TIDMCLL
RNS Number : 5741M
Cello Group plc
19 September 2012
For Immediate Release 19 September 2012
Cello Group plc
Delivering on the strategy
Cello Group plc ("Cello" AIM: CLL, "The Group"), the insight and
strategic marketing group, today announces its interim results for
the six month period to 30 June 2012. These results are the first
in which the Group re-aligns its segmental analysis to reflect its
growing emphasis on the pharmaceutical market.
Group Highlights
-- Revenue up 2.8% to GBP63.3m (2011:GBP61.6m)
-- Gross profit up 7.2% to GBP31.7m (2011:GBP29.5m)
-- Headline profit before tax2 up 2.2% to GBP3.0m (2011:GBP2.9m)
-- Statutory operating profit GBP1.7m (2011:GBP2.4m)
-- Headline basic earnings per share 2.69p (2011:3.06p)
-- Statutory basic earnings per share from continuing operations 1.16p (2011:1.79p)
-- Interim dividend up 5.5% to 0.58p (2011:0.55p)
Divisional Highlights
Cello Health Cello Consumer
------------------- -------------------- --------------------
2012 2011 2012 2011
------------------- --------- --------- --------- ---------
Gross profit GBP16.4m GBP13.2m GBP15.2m GBP16.3m
------------------- --------- --------- --------- ---------
Operating profit GBP4.1m GBP2.7m GBP0.1m GBP1.3m
------------------- --------- --------- --------- ---------
Operating margin3 25.0% 20.7% 0.4% 7.8%
------------------- --------- --------- --------- ---------
-- Strong growth performance in Cello Health
-- Stabilisation and planned profit recovery in Cello Consumer
(1) Like-for-like comparisons remove the impact of acquisitions and discontinued operations
2 Headline profit before tax is stated before non-headline
charges (see note 2)
3 Operating margin is defined as headline operating profit as a
percentage of gross profit
Mark Scott, Chief Executive, commented:
"Cello continues to make strong headway implementing its stated
strategy. Cello Health is becoming established as a leading
business in the global pharmaceutical market. The Group's
international revenues are growing, the Group's value added
advisory revenues are growing and our web capabilities are cutting
edge. This positions the Group well for future expansion in line
with the strategy. The Group believes that management expectations
for headline operating profits will be met."
Enquiries:
Cello Group plc (www.cellogroup.com)
Mark Scott, Chief Executive 020 7812 8460
Mark Bentley, Group Finance Director
Cenkos Securities
Bobbie Hilliam 020 7484 4040
Buchanan
Mark Edwards, Nicola Cronk, Clare Akhurst 020 7466 5000
Notes to Editors (www.cellogroup.com)
Cello is an insight and strategic marketing group.
The Group's strategy is to create value for shareholders by
building an international marketing advisory business able to
advise blue chip clients globally, with a primary focus on the
pharmaceutical sector, along with other high margin client
sectors.
Cello has annualised revenues in excess of GBP130m, annualised
gross profit in excess of GBP65m and employs over 700 professional
staff.
Chairman's Statement
Overview
Cello's strategy is to focus on providing high value-added
advisory services to high margin client sectors, with a primary
focus on the pharmaceutical and healthcare sector, and to do so
globally. In line with this strategy, Cello's pharmaceutical and
healthcare activities have been consolidated into Cello Health.
These results are the first in which this new segmental analysis is
presented, reflecting the managerial structure and operational
focus of the Group. This is enabling the Group to better leverage
its expertise and resource in this area to secure growth with
existing and new clients. Cello's non pharmaceutical activities
have been grouped into Cello Consumer, reflecting their primary
focus on the consumer marketing agenda of clients.
For the first six months of 2012, Cello experienced solid
overall growth in revenues and profits, driven by strong growth in
Cello Health. This was founded on strong like-for-like(1) gross
profit growth of 11.1% in Cello Health and the full effect of
MedErgy which joined the Group in April 2011. Overall operating
profit margins in Cello Health have risen to 25.0% (2011:20.7%),
which is highly competitive for this area of activity. Operating
profit in Cello Health increased to GBP4.1m (2011:GBP2.7m) on gross
profit of GBP16.4m (2011:GBP13.2m).
Cello Health's core areas of activity which are market research
(Insight), medical communications (MedErgy) and strategy consulting
(MSI) continued to make solid progress, with increasing sharing of
client opportunities across the 22 of the top 25 pharmaceutical
clients they work with. The international profile of work also
increased, notably in New York and Philadelphia.
The core growth thrusts of extending Cello Health's quantitative
research offering (Insight and RS), of extending into Consumer
Health (The Value Engineers), as well as strengthening the Market
Access offering, have all made good progress following investment
by the Group. A number of senior hirings have been made to support
this growth strategy. In addition, the Group has also commenced a
number of larger organic growth initiatives to further broaden its
client offering and geographical reach. The Group has invested in
the expansion of MedErgy into Europe with the opening of a London
office. Geographical reach is also being extended following the
continued investment in the new office in Singapore. The Group has
also invested in the development of a web-based analytics service
for pharmaceutical clients under the Cello Business Sciences
banner. The costs of these initiatives have been highlighted
separately (GBP0.3m).
Cello Consumer experienced an overall revenue decline in the
first six months of 5.6%, and a consequent decline in profits. This
decline is largely attributable to a marked slow-down in client
activity in qualitative and quantitative research during the
period. By contrast, the communications activities of Cello
Consumer (previously called "Cello Communications") performed as
expected, with modest overall growth in both revenues and profits.
The decline in client spend in qualitative and quantitative
research has now recovered somewhat and as a result it is expected
that full year performance in this area will improve. This profit
recovery process has required a reduction in headcount and property
rationalisation, incurring an exceptional charge of approximately
GBP0.7m.
The Group has continued its overseas expansion, with the overall
proportion of international revenues increasing to 37% (2011:31%),
with over 65% of Cello Health's revenue coming from non UK
activity. The Group will organically expand its footprint in New
York during the second half, and plans to expand further in
Philadelphia. In addition, the Group will shortly open an office in
Hong Kong.
Net debt was in line with expectations; following the settlement
of all outstanding earnouts in May 2012 and seasonal working
capital movements.
The Board has decided to increase the interim dividend by 5.5%
from 0.55p to 0.58p, continuing the track record of progressive
dividend policy.
Financial Review
Revenue for the six months to 30 June 2012 was GBP63.3m
(2011:GBP61.6m) and gross profit was GBP31.7m
(2011:GBP29.5m). Headline operating profit was GBP3.3m
(2011:GBP3.2m). Headline operating margins remained largely flat at
10.3% (2011:10.9%). Headline pre-tax profit was up 2.2% at GBP3.0m
(2011:GBP2.9m).
Headline basic earnings per share were 2.69 p (2011:3.06p). This
drop is explained by the full impact of prior and current year
share issuances to settle earnouts.
The interim dividend has been increased by 5.5% to 0.58p
(2011:0.55p). It is payable on 4 January 2013 to all holders on the
register on 9 December 2012.
The Group's net debt at 30 June 2012 increased to GBP13.7m (31
December 2011:GBP7.7m; 30 June 2011: GBP11.2m). This debt increase
largely reflects normal seasonal operating cash outflows, as well
as the settlement of GBP1.7m of earnouts in May 2012.
In line with the Group's stated strategy the Group has invested
organically in new offices and products. The losses incurred on
these start-up operations total GBP0.3m, and these have been
highlighted separately.
Following restructuring within Cello Consumer to address the
slow-down in consumer market research, the Group has incurred an
exceptional charge of GBP0.7m.
The following table details the adjustments made to calculate
headline operating profit.
GBPm 2012 2011
---------------------------------- ------ ------
Headline operating profit 3.3 3.2
---------------------------------- ------ ------
Restructuring costs (0.7) -
---------------------------------- ------ ------
Start-up losses (0.3) -
---------------------------------- ------ ------
Share based payment charges (0.1) -
---------------------------------- ------ ------
Exceptional acquisition
costs - (0.2)
---------------------------------- ------ ------
Acquisition related remuneration - (0.2)
---------------------------------- ------ ------
Amortisation (0.5) (0.5)
---------------------------------- ------ ------
Statutory operating profit 1.7 2.3
---------------------------------- ------ ------
Interest (0.3) (0.3)
---------------------------------- ------ ------
Statutory profit before
tax 1.4 2.0
---------------------------------- ------ ------
Operating review
The Group continues to benefit from a broad set of blue chip
multinational client relationships. 15 of the top 20 clients from
2011 remained significant clients in 2012. The Group's largest
client accounts for less than 5% of total Group gross profit and
the top 20 clients account for less than 45% of total Group gross
profit.
Cello's pharmaceutical and health activities are now grouped
under Cello Health, with a single board and director group,
enabling better leveraging of specialist resource and better
leveraging of client relationships across the top 50 pharmaceutical
companies. Cello Health now accounts for over half of the Group's
overall gross profit, in line with the Group's stated strategy,
contributing GBP16.4m from a total gross profit of GBP31.7m for the
first six months of the year, and with overall growth of 24% over
the equivalent period last year.
The Group continues to invest behind expanding activities
outside the UK, enabling it to service global client needs.
Approximately 65% of Cello Health's revenues are won outside the
UK. The Group's New York office will double in size in September
this year, enabling the addition of professionals. The Group's
Philadelphia office is also planning to expand materially over the
course of the next 12 months. It is expected that the Group will
open another North American office during the course of the next
twelve months, to complement its offices in New York, Philadelphia
and San Francisco. The Group also plans to build on its presence in
Singapore with a sister office in Hong Kong, enabling servicing of
international work into that region.
The web related advisory and delivery capabilities of the Group
continue to make strong strides under the key brands of Face
(social media based research and analysis), e-Village (health
related social media based research), e-luminate (non-health
related social media based research) and Blonde (web infrastructure
and advisory).
Cello Health
GBP'000 2012 2011
Gross Profit 16,440 13,237
Operating Profit 4,106 2,737
Operating margin 25.0% 20.7%
The formalisation of Cello Health as a management and reporting
structure, announced on the 11(th) July, has enabled us to better
leverage our professional resource and our existing client
relationships. The benefits of this have rapidly become apparent.
In the first six months of 2012, Cello Health saw gross profit
increase by 24.2% to GBP16.4m (2011:GBP13.2m). Like-for-like gross
profit grew at 11.1%. Headline operating profit was up 50.0% to
GBP4.1m (2011:GBP2.7m). Headline operating margins improved to
25.0% (2011:20.7%) although it is expected that margins will return
to closer to 20% on a full year basis which would represent a
solid, competitive position.
New business momentum has been strong over the past six months,
with major wins coming from: Bayer, NSFI, Sinclair IS Pharma, TEVA
Russia, United Therapeutics Europe, Shire Pharmaceuticals, Pfizer,
Abbott Laboratories, Astellas, Gilead Sciences Europe, Amgen,
Horizon, Mundipharma, NHS Business Service Authority, and Boots
Opticians.
Cello Health works for nine of the top ten pharmaceutical
companies, 22 of the top 25 and 31 of the top 50. This is a solid
foundation-stone for strong future growth, based on the development
and enlargement of existing relationships. Cello Health has also
been effective at leveraging relationships across the broad palette
of its specialist capabilities. Two or more of the Cello Health
companies work for five of the top ten pharmaceutical clients, ten
of the top 25 and 13 of the top 50. All three of our key product
areas are sold to two of the top ten pharmaceutical companies, four
of the top 25 and five of the top 50. In other words, its client
relationships across the eligible client base are broad and also
deep.
Cello Health's core client deliverables are strategic
consulting, market research and scientific communications. These
activities all have a strong scientific foundation and are
delivered by pharmacologically qualified professionals. In
addition, Cello Health is in the process of building a strong
consumer health proposition through its Value Engineers subsidiary,
targeted at clients dealing with the over-the-counter market where
consumer branding and positioning are paramount. Cello Health has
made rapid progress in building a quantitative research offering to
complement its qualitative research offering, bringing closer
together Insight and RS. Cello Business Sciences, the data
analytics and decision support arm of Cello Health, has also made
rapid strides developing its suites of web based tools and
generating client activity. The business is also developing a
shared offering in the Market Access area, helping pharmaceutical
clients market to centralised buying points.
Cello Health operates primarily from its London, New York and
Philadelphia base, but offers global servicing coverage. All of its
core activity areas are now delivered both in Europe and the USA,
with both MedErgy and MSI having opened international offices. It
is expected that the US presence of Cello Health will be grown
rapidly, reflecting the heavy dominance of the US pharmaceutical
market overall.
Cello Health also has a strong digital component. e-Village, in
particular, has emerged as the leading core offering within Cello
Health, enabling clients to use social media communities for
research applications. Cello Business Sciences, whose services are
founded on web enabled analytical and decision support software, is
making rapid strides recently winning "Best Technical Innovation"
at the 2012 WireHive awards. The Group is also in the process of
building a Real World Data Market Access offering using its social
media analysis capability.
As part of leveraging its expertise in the Health field, Cello
has invested in developing strong capabilities in the area of
social health. This has included the creation of a ground-breaking
CSR programme, Talking Taboos. In its initial phase, Talking Taboos
has partnered with YoungMinds, the UK's leading children and young
people's mental health and wellbeing charity, to produce a
pioneering piece of research, exploring the perceptions of young
people who self-harm and whether they receive the help they truly
need. The findings will be unveiled at an event chaired by Claire
Perry MP at the Houses of Parliament on Tuesday 23(rd) October
2012.
Cello Consumer
GBP'000 2012 2011
Gross Profit 15,217 16,301
Operating Profit 55 1,266
Operating margin 0.4% 7.8%
Cello Consumer encompasses Cello's services to largely consumer
focused clients. The two primary service areas are qualitative and
quantitative market research, and communications consultancy and
delivery. Its primary client base is comprised of blue chip
multinationals, market leading organisations and charities.
Overall, Cello Consumer suffered a decline in revenues in the
first half and a consequent decline in profits. This was entirely
driven by a marked decline in client activity in qualitative and
quantitative market research, both in the UK and internationally.
This trend was industry wide and not isolated to Cello. In response
to this, the Group has reduced staff and property overheads. This
has resulted in an exceptional charge of GBP0.7m, of which GBP0.4m
relates to excess property commitments. More recently, a modest
recovery in client activity has commenced. It is expected that this
recovery will continue through the remainder of the year. As a
result of this modest recovery in client spend, combined with the
overhead actions, it is expected that profit recovery will occur
quickly.
The other communications activities of Cello Consumer
(previously Cello Communications) have performed slightly ahead of
expectations, following strong performances from its core brands of
Leith and Brightsource.
Cello Consumer's overall strategy is to position itself as a
senior advisor to blue chip clients, based on outstanding market
data and insight, and an ability to translate this into action,
with a particular focus on web delivery. Cello Consumer has key
strengths in data led marketing consulting, and web enabled
marketing delivery. It has a leading position in the use and
application of social media tools both for data collection and
marketing execution. The Group has made material investments behind
developing a suite of web based analytical tools to reinforce its
social media research and advisory capabilities, hosting
communities and allowing analysis of social media activity for
clients, particularly through mobile devices.
In order to continue to build a leadership position in this
area, Cello Consumer will continue to consolidate its primary
business behind its largest lead brands in key areas; Leith Group
(communications delivery); 2CV (qualitative and quantitative
research); Face (social media) and Brightsource Group (data, print
and direct marketing support). Cello Consumer has a single board
charged with executing this strategy.
Over the past twelve months, Cello Consumer has also worked hard
to introduce new international revenue streams. It now has offices
in San Francisco, New York, Singapore, and will shortly open in
Hong Kong. This will progressively increase Cello Consumer's
dependence on non-UK client activity.
Cello Consumer has enjoyed a strong run of new business activity
in the past few months with major projects secured from: Diageo,
adidas, Hewlett Packard, Electronic Arts, Costa Coffee, Barnes and
Noble, AOL, ebay, Coke, Reckitt Benkiser, Unilever, General Motors,
Johnson and Johnson, Philips, NBC, Hallmark, EMC, Heathrow Express,
Veolia Water, Glasgow 2014, Marketing Edinburgh, Velux, Ryder Cup,
ASCO, ATOC, SWIP, Edrington Group, Intelligent Mobile, Vanguard, AG
Barr, ABF Soldiers Charity, Breakthrough Breast Cancer, Diabetes
UK, Achica, Marie Curie Cancer Care, Amnesty International, The
National Trust, and Land Securities.
Current trading and outlook
The clarity and focus of the Group's strategy puts it in a good
position to continue to achieve growth, against a challenging
economic backdrop. The Board is confident that Cello Health will
continue with its strong performance over the full year and that
the growth investments made will promote longer term expansion.
Provided the stabilisation of the consumer research market
continues, then Cello Consumer should deliver a solid full year
outcome. Overall, the Board believes that management's expectations
for headline operating profits for 2012 will be met.
Allan Rich,
Chairman
19 September 2012
Condensed Consolidated Income Statement
For the six months ended 30 June 2012
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended 31 December
Notes 30 June 2012 30 June 2011 2011
GBP'000 GBP'000 GBP'000
Continuing operations
Revenue 4 63,330 61,597 131,031
Cost of sales (31,673) (32,059) (68,527)
Gross profit 4 31,657 29,538 62,504
Administration expenses (29,983) (27,184) (60,606)
Operating profit 4 1,674 2,354 1,898
Financial income 7 25 38 86
Other finance costs 7 (319) (366) (885)
Profit on continuing operations
before taxation 4 1,380 2,026 1,099
Tax 8 (463) (657) (1,557)
Profit/(loss) on continuing
operations after taxation 917 1,369 (458)
(Loss)/Profit from discontinued
operations 9 (77) 117 188
Profit/(loss) for the year 840 1,486 (270)
Profit/(loss) attributable
to:
Equity holders of parent 825 1,330 (587)
Non-controlling interests 15 156 317
840 1,486 (270)
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended 31 December
30 June 2012 30 June 2011 2011
GBP'000 GBP'000 GBP'000
Basic earnings/(loss) per
share
From continuing operations 10 1.16 p 1.79 p (1.07)p
From discontinued operations 10 (0.10) p 0.17 p 0.26 p
Total 10 1.06 p 1.96 p (0.81)p
Diluted earnings/(loss) per
share
From continuing operations 10 1.12 p 1.69 p (1.07)p
From discontinued operations 10 (0.10) p 0.16 p 0.24 p
Total 10 1.03 p 1.85 p (0.81)p
Condensed Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2012
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended 31 December
30 June 2012 30 June 2011 2011
GBP'000 GBP'000 GBP'000
Profit/(loss) for the period 840 1,486 (270)
Other comprehensive income:
Exchange differences on translation
of foreign operations (78) 25 208
Total comprehensive income
for the year 762 1,511 (62)
Total comprehensive income
attributable to:
Equity holders of the parent 747 1,355 (379)
Non-controlling interests 15 156 317
762 1,511 (62)
Reconciliation of profit before tax to headline profit before
tax
Six months Six months Year ended
ended ended 30 December
Notes 30 June 2012 30 June 2011 2011
GBP'000 GBP'000 GBP'000
Profit on continuing operations
before taxation 1,380 2,026 1,099
Restructuring costs 6 747 - 949
Start-up losses 6 335 - 163
Acquisition costs 6 - 211 211
Amortisation of intangible
assets 431 457 1,198
Acquisition related employee
remuneration expense 24 159 631
Share options charge 65 39 97
Impairment of goodwill - - 2,499
Finance cost of deferred
consideration - 32 58
Fair value gain on derivative
instruments (21) (26) (64)
Facility fees written off - - 111
Headline profit before tax 2,961 2,898 6,952
Headline profit is made up
as follows:
Headline operating profit 3,276 3,220 7,646
Headline finance income 7 4 12 22
Headline finance costs 7 (319) (334) (716)
Headline profit before tax 2,961 2,898 6,952
Condensed Consolidated Balance Sheet
As at 30 June 2012
Unaudited Unaudited Audited
At 30 June At 30 June At 31 December
Notes 2012 2011 2011
GBP'000 GBP'000 GBP'000
Goodwill 11 73,746 76,321 73,823
Intangible assets 2,065 3,029 2,373
Property, plant and equipment 2,397 2,113 2,176
Deferred tax assets 580 1,082 577
Non-current assets 78,788 82,545 78,949
Trade and other receivables 26,944 28,698 29,131
Cash and cash equivalents 1,221 5,097 4,170
Current assets 28,165 33,795 33,301
Trade and other payables (22,235) (26,501) (29,968)
Current tax liabilities (762) (1,463) (1,190)
Borrowings (852) (5,588) (959)
Provisions 12 (360) - (2,268)
Obligations under finance
leases (31) (47) (39)
Derivative financial instruments - - (55)
Current liabilities (24,240) (33,599) (34,479)
Net current assets/(liabilities) 3,925 196 (1,178)
Total assets less current
liabilities 82,713 82,741 77,771
Non-current liabilities
Borrowings (13,958) (10,600) (10,806)
Provisions 12 (158) (2,608) -
Obligations under finance
leases (31) (46) (43)
Derivative financial instruments (34) (93) -
Deferred tax liabilities (656) (1,045) (799)
Non-current liabilities (14,837) (14,392) (11,648)
Net assets 67,876 68,349 66,123
Equity
Share capital 13 8,226 7,853 7,853
Share premium 18,198 18,104 18,104
Merger reserve 29,630 31,241 28,742
Capital redemption reserve 50 50 50
Retained earnings 11,375 10,518 10,389
Share-based payment reserve 274 151 209
Foreign currency reserve 85 (20) 163
Equity attributable to equity
holders of parent 67,838 67,897 65,510
Non-controlling interests 38 452 613
Total equity 67,876 68,349 66,123
Condensed Consolidated Cash Flow Statement
For the six months ended 30 June 2012
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended 31 December
Notes 30 June 2012 30 June 2011 2011
GBP'000 GBP'000 GBP'000
Net cash (outflow)/inflow from
operating activities before
taxation 14a (858) 928 7,024
Tax paid (1,002) (298) (1,266)
Net cash (outflow)/inflow from
operating activities after
taxation (1,860) 630 5,758
Investing activities
Interest received 4 12 22
Purchase of property, plant
and equipment (767) (343) (975)
Sale of property, plant and
equipment 63 5 25
Expenditure on intangible assets (144) (17) (38)
Purchase of subsidiary undertakings (1,682) (2,673) (2,767)
Net cash outflow from investing
activities (2,526) (3,016) (3,733)
Financing activities
Proceeds from issuance of shares - 2,541 2,541
Dividends paid to equity holders (429) - (709)
Repayment of borrowings (800) 4,600 (9,494)
Repayment of loan notes (617) (105) (1,430)
Drawdown of borrowings 4,000 - 11,300
Increase in overdrafts 206 - -
Capital element of finance
lease payments (37) (18) (61)
Interest paid (876) (324) (704)
Net cash inflow/(outflow) from
financing 1,447 6,694 1,443
Movements in cash and cash
equivalents
Net (decrease)/increase in
cash and cash equivalents (2,939) 4,308 3,468
Exchange gains on cash and
bank overdrafts (10) (8) (95)
Cash and cash equivalents at
the beginning of the period 4,170 797 797
Cash and cash equivalents at
end of the period 1,221 5,097 4,170
Condensed Consolidated Statement of Changes in Equity
For the six months ended 30 June 2012
Statement of changes in equity for the six months ended 30 June
2012:
Capital Share-based Currency Attributable
Share Share Merger Redemption Retained Payment Exchange to Equity Non-Controlling Total
Capital Premium Reserve Reserve Earnings Reserve Reserve Shareholders Interest Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2012 7,853 18,104 28,742 50 10,389 209 163 65,510 613 66,123
Profit for the
period - - - - 825 - - 825 15 840
Other
comprehensive
income:
Currency
translation - - - - - - (78) (78) - (78)
Total
comprehensive
income in the
period - - - - 825 - (78) 747 15 762
Transactions
with owners
Shares issued 373 94 888 - - - - 1,355 - 1,355
Credit for
share-based
incentives - - - - - 65 - 65 - 65
Changes in
non-controlling
interests in
share holdings - - - - 590 - - 590 (590) -
Dividends paid - - - - (429) - - (429) - (429)
Total
transactions
with owners 373 94 888 - 161 65 - 1,581 (590) 991
As at 30 June
2012 8,226 18,198 29,630 50 11,375 274 85 67,838 38 67,876
Statement of changes in equity for the six months ended 30 June
2011:
Capital Share-based Currency Attributable
Share Share Merger Redemption Retained Payment Exchange to Equity Non-Controlling Total
Capital Premium Reserve Reserve Earnings Reserve Reserve Shareholders Interest Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2011 6,164 15,738 26,741 50 9,187 112 (45) 57,947 296 58,243
Profit for the
period - - - - 1,330 - - 1,330 156 1,486
Other
comprehensive
income:
Currency
translation - - - - - - 25 25 - 25
Total
comprehensive
income in the
period - - - - 1,330 - 25 1,355 156 1,511
Transactions
with owners
Shares issued 1,689 2,366 4,500 - - - - 8,555 - 8,555
Credit for
share-based
incentives - - - - - 39 - 39 - 39
Deferred tax
on share
based
payments
recognised
directly in
equity - - - - 1 - - 1 - 1
Total
transactions
with owners 1,689 2,366 4,500 - 1 39 - 8,595 - 8,595
As at 30 June
2011 7,853 18,104 31,241 50 10,518 151 (20) 67,897 452 68,349
Capital Share-based Currency Attributable
Share Share Merger Redemption Retained Payment Exchange to Equity Non-Controlling Total
Capital Premium Reserve Reserve Earnings Reserve Reserve Shareholders Interest Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2011 6,164 15,738 26,741 50 9,187 112 (45) 57,947 296 58,243
Loss for the
period - - - - (587) - - (587) 317 (270)
Other
comprehensive
income:
Currency
translation - - - - - - 208 208 - 208
Total
comprehensive
income for
the
period - - - - (587) - 208 (379) 317 (62)
Transactions
with owners:
Shares issued 1,689 2,366 4,500 - - - - 8,555 - 8,555
Credit for
share-based
incentives - - - - - 97 - 97 - 97
Deferred tax
on share
based
payments
recognised
directly in
equity - - - - (1) - - (1) - (1)
Transfer
between
reserves in
respect of
impairment - - (2,499) - 2,499 - - - - -
Dividends paid - - - - (709) - - (709) - (709)
Total
transactions
with owners 1,689 2,366 2,001 - 1,789 97 - 7,942 - 7,942
As at 31
December
2011 7,853 18,104 28,742 50 10,389 209 163 65,510 613 66,123
Statement of changes in equity for the year ended 31 December
2011:
Notes to the Financial Information
For the six months ended 30 June 2012
1. ACCOUNTING POLICIES AND BASIS OF PREPARATION
The condensed consolidated financial information for the six
months ended 30 June 2012 has been prepared in accordance with IAS
34 Interim Financial Reporting, as adopted by the European Union.
The condensed consolidated financial information should be read in
conjunction with the annual financial statements for the year ended
31 December 2011, which have been prepared in accordance with IFRSs
as adopted by the European Union.
The condensed consolidated financial information does not
comprise statutory accounts within the meaning of section 434 of
the Companies Act 2006. Statutory accounts for the year ended 31
December 2011 were approved by the Board of directors on 12 March
2012 and delivered to the Registrar of Companies. The report of the
auditors on those accounts was unqualified, did not contain an
emphasis of matter paragraph and did not contain any statement
under section 498 of the Companies Act 2006.
The condensed consolidated financial information was approved
for issue on 19 September 2012 and has not been audited.
The accounting policies applied are consistent with those of the
annual financial statements for the year ended 31 December 2011, as
described in those annual financial statements.
There are no new IFRS's or IFRIC's that are effective for the
first time for the interim period that would be expected to have a
material impact on the Group.
2. HEADLINE MEASURES
The Group believes that reporting non-GAAP or headline measures
provides a useful comparison of business performance and reflects
the way the business is controlled. Accordingly headline measures
of operating profit, finance income, finance costs, profit before
taxation and earnings per share exclude, where applicable,
restructuring costs, start-up losses, amortisation of intangible
assets, impairment charges, acquisition accounting adjustments,
share option charges, fair value gains and losses on derivative
financial instruments and other exceptional costs. Non-headline
gains and losses are items that, in the opinion of the directors,
are required to be disclosed separately, by virtue of their size or
incidence, to enable a full understanding of the Group's financial
performance.
A reconciliation between statutory and headline profit/(loss)
before taxation is presented after the Condensed Consolidated
Statement of Comprehensive Income. In addition to this, a
reconciliation between statutory and headline operating profit is
presented in note 4, a reconciliation between statutory and
headline finance income and costs is presented in note 7 and a
reconciliation between statutory and headline earnings per share is
presented in note 10. Headline measures in this report are not
defined terms under IFRS and may not be comparable with similarly
titled measures reported by other companies.
3. SEASONALITY OF OPERATIONS
The Cello Health division is not materially influenced by
seasonal factors. However, there are a number of clients in the
Cello Consumer division who traditionally commission activity in
the second half of the year leading to increased revenues for that
period with respect to those clients.
4. SEGMENTAL INFORMATION
During the year the Group has changed its operating segments in
line with the way the operating results are now reported to the
chief operating decision maker and the way the Group is managed.
Prior period segmental information has been represented in line
with these new operating segments.
The new operating segments are Cello Health and Cello Consumer.
Cello Health includes the Group's pharmaceutical and healthcare
activities. Cello Consumer includes the businesses of the Group
whose clients seek to influence consumers via a variety of
marketing disciplines.
Six months ended 30 June
2012
Unallocated
Corporate
Cello Health Cello Consumer Expenses Group
GBP'000 GBP'000 GBP'000 GBP'000
Profit and loss
Revenue
External sales 24,235 39,095 - 63,330
Inter-segment revenue 11 35 (46) -
24,246 39,130 (46) 63,330
Gross profit 16,440 15,217 - 31,657
Headline operating profit
(segment result) 4,106 55 (885) 3,276
Amortisation of intangible
assets (431)
Acquisition related employee
expense (24)
Share option charges (65)
Start-up losses (335)
Restructuring costs (747)
Operating profit 1,674
Financing income 25
Finance costs (319)
Profit before tax 1,380
Other information
Additions to property plant
and equipment 332 435 - 767
Capitalisation of intangible
assets 48 96 - 144
Depreciation of property,
plant and equipment 188 347 5 540
Six months ended 30 June
2011
Unallocated
Corporate
Cello Health Cello Consumer Expenses Group
GBP'000 GBP'000 GBP'000 GBP'000
Profit and loss
Revenue
External sales 20,140 41,457 - 61,597
Inter-segment revenue 139 - (139) -
20,279 41,457 (139) 61,597
Gross profit 13,237 16,301 - 29,538
Headline operating profit
(segment result) 2,737 1,266 (783) 3,220
Acquisition costs (211)
Amortisation of intangible
assets (457)
Acquisition related employee
expense (159)
Share option charges (39)
Operating profit 2,354
Financing income 38
Finance costs (366)
Profit before tax 2,026
Other information
Additions to property plant
and equipment 16 300 1 317
Capitalisation of intangible
assets - 17 - 17
Depreciation of property,
plant and equipment 161 272 5 438
Year ended 31 December 2011
Unallocated
Corporate
Cello Health Cello Consumer Expenses Group
GBP'000 GBP'000 GBP'000 GBP'000
Profit and loss
Revenue
External sales 44,772 86,259 - 131,031
Inter-segment revenue 260 30 (290) -
45,032 86,289 (290) 131,031
Gross profit 29,225 33,279 - 62,504
Headline operating profit
(segment result) 6,100 3,268 (1,722) 7,646
Restructuring costs (949)
Acquisition costs (211)
Start-up losses (163)
Amortisation of intangible
assets (1,198)
Acquisition related employee
expense (631)
Share option charges (97)
Impairment of goodwill (2,499)
Operating profit 1,898
Financing income 86
Finance costs (885)
Profit before tax 1,099
Other information
Additions to property plant
and equipment 273 614 1 888
Capitalisation of intangible
assets - 38 - 38
Depreciation of property,
plant and equipment 374 589 10 973
5. DIVIDEND
An interim dividend of 0.58p (2011: 0.55p) per ordinary share is
declared and will be paid on 4 January 2013 to all shareholders on
the register on 9 December 2012. In accordance with IAS 10 Events
after the Balance Sheet Date, this dividend has not been recognised
in the accounts at 30 June 2012, but will be recognised in the
accounting period ending 31 December 2013.
6. RESTRUCTURING COSTS, START-UP LOSSES AND ACQUISITION COSTS
Restructuring costs, start-up losses and acquisition costs have
been separately disclosed in order to assist in understanding the
financial performance of the Group.
Restructuring costs principally relate to redundancy costs and
onerous lease costs.
Start-up losses relate to losses incurred by the group where it
has invested organically in new businesses, new offices or new
products.
Acquisition costs relate to professional costs incurred in
relation to acquisitions.
7. FINANCE INCOME AND COSTS
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2011 2011
2012 GBP'000 GBP'000
GBP'000
Finance income:
Interest receivable on bank
deposits 4 12 22
Headline finance income 4 12 22
Fair value gains on derivative
financial instruments 21 26 64
Total finance income 25 38 86
Finance costs:
Interest payable on bank loans
and overdrafts 316 290 617
Interest payable in respect
of finance leases 3 5 9
Finance costs on cap and collar
interest rate hedge - 39 90
Headline finance costs 319 334 716
Notional finance costs on future
deferred consideration - 32 58
Facility Fee written off - - 111
Total finance costs 319 366 885
8. TAXATION ON PROFIT ON ORDINARY ACTIVITIES
The tax charge for the period ended 30 June 2012 is based on
management's estimate of weighted average annual tax rate expected
for the full financial year. The estimated average annual tax rate
used is 30.2% (2011:29.0%).
9. DISCONTINUED OPERATIONS
The (loss)/profit for the discontinued operations in the period
ended 30 June 2011 and the year ended 31 December 2011 relates to
Farm , a division of Tangible UK Limited, a wholly owned subsidiary
of the Group.
In accordance with IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations the income statement for the period ended
30 June 2011 and year ended 31 December 2011 has been re-presented
to include income and expenses of the discontinued operations
within (loss)/profit from discontinued operations.
The financial performance and cash flow of the discontinued
operations are as follows:
Unaudited Unaudited Audited
Six months Six months Year ended
ended 30 ended 30 31 December
June 2012 June 2011 2011
GBP'000 GBP'000 GBP'000
Revenue 324 1,330 2,503
Cost of sales (95) (381) (736)
Gross profit 229 949 1,767
Administrative expenses (334) (785) (1,502)
(Loss)/profit before tax from discontinued
operations (105) 164 265
Tax 28 (47) (77)
(Loss)/profit in the period from
discontinued operations (77) 117 188
Loss for the period from discontinued
operations is attributable to:
Equity holders of the parent (77) 117 188
Non-controlling interest - - -
(77) 117 188
Unaudited Audited Audited
Six months Six months Year ended
ended 30 ended 30 31 December
June 2012 June 2011 2011
GBP'000 GBP'000 GBP'000
Operating cash inflows 9 320 40
Investing cash outflows (24) (26) (118)
Total cash flows (15) 294 (78)
10. EARNINGS/(LOSS) PER SHARE
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended 31 December
30 June 2012 30 June 2011 2011
GBP'000 GBP'000 GBP'000
Earnings attributable to ordinary
shareholders 825 1,330 (587)
Loss/(earnings) from discontinuing
operations 77 (117) (188)
Earnings attributable to ordinary
shareholders from continuing operations 902 1,213 (775)
Non-controlling interests 15 153 311
Earnings/(loss) from continuing
operations 917 1,366 (464)
Adjustments to earnings:
Restructuring costs 747 - 949
Start-up losses 335 - 163
Acquisition costs - 211 211
Amortisation of intangible assets 431 457 1,198
Acquisition related employee remuneration
expense 24 159 631
Share-based payments charge 65 39 97
Impairment of goodwill - - 2,499
Notional finance costs on future
deferred consideration payments - 32 58
Fair value gain on derivative financial
instruments (21) (26) (64)
Facility fees written off - - 111
Tax thereon (410) (164) (575)
Headline earnings attributable
to ordinary shareholders 2,088 2,074 4,814
30 June 2012 30 June 2011 30 December
number of number of 2011
shares shares number of
shares
Weighted average number of ordinary
shares 79,388,465 69,622,829 74,111,359
Weighted average number of treasury
shares (237,000) (237,000) (237,000)
Weighted average number of shares
held in employee benefit trusts (1,624,515) (1,582,097) (1,739,754)
Weighted average number of ordinary
shares 77,526,950 67,803,732 72,134,605
Dilutive effect of securities:
Deferred consideration shares to
be issued 2,873,040 4,126,006 5,629,378
Diluted weighted average number
of ordinary shares 80,399,990 71,929,738 77,763,983
Further dilutive effect of securities:
Share options 4,097,576 2,308,715 4,097,576
Contingent consideration shares
to be issued 44,561 4,294,145 143,885
Fully diluted weighted average
number of ordinary shares 84,542,127 78,532,598 82,005,444
Basic earnings/(loss) per share
From continuing operations 1.16 p 1.79 p (1.07)p
From discontinuing operations (0.10) p 0.17 p 0.26 p
Total 1.06 p 1.96 p (0.81)p
Diluted earnings/(loss) per share
From continuing operations 1.12 p 1.69 p (1.07)p
From discontinuing operations (0.10) p 0.16 p 0.24 p
Total 1.03 p 1.85 p (0.81)p
In addition to basic and diluted earnings/(loss) per share, headline
earnings per share and fully diluted earnings per share, which are
non-GAAP measures, have also been presented.
Fully diluted earnings/(loss) per
share
From continuing operations 1.07 p 1.54 p (1.07)p
From discontinuing operations (0.10) p 0.15 p 0.23 p
Total 0.98 p 1.69 p (0.81)p
Headline earnings per share
Headline basic earnings per share 2.69 p 3.06 p 6.67 p
Headline diluted earnings per share 2.60 p 2.88 p 6.19 p
Headline fully diluted earnings
per share 2.47 p 2.64 p 5.87 p
Basic earnings/(loss) per share is calculated by dividing the
earnings/(loss) attributable to ordinary shareholders by the
weighted average number of ordinary shares in issue during the
year, excluding treasury shares and shares in employee benefit
trusts, determined in accordance with the provisions of IAS 33
Earnings per share.
Diluted earnings/(loss) per share is calculated by dividing
earnings/(loss) attributable to ordinary shareholders by the
weighted average number of ordinary shares in issue during the year
adjusted for the potentially dilutive ordinary shares for which the
conditions of issue have substantially been met but not issued at
the end of the year.
The Group's potentially dilutive shares are shares expected to
be issued as deferred consideration on acquisitions and share
options issued but not exercised.
Fully diluted earnings/(loss) per share is calculated by
dividing earnings/(loss) attributable to ordinary shareholders by
the weighted average number of shares in issue during the year
adjusted for all of the potentially dilutive ordinary shares
expected to be issued in future period whether or not the
conditions of the issue have substantially been met. This measure
is presented to show the dilutive effect on earnings per share of
all shares expected to be issued in the future.
Headline earnings per share is calculated using headline
earnings for the year, which excludes the effect of restructuring
costs, start-up losses, amortisation of intangibles, impairments
charges, acquisition accounting adjustments, share option charges,
fair value gains and losses on derivative financial instruments and
other exceptional costs. The calculation also excludes
non-controlling interests over which the Group has exclusive
options to acquire in the future.
11. GOODWILL
Unaudited Unaudited Audited
30 June 30 June 2011 31 December
2012 GBP'000 2011
GBP'000 GBP'000
Cost
At 1 January 2012 73,823 71,155 71,155
Goodwill arising on acquisitions
in the period - 5,081 4,687
Adjustment to fair value of
deferred consideration - 54 225
Impairment of goodwill - - (2,499)
Exchange differences (77) 31 255
At 30 June 2012 73,746 76,321 73,823
The adjustment to the fair value of deferred consideration
relates to changes in estimate of deferred consideration payable
under earn out arrangements for acquisitions before 1 July 2009 in
accordance with the terms of the relevant acquisition agreements
and therefore not accounted for in accordance with the provisions
of IFRS 3 Business Combinations (as revised 2008).
12. PROVISIONS
Contingent
deferred Restructuring
consideration provision Total
for acquisitions GBP'000 GBP'000
GBP'000
At 1 January 2012 2,268 - 2,268
Additions in the period - 518 518
Utilised in the period (2,268) - (2,268)
At 30 June 2012 - 518 518
Current - 360 360
Non-current - 158 158
- 518 518
The provision for contingent deferred consideration for
acquisitions represents the directors' best estimate of the amount
expected to be payable in cash (or loan notes) and shares to be
issued on acquisitions before 1 July 2009 and accounted for under
IFRS 3 Business Combinations (as revised January 2008). The
provision is discounted to present value at the risk free rate at
the acquisition date.
The restructuring provision relates to redundancy costs, and
onerous lease costs in the Cello Consumer Division.
13. SHARE CAPITAL
Unaudited Unaudited Audited
At 30 June 2012 At 30 June At 31 December
GBP'000 2011 2011
GBP'000 GBP'000
Authorised:
100,000,000 ordinary shares
of 10p each 10,000 10,000 10,000
Allotted, issued and fully
paid
82,261,505 ordinary shares
of 10p each 8,226 7,853 7,853
During the interim period the following shares were issued:
On 30 April 2012, 486,219 new ordinary shares of 10p each were
issued at a value of 39.7p to vendors of businesses previously
acquired by the group and certain employees of the Group. These
shares were issued pursuant to the terms of minority share
purchases under the share purchase agreements in relation to Blonde
Digital Limited, Stripe PR and Communications Limited and Opticomm
Media Limited.
On 23 May 2012, 3,248,580 new ordinary shares of 10p each were
issued at 35.8p to vendors of businesses previously acquired by the
group and certain employees of the Group. These shares were issued
pursuant to the share purchase agreements in relation to Fenix
Media Limited (which trades as Face Group) and Red Kite Consulting
Group Limited.
14. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
(a) Reconciliation of operating profit to net cash (outflow)/inflow from operating activities
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended 31 December
30 June 2012 30 June 2011 2011
GBP'000 GBP'000 GBP'000
Profit/(loss) for the period 840 1,486 (270)
Financing income (25) (38) (86)
Finance costs 319 366 885
Tax 435 704 1,634
Depreciation 540 466 1,035
Amortisation of intangible assets 431 457 1,198
Impairment of goodwill - - 2,499
Share based payment expense 65 39 97
Acquisition related employee
remuneration expense 24 159 631
Profit on disposal of property,
plant and equipment (44) 34 64
Decrease/(increase) in receivables 2,450 190 (324)
(Decrease)/increase in payables (5,893) (2,935) (339)
Net cash (outflow)/inflow from
operating activities (858) 928 7,024
(b) Analysis of net debt
At 1 January Other non-cash Foreign At 30 June
2012 Cash flow changes exchange 2012
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cash and cash
equivalents 4,170 (2,939) - (10) 1,221
Loan notes (959) 617 (304) - (646)
Bank loans (10,806) (3,200) - 48 (13,958)
Overdrafts - (206) - - (206)
Finance leases (82) 37 (17) - (62)
(7,677) (5,691) (321) 38 (13,651)
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR QVLFFLKFBBBF
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