TIDMCLL
RNS Number : 8476Z
Cello Group plc
13 March 2013
FOR IMMEDIATE RELEASE 13 February 2013
Cello Group plc
Solid overall 2012 performance - Cello Health continued growth;
Cello Consumer H2 recovery
Cello Group plc (AIM:CLL, "Cello" or "the Group"), the insight
and strategic marketing group, today announces its final audited
results for the year to 31 December 2012.
Financial Highlights
2012 2011
Gross profit GBP65.1m GBP61.8m
--------- ---------
Headline operating profit(1) GBP7.7m GBP7.8m
--------- ---------
Headline profit before GBP7.0m GBP7.1m
tax
--------- ---------
Headline operating margin(2) 12.1% 12.6%
--------- ---------
Basic headline earnings
per share(3) 6.37p 6.82p
--------- ---------
Reported profit before GBP1.4m GBP1.2m
tax
--------- ---------
Reported basic loss per
share 0.49p 0.81p
--------- ---------
Proposed full year dividend 2.00p 1.72p
--------- ---------
Net debt GBP8.7m GBP7.7m
--------- ---------
-- Strong cash conversion of 88.5% (2011: 90.6%)
-- Net debt follows earn out settlement in the year of GBP2.0m
Ø Forward looking deferred consideration minimal
-- Gross profit in Cello Health up 7.2%; like-for-like(4) gross profit up 2.6%
-- Headline operating margin in Cello Health 20.8% (2011: 20.9%)
-- Like for like Gross Profit in Cello Consumer maintained, despite challenging H1
-- Headline operating margin in Cello Consumer of 9.1% (2011: 10.4%)
-- Good start to 2013, with strong bookings momentum continuing from Q4 2012
Operational Highlights
-- Successful restructuring of the Group into Cello Health and Cello Consumer
-- Strong performance from Cello Health, underpinned by a unified client proposition
-- Good recovery in H2 from Cello Consumer
-- International gross profit increase from 40.6% to 46.1% of total Group revenue
-- International gross profit in Cello Health increase from 68.2% to 72.3%
-- Strong performance from digital products and brands within Cello Consumer
-- Acquisition of Mash Healthcare Limited in January 2013 and integration into Cello Health
Mark Scott, Chief Executive, commented:
"2012 has seen the Group continue to grow its pharmaceutical
expertise in the UK and overseas markets. The recent acquisition of
Mash Health, combined with centralised new business activity and
further organic investment, will continue this progress into 2013.
Cello Consumer, after a challenging first half, recovered strongly
in the second half and this momentum is continuing in the early
stages of the current year. We are confident that both these
factors will combine to deliver a successful 2013 performance and
as an indicator of that confidence we have raised the dividend by
16.3%, the sixth successive year of dividend growth."
1 Headline measures exclude, where applicable, restructuring
costs, amortisation of intangible assets, impairment charges,
acquisition
accounting adjustments, start-up losses, share option charges
and fair value gains and losses on derivative financial
instruments.
(2) Operating margin is calculated by expressing operating
profit as a percentage of gross profit.
(3) Headline earnings per share is defined in note 10.
(4) Like-for-like measures exclude discontinued operations and
the impact of any reclassification of business between reporting
segments.
Enquiries:
Cello Group plc
Mark Scott, Chief Executive 020 7812 8460
Mark Bentley, Group Finance Director
Cenkos
Bobbie Hilliam 020 7397 8927
Buchanan
Mark Edwards 020 7466 5000
Sophie McNulty
Clare Akhurst
Overview
2012 saw a solid performance with the Group reporting a 5.3%
increase in gross profit to GBP65.1m (2011: GBP61.8m) and headline
profit before tax of GBP7.0m (2011: GBP7.1m). The restructuring of
the Group into Cello Health and Cello Consumer was successfully
completed and the benefits of this are already evident in new
client activity. The last quarter of 2012 showed good momentum in
forward bookings for the first quarter of 2013, providing good
visibility for the start of the current year.
Cello Health produced headline operating profit growth of 6.7%
on an increase in gross profit of 7.2%, reflecting robust demand
from global clients for its highly specialist range of services.
Cello Health enjoyed a full year contribution from MedErgy which
was acquired in April 2011. This top line growth has allowed for
continued investment in qualified staff, the initiation of a range
of new services and expansion of international offices to sustain
future revenue growth. Like-for-like gross profit in Cello Health
grew by 2.6%.
Cello Health's profile with global clients continues to grow
rapidly, with the recent addition of a central business development
team reporting to the Board of Cello Health. The Board of Cello
Health are working rapidly to deliver a fully integrated global
service, promoted under the Cello Health brand, enabling it to
compete effectively against larger US based competitors.
Cello Consumer enjoyed a strong recovery in the second half
after a marked slowdown in the first half caused by a hiatus in
research activity by clients. Cello Consumer's rapid transition
into a dominantly digital proposition supported by a range of
web-centric services has enabled it to continue to develop its wide
range of blue chip client relationships. With headline operating
profit of GBP3.0m (2011: GBP3.4m) on gross profit of GBP32.7m
(2011: GBP32.6m), Cello Consumer achieved operating margins of 9.1%
(2011: 10.4%). Like-for-like gross profit in Cello Consumer grew by
0.6%.
The Group's strategy of increasing the proportion of work won or
serviced outside the UK has also made continued progress with
international work now accounting for 46.1% of total Group gross
profit (2011: 40.6%). Within Cello Health 72.3% of the gross profit
was secured from international clients (2011: 68.2%). The Group now
has overseas offices in New York, Philadelphia, San Francisco, Los
Angeles, Singapore and Hong Kong. There are plans to open an office
in Chicago during the course of the current year.
The Group's top 20 clients accounted for 40.0% of Cello's
overall gross profit (2011: 38.3%) and remain largely unchanged
from the prior year. Cello Health continues to benefit from
accredited supplier status with the majority of its large
pharmaceutical clients, enabling it to increase its service
offering to these clients. The Group saw significant new business
wins in the last quarter of 2012 which will be active in 2013.
Following strong operating cash flow and the settlement of the
earn out commitments during the year, net debt at year end was
GBP8.7m (2011: GBP7.7m). As a consequence of the vastly reduced
deferred consideration profile, and continued strong operating cash
flow, the Board is pleased to propose an increase in the full year
dividend of 16.3% to 2.00p per share (2011: 1.72p). The dividend
has now grown every year since 2006.
In January 2013 the Group completed the acquisition of Mash
Healthcare Limited ("Mash"), for a total maximum consideration of
GBP1.5m, payable over the next 18 months. Mash has joined the
Consumer Health division of Cello Health.
Financial Review
Total Group gross profit was GBP65.1m (2011: GBP61.8m) on
revenues of GBP135.1m (GBP127.7m). Headline profit before tax was
GBP7.0m (2011: GBP7.1m). The Group's results reflect a solid
performance by Cello Health and a markedly improved performance by
Cello Consumer in the second half.
Reported profit before tax was GBP1.4m (2011: GBP1.2m) after the
impact of restructuring costs of GBP1.3m (2011: GBP0.9m);
amortisation of GBP0.9m (2011: GBP1.2m); start-up losses of GBP0.8m
(2011: GBP0.2m); and impairment charges of GBP2.5m (2011: GBP2.5m).
The Group's headline operating margin was 12.1% (2011: 12.6%) with
a headline operating margin of 20.8% in Cello Health (2011: 20.9%),
and 9.1% in Cello consumer (2011: 10.4%).
Headline finance costs were GBP0.7m (2011: GBP0.7m). The Group's
tax charge was GBP1.2m (2011: GBP1.6m) reflecting a normalised tax
rate on taxable profits of 31.5% (2011: 31.7%). Headline basic
earnings per share was 6.37p (2011: 6.82p).
The Board is proposing a final dividend of 1.42p per share
(2011: 1.17p), giving a total dividend per share of 2.00p (2011:
1.72p), an increase of 16.3%. The final dividend will be paid,
subject to shareholder approval, on 5 July 2013 to all shareholders
on the register at 31 May 2013 and will be recognised in the year
ending 31 December 2013.
The Group's net debt position at 31 December 2012 was GBP8.7m
(2011: GBP7.7m). This debt figure is well within existing debt
facilities of GBP29.0m which are in place until March 2016.
Operating cash flow before tax of GBP6.8m (2011: GBP7.0m) during
the year represented an 88.5% conversion of headline operating
profit (2011: 90.6%).
In April and May 2012 GBP3.3m of acquisition related liabilities
were settled. These were settled by GBP2.0m in cash and loan notes
and GBP1.3m in shares issued at an average price of 37p per share.
Following these payments, deferred consideration commitments now
stand at GBP0.4m, all payable in 2013. In January 2013, the Group
acquired Mash for a maximum potential consideration of GBP1.5m.
This consideration will all be paid by May 2014 with a maximum of
20% payable in shares.
The Group has invested in a number of new start-up activities in
2012, most notably the start-up of a quantitative research activity
in Cello Health; the opening of new offices in Singapore, Hong Kong
and Los Angeles; the creation of Cello Business Sciences, a
web-enabled analytics offering; and expansion in New York. This
incurred a net investment cost of GBP0.8m which has been added back
to earnings for purposes of headline operating profit so as not to
distort the reporting of underlying operational performance. We are
confident about the majority of these activities being profitable
in 2013. We were pleased to earn GBP1.0m of gross profit from these
activities in their first year of operations.
As indicated in the interim results, Cello Consumer suffered
from a marked slowdown of certain research activities in the first
half of 2012. As a result the Group took action to reduce costs in
certain areas, some of which have been closed and are therefore
accounted for as discontinued operations. There was a restructuring
charge of GBP1.3m for 2012 of which GBP0.6m related to a vacant
property provision. The restructuring also necessitated an
impairment charge of GBP2.5m.
The Group incurs a number of charges in the income statement
below headline operating profit, detailed overleaf:
2012 2011
GBP'000 GBP'000
Headline operating profit 7,720 7,756
Net interest payable (686) (694)
Headline profit before tax 7,034 7,062
Acquisition costs - (211)
Restructuring costs (1,328) (928)
Start-up losses (787) (163)
Fair value gain on financial instruments* 50 64
Acquisition related employee remuneration
expenses* (82) (631)
Share option charges* (134) (97)
Impairment of goodwill and intangibles* (2,497) (2,499)
Amortisation of intangibles* (876) (1,198)
Finance costs on deferred consideration* - (58)
Facility fees written off* - (111)
Reported profit before tax 1,380 1,230
*no cash flow impact
The Group monitors many financial measures on a regular basis
but our key performance indicators are headline operating profit,
headline operating margin, like-for-like gross profit, headline
operating cash flow conversion and headline basic earnings per
share.
Operational Review
Cello Health
The Group's healthcare business enjoyed another year of strong
performance, delivering headline operating profit of GBP6.5m (2011:
GBP6.1m) from gross profit of GBP31.3m (2011: GBP29.2m). This has
been driven by continued spend from the business's large, long
term, global client relationships. The professional employee base
has increased to 305 during the year (2011: 280) reflecting the
addition of senior resource, particularly in the USA, to enable
continued growth. Despite this senior headcount increase operating
margins have remained static at 20.8% (2011: 20.9%) which
represents competitive levels versus the larger competitor set.
Cello Health has increased the proportion of pharmaceutical
assignments won on the basis of joint pitches across multiple Cello
Health companies. These are often won in competition with larger,
consolidated healthcare services providers, often domiciled in the
USA. It has also responded effectively to the increasing demand by
clients for scientifically based data input into their marketing
efforts based on actual patient outcomes.
Cello Health is managed by a single executive Board comprising
Stephen Highley (Chair), Julia Ralston (CEO USA) and Jane Shirley
(CEO Europe and Asia), supported by a leadership team. The business
has a central senior business development function. During the
course of 2013 the board of Cello Health plans to transition its
core operating brands into a single brand format reflecting the
Cello Health positioning, as Cello Health transitions into the lead
client facing identity. This will enable it to compete more
effectively, with better sharing of professional resource, and to
raise Cello Health's market profile.
The international profile of Cello Health has progressed
considerably. In July 2012 Cello Health moved to new, enlarged
premises in New York, complemented by the Philadelphia office of
MedErgy. During the course of 2013 the business will open an office
in Chicago to service the North West of the US and the Philadelphia
office is being materially expanded to allow further growth in
headcount. All of Cello Health's core businesses are now
represented in the US market, which is by far the largest market
for such services globally.
The business continues to invest in organic expansion. In 2012
investments were made in quantitative research to complement the
dominant qualitative research focus of the business; geographical
expansion; the development of an integrated Market Access
proposition; and the development of a focused Consumer Health
offering. The recent acquisition of Mash in early 2013 has been a
significant addition to the effort to build a major global offering
in the Consumer Health space. The Board of Cello Health is charged
with demonstrating profitable revenue flow from these investment
activities.
Innovation is at the core of Cello Health's proposition. Cello
Health's digital capabilities have continued to gain market
traction. eVillage, the division's social media research product
for the pharmaceutical industry, made a material contribution to
revenues in 2012. In 2012 Cello Health also launched Cello Business
Sciences, a bespoke web-based analytical tool for marketing
directors in the pharmaceutical industry.
Notable, disclosable client wins in 2012 included: Actelion,
Ahlstrom, Airwave, Alix Partners, Allergan, Amgen, AVEBE, Avery
Dennison, Boehringer Ingelheim, Boots Opticians, Centro,
CooperVision, EE, GE Healthcare, General Mills, Infineum, Johnson
and Johnson, Mundipharma, NEST, Novartis, Shionogi, Synergy, TATA
Group, Tunstall Healthcare, and Vision Care.
Cello Consumer
Cello Consumer delivered headline operating profit of GBP3.0m
(2011: GBP3.4m) on gross profit of GBP32.7m (2011: GBP32.6m). This
represented a solid recovery following a challenging first half in
2012 caused by a temporary slowdown of research activity by a range
of large clients, consistent with that experienced by the market
overall. Operating margins were 9.1% (2011: 10.4%).
Cello Consumer is based on three core capabilities - Insight:
helping clients identify market and customer issues and
opportunities; Creative: helping clients solve their customer
issues and capture opportunities through communications processes;
and Logistics: helping clients execute these plans most cost
effectively. These capabilities are represented by 2CV and Face on
the research side; Leith Group on the creative side; and by Bright
Group on the logistics side. These core brands are in turn
supported by a number of specialist sub brands.
Cello Consumer is managed by an executive Board led by Mark
Scott (Chair) and John Rowley (CEO) along with six other
executives. The mission of the Board is to establish Cello Consumer
as a leading global advisor to marketing clients, enabling them to
better manage relationships with customers in an increasingly
digital context. Cello Consumer responds to clients increasing need
for speed of response, need to drive down cost and need to show
immediate return on marketing investment. As part of this process
Cello Consumer will be changing its name in 2013 into a client
facing brand to help drive additional revenue into the core branded
engines of the business.
Cello Consumer has a very high quality, blue chip, client list
that will underpin global business growth. The primary client
segments served by Cello Consumer are fmcg, mobile telephony,
computer games, financial services, as well as charities. The
largest client accounted for less than 3% of total revenues for
Cello Consumer.
Cello Consumer has continued to develop a strong digital
footprint. Through its brand Face, the Group has established an
industry leading capability in social media based advisory work,
backed by
software enabled analytical products. Through its brand Blonde,
it also has a highly successful offering in digital communications
and web-based marketing. In addition, through its brand
Brightsource, it has developed an industry leading capability in
digital based print management, communications planning and
delivery.
Cello Consumer has been rapidly transforming itself from a UK
focused business into a global business. With offices in San
Francisco, Los Angeles, New York, Singapore and Hong Kong, it can
truly offer global coverage. International gross profits have grown
from 18.2% in 2011 to 20.6% in 2012 and this trend is
accelerating.
Notable, disclosable client wins in 2012 included: AB Inbev, Aer
Lingus, Air Malta, Airwick, Aldi, ANZ, AOL, Arla, Asia Pacific
Breweries, Avon, Bang and Olufsen, Barnes and Noble, BBC Global
business, Ben & Jerry's, Berry Bros, BHF furniture stores,
British Gas, British Red Cross, Britvic, Camelot, Church &
Dwight, Coutts, Dairy Crest, Debenhams, Delhaize Group, Edrington,
Electrolux, EMC, Eurostar, Fitflop, Forestry Commission, General
Motors, Glasgow 2014 Commonwealth Games, Hallmark, Heathrow
Express, HSBC, ING, Johnson & Johnson, Land Securities, Liberty
Mutual, Lipton, Magic Radio, Magnum, Malaysia Airlines, Marie Curie
Cancer Care, Marriott, Montpelier Group, Mortein, NBC, NHS, Nokia,
O2, Odeon, Pfizer, Philips, Phones 4U, Powerade, Pronova, Quaker,
RBK, RBS, Royal Mail, Save the Children, Scottish Widows, Sky,
Skyscanner, Stansted Airport, Strategic Defence, Tesco, The
Alzheimers Society, Timberland, Toyota, and Veolia Water.
People
Cello maintains a range of initiatives that span the entire
Group, encompassing both Cello Health and Cello Consumer, which are
aimed at developing and retaining the Group's professional
resource. At the heart of this is the Cello Partnership which
comprises 44 Associates, 31 Partners and 13 Managing Partners. The
Partnership meets regularly and forms sub-groups to address areas
critical to the future of the business, notably innovation,
international expansion and cross group working. Many Partners and
Associates are alumni of Cello Academy.
Cello Academy is the Group's well respected and proprietary
training programme which has been in place for seven years, and
through which over 150 people have passed during that time. In
addition there is a Cello graduate forum for the substantial annual
graduate in-take of the Group. In 2012 33 new graduate trainees
were recruited over the course of the year (2011: 28).
In order to properly incentivise the Partnership the Group
administers a robust and demanding annual bonus scheme that rewards
based on performance.
As part of making a difference, Cello invests in helping its
professionals engage in socially contributive activities with a
health orientation. In particular, Cello has invested in creating
Talking Taboos, a research programme aimed at supporting selected
charities to further develop their positions and raise their
profile supported by market data. In 2013 Cello aims to launch
Talking Taboos as a charitable foundation led by Vincent Nolan.
Current Trading and Outlook
Cello began 2013 with a good level of secured forward bookings
and has also seen encouraging levels of new business wins so far in
2013. This solid start to 2013 means that the Group is in a good
position to progress against its growth goals. The strong balance
sheet position of the Group means it is able to materially increase
the full year dividend, as well as further invest in the growth
strategy of the Group. At this early stage of the year, the Board
is confident that current expectations for 2013 can be met.
Allan Rich
Non-Executive Chairman
12March 2013
CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2012
Year ended Year ended
31 December 2012 31 December 2011
Notes GBP'000 GBP'000
Continuing operations
Revenue 2 135,141 127,714
Cost of sales (70,046) (65,910)
Gross profit 2 65,095 61,804
Administration expenses 4 (63,079) (59,775)
Operating profit 2 2,016 2,029
Finance income 3 76 86
Finance costs 3 (712) (885)
Profit on continuing operations
before taxation 1,380 1,230
Taxation 7 (1,224) (1,564)
Profit/(loss) on continuing
operations after taxation 156 (334)
(Loss)/profit from discontinued
operations 8 (516) 64
Loss for the year (360) (270)
Attributable to:
Owners of the parent (386) (587)
Non-controlling interests 26 317
(360) (270)
Year ended Year ended
31 December 2012 31 December 2011
Basic earnings/(loss) per
share
From continuing operations 10 0.16p (0.90)p
From discontinued operations 10 (0.65)p 0.09p
Total basic loss per share 10 (0.49)p (0.81)p
Diluted earnings/(loss) per
share
From continuing operations 10 0.16p (0.90)p
From discontinued operations 10 (0.65)p 0.08p
Total diluted loss per share 10 (0.49)p (0.81)p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2012
Year ended Year ended
31 December 2012 31 December
GBP'000 2011
GBP'000
Loss for the year (360) (270)
Other comprehensive income:
Exchange differences on translation of
foreign operations (287) 208
Total comprehensive income for the
year (647) (62)
Total comprehensive income attributable
to:
Owners of the parent (673) (379)
Non-controlling interest 26 317
Total comprehensive income for the
year (647) (62)
Total comprehensive income attributable to owners of
the parent arises:
From continuing operations (164) (437)
From discontinued operations (509) 58
Total comprehensive income attributable to owners
of the parent (673) (379)
CONSOLIDATED BALANCE SHEET
31 December 2012
31 December 31 December
2012 2011
Notes GBP'000 GBP'000
Goodwill 11 71,028 73,823
Intangible assets 1,790 2,373
Property, plant and equipment 2,289 2,176
Deferred tax assets 463 577
Non-current assets 75,570 78,949
Trade and other receivables 29,935 29,131
Cash and cash equivalents 4,148 4,170
Current assets 34,083 33,301
Trade and other payables (29,717) (29,968)
Current tax liabilities (582) (1,190)
Borrowings 14 (498) (959)
Provisions 12 (108) (2,268)
Obligations under finance leases (23) (39)
Derivative financial instruments (5) (55)
Current liabilities (30,933) (34,479)
Net current assets/(liabilities) 3,150 (1,178)
_
Total assets less current liabilities 78,720 77,771
Borrowings 14 (12,320) (10,806)
Provisions 12 (280) -
Obligations under finance leases (26) (43)
Deferred tax liabilities (498) (799)
Non-current liabilities (13,124) (11,648)
Net assets 65,596 66,123
Equity
Share capital 8,226 7,853
Share premium 18,188 18,104
Merger reserve 28,228 28,742
Capital redemption reserve 50 50
Retained earnings 10,636 10,389
Share-based payment reserve 343 209
Foreign currency reserve (124) 163
Equity attributable to owners
of the parent 65,547 65,510
Non-controlling interests 49 613
Total equity 65,596 66,123
CONSOLIDATED CASHFLOW STATEMENT
for the year ended 31 December 2012
Year ended Year ended
31 December 31 December
Notes 2012 2011
GBP'000 GBP'000
Net cash generated from operating
activities before taxation 13 6,835 7,024
Tax paid (1,874) (1,266)
Net cash generated from operating
activities after taxation 4,961 5,758
Investing activities
Interest received 26 22
Purchase of property, plant and equipment (1,432) (975)
Sale of property, plant and equipment 75 25
Expenditure on intangible assets (358) (38)
Purchase of subsidiary undertakings (2,037) (2,767)
Net cash used in investing activities (3,726) (3,733)
Financing activities
Proceeds from issuance of shares - 2,541
Dividends paid to equity holders
of the parent 9 (1,386) (709)
Repayment of borrowings (3,800) (9,494)
Repayment of loan notes (461) (1,430)
Drawdown of borrowings 5,500 11,300
Capital element of finance lease
payments (50) (61)
Interest paid (911) (704)
Net cash (used)/generated in financing
activities (1,108) 1,443
Net increase in cash and cash equivalents 127 3,468
Exchange losses on cash and cash
equivalents (149) (95)
Cash and cash equivalents at the
beginning of the year 4,170 797
Cash and cash equivalents at end
of the year 14 4,148 4,170
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2012
Total
attributable
Foreign to the
Capital Share-based currency owners Non-
Share Share Merger redemption Retained payment exchange of the controlling Total
capital premium reserve reserve earnings reserve reserve parent 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
Comprehensive
income:
Loss for the
year - - - - (587) - - (587) 317 (270)
Other
comprehensive
income:
Currency
translation - - - - - - 208 208 - 208
Total
comprehensive
income for the
year - - - - (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 (note
9) - - - - (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
Comprehensive
income:
Loss for the
year - - - - (386) - - (386) 26 (360)
Other
comprehensive
income:
Currency
translation - - - - - - (287) (287) - (287)
Total
comprehensive
income for the
year - - - - (386) - (287) (673) 26 (647)
Transactions
with owners:
Shares issued 373 84 898 - - - - 1,355 - 1,355
Credit for
share-based
incentives - - - - - 134 - 134 - 134
Deferred tax
on share-based
payments
recognised
directly in
equity - - - - 17 - - 17 - 17
Changes in
non-controlling
interests in
shareholdings - - - - 590 - - 590 (590) -
Transfer between
reserves in
respect of
impairment - - (1,412) - 1,412 - - - - -
Dividends (note
9) - - - - (1,386) - - (1,386) - (1,386)
Total
transactions
with owners 373 84 (514) - 633 134 - 710 (590) 120
As at 31
December
2012 8,226 18,188 28,228 50 10,636 343 (124) 65,547 49 65,596
SIGNIFICANT ACCOUNTING POLICIES
1. Basis of Preparation
The financial information included in this report does not
amount to full financial statements within the meaning of Section
434 of Companies Act 2006. The financial information has been
extracted from the Group's Annual Report and financial statements
for the year ended 31 December 2012, on which an unqualified report
has been made by the Company's auditors, PricewaterhouseCoopers
LLP.
Financial statements for the year ended 31 December 2011 have
been delivered to the Registrar of Companies; the report of the
auditors on those account were unqualified and did not contain a
statement under Section 498 of the Companies Act 2006. The 2012
statutory accounts are expected to be published on 11 April
2013.
During the year the Group generated a profit before tax on
continuing activities of GBP1.4m and excluding non-recurring
restructuring costs and other non-headline charges the Group
generated a profit before tax of GBP7.0m.
The Group meets its day to day working capital requirements
through its bank facilities. The Group's bank facilities consist of
a GBP4.0m overdraft facility and a GBP25.0m revolving credit
facility which is committed to March 2016. GBP12.7m of the
revolving credit facility is undrawn at 31 December 2012 and the
Groups forecasts and projections show that the Group is able to
operate within the level of its current facilities.
After reviewing the Group's performance and forecast future cash
flows, the directors consider the Group has adequate resources to
continue in operational existence for the foreseeable future. The
Group therefore continues to adopt the going concern basis in
preparing the Group's financial statements.
2. Headline Measures
The Group believes that reporting non-GAAP or headline measures
provides a useful comparison of business performance and this
reflects the way the business is reported internally and
controlled. Accordingly headline measures of operating profit,
finance income, finance costs, profit before taxation and earnings
per share exclude, where applicable, restructuring costs,
amortisation of intangible assets, impairment charges, acquisition
accounting adjustments, start-up losses, share option charges and
fair value gains and losses on derivative financial instruments.
These 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 reported and headline profit before
taxation is presented in note 1. In addition to this, a
reconciliation between reported and headline operating profit is
presented in note 2, a reconciliation between reported and headline
finance income and costs is presented in note 3 and a
reconciliation between reported and headline earnings per share is
presented in note 11. Headline measures in this report are not
defined terms under IFRSs and may not be comparable with similarly
titled measures reported by other companies.
3. Accounting Estimates and Judgements
The Group makes estimates and judgements concerning the
application the Group's accounting policies and concerning the
future. The resulting estimates may, by definition, vary from the
actual results. Estimates are based on historical experience and
various other assumptions that management and the Board of
directors believe are reasonable.
The directors consider the critical accounting estimates and
judgements used in the financial statements and concluded that the
main areas of judgements are:
i. Revenue recognition policies in respect of contracts which straddle the year end.
The Group is required to make an estimate of the project
completion levels in respect of contracts which straddle the year
end for income recognition purposes. Estimates are based on
expected total costs and revenues from each contract. This involves
a level of judgement and therefore differences may arise between
the actual and estimated result. Where immaterial differences arise
they are recognised in the income statement for the following
reporting period. Any material changes to these estimates would
affect revenue recognised in the financial statements and the level
of deferred or accrued income on the balance sheet.
ii. Contingent deferred consideration payments in respect of
acquisitions and acquisition related employee remuneration.
The Group has estimated the value of future amounts payable in
respect of acquisitions. The estimate is based on management's
estimates of the relevant entities future performance. If these
estimates change in the future as the earn out progresses, the
amount of the provision will vary. Any changes to the carrying
value of the provision are recognised in the income statement.
As part of a typical acquisition an amount is also payable to
the employees of the acquired company. These acquisition related
employee remuneration costs are calculated using the same estimates
of the relevant entities future performance as the deferred
consideration payable. If these estimates change in the future, as
the earn out progresses, the amount of the employee liability,
which is recognised over the earn out period, will vary. Any
changes to the carrying value of these liabilities are recognised
in the income statement.
iii. Valuation and amortisation period of separately
identifiable intangible assets on acquisitions.
The Group is required to value the separately identifiable
intangible assets acquired as part of a business combination. In
order to value some of these intangible assets, the Group must make
assumptions as to future cash flows derived from these costs and
estimate the expected lives of these assets. Changes to these
estimates would affect the resulting valuation of goodwill and the
amortisation charge recognised in the financial statements.
iv. Impairment of goodwill.
The Group tests goodwill annually for impairment, in accordance
with the Group's accounting policy. The recoverable amount is based
on value-in-use calculations, which requires estimates of future
cash flows and the discount rate to apply in order to calculate the
present values of these cash flows. The estimates used and
sensitivity of these assumptions is disclosed in note 11.
NOTES TO THE PRELIMINARY ANNOUNCEMENT
1 Reconciliation of Profit on Continuing Operations Before
Taxation to Headline Profit Before Tax
Year ended Year ended
31 December 31 December
Notes 2012 2011
GBP'000 GBP'000
Profit on continuing operations
before taxation 1,380 1,230
Restructuring costs 5 1,328 928
Start-up losses 6 787 163
Acquisition costs 4 - 211
Amortisation of intangible assets 4 876 1,198
Acquisition related employee remuneration
expense 4 82 631
Share option charges 4 134 97
Impairment of goodwill 11 2,497 2,499
Finance cost of deferred consideration 3 - 58
Fair value gain on derivative financial
instruments 3 (50) (64)
Facility fees written off 3 - 111
Headline profit before taxation 7,034 7,062
Headline profit before taxation is made
up as follows:
Headline operating profit 2 7,720 7,756
Headline finance income 3 26 22
Headline finance costs 3 (712) (716)
7,034 7,062
2 Segmental Information
For management purposes, the Group is organised into two
operating groups; Cello Health and Cello Consumer. These groups are
the basis on which the Group reports internally to the plc's board
of directors, who have been identified as the chief operating
decision makers.
During the year the Group has changed its operating segments, in
line with the way the group is managed and reported to the chief
operating decision maker. Prior period segmental information has
been represented in line with these new operating segments.
The principal activities of the operating segments are as
follows:
Cello Health
The Cello Health Division provides market research, consulting
and communications services principally to the Group's
pharmaceutical and healthcare clients.
Cello Consumer
The Cello Health Division provides market research and direct
communications services principally to the Group's consumer facing
clients.
Revenues derived from the Group's largest client are less than
10% of the group's total revenue. Revenue derived from the largest
client in each operating segment also represents less than 10% of
external revenue in each segment.
Sales between segments are carried out at arms-length. The
revenue from external parties reported to the chief operating
decision maker is measured in a manner consistent with that in the
income statement.
2 Segmental Information (continued)
for the year ended 31
December 2012 Consolidation and Unallocated
Cello Health Cello Consumer GBP'000 Group
GBP'000 GBP'000 GBP'000
Revenue
External sales 46,247 87,457 - 133,704
Intersegment revenue 100 88 (188) -
Total segmental revenue 46,347 87,545 (188) 133,704
Start-up revenue 1,437
Total revenue 135,141
Gross profit
Segmental gross profit 31,322 32,735 - 64,057
Start-up gross profit 1,038
Total gross profit 65,095
Operating profit
Headline operating profit
(segment result) 6,506 2,995 (1,781) 7,720
Restructuring costs (1,328)
Start-up losses (787)
Amortisation of intangible
assets (876)
Acquisition related employee remuneration
expense (82)
Share Option charges (134)
Impairment of goodwill (2,497)
Operating profit 2,016
Financing income 76
Finance costs (712)
Profit before tax on
continuing operations 1,380
Other information
Capital expenditure 605 843 1 1,449
Capitalisation of
intangible assets 102 256 - 358
Depreciation of property,
plant and equipment 391 728 8 1,127
2 Segmental Information (continued)
for the year ended 31
December 2011
Consolidation and Unallocated
Cello Health Cello Consumer GBP'000 Group
GBP'000 GBP'000 GBP'000
Revenue
External sales 45,104 82,550 127,654
Intersegment revenue 260 63 (323) -
Total segmental revenue 45,364 82,613 (323) 127,654
Start-up revenue 60
Total revenue 127,714
Gross profit
Segmental gross profit 29,225 32,553 - 61,778
Start-up gross profit 26
Total gross profit 61,804
Operating profit
Headline operating profit
(segment result) 6,100 3,378 (1,722) 7,756
Restructuring costs (928)
Start-up losses (163)
Acquisition costs (211)
Amortisation of intangible
assets (1,198)
Acquisition related employee remuneration
expense (631)
Share option charges (97)
Impairment of goodwill (2,499)
Operating profit 2,029
Financing income 86
Finance costs (885)
Profit before tax on
continuing operations 1,230
Other information
Capital expenditure 273 733 1 1,007
Capitalisation of
intangible assets - 38 - 38
Depreciation of property,
plant and equipment 374 651 10 1,035
2 Segmental Information (continued)
The Group's operations are located in the United Kingdom and the
USA.
The following table provides an analysis of the Group's revenue
by geographical market, based on the location of the client:
Year ended Year ended
31 December 2012 GBP'000 31 December 2011 GBP'000
Geographical
UK 85,159 84,427
Rest of Europe 17,053 21,808
USA 26,172 18,822
Rest of the World 6,757 2,657
135,141 127,714
3 Finance Income and Costs
Year ended Year ended
31 December 31 December
2012 2011
GBP'000 GBP'000
Finance income:
Interest received on bank deposits 26 22
Headline finance income 26 22
Fair value gains on derivative financial
instruments 50 64
Total finance income 76 86
Finance costs:
Interest payable on bank loans and overdrafts 649 617
Interest payable in respect of finance
leases 6 9
Finance costs paid on derivative financial
instruments 57 90
Headline finance costs 712 716
Finance costs on deferred consideration - 58
Facility fee written off - 111
Total finance costs 712 885
4 Loss for the Year
Loss for the year is stated after charging:
Continuing operations Discontinued Total
operations
Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
31 December 31 December 31 December 31 December 31 December 31 December
2012 2011 2012 2011 2012 2011
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Headline administration costs:
Staff costs 41,816 40,366 645 1,662 42,461 42,028
Operating lease
rentals 2,156 2,120 - - 2,156 2,120
Depreciation of
property, plant
and equipment 1,033 1,017 94 18 1,127 1,035
Loss on disposal
of property, plant
and equipment 38 64 82 - 120 64
Auditors remuneration 335 289 8 13 343 302
Net foreign exchange
losses/(gains) 83 (15) 5 5 88 (10)
Other property
costs 1,825 1,243 96 86 1,921 1,329
Other administration
costs 9,051 8,938 349 549 9,400 9,487
Non-headline administration
costs:
Restructuring
costs 5 1,328 928 - - 1,328 928
Start-up costs 6 1,825 189 - - 1,825 189
Acquisition costs - 211 - - - 211
Acquisition related
employee
remuneration 82 631 - - 82 631
Amortisation of
intangible assets 876 1,198 - - 876 1,198
Impairment of
goodwill 11 2,497 2,499 - - 2,497 2,499
Share option costs 134 97 - - 134 97
63,079 59,775 1,279 2,333 64,358 62,108
5 Restructuring Costs
Restructuring costs comprise of cost saving initiatives including
severance payments, property and other contract termination costs.
They are included within administration costs and have been separately
identified because of their size or their nature or because they
are non-recurring. In the opinion of the directors, these costs
are required to be separately identified, to enable a full understanding
of the Group's financial performance.
An analysis of restructuring costs incurred is as follows:
Year Ended Year Ended
31 December 31 December
2012 2011
GBP'000 GBP'000
Staff redundancies 730 855
Property costs 598 -
Other - 73
Total restructuring costs 1,328 928
6 Start-up Losses
Start-up losses have been separately identified because, in the
opinion of the directors, separate disclosure is required to
enable a full understanding of the Group's financial performance.
Start-up losses are defined as the net operating result in the
period of the trading activities that relate to new offices,
new products, or new organically started businesses. Activities
so defined will cease being separately identified where, in the
opinion of the directors, the activities show evidence of becoming
sustainably profitable or are closed, whichever is earlier. In
any event start-up losses will cease being separately identified
after two years from the commencement of the activity.
An analysis of start-up losses incurred is as follows:
Year Ended Year Ended
31 December 31 December
2012 2011
GBP'000 GBP'000
Revenue 1,437 60
Cost of sales (399) (34)
Gross profit 1,038 26
Administration costs (1,825) (189)
Start-up losses (787) (163)
7. Taxation Year ended Year ended
31 December 2012 31 December 2011
GBP'000 GBP'000
Current tax:
Current tax on profits for the year 1,499 1,892
Adjustment in respect of prior year (132) (294)
1,367 1,598
Deferred tax:
Origination and reversal of temporary differences (98) (256)
Effect of decrease in tax rate on deferred tax assets 21 19
Adjustment in respect of prior year (66) 203
(143) (34)
Tax charge 1,224 1,564
The standard rate of corporation tax in the UK changed from 26% to 24% with effect from 1
April 2012. Accordingly the Group's profits from the UK are taxed at an effective rate of
24.5% (2011: 26.5%). A further rate reduction to 23% on 1 April 2013 has also been substantially
enacted and this rate has been applied in valuing UK deferred tax assets and liabilities.
Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdiction.
The charge for the year can be reconciled to the profit per the income statement.
Year ended Year ended
31 December 2012 31 December 2011
GBP'000 GBP'000
Profit before taxation 1,380 1,230
Tax at the UK corporation tax rate of 24.5% (2011:26.5%) 338 326
Tax effect of expenses not deductible for tax purposes 870 996
Effect of decrease in tax rate on deferred tax assets 21 19
Effect of different tax rates of subsidiaries in foreign jurisdiction 193 314
Prior year corporation tax adjustment (132) (294)
Prior year deferred tax adjustment (66) 203
1,224 1,564
On 5 December 2012, legislation to reduce the main rate of corporation tax in the UK from
23% to 21%, from 1 April 2014, was announced. This change had not been substantially enacted
at the balance sheet date and is therefore not included in these financial statements.
If applied to the deferred tax balances at 31 December 2012, the 2% reduction in the main
rate of corporation tax would increase the net deferred tax liability provided at the balance
sheet date by GBP40,000.
8 Discontinued Operations
10
The (loss)/profit from discontinued operations relates to Farm,
Magnetic and Leapfrog in America Inc. Farm was a division of
Tangible UK Limited, a wholly owned subsidiary of the Group.
Magnetic was a division of Brightsource limited, a wholly owned
subsidiary of the Group. Leapfrog in America Inc is a wholly
owned subsidiary of the Group. The operations of Farm, Magnetic
and Leapfrog in America Inc are included as discontinued operations
because their activities ceased during the year.
In accordance with IFRS 5 Non-current assets held for sale and
discontinued operations the income statement for the year ended
31 December 2011 has been re-presented to include income and
expenses of the discontinued operations within (loss)/profit
from discontinued operations.
An analysis of the result of discontinued operations
is as follows:
Year ended
31 December Year ended
2012 31 December
GBP'000 2011 GBP'000
Revenue 2,703 5,819
Cost of sales (2,041) (3,352)
Gross profit 662 2,467
Administration expenses (1,279) (2,333)
Pre-tax (loss)/profit of discontinued
operations (617) 134
Taxation 101 (70)
Post-tax (loss)/profit for the year
from discontinued operations (516) 64
(Loss)/profit for the year from discontinued operations
attributable to:
Equity holders of the parent (516) 64
Non-controlling interest - -
(516) 64
In accordance with IFRS 5 Non-current assets held for sale and
discontinued operations, cash flows from discontinued operations
have been included in the cash flow statement together with cash
flows from continuing operations. Cash flows from discontinued
operations are as follows:
Year ended
31 December Year ended
2012 31 December
GBP'000 2011 GBP'000
Operating cash flows 147 125
Investing cash flows (30) (177)
Total cash flows 117 (52)
9 Equity Dividends
The dividends paid in the year ended 31 December 2012 and 31
December 2011 were:
Year ended Year ended
31 December 31 December
2012 2011
Date paid GBP'000 GBP'000
Final dividend 2010 - 0.905p
per share 8 July 2011 - 709
Interim dividend 2011 - 0.55p 6 January
per share 2012 429 -
Final dividend 2011 - 1.17p
per share 6 July 2012 957 -
1,386 709
A 2012 interim dividend of 0.58p per ordinary share was paid on
6 January 2013 and a 2012 final dividend of 1.42p has been proposed
for approval at the Annual General meeting in 2013. In accordance
with IAS 10 Events of the reporting date these dividends have not
been recognised in the consolidated financial statements at 31 December
2012.
10 Earnings/(Loss) per Share
Year ended Year ended
31 December 31 December
2012 2011
GBP'000 GBP'000
Loss attributable to ordinary shareholders (386) (587)
Loss/(profit) from discontinued operations 516 (64)
Earnings/(loss) attributable to ordinary
shareholders from continuing operations 130 (651)
Non-controlling interests 22 311
Earnings/(loss) from year from continuing
operations 152 (340)
Adjustments to earnings/(loss):
Restructuring costs 1,328 928
Start-up losses 787 163
Acquisition costs - 211
Amortisation of intangible assets 876 1,198
Acquisition related employee remuneration
expenses 82 631
Share-based payments charge 134 97
Impairment of goodwill 2,497 2,499
Finance costs on deferred consideration - 58
Fair value gain on derivative financial
instruments (50) (64)
Facility fees written off - 111
Tax thereon (766) (570)
Headline earnings for the year 5,040 4,922
10 Earnings/(Loss) per Share (continued)
2012 2011
Number of shares Number of shares
Weighted average number of ordinary shares
in issue 80,720,587 74,111,359
Less:
Weighted average number of treasury shares (237,000) (237,000)
Weighted average number of shares held in
employee benefit trusts (1,367,378) (1,739,754)
Weighted average number of ordinary shares 79,116,209 72,134,605
Dilutive effect of securities:
Deferred consideration shares 1,540,918 5,629,378
Diluted weighted average number of ordinary
shares 80,657,127 77,763,983
Further dilutive effect of securities:
Share options 3,713,181 4,097,576
Contingent consideration shares to be issued 89,127 143,885
Fully diluted weighted average number of
ordinary shares 84,459,435 82,005,444
Year ended Year ended
31 December 2012 31 December
2011
Basic earnings/(loss) per share
From continuing operations 0.16 p (0.90)p
From discontinued operations (0.65)p 0.09 p
Total basic earnings per share (0.49)p (0.81)p
Diluted earnings/(loss) per share
From continuing operations 0.16 p (0.90)p
From discontinued operations (0.65)p 0.08 p
Total diluted earnings per share (0.49)p (0.81)p
In addition to basic and diluted earnings/(loss) per share, headline
earnings per share and fully diluted earnings/(loss) per share,
which are non-GAAP measured, have also been presented.
Fully diluted earnings/(loss)
per share
From continuing operations 0.15 p (0.90)p
From discontinued operations (0.65)p 0.08 p
Total fully diluted earnings per
share (0.49)p (0.81)p
Headline earnings per share
Headline basic earnings per share 6.37 p 6.82 p
Headline diluted earnings per
share 6.25 p 6.33 p
Headline fully diluted earnings
per share 5.97 p 6.00 p
10 Earnings/(Loss) per Share (continued)
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
2012 2011
GBP'000 GBP'000
At 1 January 73,823 71,155
Goodwill arising on acquisitions
in the year - 4,687
Adjustment to fair value of deferred
consideration (8) 225
Impairment of goodwill (2,497) (2,499)
Exchange differences (290) 255
At 31 December 71,028 73,823
Goodwill represents the excess of consideration over the
fair value of the Group's share of the net identifiable assets
of the acquired subsidiary at the date of acquisition.
Goodwill arising on acquisition in the year ended 31 December
2011 relates to the Group's acquisition of MedErgy HealthGroup
Inc. ("MedErgy").
The adjustment to fair value of deferred consideration relates
to the changes in estimate to deferred consideration payable
under earn out arrangements in accordance with the terms
of the relevant acquisition agreements for acquisitions before
1 July 2009 and therefore not accounted for in the accordance
the provisions of IFRS 3 Business combinations (as revised
January 2008).
Goodwill acquired through business combinations is allocated
to cash-generating units ("CGUs") for impairment testing.
The goodwill balance was allocated to the following CGUs:
2012 2011
GBP'000 GBP'000
Insight 10,224 10,224
Leapfrog - 3,908
The Value Engineers 9,526 9,526
RS Consulting 4,305 3,364
MSI 7,666 7,666
2CV 8,276 8,276
Tangible UK 22,889 22,419
Face 3,442 3,450
Opticomm 48 48
MedErgy 4,652 4,942
Total 71,028 73,823
11 Goodwill (continued)
During the year ended 31 December 2012, as a result of
restructuring initiatives which rationalised the Group's management
structure, the goodwill allocations changed.
The recoverable amount for each CGU is determined using a
value-in-use calculation. This calculation uses pre-tax cash flow
projections derived from 2013 budgets, as approved by management,
with an underlying growth rate of 3.5% per annum in years two to
five, representing economic growth and inflation. After year five a
terminal value has been applied using an underlying long term
inflation rate of 2.5%. No additional Cello specific growth has
been assumed beyond year one. The pre-tax cash flows are discounted
to present value using the Group's pre-tax weighted average cost of
capital ("WACC"), which was 10.5% for 2012 (2011: 10.8%). This rate
was calculated using the Capital Asset Pricing Model with an
estimated cost of debt and equity, with appropriate small company
risk factors.
The review performed at 31 December 2012 did not result in an
impairment of goodwill for any CGU. In addition to this review, a
review of the Leapfrog CGU was performed prior to the restructuring
of operations. This review resulted in an impairment of goodwill of
GBP2,497,000. The remaining goodwill of the Leapfrog CGU has been
allocated to the Tangible UK CGU and the RS Consulting CGU, in line
with the restructuring.
Sensitivity to changes in assumptions
The value-in-use exceeds the total goodwill value across the
group by GBP52.3m.
The impairment review of the Group is sensitive to changes in
the key assumptions, most notably the pre-tax discount rate, the
terminal growth rate and projected operating cash flows. Reasonable
changes to these assumptions would not result in an impairment to
goodwill for any of the Groups CGU's, with the exception of the
Tangible CGU, where an impairment was recognised in the year ended
31 December 2011.
Variations required to each of the key assumptions, in
isolation, for the value-in-use of the Tangible CGU to equal the
carrying value are:
Increase in pre-tax discount rate 0.5%
Decrease in projected operating
cash flows 5.7%
Decrease in terminal growth rate 0.5%
The table below shows the impairment charge that would be
recognised against the carrying value of goodwill in the Tangible
CGU, with reasonable variations, in isolation, of the key
assumptions used in the value-in-use calculation:
Impairment charge
GBP'000
1% increase in pre-tax discount rate 2,582
10% decrease in projected operating
cash flows 1,178
1% decrease in terminal growth rate 1,275
12 Provisions
2012 2011
GBP'000 GBP'000
Contingent deferred consideration
for acquisitions - 2,268
Restructuring provision 388 -
388 2,268
Current 108 2,268
Non-current 280 -
388 2,268
Contingent deferred
consideration Restructuring
for acquisitions provision Total
GBP'000 GBP'000 GBP'000
At 1 January 2011 6,415 456 6,871
Adjustments to provisions
for additions in prior
years 225 - 225
Finance costs on deferred
consideration 58 - 58
Utilisation of provisions (4,430) (456) (4,886)
At 31 December 2011 2,268 - 2,268
Additions for the year - 388 388
Adjustments to provisions
in prior years (8) - (8)
Utilisation of provisions (2,260) - (2,260)
At 31 December 2012 - 388 388
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 at the acquisition
date.
The restructuring provision relates to redundancy costs and
onerous lease costs as a result of restructuring of operations
within the Cello Consumer Division.
13 Cash Generated from Operations
Year ended Year ended
31 December 2012 31 December 2011
GBP'000 GBP'000
Profit on continuing activities before
taxation 1,380 1,230
(Loss)/profit on discontinued operations (617) 134
Financing income (76) (86)
Finance costs 712 885
Depreciation of the property, plant
and equipment 1,127 1,035
Amortisation of intangible assets 876 1,198
Impairment of goodwill 2,497 2,499
Share-based payment expense 134 97
Acquisition related employee remuneration
expense 82 631
Loss on disposal of property, plant
and equipment 120 64
Increase in trade and other receivables (879) (324)
Increase/(decrease) in trade and other
payables 1,479 (339)
Net cash inflow from operating activities 6,835 7,024
14 Net debt
At 1 January Foreign Other At 31 December
2012 Cash flow exchange changes 2012
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cash and cash equivalents 4,170 127 (149) - 4,148
Loan notes (959) 461 - - (498)
Bank loans (10,806) (1,700) 186 - (12,320)
Finance leases (82) 50 - (17) (49)
(7,677) (1,062) 37 (17) (8,719)
15 Post Balance Sheet Events
On 25 January 2013, the Group acquired the entire share capital
of Mash Health Limited for an initial consideration of GBP0.5m
of cash and the issue of 333,332 new ordinary shares of 10p each.
Additional payments of up to GBP0.9m may be payable to the vendors,
subject to performance conditions.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR QLLFFXXFZBBX
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