The 5 per cent share price rally which greeted Creston 's (CRE) full-year results suggests investors in the marketing communications group had expected further bad news following January's profit warning. That trading update - which detailed a sudden swathe of client budget cuts and project delays - nonetheless proved accurate in forecasting eventual revenues and adjusted pre-tax profits, the latter flat year-on-year at £9.9m.
The real damage came in an exceptional non-cash impairment charge of £15.2m. This has been allocated to two units: insight agency ICM Unlimited and healthcare marketing agency DJM PAN Unlimited, owing to lower future operating profit estimates.
That goodwill charge explains the swing to a statutory loss for the period, though management's confidence in the balance sheet and cash conversion rate of 111 per cent were enough to raise the full-year dividend. Nevertheless, Creston will be hoping that its clients will start to spend a bit more in the second half of this year. Analysts at Peel Hunt pointed out that there was effectively no revenue growth in the year once acquisitions were stripped out. Investors can take some assurance from what chief executive Barrie Brien rightly described as an enviable list of new business wins in the period, including work for British Airways, Vodafone, AstraZeneca and Novartis.
Analysts at N+1 Singer expect adjusted pre-tax profit of £10.2m and EPS of 11.5p for the March 2017 year-end, against £9.5m and 10.9p in 2016.
CRESTON (CRE) | ||||
|---|---|---|---|---|
| ORD PRICE: | 96p | MARKET VALUE: | £56m | |
| TOUCH: | 95-97p | 12-MONTH HIGH: | 163p | LOW: 88p |
| DIVIDEND YIELD: | 4.6% | PE RATIO: | na | |
| NET ASSET VALUE: | 180p* | NET CASH: | £1.4m | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 74.9 | 10.8 | 15.1 | 3.50 |
| 2013 | 75.2 | 11.0 | 16.1 | 3.67 |
| 2014 | 74.9 | 7.2 | 8.6 | 3.90 |
| 2015 | 76.9 | 9.6 | 12.5 | 4.20 |
| 2016 | 82.6 | -7.6 | -16.7 | 4.40 |
| % change | +8 | - | - | +5 |
Ex-div: 4 Aug Payment: 9 Sep *Includes intangible assets of £100m, or 170p a share. | ||||
