TIDMCLL
RNS Number : 2365O
Cello Group plc
18 September 2013
For Immediate Release 18 September 2013
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 2013.
Group Highlights
-- Revenue up 14.3% to GBP71.5m (2012: GBP62.6m)
-- Gross profit up 7.9% to GBP34.4m (2012: GBP31.9m)
-- Like-for-like(1) gross profit growth of 4.7%
-- Headline profit before tax2 up 11.0% to GBP3.5m (2012: GBP3.2m)
-- Statutory operating profit up 9.0% to GBP2.1m (2012: GBP1.9m)
-- Headline basic earnings per share up 5.2% to 3.05p (2012: 2.90p)
-- Statutory basic earnings per share up 22.6% to 1.30p (2012: 1.06p)
-- Interim dividend up 10.3% to 0.64p (2012: 0.58p)
-- Successful acquisition of Mash Healthcare in January 2013
Divisional Highlights
Cello Health Cello Consumer
-------------------- -------------------------- --------------------------
GBP'000 2013 2012 FY 2012 2013 2012 FY 2012
-------------------- ------- ------- -------- ------- ------- --------
Gross profit 17,341 16,441 31,322 16,742 15,000 32,735
-------------------- ------- ------- -------- ------- ------- --------
Headline operating
profit 3,739 4,106 6,506 1,216 265 2,995
-------------------- ------- ------- -------- ------- ------- --------
Headline operating
margin3 21.6% 25.0% 20.8% 7.3% 1.8% 9.1%
-------------------- ------- ------- -------- ------- ------- --------
-- Continued solid performance from Cello Health
-- Significant improvement in Cello Consumer
(1) Like-for-like comparisons remove the impact of acquisitions and discontinued operations
2 Headline measures are stated before non-headline charges (see
note 2)
3 Headline operating margin is defined as headline operating
profit as a percentage of segmental gross profit
Mark Scott, Chief Executive, commented:
"The refocusing of the Group last year into Cello Health and
Cello Consumer has begun to demonstrate its potential to deliver
strong performance. The Group had an excellent first six months of
the year in both overseas and domestic markets. We look forward to
continued progress in the second half and a strong full year
outcome."
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, Sophie McNulty,
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
The Group performed strongly in the first six months of the
year, with good growth in both revenues and profits. Cello Health
performed well and in line with management expectations, with
margins remaining highly competitive. Cello Consumer delivered the
anticipated recovery in performance, following the refocusing of
the business last year.
As well as seeing strong performances in its core businesses,
operations that were new in 2012 (start-up activities) have also
done well, with the majority of them becoming profitable in the
first half of the year. The Group continues to benefit from its
investment in innovation and digital capacity with a particular
focus on contracted revenue streams. The proportion of the Group's
income generated by sale of multi-year product-based services
continues to rise.
The Group's strategy to increase its international footprint
continues to make progress, with the opening of new offices in
Chicago, Los Angeles and Hong Kong. The Singapore office opened
last year has now moved into profit.
The Group acquired Mash Healthcare Limited ("Mash") in January
2013. The Board is pleased with the performance of the business
post acquisition as part of Cello Health.
Cash flow has been strong for the first six months of the year.
The balance sheet remains robust, with net debt being in line with
management expectations. The Group has low deferred consideration
obligations.
As a result, the Group is proposing to increase the interim
dividend by over 10%.
Financial Review
Revenue for the six months to 30 June 2013 was up 14.3% to
GBP71.5m (2012: GBP62.6m) and gross profit was up 7.9% to GBP34.4m
(2012: GBP31.9m). Like-for-like growth in gross profit was 4.7%.
Headline operating profit was up 9.0% to GBP3.8m (2012: GBP3.5m).
Headline operating margins were 11.1% (2012: 11.1%). Headline
pre-tax profit was up 11.0% to GBP3.5m (2012: GBP3.2m).
Headline basic earnings per share were up 5.2% to 3.05p (2012:
2.90p).
The reported tax charge is GBP0.7m (2012: GBP0.5m). This
represents a headline tax rate of 28.4% (2012: 30.2%) which has
fallen due to falling UK tax corporation tax rates.
The Group's net debt at 30 June 2013 was GBP11.4m (31 December
2012: GBP8.7m; 30 June 2012: GBP13.7m). This debt figure reflects
normal seasonal working capital outflows, and is in line with
management expectations. Total debt facilities of GBP29.0m expire
in March 2016.
The interim dividend has been increased 10.3% to 0.64p (2012:
0.58p). It is payable on 6 January 2014 to all holders on the
register on 6 December 2013. The Group continues a seven year
unbroken record of annual dividend growth.
The Group incurred a restructuring charge of GBP0.3m as a result
of redundancies created by the increasing convergence of businesses
within both Cello Health and Cello Consumer, as the Group pursues
efficiency gains. Costs of GBP0.2m were incurred from continued
investment in start-up activity, including software development,
and the opening of new overseas offices to support future growth.
The following table details the adjustments made to calculate
headline operating profit. The acquisition related remuneration
charge of GBP0.6m (2012: GBPnil) relates to necessary accounting
charges arising from the acquisition of Mash.
GBPm 2013 2012
---------------------- ------ ------
Headline operating
profit 3.8 3.5
---------------------- ------ ------
Restructuring costs (0.3) (0.8)
---------------------- ------ ------
Start-up losses (0.2) (0.3)
---------------------- ------ ------
Share option charges (0.1) (0.1)
---------------------- ------ ------
Acquisition related (0.6) -
remuneration
---------------------- ------ ------
Amortisation (0.5) (0.4)
---------------------- ------ ------
Statutory operating
profit 2.1 1.9
---------------------- ------ ------
Net finance costs (0.3) (0.3)
---------------------- ------ ------
Statutory profit
before tax 1.8 1.6
---------------------- ------ ------
Operating Review
Cello Health
2013 2012 Full year
2012
GBP'000 GBP'000 GBP'000
Gross profit 17,341 16,441 31,322
Operating profit 3,739 4,106 6,506
Operating margin 21.6% 25.0% 20.8%
Cello Health had a good six months, with overall client spending
patterns continuing to be robust. The addition of Mash Healthcare
to Cello Health in January 2013 has enhanced the Group's ability to
service consumer facing healthcare products.
Gross profit increased by 5.5% to GBP17.3m (2012: GBP16.4m).
After accounting for the impact of the Mash acquisition, this gross
profit performance was flat on a like-for-like basis. Like-for-like
income growth in the first half of 2012 was 11.1%. This 2013
performance represents a return to more normal levels of margin and
profitability for the first half of the year. Margins remained
healthy and competitive at 21.6% (H1 2012: 25.0%, FY 2012: 20.6%)).
Operating profit fell slightly to GBP3.7m (2012: GBP4.1m).
The Group's global client penetration remains as strong as ever,
with Cello Health continuing to work for nine of the top ten
pharmaceutical companies. The introduction of the central new
business team in Cello Health has borne fruit, with some notable
incremental cross-Group projects that would not otherwise have been
won.
Cello Health's digital product suite continues to trade
strongly, with eVillage (its online community health research
product) contributing over GBP0.5m of revenue in the period. Cello
Business Sciences launched its web-based product suite formally in
January and has had excellent client uptake in the first six
months, with encouraging signs of growth in recurring licence based
revenues.
Overall, good progress has been made within the organic start-up
initiatives that were reported in 2012, as follows:
-- In 2012 Cello Health invested in the development of a
specialist quantitative research offer, IQ, incurring costs of
GBP0.2m in 2012. In 2013 there have been 28 projects which have
included this offer within them, with a gross profit value of
GBP0.8m.
-- In 2012 Cello Health started a Consumer Health business
within its Brand Consulting Business, The Value Engineers,
incurring start-up losses in 2012 of GBP0.1m. The business has won
several clients in 2013, and is sustainably profitable looking
forward. This development complements the recent acquisition of
Mash Healthcare, continuing to expand Cello Health's exposure to
the Consumer Health marketplace.
-- Within its consulting offer, Cello Health started Cello
Business Sciences in 2012, with associated start-up losses. This
business has now developed award winning proprietary software to
enable clients to evaluate and track the return on investment
achieved by marketing campaigns. Uptake has been good from a wide
range of clients who buy services on a project consultancy basis
and by buying software licences.
Cello Health has also commenced further expansion activity in
2013 with the opening of a Chicago office and with the commencement
in the US of an early stage market access consultancy. Both these
initiatives have had early client project wins and the Group is
confident of profitable outcomes in future years from these
activities.
Considerable internal progress has been made regarding brand
consolidation, with a view to external launch in early 2014. The
continued growth of Cello Health is a key strategic priority for
the Group, and opportunities for further investment in the form of
start-up ventures and acquisitions are being actively
appraised.
The major new business wins achieved in the first six months of
2013 included: Abellio, Ahlstrom, Avia, Bauer Media, BI Global and
Domestic, Biogen Idec, Chamberlain, Colgate Palmolive, Eisai, FCA,
GSK Oncology, House Foods, Hug, Johnson & Johnson, Kimberly
Clark, Medtronic, Nexus, NHS Blood Transfusions, NHS Business
Services Authority, Otsuka, Pfizer, PruHealth, Saint Gobain,
Sanofi, Shire and Terumo.
Cello Consumer
2013 2012 Full year
2012
GBP'000 GBP'000 GBP'000
Gross profit 16,742 15,000 32,735
Operating profit 1,216 265 2,995
Operating margin 7.3% 1.8% 9.1%
Cello Consumer had a strong six months, reflecting the benefit
of the focused growth strategy implemented in 2012. This was driven
by continued recovery in core activity areas, including improved
consumer market research spend, improved client activity in
financial services and an increasingly strong strategic position in
Scotland. It was also a reflection of Cello Consumer's growing
strength in digital products, and the increasing proportion of its
revenues won and serviced in the US and Asia.
Gross profit increased by 11.6% to GBP16.7m (2012: GBP15.0m).
The improvement that was seen in the second half of 2012 has been
maintained into the first half of 2013, consequently like-for-like
growth in gross profit was 9.7%. Operating profit rose to GBP1.2m
(2012: GBP0.3m), and operating margins recovered to more normal
levels at 7.3% (2012: 1.8%).
The digital orientation of Cello Consumer is strengthening
rapidly. Pulsar TRAC (www.pulsarplatform.com), Cello Consumer's
advanced social intelligence platform, has been formally launched
to an excellent client response. This product analyses and
interprets social media data and allows the user to mine data by
topic, by audience, and by content.
Brightsource, the Group's data-driven marketing communications
consultancy, has continued to grow strongly, with technological and
digital solutions to client problems being at the fore of the
offer. In addition, Cello Consumer's organically started pure
digital agency, Blonde, has experienced significant gross profit
growth this year, and has recently been appointed to the digital
roster for the Scottish Government.
Cello Consumer's international profile continues to make rapid
strides. The Group's research business in Singapore is now
profitable and is regularly securing new mandates. An additional
office has been opened in Hong Kong. Cello Consumer's research
business on the West Coast of the USA has opened a Los Angeles
office and gross profit has broken through the GBP1.0m barrier in
the first six months of the year. This office is expected to be
profitable by the end of the year. Cello Consumer continues to
review new office opportunities in Asia, the USA and Africa.
Cello Consumer has made good progress in moving from a project
based revenue profile to a more contracted, recurring revenue
profile. The retained income base of Cello Consumer has grown
considerably so far this year, with the addition of several large
tracker research clients, as well as the extension of a core
retained financial services client.
With the recovery in performance, the Group is once again
prepared to back the accelerated growth of Cello Consumer through a
mixture of selected start-up ventures, investment in software and
focused acquisitions. As an example, Cello Consumer's offer in
Scotland has been enhanced in June 2013 by the acquisition of the
trade and certain assets of Newhaven Communications.
The major new business wins achieved in the first six months of
2013 include: Anheuser Busch, Audi (Asia), Barnes & Noble,
Bauer Media, Border Biscuits, British Red Cross, CBRE, Disney
(Asia), Costa, Economist, Electrical Safety Council, Eurostar,
Fantasy Football Manager, Halo Foods, HALO Trust, Hearst Magazines,
Hilti, International Cancer Research, Michelmores, Nestle, Nokia,
Oliver Bonas, ONS, Pizza Express, Prostate Cancer UK, Quality Meat
Scotland, Reckitt Benckiser, Royal British Legion, Russell Brands,
Scottish Government, SingTel (Asia), Spar, The Ritz Carlton,
Unilever, Visit England and Wells and Young.
Talking Taboos Foundation
Building on its 2012 research programme into the area of
self-harm amongst teenagers, the Group has invested in the launch
of an independent charity to support the continuation of such
activity on a sustainable basis. The Talking Taboos Foundation will
be launched later in 2013, chaired by Vincent Nolan.
Current Trading and Outlook
The robust trading that the Group has experienced in the first
half of the year has continued over the summer period. The Board
remains confident that full year expectations will be met.
Allan Rich,
Chairman
18 September 2013
Condensed Consolidated Income Statement
For the six months ended 30 June 2013
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended 31 December
Notes 30 June 30 June 2012
2013 2012 GBP'000
GBP'000 GBP'000
Continuing operations
Revenue 5 71,548 62,616 135,141
Cost of sales (37,163) (30,762) (70,046)
Gross profit 5 34,385 31,854 65,095
Administration expenses (32,332) (29,971) (63,079)
Operating profit 5 2,053 1,883 2,016
Finance income 6 10 25 76
Finance costs 6 (285) (319) (712)
Profit on continuing
operations before taxation 5 1,778 1,589 1,380
Taxation 7 (722) (514) (1,224)
Profit on continuing
operations after taxation 1,056 1,075 156
Loss from discontinued
operations 10 - (235) (516)
Profit/(loss) for the
year 1,056 840 (360)
Attributable to:
Owners of the parent 1,059 825 (386)
Non-controlling interests (3) 15 26
1,056 840 (360)
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2012
2013 2012 GBP'000
GBP'000 GBP'000
Basic earnings/(loss)
per share
From continuing operations 11 1.30p 1.37p 0.16p
From discontinued operations 11 0.00p (0.30)p (0.65)p
Total 11 1.30p 1.06p (0.49)p
Diluted earnings/(loss)
per share
From continuing operations 11 1.29p 1.32p 0.16p
From discontinued operations 11 0.00p (0.30)p (0.65)p
Total 11 1.29p 1.03p (0.49)p
Condensed Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2013
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2012
2013 2012 GBP'000
GBP'000 GBP'000
Profit/(loss) for the
year 1,056 840 (360)
Other comprehensive
income:
Exchange differences on
translation of foreign
operations 39 (78) (287)
Total comprehensive
income for the year 1,095 762 (647)
Total comprehensive
income attributable
to:
Owners of the parent 1,098 747 (673)
Non-controlling interests (3) 15 26
Total comprehensive
income for the year 1,095 762 (647)
Total comprehensive income attributable
to owners of the parent arises:
From continuing operations 1,098 982 (164)
From discontinued operations - (235) (509)
Total comprehensive income
attributable to owners of
the parent 1,098 747 (673)
Condensed Consolidated Balance Sheet
As at 30 June 2013
Unaudited Unaudited Audited
At 30 June At 30 June At 31 December
Notes 2013 2012 2012
GBP'000 GBP'000 GBP'000
Goodwill 12 71,498 73,746 71,028
Intangible assets 1,964 2,065 1,790
Property, plant and
equipment 2,272 2,397 2,289
Deferred tax assets 566 580 463
Non-current assets 76,300 78,788 75,570
Trade and other receivables 28,013 26,944 29,935
Cash and cash equivalents 3,449 1,221 4,148
Current assets 31,462 28,165 34,083
Trade and other payables (24,285) (22,235) (29,717)
Current tax liabilities (1,306) (762) (582)
Borrowings (2,030) (852) (498)
Provisions (116) (360) (108)
Obligations under finance
leases (19) (31) (23)
Derivative financial
instruments - (34) (5)
Current liabilities (27,756) (24,274) (30,933)
Net current assets 3,706 3,891 3,150
Total assets less current
liabilities 80,006 82,679 78,720
Borrowings (12,739) (13,958) (12,320)
Provisions (230) (158) (280)
Obligations under finance
leases (13) (31) (26)
Deferred tax liabilities (479) (656) (498)
Non-current liabilities (13,461) (14,803) (13,124)
Net assets 66,545 67,876 65,596
Equity
Share capital 14 8,268 8,226 8,226
Share premium 18,224 18,188 18,188
Merger reserve 28,322 29,640 28,228
Capital redemption
reserve 50 50 50
Retained earnings 11,302 11,375 10,636
Share-based payment
reserve 418 274 343
Foreign currency reserve (85) 85 (124)
Equity attributable
to equity holders of
parent 66,499 67,838 65,547
Non-controlling interests 46 38 49
Total equity 66,545 67,876 65,596
Condensed Consolidated Cash Flow Statement
For the six months ended 30 June 2013
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended 31 December
Notes 30 June 30 June 2012
2013 2012 GBP'000
GBP'000 GBP'000
Net cash generated from
operating activities
before taxation 15 291 (1,146) 6,835
Tax paid (372) (1,002) (1,874)
Net cash generated from
operating activities
after taxation (81) (2,148) 4,961
Investing activities
Interest received 5 4 26
Purchase of property,
plant and equipment (503) (767) (1,432)
Sale of property, plant
and equipment 2 63 75
Expenditure on intangible
assets (160) (144) (358)
Purchase of subsidiary
undertakings (828) (1,682) (2,037)
Net cash used in investing
activities (1,484) (2,526) (3,726)
Financing activities
Dividends paid to equity
holders (476) (429) (1,386)
Repayment of borrowings (3,000) (800) (3,800)
Repayment of loan notes (84) (617) (461)
Drawdown of borrowings 3,024 4,000 5,500
Increase in overdrafts 1,616 206 -
Capital element of finance
lease payments (17) (37) (50)
Interest paid (253) (588) (911)
Net cash generated/(used)
in financing activities 810 1,735 (1,108)
Movements in cash and
cash equivalents
Net (decrease)/increase
in cash and cash equivalents (755) (2,939) 127
Exchange gains/(losses)
on cash and bank overdrafts 56 (10) (149)
Cash and cash equivalents
at the beginning of
the period 4,148 4,170 4,170
Cash and cash equivalents
at end of the period 3,449 1,221 4,148
Condensed Consolidated Statement of Changes in Equity
For the six months ended 30 June 2013
Statement of changes in equity for the six months ended 30 June
2013:
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
2013 8,226 18,188 28,228 50 10,636 343 (124) 65,547 49 65,596
Profit for
the period - - - - 1,059 - - 1,059 (3) 1,056
Other
comprehensive
income:
Currency
translation - - - - - - 39 39 - 39
Total
comprehensive
income in
the period - - - - 1,059 - 39 1,098 (3) 1,095
Transactions
with owners:
Shares issued 42 36 94 - - - - 172 - 172
Credit for
share-based
incentives - - - - - 75 - 75 - 75
Deferred
tax on
share-based
payments
recognised
directly
in equity - - - - 83 - - 83 - 83
Dividends
paid - - - - (476) - - (476) - (476)
Total
transactions
with owners 42 36 94 - (393) 75 - (146) - (146)
As at 30
June 2013 8,268 18,224 28,322 50 11,302 418 (85) 66,499 46 66,545
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 84 898 - - - - 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 84 898 - 161 65 - 1,581 (590) 991
As at 30
June 2012 8,226 18,188 29,640 50 11,375 274 85 67,838 38 67,876
Statement of changes in equity for the year ended 31 December
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
Loss for
the period - - - - (386) - - (386) 26 (360)
Other
comprehensive
income:
Currency
translation - - - - - - (287) (287) - (287)
Total
comprehensive
income for
the period - - - - (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
paid - - - - (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
Notes to the Financial Information
For the six months ended 30 June 2013
1. ACCOUNTING POLICIES AND BASIS OF PREPARATION
The condensed consolidated financial information for the six
months ended 30 June 2013 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 2012, 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 2012 were approved by the Board of directors on 12 March
2013 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 18 September 2013 and has not been audited.
The accounting policies applied are consistent with those of the
annual financial statements for the year ended 31 December 2012, as
described in those annual financial statements.
There are no new IFRSs or IFRICs 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 before
taxation is presented in note 4. In addition to this a
reconciliation between statutory and headline finance income and
costs is presented in note 6 and a reconciliation between statutory
and headline earnings per share is presented in note 11. 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. RECONCILIATION OF PROFIT FROM CONTINUING OPERATIONS BEFORE TAXATION TO
HEADLINE PROFIT BEFORE TAX
Unaudited Unaudited Audited
Six Months Six Months Year ended
ended ended 31 December
30 June 30 June 2012
2013 2012 GBP'000
GBP'000 GBP'000
Profit from continuing
operations before taxation 1,778 1,589 1,380
Restructuring costs 314 747 1,328
Start-up losses 217 335 787
Acquisition costs 66 - -
Amortisation of intangible
assets 545 431 876
Acquisition related employee
remuneration expense 529 24 82
Share option charges 75 65 134
Impairment of goodwill - - 2,497
Fair value gain on derivative
financial instruments (5) (21) (50)
Headline profit before
taxation 3,519 3,170 7,034
Headline profit before
tax is made up as follows:
Headline operating profit 3,799 3,485 7,720
Headline finance income 5 4 26
Headline finance costs (285) (319) (712)
3,519 3,170 7,034
5. 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.
Six months ended 30
June 2013
Consolidated
Cello Cello and Unallocated Group
Health Consumer GBP'000 GBP'000
GBP'000 GBP'000
Revenue
External sales 25,230 45,926 - 71,156
Intersegment revenue - 28 (28) -
Total segmental revenue 25,230 45,954 (28) 71,156
Start-up revenue 392
Total revenue 71,548
Gross profit
Segmental gross profit 17,341 16,742 - 34,083
Start-up gross profit 302
Total gross profit 34,385
Operating profit
Headline operating
profit (segment result) 3,739 1,216 (1,156) 3,799
Restructuring costs (314)
Start-up losses (217)
Acquisition costs (66)
Amortisation of intangible
assets (545)
Acquisition related
employee remuneration
expense (529)
Share option charges (75)
Operating profit 2,053
Financing income 10
Finance costs (285)
Profit from continuing
operations before taxation 1,778
Other information
Capital expenditure 99 402 2 503
Capitalisation of intangible
assets 601 160 - 761
Depreciation of property
plant and equipment 223 333 2 558
Six months ended 30
June 2012
Consolidated
Cello Cello Consumer and Unallocated Group
Health GBP'000 GBP'000 GBP'000
GBP'000
Revenue
External sales 24,235 37,776 - 62,011
Intersegment revenue 27 35 (62) -
Total segmental revenue 24,262 37,811 (62) 62,011
Start-up revenue 605
Total revenue 62,616
Gross profit
Segmental gross profit 16,441 15,000 - 31,441
Start-up gross profit 413
Total gross profit 31,854
Operating profit
Headline operating
profit (segment result) 4,106 265 (886) 3,485
Restructuring costs (747)
Start-up losses (335)
Amortisation of intangible
assets (431)
Acquisition related
employee remuneration
expense (24)
Share option charges (65)
Operating profit 1,883
Financing income 25
Finance costs (319)
Profit from continuing
operations before taxation 1,589
Other information
Capital expenditure 332 452 - 784
Capitalisation of intangible
assets 48 96 - 144
Depreciation of property
plant and equipment 188 347 5 540
Year ended 31 December
2012
Cello Consolidated
Cello Consumer and Unallocated Group
Health GBP'000 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 from continuing
operations before
taxation 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
6. FINANCE INCOME AND COSTS
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2012
2013 2012 GBP'000
GBP'000 GBP'000
Finance income:
Interest receivable
on bank deposits 5 4 26
Headline finance income 5 4 26
Fair value gains on
derivative financial
instruments 5 21 50
Total finance income 10 25 76
Finance costs:
Interest payable on
bank loans and overdrafts 278 289 649
Interest payable in
respect of finance leases 3 3 6
Finance costs paid on
derivative financial
instruments 4 27 57
Total and headline finance
costs 285 319 712
7. TAXATION ON PROFIT ON ORDINARY ACTIVITIES
The tax charge for the period ended 30 June 2013 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 28.4% (2012: 30.2%).
8. DIVIDEND
Unaudited Unaudited Audited
Six months Six months Year ended
ended 30 ended 30 31 December
Date Paid June 2013 June 2012 2012
GBP'000 GBP'000 GBP'000
Interim dividend
2011 - 0.55p per 06 January
share 2012 - 429 429
Final dividend
2011 - 1.17p per 06 July
share 2012 - - 957
Interim dividend 06 January 476 - -
2012 - 0.58p 2013
476 429 1,386
An interim dividend of 0.64p (2012: 0.58p) per ordinary share is
declared and will be paid on 6 January 2014 to all shareholders on
the register on 6 December 2013. In accordance with IAS 10 Events
after the Balance Sheet Date, this dividend has not been recognised
in the accounts at 30 June 2013, but will be recognised in the
accounting period ending 31 December 2014. A final dividend of
1.42p (2012: 1.17p) per ordinary share was paid on 5 July 2013, to
all shareholders on the register on 31 May 2013.
9. 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.
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.
Acquisition costs relate to professional costs incurred in
relation to acquisitions.
10. DISCONTINUED OPERATIONS
There are no discontinued operations in the current period. The
loss from discontinued operations in the six months ended 30 June
2012 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 in the prior year because their activities ceased during
the year ended 31 December 2012.
In accordance with IFRS 5 Non-current assets held for sale and
discontinued operations, the income statement for the six months
ended 30 June 2012 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 2013 June 2012 2012
GBP'000 GBP'000 GBP'000
Revenue - 1,643 2,703
Cost of sales - (1,198) (2,041)
Gross profit - 445 662
Administrative expenses - (759) (1,279)
Loss before tax from discontinued
operations - (314) (617)
Taxation - 79 101
Loss in the period from
discontinued operations - (235) (516)
Loss for the period from
discontinued operations
is attributable to:
Equity holders of the parent - (235) (516)
Non-controlling interest - - -
- (235) (516)
Unaudited Audited Audited
Six months Six months Year ended
ended 30 ended 30 31 December
June 2013 June 2012 2012
GBP'000 GBP'000 GBP'000
Operating cash inflows - 52 147
Investing cash outflows - (24) (30)
Total cash flows - 28 117
11. EARNINGS/(LOSS) PER SHARE
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2012
2013 2012 GBP'000
GBP'000 GBP'000
Earnings attributable to
owners of the parent 1,059 825 (386)
Loss from discontinuing
operations - 235 516
Earnings attributable to
ordinary shareholders from
continuing operations 1,059 1,060 130
Non-controlling interests (3) 15 22
Earnings from continuing
operations 1,056 1,075 152
Adjustments to earnings:
Restructuring costs 314 747 1,328
Start-up losses 217 335 787
Acquisition costs 66 - -
Amortisation of intangible
assets 545 431 876
Acquisition related employee
remuneration expense 529 24 82
Share-based payments charge 75 65 134
Impairment of goodwill - - 2,497
Fair value gain on derivative
financial instruments (5) (21) (50)
Tax thereon (318) (410) (766)
Headline earnings attributable
to ordinary shareholders 2,479 2,246 5,040
30 June 30 June 30 December
2013 2012 2012
number number number of
of shares of shares shares
Weighted average number
of ordinary shares in issue 82,568,384 79,388,465 80,720,587
Weighted average number
of treasury shares (237,000) (237,000) (237,000)
Weighted average number
of shares held in employee
benefit trusts (969,114) (1,624,515) (1,367,378)
Basic weighted average
number of ordinary shares 81,362,270 77,526,950 79,116,209
Dilutive effect of securities:
Deferred consideration
shares 129,674 2,873,040 1,540,918
Share options 295,872 - -
Diluted weighted average
number of ordinary shares 81,787,816 80,399,990 80,657,127
Further dilutive effect
of securities:
Share options 4,049,713 4,097,576 3,713,181
Contingent consideration
shares to be issued 304,156 44,561 89,127
Fully diluted weighted
average number of ordinary
shares 86,141,685 84,542,127 84,459,435
Basic earnings/(loss) per
share
From continuing operations 1.30p 1.37p 0.16p
From discontinuing operations 0.00p (0.30)p (0.65)p
Total basic loss per share 1.30p 1.06p (0.49)p
Diluted earnings/(loss)
per share
From continuing operations 1.29p 1.32p 0.16p
From discontinuing operations 0.00p (0.30)p (0.65)p
Total diluted loss per
share 1.29p 1.03p (0.49)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
measures, have also been presented.
Fully diluted earnings/(loss)
per share
From continuing operations 1.23p 1.25p 0.15p
From discontinuing operations 0.00p (0.30)p (0.65)p
Total fully diluted loss
per share 1.23p 0.98p (0.49)p
Headline earnings per share
Headline basic earnings
per share 3.05p 2.90p 6.37p
Headline diluted earnings
per share 3.03p 2.79p 6.25p
Headline fully diluted
earnings per share 2.88p 2.66p 5.97p
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.
12. GOODWILL
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2012
2013 2012 GBP'000
GBP'000 GBP'000
Cost
At beginning of period 71,028 73,823 73,823
Goodwill arising on 133 - -
acquisitions in the
period
Adjustment to fair
value of deferred
consideration - - (8)
Impairment of goodwill - - (2,497)
Exchange differences 337 (77) (290)
At end of period 71,498 73,746 71,028
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).
13. ACQUISITIONS
Mash
On 25 January 2013, the Group acquired the entire share capital
of Mash Health Limited ("Mash"), a healthcare communications
consulting company based in the UK.
Mash has contributed GBP1.4m to revenue and GBP0.4m to profit
before tax for the period between the date of acquisition and the
balance sheet date. Had Mash been consolidated from 1 January 2013,
the consolidated income statement for the period ended 30 June 2013
would show revenue of GBP71.8m and profit before tax of
GBP1.8m.
The provisional fair value of the net assets at the acquisition
date is as follows:
Fair value
GBP'000
Client relationships 531
Property, plant and equipment 15
Trade and other receivables 712
Cash and cash equivalents 694
Trade and other payables (565)
Deferred tax liability (124)
Net assets acquired 1,263
Goodwill arising on acquisition 133
1,396
The fair value of trade and other receivables include trade
receivables with a fair value of GBP567,000. The gross contractual
amount of trade receivables is equal to the fair value.
Goodwill comprises the value of expected synergies and other
opportunities arising from the acquisition, management know how,
the skilled work force employed by Mash and other intangible assets
that do not qualify for separate recognition. None of the goodwill
recognised is expected to be deductible for tax purposes.
The fair value of the consideration paid is as follows:
GBP'000
Cash consideration 500
Issue of ordinary shares 127
Deferred consideration 769
1,396
As part of the consideration for the acquisition of Mash
deferred consideration is payable. The amount to be paid is
dependent on the profits earned by Mash in the year to 31 December
2013. The fair value of this consideration at the acquisition date
was GBP175,000 and at 30 June 2013 is GBP175,000. The maximum
amount of deferred contingent consideration payable is GBP175,000.
Any changes to the fair value of deferred contingent consideration
in the future will be recognised in the income statement.
In addition to the deferred consideration, acquisition related
employee remuneration of up to GBP700,000 is also payable to the
vendors of Mash. This remuneration is also dependent on the profits
earned by Mash in the year to 31 December 2013 and is recognised in
the income statement over that period.
Newhaven
On 14 June 2013, the Group acquired the trade and certain assets
of Newhaven Communications. The net assets acquired and
consideration paid were immaterial.
14. SHARE CAPITAL
Unaudited Unaudited Audited
At 30 June 2013 At 30 At 31 December
GBP'000 June 2012 2012
GBP'000 GBP'000
Authorised:
100,000,000 ordinary
shares of 10p each 10,000 10,000 10,000
Allotted, issued
and fully paid
82,683,959 ordinary
shares of 10p each 8,268 8,226 8,226
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.
On 28 January 2013, 333,332 new ordinary shares of 10p each were
issued at 38.2p to vendors of Mash Health Limited pursuant to the
terms of the share purchase agreement of that company.
On 10 May 2013, 89,122 new ordinary shares of 10p each were
issued at 50.0p to certain employees of the Group. These shares
were issued pursuant to the share purchase agreements in relation
to Red Kite Consulting Group Limited.
15. CASH GENERATED FROM OPERATIONS
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2012
2013 2012 GBP'000
GBP'000 GBP'000
Profit on continuing
operations before taxation 1,778 1,589 1,380
Loss on discontinued
operations before taxation - (314) (617)
Financing income (10) (25) (76)
Finance costs 285 319 712
Depreciation 558 540 1,127
Amortisation of intangible
assets 659 431 876
Impairment of goodwill - - 2,497
Share-based payment expense 75 65 134
Acquisition related employee
remuneration expense 529 24 82
Acquisition costs 66 - -
(Profit)/loss on disposal
of property, plant and
equipment - (44) 120
Decrease/(increase) in
receivables 2,599 2,162 (879)
(Decrease)/increase in
payables (6,248) (5,893) 1,479
Net cash inflow/(outflow)
from operating activities 291 (1,146) 6,835
16. NET DEBT
At 1 January Foreign At 30 June
2013 Cash flow exchange 2013
GBP'000 GBP'000 GBP'000 GBP'000
Cash and cash
equivalents 4,148 (755) 56 3,449
Overdrafts - (1,616) - (1,616)
Loan notes (498) 84 - (414)
Bank loans (12,320) (24) (395) (12,739)
Finance leases (49) 17 - (32)
(8,719) (2,294) (339) (11,352)
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LRMATMBJBBFJ
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