Share price: 162.00p

Pre close Trading Statement

22nd January 2015

Cello, the health and consumer strategic marketing group, today publishes the following trading update for the year ended 31 December 2014.

The Group has experienced strong trading for the year, with revenues and headline profits in line with consensus market expectations.


– Cello Health maintains strong headline revenue growth and 20% operating margins
– Recent investments in iS Healthcare Dynamics and Promedica already bedding in well
– Recent investments in overseas expansion performing to plan
– Good momentum into 2015 from strong bookings in Q4 2014

Cello Health

Cello Health delivered double digit revenue growth, whilst maintaining 20% operating margins. The majority of Cello Health’s revenues come from outside the UK, with the US being the primary overseas growth market. The acquisition of iS Healthcare Dynamics in May 2014 has proved a rapid success, reinforcing the global medical communications capability the Group can offer clients. The acquisition of Promedica in December 2014 has given Cello Health a presence on the West Coast of the USA enabling access to existing clients and the large biotech community there.

The integrated proposition and capabilities of Cello Health have resulted in the winning of a number of high profile contracts which the Group would not otherwise have secured. As a consequence, the last quarter of 2014 secured a strong new business pipeline for 2015, providing confidence for the new year. Of particular note is a multi capability contract secured from a major pharmaceutical client which is worth at least $7m a year.

Cello Signal

Full year revenue growth in Cello Signal was achieved across the year, against a tough comparator for the second half of 2013 which was influenced heavily by a one off project at the time.

The rapid transition to a digital product suite included continued investment in Pulsar, which generated an approximately £0.4m headline operating loss for the period on £1.2m of revenues. These revenues continue to grow. The acquisition of Line Digital in May 2014 has bedded in well and been fully integrated with Blonde, Signal’s core technology business.

The overseas presence of Signal has been enhanced with new offices in New York, Singapore and Hong Kong, increasing the ability to service global contracts, although reducing operating margins in the short term.

Several large multi-year contracts were secured against global technology competitors, which have confirmed the validity of the growth strategy for Signal.

A restructuring charge of £0.5m has been incurred in the process of continuing the transition of Signal to delivering global technology solutions.

Bookings momentum towards the end of 2014 provides Signal with a solid platform for 2015.

Balance Sheet

Overall cash flow was delivered as planned, accounting for acquisition costs, increases and acceleration of dividend and the anticipated working capital outflow. Net debt at 31 December 2014 was approximately £7.0m, which remains well below 1 times EBITDA.

In 2014 the Group secured an extension of the existing facility with RBS until April 2018, at reduced cost.

VAT issue

Following discussion between HMRC, The Direct Marketing Association and The Charity Tax Group regarding the VAT status of the supply of certain goods and services to charities, one of Cello Signal’s subsidiaries, in good faith, may not have been charging VAT on certain items to its charity clients appropriately. The Group intends to robustly defend its historical position on this issue which it believes has been in line with historical industry practice. Any backdated VAT assessment arising would be substantially contractually recoverable from clients should this be appropriate. The Group’s current estimate of the maximum potential liability before recovery is between £1m and £2m and a non-headline exceptional charge would be made in the event of a claim. The Group will update on this matter as appropriate.


The Group begins the new year with good bookings momentum from the last quarter of 2014 and, at this early stage of the year, the Board is confident of a strong trading year ahead.

Preliminary results

The preliminary results for year ended 31 December 2014 will be announced on 19 March 2015.

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Cello Health plc

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8-9 Queen Street



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