Share price: 105.25p

Pre-Close Trading Statement

22nd January 2014

Cello, the insight and strategic marketing group, today publishes the following trading update for the year ended 31 December 2013.

Highlights

–      Strong trading for the year, revenues and headline profit before tax ahead of consensus market expectations

–      Cello Health delivers double digit revenue growth and maintains 20% operating margin

–      Cello Consumer delivers double digit revenue growth and restores double digit operating margin

–      Very strong cash conversion, reducing net debt to below expected levels

–      Growth investments in healthcare ventures prove successful in first year

–      Good new business pipeline in Q4 2013 underpins solid start to 2014

–      Group rebranding initiatives proceeding to plan

Cello Health

Strong performance at both revenue and profit line

–      Cello Health delivered double digit revenue growth, whilst maintaining a competitive headline operating profit margin of over 20%.

Growing role of international operations

–      The majority of revenues came from outside the UK, with the US being the largest overseas market for Cello Health. An enlarged senior team in New York and a new Chicago office sowed the seeds for continued growth.

Successful growth investments

–      The majority of growth investments made in 2012 proved successful in 2013, notably in Consumer Health and in two overseas offices. The acquisition of Mash proved a particular success in 2013. Further investments in start-ups were made in 2013, although at a reduced level of c.£0.4m.

 

Solid new business gains

–      The last quarter of 2013 established a strong new business pipeline, providing confidence for the new financial year.

Launch of Cello Health brand

–      Cello Health is increasingly selling integrated client solutions, encompassing marketing consulting, market research and medical communications. To achieve this, it is organised into global speciality practices. The launch of the Cello Health brand as a client facing brand will replace a number of the original operating brands. This transition will be substantially complete by early Q2 2014, helping the management team achieve its goal of establishing Cello Health as one of the world’s leading advisers to the healthcare sector.

Cello Consumer

Strong revenue growth and a return to double digit operating margin

–      Cello Consumer delivered strong revenue growth, which fed through into very strong profit growth. A single large, non-recurring contract from an existing client expanded rapidly in the second half of 2013, contributing to this particularly high level of profit growth.  This particular contract will not recur. The diverse blue-chip client base of Cello Consumer provides several opportunities to replace it during 2014. Continued emphasis on margin improvement necessitated a £0.5m restructuring charge, which is in line with previous guidance.

Increased international exposure

–      An increasing proportion of revenue was won from outside the UK. With three US offices and three Asian offices, the business is now well positioned to sell and deliver global assignments.

Growing dominance of web-related services

–      In its three core delivery areas of research, customer engagement and communications delivery, Cello Consumer has developed market-leading digital credentials, underpinned by a strong systems-build capability.

Solid gains in contracted revenue

–      The level of revenue of a contracted, longer term nature continued to increase in 2013. An expanding suite of digital software tools enabled a gradual transition to a partial licensing model for some services.

Launch of Cello Signal brand

–      Cello Consumer is being re-branded as Cello Signal, a client centred brand that will enable better leverage of the Group’s capabilities against client opportunities, including systems-build capability, customer engagement and management, social media and mobile research, and digital communications services. This transition will be complete by early Q2.

Balance sheet

Strong cash conversion in the last quarter of 2013 resulted in a better than expected level of net debt, at less than £4.0m, putting the Group in a very strong position. The Group has minimal deferred payments due to vendors.

Outlook

The Group starts the year with good momentum from the last quarter of 2013, and, although it is only early in the new year, the Board is confident of a strong year for the Group.

Preliminary results

The preliminary results for the year ended 31 December 2013 will be announced on 20 March 2014.

Contact Us

Dianna Hillier

Dianna.Hillier@cellohealth.com

Phone 020 7812 8468

Address

Cello Health plc

Queens House

8-9 Queen Street

London

EC4N 1SP

Registered Office

Queens House

8-9 Queen Street

London

EC4N 1SP

Company Registered

in England no.05120150