Euro woes and 'client budget weaknesses' hit Creston as first-half growth slows

Creston has reported a "slow start" to its financial year, citing the impact of the weakening Euro, "client budget weaknesses" and slower performance in its health arm linked to the need for a more integrated health offer.

Creston CEO Barrie Brien: Pleased with group's progress despite slower growth in H1
Creston CEO Barrie Brien: Pleased with group's progress despite slower growth in H1

Like-for-like revenue rose one per cent to £37.7m in the six months to 30 September for the Nelson Bostock Unlimited, Fever Unlimited and Red Door Unlimited owner, which said it expected full-year performance to be slightly below expectations.

Headline pre-tax profit rose eight per cent to £4.2m. That figure excludes acquisition costs and a £2m impairment charge relating to the closure of market research firm FieldworkUK.com.

CEO Barrie Brien attributed lower like-for-like revenue growth to "weaker trading by a small number of our larger retail and consumer tech clients causing budget cuts"; the weakening Euro, costing the firm around £400,000 per year; and a slower performance in its UK health advertising offer, linked to the health sector's "growing need for integrated channel-neutral and more patient-centric campaigns".

Profit before interest and tax in Creston's Health division fell six per cent to £1.6m, with revenue in the division also down six per cent to £9.7m.

Despite these factors, Brien said Creston had a "strong start to the year" for new business across Creston, adding new clients such as Logitech and Costa and assignments from existing clients such as Canon, Danone and Diageo.

New business wins since the end of the half-year have included the Vodafone Customer Value Marketing account, its appointments as both Sony Mobile and McLaren's global lead digital strategy agency and Creston Unlimited's appointment as British Airways' CRM and data strategy adviser.

Headline profit before interest and tax in Creston’s Communications & Insight division rose 24 per cent to £4m on revenue up 14 per cent to £30.6m. The company cited the acquisition of Splendid Unlimited in April 2015 and the "wider impact of new business wins".

Like-for-like revenue rose four per cent to £28m in the division.

Overall revenue growth for Creston was eight per cent in the half-year, following acquisitions that included a 51 per cent stake in Splendid Unlimited and a 27 per cent stake in ad agency 18 Feet & Rising.

Headline profit margin was maintained at 10 per cent in the half year, with headline earnings per share also maintained at 4.98p.

Brien said: "I am pleased with both revenue and headline profit before interest and tax being up eight per cent and a five per cent growth in our dividend, despite the slower start to the first half. The group also made good progress against its five-year strategy broadening its Unlimited offer through a mix of acquisitions, investments, start-ups and partnerships and this strategic progress is underpinning a continuing strong new business performance."

He added: "I am pleased with the progress the group continues to make against its five-year strategy and the breadth of offer we are building under the Unlimited brand, which is underpinning our new business success. While our slower growth in Q1 has been followed by a stronger performance in Q2 and start of H2, we are anticipating our full-year performance to fall slightly behind expectations. Overall, with the combination of our good progress against the group's strategy and continued growth, we remain confident in the group's ability to deliver ongoing value to shareholders."

Last week Creston announced that Nelson Bostock Unlimited CEO Lee Nugent is to step down after 20 years at the agency.

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