pre close trading statement
27th January 2016
The Group has experienced good trading for the year, with revenues and headline profits in line with consensus market expectations.
– Cello Health maintains good like-for-like revenue growth and a competitive profit margin
– Cello Signal also delivers good like-for-like revenue growth, with an improving profit margin
– Cello Signal benefits from aligning its core activities behind the client-facing Signal brand
– The Group ends the year with net debt below £5.0m
– Strong bookings momentum from Q4 2015 provides good visibility for the start of 2016
In 2015 Cello Health continued to benefit from trading as a unified business under its global client-facing brand, delivering good like-for-like revenue growth, and maintaining a competitive operating profit margin. The US continued to increase its share of overall revenue and profit generation, underpinned by the ongoing development of new offices in San Francisco and Chicago.
Cello Health Insight, Cello Health Consulting and Cello Health Communications maintained strong like-for-like revenue growth, at a very competitive overall operating profit margin. Cello Health Consumer had a slower year, with a decline in revenues and profits due to certain project deferrals.
Good progress was made in developing the new biotech client base, to complement the core pharmaceutical revenue base of the business, on the West Coast of the US with key client wins during the year. The new start-up office in Boston required a larger investment cost than originally anticipated resulting in a larger start-up loss for the year. Overall growth prospects for Cello Health in the US biotech area are strong as this sector continues to develop.
In 2015 Cello Signal began to see the benefits of trading as a unified business under its core client-facing Signal brand, securing a number of large multi-disciplinary contracts with major brands, including The Royal Bank of Scotland. As a result, the business delivered a strong second half of the year, with good full year like-for-like revenue growth and an improving operating profit margin.
The new office network in the US which has grown revenues strongly, achieved a break-even position and should now come into profit in 2016, albeit at a lower margin for a period. Pulsar, Signal’s social media software analytics product, almost doubled sales from software licence sales in the period to over £2.0m and reduced its headline loss position materially. This again should come into profit for 2016. As part of the strategic migration of digital skills into Cello Health, the Group will shortly launch a Pulsar supported social media analytics application for pharmaceutical and healthcare clients.
Signal is committed to the progressive raising of its operating profit margin. One consequence of this is an exceptional charge of c. £0.7m reflecting action taken to reduce costs during the year.
Net debt at year end was less than £5.0m, reflecting solid cash flow conversion for the period.
Negotiations are ongoing with HMRC regarding potential VAT on work for UK charities. The Group and its advisers continue to believe that its current provision for VAT and associated expenses of £3.2m is appropriate. Whilst progress has been made with HMRC on this issue, it has as yet not been concluded. The provision made is before any client recovery of input VAT.
The Group begins 2016 with good bookings momentum from the last quarter of 2015 and, at this early stage of the year, the Board is confident of a good trading year ahead for the Group.
The preliminary results for the year ended 31 December 2015 will be announced on 17 March 2016.