Creston's (LON:CRCRE) full year results exceeded the expectations that had been set in January, with constant currency like-for-like revenues and headline PBT flat on the prior year. The group is making good progress in leveraging its Unlimited group branding, with an increasing number of clients working with several group agencies. Good cash conversion has led to a higher year-end cash position – there is no debt, enabling a progressive dividend (up 5% year-on-year) on a yield well ahead of sector and market. The shares trade on an unjustifiably large discount to peers and market.
Acquisitions show strong contribution
Splendid Unlimited, the digital design and development consultancy 51% acquired in April 2015, helped boost group revenues by 8%. This countered the weakness in agencies serving the UK retail and consumer technology sectors, where market conditions were more volatile and the translation effect of euro-denominated revenues. The Health business is not yet fulfilling its potential, but costs have been taken out (as they also have in the Communications & Insight division) and our model therefore shows some recovery in operating margin in the current year and in FY18. With these results, the group has taken a non-cash exceptional write-down on goodwill of £15.2m relating 70% to Insight and 30% to Health on reappraisal of the earnings potential of two of the group’s agencies.
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