Creston

SPECULATIVE BUY

14/08/2009 James Crux

Communications specialist Creston, guided by ex-Saatchi & Saatchi mover and shaker Don Elgie, is coping creditably with the downturn and winning new business.

In a trading update covering the four months to July, Creston said it had performed in line with management’s expectations in the opening months of its new financial year. The recession, Creston conceded, is having an effect, hitting the marketing budgets and spend of ‘some’ clients and causing a 6% like-for-like sales decline in the first quarter. To put this in context, the London-based company enjoyed 5% growth in last year’s first quarter.

Overall, though Creston is feeling short-term budget cut pain, this is being partly offset by new business wins. Recent successes for Creston, which Elgie, CEO, says has a historical high ‘pitch to win’ ratio, include wins with Astra Zeneca, BMW, E-on, GSK and ‘other major wins yet to be announced’, whilst the new business pipeline remains ‘strong’.

Furthermore Creston, which recently topped up its working capital coffers with a £3.3m funding at 60p, cheered with robust results for the year to March earlier this summer. Pre-tax profits were up 5% at £14.2m, on 4% sales growth to £83.8m, with the positive performance driven by Creston’s quality, blue chip client base as well as its weighting ‘towards market research, integrated digital communications and healthcare marketing.'

Creston shares, north of 200p in late 2005, have rebounded encouragingly in 2009, moving up from their 52-week low of 19.75p. Though sector sentiment remains poor, the proven, dividend paying Creston represents an intelligent recovery bet.