Cello Group plc – Solid full year performance

Cello Group plc – Solid full year performance

Cello Group plc, the insight and strategic marketing group, today publishes the following trading update for the year ended 31 December 2011.


  • Solid trading for the year, in line with expectations
  • Pharmaceutical and international income shows particular strength
  • Acquisition of MedErgy in US, opening of offices in Singapore
  • Strong cash conversion resulting in net debt less than £8.5m
  • Further material drop in earn out commitments
  • Expected material increase in full year dividend
  • Enlarged bank facilities renewed until March 2016 at lower interest rates

Cello Research and Consulting
The Group's research and consulting business has experienced a solid performance for the year against a challenging client backdrop.

Cello's strategy of focusing on the pharmaceutical sector, offering a multi-disciplinary approach, continues to pay dividends. This activity area has grown to more than 45% of the Group's research and consulting revenue, achieving above average growth and profit margins for Cello.

The Group's focus on growing its non UK revenue base has also paid off, with international work growing strongly. To help support this, the Group has expanded its US presence, which now accounts for more than 10% of Cello's revenue, as well as establishing an office in Singapore. MedErgy, the US based healthcare communications consultancy, was acquired in March 2011. It has had a successful first year as part of the Group, with new shared Cello clients, and enters 2012 with a robust income pipeline.

The Group's social media and web based research offering continues to grow rapidly under the eVillage product (pharmaceuticals) and the e-luminate product (non pharmaceuticals). Industry recognition is also increasing for these products, with both winning industry awards during the year.  

Notable major project and client wins include: GSK, Pfizer, Johnson & Johnson, AstraZeneca, Novartis, Merck Serono, Boehringer Ingelheim, Abbott, Shire Novo Nordisk, Kimberly Clark, Amgen, EA, Heinz, Arla, Janssen, Legal & General, Pentland, AOL, Skype, Vodafone, West Bromwich BS, The Man Group, City of London, Chamberlain/Liftmaster, Lidl, Prudential, Forest, Webfusion, Intuit, Northern Foods, Kallo Food, Bakehouse, Tata, and Interbev.

As indicated in the Group's interim results on 13 September 2011, one of the Cello  companies lost a major retail account during the year. Subsequently, the required restructuring incurred an exceptional charge of approximately £0.9m relating to headcount reduction and the closure of associated activities. This process is now complete.

Tangible delivered a solid outcome against a strong headwind in UK-centric communications services, particularly from the public sector. The Board anticipates a broadly flat performance from Tangible versus the prior year.

Tangible has developed a strong social media research offering under the Face brand. The Group will continue to invest in the technology underpinning this offering during 2012.

Notable new business wins for Tangible include: Reckitt Benckiser, Unilever, Dobbies Garden Centres, Aldi, Baxters Food Group, Scottish Government, Cofunds, JP Morgan, Fidelity, Centaur Media,  IFAW (International Fund for Animal Welfare), Macmillan Cancer Support, Bank of Scotland, NHS Health Scotland, UCAS, Marriott Hotels, Sainsbury's, Air Malta, Standard Life Ireland and BAA Stansted.

Balance Sheet
The balance sheet continues to strengthen as net debt and earn out commitments reduce materially. Following good cash conversion, net debt is expected to be less than £8.5m, and the earn out profile of the Group is materially reduced. In light of this, the Board feels it is appropriate to review its dividend policy, and it is therefore expected that the full year dividend for 2011 will be materially increased.

In December 2011, the Group extended and renewed its banking arrangements with Royal Bank of Scotland to March 2016. The new facilities comprise a £25.0m revolving credit facility and a £4.0m overdraft. Subject to net debt: EBITDA thresholds, the Group will also be benefitting from reductions in interest rates by up to 100 basis points.

Good revenue momentum experienced in the research and consulting business in the last quarter of 2011 means that the Group is carrying forward a solid bookings profile for the first quarter of 2012. Whilst mindful of the challenging and fast moving industry backdrop, the Board is optimistic for a solid outcome for 2012.

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