18th Feb 2008 07:00
Creston PLC18 February 2008 18 February 2008 Creston plc Interim Management Statement Creston plc (LSE: CRE), the Insight and Communications Group, announces itsinterim management statement for the period 1 October 2007 to 31 December 2007. Operational Trading The Group continued its consistent track record of achieving growth in excess ofthe industry average. Trading during the first three quarters of FY08 is aheadof the prior year, with revenue growth across the Group of 20 per cent and on alike-for-like basis 8 per cent. This continued growth has been achieved despite the present volatile economicenvironment and given the structural shift from off-line to on-line which istaking place within the industry. During the year the Group increased its investment in its existing operations tomaintain its market leading client proposition. This investment was twofold: (i) in new sector specialisations, such as International Healthcare PR and Corporate Communications; and (ii) in resource and freelance for the fast growing area of digital and online. This strategy has proven successful, as demonstrated by the addition of a numberof new blue chip client wins in the third quarter such as Capital One, FirstDirect, Homeform, Royal Mail, Thorpe Park, Toshiba Computers and others to itsalready diverse and impressive client base. Inevitably, the investments have caused a lower profit conversion on incrementalrevenue and a small decline in the Headline operating profit margin year on yearfrom over 18% to 17% for the April to December period. This operating margin isafter accounting for head office costs and Creston US and remains one of thebest in the industry. Against the current uncertain economic environment, it is even more important tomaximise the operating profit margin and actions included to date are: a) the formation of a Digital Forum with the brief to reduce the resource cost and improve the efficient delivery of projects; b) further centralisation of the Insight division's data capture and back offices; and c) the formation of a Healthcare Board to maximise client synergy opportunities and develop a truly integrated approach to clients' marketing needs. Operating cash flow during the period remained good and is in line withmanagement's expectations of a 100% conversion from operating profit. The group maintains significant headroom in each of its banking covenants and atthe period end had over £16 million of unutilised banking facility available.This unused facility plus annual operating cash flow are to be used to settleearn out commitments due over the next three financial years. The earn outliability is contingent upon the companies in earn out achieving growth up tothe end of the 2009 financial year. USA Creston announced in its Interim statement for the period ended September 2007that it had decided to put acquisitions in the USA on hold, due to the thenconcern over a potential downturn in the American economy. The global economic uncertainty and volatility has only increased since theInterim statement and more so in the USA than in most other countries.Consequently, the Board has decided to close its NY office and absorb the dutiesof building the Creston offering to American clients from within its London headoffice. As a consequence, Steve Blamer will be stepping down as CEO of CrestonInc. The costs incurred to date and of closing the office are approximately£600,000 in total and will be fully disclosed in the preliminary results. Outlook As demonstrated by the above market revenue growth to date, the Group continuesto perform well in a period of economic uncertainty and when there is growingevidence of clients delaying spend in the market research sector. As newbusiness was strong across both divisions in the quarter and the pipelineremains very positive, the Board expects to be in line with broker revenueforecasts. The Board remain confident of delivering absolute and like-for-like growth inoperating profit compared to the prior year. The Group's continued significantinvestment in digital and online resource is expected to result in a lowerprofit conversion on the revenue growth and therefore a small reduction in thefull year operating profit margin. The Board believes that Creston, with its diversified and growing online model,is well placed to weather any future economic uncertainty and it will be pleasedto report in mid-June on its progress in the preliminary results for the fullyear ending 31 March. 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 About Creston plc • Creston is an Insight and Communications marketing services group. TheBoard's aim is to identify synergistic benefits between its marketing servicescompanies offering premium services such as market research, direct andinteractive marketing, advertising, public relations, insight and to build aGroup that offers clients solutions to both existing and future marketing needsacross both on-line and off-line channels. • Creston's companies boast a range of blue-chip clientsincluding the AA, AstraZeneca, BA, Bayer, BMW, BT, Burger King, Capital One,Canon, COI Communications, Cow & Gate, Diageo, eBay, First Direct, GeneralMotors, George Wimpey, GlaxoSmithKline, Halifax, Homeform, Kimberly-Clark,Lexus, Lloyds Black Horse, Morrisons, Nestle Rowntree, Nissan, Norwich Union,Pfizer, Roche Diagnostics, Royal Mail, Sainsbury's, Tesco, Thorpe Park, Toshiba,T-Mobile, Tropicana, Unilever, Vodafone, Walkers and WH Smith. • Creston's share price is quoted in the Financial Times, TheDaily Telegraph, The Times and the London Evening Standard. 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