Marketing concern Creston proves that there is still life in the media sector.
The FTSE Fledgling constituent owns a number of businesses in areas such as PR, research and marketing, with its companies varying in nature from digital PR specialist Things With Wings to healthcare research concern Vitaris.
Founded in 2000 as a cash shell, over the following 12 years Creston snapped up a number of operators in the media sector. Last year US-based medical PR outfit The Corkery Group was acquired in a deal worth $6 million (£3.9 million), while in 2010 healthcare and pharmaceutical PR group Cooney Walters and its subsidiary Alembic Health Communications were bought in a deal worth $30.8 million.
Creston is led by chief executive Don Elgie, a veteran of the advertising business who took the reins 11 years ago. Monitoring the action is chairman David Gregson – the former chief executive of news agency Reuters – while keeping an eye on the balance sheet is finance director Barrie Brien, who previously worked at legendary advertising outfit Saatchi & Saatchi.
In its most recent results, for the year to March, pre-tax profits stood at £10.3 million (2011: £10.4 million) on sales that powered ahead by 11 per cent to £74.9 million. The full-year dividend grew by 17 per cent to 3.5p.
The period saw international revenues soar by 37 per cent to capture a 30 per cent share of the group’s overall turnover, while its digital and online offerings increased by 13 per cent. Its communications division saw sales grow by five per cent to £43 million while its health division saw turnover leap from £11.8 million to £18.1 million.
Chief executive Elgie argues that Creston’s strong performance ‘gives a strong blow to the belief that our industry [marketing] is cyclical’, noting that the company now holds contracts with clients such as Japanese car brand Nissan and 4x4 vehicle specialist Land Rover.
Regarding the dividend, Elgie remarks that the company is ‘committed to a progressive dividend strategy’, adding that investors ‘can expect it to go up each year’ as the company looks to balance ‘the need for growth with rewards for our shareholders’. The shares currently yield 5 per cent.
Analysts at Investec are forecasting pre-tax profits of £11.9 million on sales of £79.7 million for the year to March 2013.
While the media sector as a whole has received a pummelling in the downturn as investors flee to what are perceived as more defensive sectors, Creston is a debt-free, dividend-paying business that has benefited from a raft of acquisitions without crippling itself with a hefty debt pile.
With growth in Creston’s online and overseas offerings, there is considerable potential, while a yield of five per cent is an impressive bonus. Buy.
Market cap: £50.4m
PE Forecast: 6
Share price: 82.25p
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