly below that of the prior year. The
anticipated reduction in Headline PBIT is as a result of a
shortfall in fourth quarter new business, the costs
associated with staffing-up to service the expected increase
in revenue, client projects being delayed until the new
financial year and operating losses associated with the
start-up ventures in the year. Appropriate actions have begun
to align operating costs to the lower expected sales levels,
the effects of which will predominantly be realised from the
start of the new financial year.
The Insight division had a good third quarter growth in
revenue, which exceeded the preceding second quarter as well
as quarter three of the prior year. This growth has been
achieved by the addition of new clients in the first half of
the year, such as the BBC and others, which cannot currently
be named. In the Period, the division established Vitaris, a
new healthcare research consultancy, targeting new and
existing health clients. This new product offering was
launched later than expected and accordingly the contribution
to the current financial year will be below original
expectations. This business is expected to be margin
accretive in the next financial year.
Although the Insight division's performance to date has shown
positive revenue growth, the Board expects a revenue decline
for the ICM business in the fourth quarter caused by a
shortfall in new business and a delay of projects into the
new financial year. This is disappointing considering the
improving performance of the Insight division and the new
client wins earlier in the year. The necessary actions are
being taken to align operating costs to the lower expected
level of sales for the remainder of this, and future
financial years. However, the savings generated from actions
already underway will have minimal impact in the current
financial year and the revenue decline will have a direct
impact on fourth quarter profitability.
The Communications division has continued its positive
revenue growth in the third quarter versus the first half of
the year and compared to the same period last year. This
growth has been achieved due to the successful addition of
new clients, such as Brother, Open University,
Sue Ryder and the continued expansion of activity for
existing clients, such as the successful addition to the
Unilever European digital roster.
The growth in full year revenue for the Communications
division is broadly in line with the Board's expectations,
however, this incremental revenue will not fully convert to
PBIT due to the slower than budgeted financial performance of
the start-ups during the year, such as Creston Unlimited and
the Nelson Bostock Group's public relations office in Hong
Kong. Whilst such organic initiatives are generally loss
making in their first year of trading, this strategy of
investing in start-ups remains important to the long term
growth of the division.
The Health division has materially increased its revenue and
PBIT in the third quarter versus the prior year, due to the
growth of its presence in the US. The addition of the US
public relations companies to the division has strengthened
its global PR capability and as a consequence there are an
increasing number of on-going global pitches, in addition to
the recent World Hepatitis Alliance win.
Additionally, the division's new local health offer (launched
as Grapevine in the second quarter) has already won its first
client and is set to benefit from the Government's recent
announcement to ring fence £5 billion for local government
public health.
The decline however in new business opportunities announced
in the first half of the year has had the expected impact on
the third quarter with a small like-for-like revenue decline.
While there has been an improvement in new business
opportunities during the second half with some new client
wins, this will not have as big an impact this financial year
as was expected. In addition, fourth quarter delays to client
budgets are also expected to push further revenue back into
the next financial year.
The Group has reported good like-for-like revenue growth of 7
per cent in the third quarter and although the full year
like-for-like and reported revenue growth is expected to be
positive, fourth quarter revenue will be lower than the
Board's expectations. Despite this revenue growth, Headline
PBIT is expected to be slightly below that of the prior year
as detailed above. Since
the Group's performance was weighted to the second half of
the year and especially the fourth quarter, the cost
reductions that have been implemented will have minimal
impact on this
financial year, but will improve profitability on future
revenue.
For further information please contact:
Creston plc + 44 (0)20 7930 9757
Don Elgie, Group Chief Executive
Barrie Brien, COO/CFO
M:Communications +44 (0)20 7920 2339
Elly Williamson
Creston plc (LSE: CRE) is a marketing services company focused on insight-led communications. The Group delivers a range of marketing services, including digital marketing, market research, health communications, public relations, direct marketing, advertising and brand consultancy to a broad spectrum of blue-chip clients. All our companies share a common commitment to understanding, influencing and inspiring consumers on behalf of our clients and to creating value through innovative collaborative working. www.creston.com
1 Like-for-like compares current year performance to prior year performance, excluding the results from any acquisitions.
2 Headline results reflect the underlying performance of the Group and excludes acquisition, start-up and restructuring related costs, deemed remuneration charges and notional finance costs.
3 Profit before finance income, finance costs and taxation (PBIT).
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Interim Management Statement |