Creston revenues flat following client volatility and 'weaker' UK health business

Creston has reported a pre-tax loss of £7.6m in the year to 31 March 2016, with "volatility in client budgets" and a weaker performance in its UK health arm meaning like-for-like revenue across the group was broadly flat.

Creston CEO Barrie Brien: Some clients have a
Creston CEO Barrie Brien: Some clients have a

Pre-tax profit at the Nelson Bostock Unlimited, Fever Unlimited and Red Door Unlimited owner was the same as the previous year at £9.9m.

That figure excludes exceptional charges; including a £15.2m goodwill impairment charge and other exceptional costs in relation to investments totalling £2.3m. After this is taken into account, loss before tax was £7.6m.

Like-for-like revenue was also broadly flat at £76.5m (2015: £76.9m). Overall revenue, including acquisitions, rose eight per cent to £82.6m.

Creston said revenue was hit by "increased client caution due to growing economic headwinds, weaker trading by some of our larger retail and consumer tech clients resulting in budget cuts and a weaker performance of the Euro". The latter reduced its Euro-based revenue contracts by £0.4m year-on-year, the group stated.

CEO Barrie Brien (pictured above) told PRWeek a number of clients reduced their spending last year due to their own retrenchment. For example, Toshiba pulled out of the electronics industry, and mobile phone companies in particular had a "tough time".

But he sounded a positive note. "A lot of those have settled down and some of the retail activities that we do are slowly coming back again, which is good to see."

However, Brien added: "There’s no doubt that the [EU] Referendum is having an impact on the speed of decision making by clients. There is still a bit of variability, and delays and volatility in some clients’ budgets. But at the end of the day, the UK is still a large market for many of our clients – we’ve got two thirds of our business in the UK. There’s still good spend in the UK market."

The company said investment in Creston Unlimited and "the Euro weakness" contributed to a reduction in its headline pre-tax and pre-interest margin, which fell from 13 to 12 per cent.

Revenue in Creston’s Communications & Insight businesses rose 12 per cent to £62.9m, driven by the acquisition of digital design agency How Splendid, plus "the good new business performance and the broadening of our services to key clients". Like-for-like revenue in the division increased two per cent to £57.5m.

Creston said headline profit before interest and tax in the division rose 11 per cent to £9m due to the inclusion of Splendid Unlimited, although growth was offset by the weakening Euro and higher operating costs. New business in the division included work for British Airways, Vodafone, Sony Mobile and Bosch. Since the period end, wins have included Sony PlayStation Europe and additional work with L'Oreal.

Revenue in Creston’s Health arm fell five per cent to £19.7m. On a like-for-like basis, given the strengthening dollar, the decline was eight per cent (to £19.1m). Headline profit before interest and tax also fell eight per cent, to £4m.

Creston said lower revenue was "predominantly due to weaker performance in our UK health business", specifically its health advertising agency – as a result, the group combined its DJM Unlimited and PAN Unlimited shops to launch DJM PAN Unlimited in the year. Cost saving initiatives included disbanding the Health regional restructure, saving £0.5m per year.

Elsewhere, Creston said it was positive that business from clients completely new to the company accounted for 63 per cent of new business revenue in the year. Meanwhile, revenue from international services grew from 32 to 34 per cent of the total.

The company said it had made "significant progress" on the implementation of its five year strategy, which was introduced last year and has seen the rebranding of its agencies with the "Unlimited" suffix. Last year Creston took a majority stake in Splendid, a minority stake in ad agency 18 Feet & Rising, and agree three partnerships with international companies and five start-ups.

"We did an enormous amount," said Brien, adding that this year "is going to be a bit more of a consolidation, and capitalising on the work that we did last year".

He said there "may be acquisitions" although there’s "nothing in the pipeline at the moment".

Brien said: "The year's performance, while showing our strategy is on track, was however impacted by circumstances specific to certain clients and a cautious outlook from others. As a result appropriate actions have been taken to realise operational efficiencies required to maintain our operating company headline PBIT (profit before interest and tax) margin.

"The board remains confident that the group is well-placed to deliver long-term growth for shareholders on the basis of its strengthened offer, blue-chip client relationships, robust cash flow generation and positive cash position at the financial year end."

The past year has seen a number of senior departures at Creston, including chairman Richard Houghton, Health Unlimited CEO Catherine Warne and Nelson Bostock CEO Lee Nugent. Creston said senior independent director Nigel Lingwood would continue to act as non-executive chairman on an interim basis.

Brien said he expects there to be more appointments in Creston’s consultancy offer this year.

This article was updated on Wednesday morning with additional comments from Barrie Brien.

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