RNS Number : 2733W
27 January 2012
27 January 2012
Interim Management Statement
Creston 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.
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.
TheHealth 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 GBP5 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
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 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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