Today it was announced that RedWhiteBlue Digital Marketing Services Holdings Ltd — an investment vehicle of the Isle of Man offshore fund manager DBAY Advisors — has made a 125p per share cash offer to shareholders of Creston, valuing the company at a total of £75.8m. As well as the 125p per share cash offer, shareholders who are on the register at close on 2 December, 2016, will be entitled to a 1.42p per share dividend, bringing the total deal value to 126.42p per share. 

Creston’s management is recommending that the company’s shareholders accept the offer as it is “fair and reasonable” considering the company’s current position. Just under 5% of shareholders have already made their support for the deal known to the buyer. 

Poor results 

Alongside the bid announcement, Creston also published its half-year results for the six months ended 30 September 2016, which are nothing to shout about. Headline revenue came in flat at £40m for the period, but fell 4% on a like-for-like basis. Headline profit before tax grew 13% to £4.5m, and headline diluted earnings per share rose 16% year-on-year to 5.8p from 5.0p for the first half of 2015. 

Reading through the group’s first half report, it becomes clear why Creston’s management unanimously supports the buyout offer for the company. Revenue growth has ground to a halt and management notes that the “challenging economic and trading environment” is proving to be a serious headwind to growth.

And further revenue compression is expected as “increased economic uncertainty adds to the challenges already faced by clients as they experience their own business transformations within their markets.” In plain English, this statement implies that if Creston remains an independent group, investors should not expect explosive profit or revenue growth. 

With such an uncertain outlook ahead for Creston, it makes sense that the company’s patient investors take the cash offer of 125p from RedWhiteBlue. 

Past performance lacking 

Over the past five years, Creston has really struggled to produce a decent return for shareholders. Since November 2011 to close of business yesterday, the shares have risen only 25% excluding dividends, revenue has increased by 15% and pre-tax profit has fallen. In stark contract, over the same period shares in sector leader WPP have risen 171%, excluding dividends. 

For the year ending 31 March 2012 Creston reported a pre-tax profit of £10.8m, and for the year ending 31 March 2016, City analysts have pencilled in a pre-tax profit of £10.4m. Earnings per share have fallen to 12.1p from 12.3p over the same period. 

Still, the one metric that has grown over the past five years is Creston’s dividend payout to shareholders. For 2012 the company paid out 3.5p for the full year; today the payout stands at 4.6p, growth of 31% over the period. 

Overall then, Creston has struggled to grow over the past five years and it looks as if the company is now worried about what the future holds, which does not bode will for revenue growth. With this being the case, it’s probably best for investors to use the 125p cash offer to jump ship. 

The post What today’s bid means for investors as Creston plc soars by a third appeared first on The Twelfth Magpie.

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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Disappointingly, RPS has seen a downward trend in spending by oil and gas companies and with the oil price having the potential to remain at low levels over the medium term, further declines could be on the cards. As a result, RPS plans to further reduce the capacity of its energy division, with restructuring charges and impairments being one-off costs that could be recorded in future.

With RPS trading on a price-to-earnings (P/E) ratio of just 8.9, its shares are dirt cheap. And while profitability could come under pressure as spending across the oil and gas industry declines, buying shares in RPS could be a sound move for long-term investors. Certainly, volatility will likely remain high, but with such a low rating there’s clear upside potential.

Pick ‘n’ mix

Also falling today is marketing company Creston (LSE: CRE), which is down over 15% having released a mixed update. On the one hand, the company’s third quarter delivered upbeat revenue growth, with the top line rising by 11% versus the comparable period last year. However, a number of Creston’s clients have advised it of project delays in the first part of 2016 and this will cause a significant reduction in revenue in the final quarter of the current year.

Due to this, Creston expects pre-tax profit to be slightly below the prior year’s figure of £9.9m and also expects to record exceptional charges against profit in the current year. Despite this, the company remains optimistic regarding its long-term growth potential and it has enjoyed a number of key business wins in recent months.

With Creston trading on a P/E ratio of only 7.9, it appears to be worth buying for the long term. Further share price falls can’t be ruled out in the short run and additional charges may be recorded in the coming months. But for less risk-averse, long-term investors its risk/reward ratio appears to be favourable.

Shares in Sirius Minerals (LSE: SXX) are also down by more than 15% today after it released a statement to say that it’s delaying the definitive feasibility study for its potash mine in York. It was originally due to be released by the end of January but won’t now be released until March.

Although the delay is understandable given the fact that the project is large-scale, investors are understandably disappointed by the delay. However for such a major project, delays are almost inevitable and today’s share price fall shows that the market may have had unrealistic aims on how quickly and smoothly the process would move forward.

With history showing that further delays and challenges remain relatively likely on such a large project, more volatility in Sirius Minerals’ share price seems to be on the cards. However, for investors who aren’t so risk-averse and who have a long-term view, it continues to be of interest.

The post Buy, Sell Or Hold 15% Fallers Sirius Minerals PLC, RPS Group plc And Creston plc? appeared first on The Twelfth Magpie.

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• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

The London-based business advised that like-for-like revenues had edged just 1% higher between April and September, to £37.7m. The impact of a weak euro, and what it described as “client budget weaknesses” caused first-half activity to slow, Creston noted, forcing the business to swallow a 73% pre-tax profit slump, to £1.1m.

The company has suffered from the impact of weaker trading by a small number of its larger retail and consumer tech clients, while changing advertising strategies from its healthcare customers has also hampered performance more recently.

On top of this, Creston endured a £2m impairment related to the closure of research arm FieldworkUK.com. All in all Creston now expects results for the 12 months to March 2016 to slightly miss previous predictions.

So is Creston a ‘buy’?

Well today’s news comes as somewhat of a shock, naturally. But more optimistic investors will point to Creston’s great track record of securing blue-chip customers and brands, a promising precursor to long-term growth. Indeed, the business signed up Logitech and Costa during the last six months, and Canon, Danone and Diageo all awarded Creston new work.

The City expects Creston to chalk up earnings growth of 6% and 5% for the years to 2016 and 2017 respectively, leaving the business dealing on ultra-cheap P/E ratings of 10 times and 9.5 times. When you factor in chunky dividend yields of 3.2% and 3.4% for these years, I believe current share price weakness could represent a lucrative dip-buying opportunity for patient investors.

Iodine play shaken up

Likewise, investor appetite for Iofina (LSE: IOF) has fallen off a cliff in Tuesday’s session, the iodine producer plunging to record lows before recovering some ground. Still, the business is currently trading at an 14% deficit to levels punched at Monday’s close.

Iofina advised that an earthquake close to one of its plants in northern Oklahoma has led the Oklahoma Corporation Commission to reduce water supply for chemical production. Although Iofina commented that “the ramifications for the Company’s iodine production are not certain,” it estimated that crystalline iodine output could fall by between 10% and 20% per year across its five facilities.

So is Iofina a ‘buy’?

Given that Iofina’s assessment of potential disruptions is unclear, cautious investors will take the company’s assertion that production should still hit 260 to 300 metric tonnes between July and December with a pinch of salt.

Iofina is already expected to extend its poor earnings story for a little while yet, and losses of 120 US cents per share are currently pencilled in for 2015. And although the City expects the business to finally bounce into the black next year, the impact of current production problems could easily put these projections to the sword.

The post Why Are Creston plc And Iofina plc Sinking Today? appeared first on The Twelfth Magpie.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

This morning, the firm announced that its largest shareholder, asset manager DBAY Advisors, has increased its shareholding from 19% to 24%.

The move follows the recent publication of the firm’s full-year results. Although revenue only rose by 3% to £76.9m, diluted earnings per share rose by 11% to 13.1p, and the dividend rose by 8% to 4.2p.

These results have left Creston looking pretty cheap, in my view, with a trailing P/E of 10.5 and a yield of 3.0%, despite a strong outlook.

Looking at Creston’s figures has made me wonder whether this small, nimble firm could outperform FTSE 100 media stalwarts WPP (LSE: WPP) and Pearson (LSE: PSON) (NYSE: PSO.US).

A straight comparison

Let’s take a closer look at three key metrics which are likely to influence each of these companies’ share prices: earnings growth, valuation and yield.

Valuation

It’s often a good idea to demand a lower valuation when buying small cap stocks than their larger peers, as small companies tend to be more vulnerable to unexpected setbacks. Despite this, it’s fair to say that Creston looks significantly cheaper than WPP and Pearson on a P/E basis.

Earnings growth

Of course, being cheap is only attractive if earnings are expected to rise. Here are the latest forecast earnings per share (eps) growth figures for each firm:

Pearson is expected to report a sharp rise in earnings this year, thanks to more stable conditions and exchange rates in some of the firm’s key markets. The outlook also looks good at Creston, while WPP is expected to have a quiet year before earnings pick up again in 2016.

However, while Creston and WPP have both delivered annual average growth in reported earnings per share of close to 20% since 2009, Pearson’s reported earnings have fallen by an average of 6.8% per year during that time.

I’m more concerned about the long-term growth outlook for Pearson, whose main business is publishing, than for WPP and Creston.

Income

Dividends play a big role in investment returns, and all three of these companies have a strong record in this area:

WPP is the stand-out winner here, in my view, thanks to its above-average dividend growth rate. For long-term shareholders, faster dividend growth can often cancel out the effect of a higher initial yield over time.

Another consideration is that Pearson’s dividend is only expected to be covered by earnings 1.5 times this year, compared to 2.2 times for WPP and 3.1 times for Creston.

More conservative payout ratios often help to ensure that a firm’s dividend remains affordable over the longer term.

WPP vs Creston

In my view, the choice here is between WPP and Creston. As a long-term income stock I’d pick WPP, due to its greater size and diversity, but for a combination of growth and income, I’d choose Creston.

I believe Creston shares could deliver further gains over the next couple of years.

The post Is Creston plc A Better Buy Than WPP PLC and Pearson plc? appeared first on The Twelfth Magpie.

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Roland Head owns shares of WPP. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Bacanora Minerals

“The board of Bacanora has noted the sharp increase in the company’s share price during trading in Canada last night,” Bacanora said today. “The board is not aware of any reason for the price movement (and) will continue to work towards delivering value for all shareholders.“

Its shares rose 46% to CAD2.05 yesterday on the other side of the Atlantic, and the rally continued today in London. 

Canada-based Bacanora, a lithium and borates development company focused on Mexico, released on Friday an update on its upcoming milestones, which relate to “its on-going transition from an exploration to a mine development company”.

On the face of it, the statement didn’t seem to add much to the investment case, but could the imbalance between supply and demand in lithium be behind the rally? 

Or should Tesla‘s development plan be praised? 

If you are keen to invest in Bacanora, I suggest you read this, while also considering that Molycorp, a flagship US-based rare earths miner, is reportedly about to go belly-up…

Creston 

Creston, a marketing firm with a market cap of £75m, announced a strategic investment and unaudited full-year results today. The deal, according to which Creston will take a 27% stake in 18 Feet & Rising, gives the buyer access to such clients such as Allianz, Cuprinol, Kopparberg, Nando’s, and House of Fraser.

Creston said that “50% per cent of the £1 million cash payment for the shareholding will be invested in the business to help accelerate its future growth,” which valued the target’s equity at £3.7m, or about 1.4x the value of 18 Feet & Rising’s trailing revenue, which stood at £2.7m at the end of 2014. 

Creston’s unaudited full-year results for the year ended 31 March 2015 show that like-for-like revenues rose 2% to £76.6m, a growth rate in line with that of its core operating income. The group proposed a full-year dividend of 4.20p per share (2014: 3.90p per share), for a dividend yield in the region of 3%, while reporting a net cash position of £8.3m (2014: £7.5m). 

“Digital and online revenue up 7 per cent in absolute terms representing 55 per cent (2014: 53 per cent) of group revenue,” Creston noted, adding that it spent £1.8m buying back its own stock at an average price of 111p per share.

Based on its forward trading multiples, its shares do not look expensive right now, although Creston has to work hard to become a more profitable entity at operating level, in my view. Creston trades at 132p, and is flat year to date, but has risen 14% since early February and 40% over the last two years. 

The post Why Bacanora Minerals Ltd & Creston plc Are Flying High Today appeared first on The Twelfth Magpie.

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• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

Alessandro Pasetti has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.