Pre Close Trading Statement
18th January 2018
For Immediate Release
18 January 2018
Cello Group plc
(‘Cello’ or the ‘Group’)
Pre Close Trading Statement
Cello Group plc (AIM:CLL), the healthcare-led marketing consulting group, today publishes the following trading update for the year ended 31 December 2017.
The Group traded well in 2017, with continued strong overall and like-for-like growth from Cello Health. The Group has also successfully integrated two US acquisitions into Cello Health. Accordingly, the Group expects to report a full year result in line with expectations.
Cello Health has continued to make good strides in expanding its client reach. Overall, gross profit has grown at in excess of 25% in the year and like-for-like growth in gross profit has been in excess of 9%, after adjusting for exchange rates. The increasingly integrated client offering is expanding its reach within existing, long-standing pharmaceutical customers, as well as proving successful in its new business drive. Bookings in late 2017 that relate to ongoing 2018 work were strong, providing good momentum going into the new year.
Cello Health continued to increase its presence in the high growth biotech area, adding a substantial number of new client accounts. Following their acquisition in February 2017 and July 2017 respectively, Defined Health and Advantage Healthcare have both performed well and have helped expand Cello Health’s offering to biotech clients, as a complement to Cello Health’s primary focus on pharmaceutical clients.
The US continues to rapidly increase its share of Cello Health’s overall business, in line with the Board’s stated growth strategy. Cello Health’s US biotech consulting unit moved out of its investment phase half way through 2017 and is included in headline results from June 2017. The Board continues to review earnings enhancing acquisitions in the healthcare space, with a particular focus on the US market.
Overall operating profit margins are slightly lower than in 2016, reflecting the substantial addition of professional resource in the year to enable the business to meet its full year gross profit growth target, as well as its longer-term growth goals.
Cello Signal has continued to make solid progress against its strategic goals. In 2018 these goals will prioritise a much more explicit linkage with Cello Health, reflecting the fast growing demand from pharmaceutical and biotech clients for digital and social communications. Approximately 14% of Signal’s gross profit already derives from health-related client activity, ranging from healthcare charities to health and wellbeing propositions.
In line with earlier guidance, Signal has seen a decline in gross profit over the year of c. 6%, reflecting the completion of two large one-off contracts that were present in 2016. There has also been a more cautious approach by some UK clients in 2017 towards commissioning project work. With careful cost management, headline operating profit from Cello Signal is in line with expectations.
During the year Signal has also substantially reduced its headcount in bespoke consumer market research, particularly in the US. Signal has also moved all its Scottish-based operations into one office. These actions will increase profit margins in the medium term but will mean a non-headline charge of £1.5m being incurred in 2017.
Pulsar, Signal’s social media software business, has continued its rapid rate of growth in its monthly revenue run-rate, including in the US where there will be ongoing start-up investment in 2018. Cello Health is now actively selling the Pulsar solution into the global healthcare market.
As expected, and in line with the regular seasonality of cash flow, the Group has experienced strong cash inflows in the second half of the year. Accordingly, the Board is pleased to confirm that the Group is in a net cash position at the end of the year. In addition, the Board is also pleased to confirm that Group’s banking facilities have been renewed with RBS until 31 March 2022.
US tax changes
In 2017, the Group earned c. $6m in headline profit before tax from businesses domiciled in the US. The Group is assessing the impact of the significant changes that have now been enacted in the US corporate tax regime. While the impact of the drop in the headline rate is clearly expected to be positive to the Group, a more thorough review of the detail and timing of the changes is necessary to establish the quantum of the benefit.
The Group has had a good year, and is well placed to continue to execute its growth strategy.
The full year results are expected to be reported on March 22, 2018.
Cello Group plc
Mark Scott, Chief Executive
020 7812 8460
Mark Bentley, Group Finance Director
020 7397 8927
020 7466 5000
This information is provided by RNS
The company news service from the London Stock Exchange