Share price: 127.25p


19th January 2009

Cello Group plc, the leading independent market research and consulting group, today provides the following trading update for the year ended 31 December 2008.

Since the announcement of the Group’s interim results in early September, trading has tightened across certain sectors of Cello’s broad domestic and international client base. As a result, the Board anticipates that the Group’s results for the full year will be at the lower end of market expectations.

There has been very strong cash conversion in the second half of 2008, as a result of which the Board expects to report year end net debt of less than £10.5m, significantly below consensus expectations.

The Group has agreed enlarged banking facilities with the revolving credit facility now increased from £18.0m to £20.0m for 2009, amortising to £17.0m for 2010. The overdraft facility of £2.0m has also been renewed and is now a multi-currency arrangement. The extra interest cost associated with these changes is expected to be broadly offset by lower overall interest rates.

The Group has re-estimated its total anticipated earn out obligations. These are now expected to be £15.2m compared with a previous estimate of £19.2m, with a minimum loan note component of £6.3m and the balance of £8.9m payable in shares. £7.8m of this total is anticipated to be settled in May 2009 with £3.2m payable in loan notes and £4.6m payable in shares. The balance of the total earn out commitment is payable between 2010 and 2013, with a loan note payment of £0.6m expected to be paid in 2010. The Group is entitled to pay an increased proportion of these total obligations in loan notes.

As well as the strong operating cash position and the reduced earn out provisions, the Group has continued to prudently reduce its cost base. In total over £2.0m of staff costs, on an annualised basis, have been removed during 2008.

Allan Rich, whose appointment as Acting Non-Executive Chairman was announced on 2 September 2008, has been confirmed as Non-Executive Chairman. Allan brings with him a wealth of experience of managing successfully through economic downturns.

The Group remains realistically cautious about the current outlook. While it is too early to give detailed guidance, numerous clients have indicated their intention to maintain their expenditure levels and the Group is seeing refreshed levels of spend from several of its public sector clients. In addition, all of Cello’s investment start-up businesses are now trading profitably. All these factors, including the Group’s strong financial position, should hold the Group in good stead in the current economic environment.

Cello expects to announce its preliminary results for the year ended 31 December 2008 on Tuesday 17 March 2009.


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