Good morning! A very quiet day for small cap news, which is handy as I have a long drive today to visit family in Cheshire. So let's start with a share I've liked in the past, Creston (LON:CRE) . Looking back to my last comments on Creston on 22 April, I liked the apparently low PER and good dividend yield, but was confused by both their complicated accounts, and their last trading statement.
At 93p a share the market cap is currently £57m. They are a advertising, marketing & PR group, leaning heavily towards digital (now 48% of group revenue).
So the key figures for the year-ended 31 Mar 2013 are: turnover up a whisker to £75.2m, group headline EBITDA up 2% to £12.0m, and "headline diluted" EPS up 19% to 14.66p. It is important to note that the rise in EPS has been driven entirely by an unusually low tax charge this year, so it's important to NOT start valuing the business on a multiple of that 14.66p figure.
As I've complained before, Creston's accounts are just too complicated. They have so many different reported measures of profit, adjusting for so many items, that it's far too difficult to unravel how much underlying profit the group really makes.
To my mind, the underlying performance doesn't seem to have altered much from last year, so last year's EPS of just over 12p is probably about the right figure to use for valuation purposes for this year too, which normalises the tax charge. So at 93p that puts it on a normalised (for tax) PER of about 7.8, which still looks good value.
The Balance Sheet is OK, once you write off the £105m goodwill (clearly they have done lots of acquisitions in the past). Removing all intangibles brings the net tangible asset value down to only £5.2m, so there isn't really any asset backing here to speak of, although you wouldn't expect that from a people business.
The net cash position has been flattered by a large reverse premium received from a London landlord for signing a new lease, so best to ignore that and treat the company as being broadly cash neutral, in my opinion.
The final dividend is flat against last year at 2.67p, so with the interim dividend of 1p, that gives 3.67p for a yield of 3.9%,…