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Cello Group plc (CLL)

  Print          Annual reports

Wednesday 17 September, 2014

Cello Group plc

Interim Results

RNS Number : 8600R
Cello Group plc
17 September 2014
 



 

For Immediate Release

17 September 2014

 

 

Cello Group plc

 

An excellent first half

 

Cello Group plc ("Cello" AIM: CLL, "The Group"), the healthcare and consumer strategic marketing group, today announces its interim results for the six month period to 30 June 2014.

 

Group Highlights

 

·      Revenue up 9.4% to £78.3m (2013: £71.5m)

·      Gross profit up 14.8% to £39.5m (2013: £34.4m), constant currency1 growth of 16.2%

·      Like-for-like2 gross profit growth of 11.7%, constant currency like-for-like gross profit growth of 13.3%

·      Headline profit before tax3 up 26.4% to £4.4m (2013: £3.5m), constant currency growth of 28.9%

·      Statutory operating profit up 77.2% to £3.6m (2013: £2.1m)

·      Headline operating margin4 increase to 12.0% (2013: 11.1%)

·      Headline basic earnings per share up 27.1% to 3.87p (2013: 3.05p)

·      Statutory basic earnings per share up 116.0% to 2.81p (2013: 1.30p)

·      Interim dividend up 25% to 0.80p (2013: 0.64p), following rebalancing of payment phasing; payment timetable also brought forward

·      In September 2014, the existing banking facilities have been extended until March 2018 at lower cost

·      Successful acquisition of iS Healthcare Dynamics Ltd in May 2014 for up to £5.8m plus surplus net assets.

 

Divisional Highlights

 

H1

Cello Health

Cello Signal

£'000

2014

2013

% Growth

2014

2013

% Growth

Segmental gross profit

19,667

17,341

13.4%

19,410

16,742

15.9%

Headline operating profit

4,168

3,739

11.5%

1,469

1,216

20.8%

Headline operating margin4

21.2%

21.6%

 

7.6%

7.3%

 

 

 

1 Constant currency disclosures calculate the impact of retranslating overseas operating results at prior year      exchange rates

Like-for-like comparisons remove the impact of acquisitions and results from start-ups in 2014

3 Headline measures are stated before non-headline charges (see note 2)

4 Headline operating margin is defined as headline operating profit as a percentage of segmental gross profit

 

 

 Mark Scott, Chief Executive, commented:

 

"Both Cello Health and Cello Signal have performed strongly during the first six months and the business continues to expand globally in line with its stated strategy. The board remains confident of meeting full year expectations. "

 



 

 

Enquiries:

 

Cello Group plc (www.cellogroup.com)

 

Mark Scott, Chief Executive

020 7812 8460

Mark Bentley, Group Finance Director

 

 

 

Cenkos Securities

 

Bobbie Hilliam

020 7484 4040

 

 

Buchanan

 

Mark Edwards, Sophie McNulty, Clare Akhurst

020 7466 5000

 

 

Notes to Editors (www.cellogroup.com)

Cello is a healthcare and consumer strategic marketing group.

The Group's strategy is to create value for shareholders by building an international marketing advisory business able to advise blue chip clients globally, with a primary focus on the pharmaceutical sector, along with other high margin client sectors.

Cello has annualised revenues in excess of £160m, annualised gross profit in excess of £80m and employs over 900 professional staff.

 

 

 

 



 

Chairman's Statement

 

Overview

 

The Group performed very strongly in the first six months of the year, with excellent like-for-like gross profit growth in both divisions.

 

Cello Health continues to make rapid progress as an integrated business, benefiting from its multi-disciplinary capabilities unified under a single brand. The number of large scale, global briefs being tendered on and secured by the Cello Health team continues to increase.

 

Cello Signal has grown rapidly in the first half, with a focus on delivering complex digital solutions, social media analytics and technology based marketing services. Pulsar, Signal's social media analytics product, has grown rapidly to have over 60 licensed clients.

 

The start-up activities that were reported on in 2012 and 2013 have substantially moved into being profitable businesses. These include overseas offices in New York, Singapore and Chicago, where the Group has established businesses organically over the last 2 years.

 

The international profile of the Group continues to make rapid progress, with a particular focus on the US market which is the strategic growth priority for both Cello Health and Cello Signal.

 

The Group acquired iS Healthcare Dynamics Limited ("iS"), an award winning healthcare communications agency, in May 2014. The Board is pleased with the performance of the business post acquisition as part of Cello Health.

 

Operating cash flow has been in line with expectations. The balance sheet remains robust, and the Group has low deferred consideration obligations. The Group has also extended its existing banking facility until March 2018, and has secured a reduction in interest rates.

 

The Group is pleased to increase the interim dividend by 25% to 0.80p (2013: 0.64p). The increase reflects the shift towards a one third / two thirds split between the interim and final dividend and also reflects the Board's continued confidence in the growth prospects of the Group.

 

 

Financial Review

 

Revenue for the six months to 30 June 2014 was up 9.4% to £78.3m (2013: £71.5m) and gross profit was up 14.8% to £39.5m (2013: £34.4m). Like-for-like growth in gross profit was 11.7%. Headline operating profit was up 23.0% to £4.7m (2013: £3.8m). Headline operating margins were 12.0% (2013: 11.1%). Headline pre-tax profit was up 26.4% to £4.4m (2013: £3.5m). Further detail on these numbers is provided in the operating review.

 

The Group has considerable overseas activity both in terms of office infrastructure and global client activity. The lower value of the US Dollar during the period had a minor negative impact on reported Gross Profit of £0.5m. This adjustment only relates to the translation of overseas activities. The Group also has significant Dollar and Euro exposure arising out of its UK operations. Given the strength of the Pound against the Dollar and the Euro, these operations have incurred a further foreign exchange loss of £0.2m in the period. However, the Group has substantially hedged this loss by consistently carrying Dollar and Euro overdrafts, which have generated an exchange gain in this period. This has resulted in a reduction in central costs in the period of £0.2m. The overall impact from currency movements has therefore been minimal.

 

The reported tax charge is £1.0m (2013: £0.7m). This represents a headline tax rate of 27.0% (2013: 28.4%) which has fallen due to reduced UK tax corporation tax rates.

 

Headline basic earnings per share were up 27.1% to 3.87p (2013: 3.05p). Statutory earnings per share were up 116.0% to 2.81p (2013: 1.30p).

 

In May 2014, the Group acquired the entire share capital of iS Healthcare Dynamics Limited. Initial consideration was £2.5m, with £0.5m of this amount settled by the issue of new ordinary shares. Deferred consideration of up to £3.3m is payable by May 2017 and is dependent on profit performance over the period to 31 December 2016. The deferred consideration is payable in at least 80% cash, with the balance to be settled by the issue of new ordinary shares.

 

The Group's net debt at 30 June 2014 was £10.2m (31 December 2013: £3.6m; 30 June 2013: £11.4m). The operating cash outflow reflects normal seasonal working capital outflows, the unwinding of prior year operating cashflow surpluses, and the payment of larger bonuses in the first half that were in relation to the strong performance in 2013. All of these items are in line with management expectations.

 

Total debt facilities are £24.0m. These facilities were reduced in February 2014 by £5.0m to reduce non-utilisation costs. In September 2014, these facilities have been extended by two years. Accordingly, the expiry date is now March 2018. Interest rates have been reduced by 50 basis points, reducing the lowest interest rate to 125 points above LIBOR when adjusted net debt: EBITDA is less than 1 times.

 

The interim dividend has been increased 25% to 0.80p (2013: 0.64p). This larger than expected increase reflects a rebalancing of the dividend towards a one third / two third split between the interim dividend and the final dividend. The payment timetable has also been brought forward by two months, and it can be expected that going forward dividends will be paid in November and May, rather than January and July as has been the case in the past. Accordingly, the interim dividend is payable on 7 November 2014 to all shareholders on the register on 3 October 2014. The Group continues an unbroken eight year record of annual dividend growth.

 

The Group has incurred operating losses in the first half in relation to the development of the Pulsar suite of products. As these losses do not fit the Group's tight definitions of 'start-up' activity, these losses have been absorbed within headline operating profit.

 

Costs of £0.1m were incurred from continued investment in start-up activity, including the opening of new overseas offices to support future growth, notably in Hong Kong. This is disclosed below headline operating profit. The vast majority of previous start-up activities are now profitable, albeit currently operating at lower margins than the core business.

 

The following table details the adjustments made to calculate headline operating profit. The acquisition related costs of £0.5m (2013: £0.6m) relate to necessary accounting charges arising from the acquisition of iS.

 

£m

2014

2013

Headline operating profit

4.7

3.8

Restructuring costs

-

(0.3)

Start-up losses

(0.1)

(0.2)

Share option charges

(0.1)

(0.1)

Acquisition related costs

(0.5)

(0.6)

Amortisation

(0.4)

(0.5)

Statutory operating profit

3.6

2.1

Net finance costs

(0.2)

(0.3)

Statutory profit before tax

3.4

1.8

 

 

Operating Review

 

 

Cello Health

 

H1 2014

H1 2013

Full year 2013

 

£'000

£'000

£'000

Segmental gross profit

19,667

17,341

35,632

Headline operating profit

4,168

3,739

7,560

Headline operating margin

21.2%

21.6%

21.2%

 

 

Cello Health had an excellent six months, with overall client spending patterns continuing to be robust.

 

Segmental gross profit increased by 13.4% to £19.7m (2013: £17.3m). Like-for-like gross profit growth in the first half of 2014 was 7.1%. Margins remained healthy and competitive at 21.2% (H1 2013: 21.6%, FY 2013: 21.2%). Operating profit therefore rose to £4.2m (2013: £3.7m).

 

Cello Health consists of four capabilities; Cello Health Insight, Cello Health Consulting, Cello Health Communications and Cello Health Consumer. These underlying brands were formally launched in March 2014. The client response has been very encouraging, and there has already been a notable increase in the value and quantity of projects that use more than one of the disciplines of Cello Health. These are incremental cross-Group projects that would not have been won without the launch of Cello Health.

 

As Cello Health wins and services ever larger client contracts of a more integrated nature, the role of the procurement function within the client plays a more significant role in determining the initiation and pricing of contracts. This can cause delays both in the initiation of contracts, their final scoping and the timing of cash flows. Cello Health will continue to work hard to manage these growth issues.

 

The Group's global client penetration remains as strong as ever, with Cello Health continuing to work for nine of the top ten pharmaceutical companies. The decision to build a strong consumer centred health capability has also proven to be itself a vital addition to Cello Health's innovative offering.

 

The addition of iS to Cello Health in May 2014 has enhanced the Group's ability to service medical communications accounts from the UK, supplementing existing capacity in the US. The business now forms an important part of the Cello Health Communications offering.

 

Cello Health continues to focus on expanding its presence in the vital US market, with planned expansion in Chicago and San Francisco.

 

The major new business wins achieved in the first six months of 2014 included: Amgen, Boehringer Ingelheim, Celgene, Cooper Vision, Eli Lilly and Company Limited, GSK Consumer Healthcare, GSK Global, HP, Johnson & Johnson, Lloyds Pharmacy, MSD Schering Plough, Nexus, NHS Business Services Authority, NHS Leadership Team, NHS Warrington, Novartis IHC, Novartis Respiratory, NS&I, Pfizer, Roche Oncology, Shire HGT, Shire, and UCB Pharma.

 

 

Cello Signal

 

 

H1 2014

H1 2013

Full year 2013

 

£'000

£'000

£'000

Segmental gross profit

19,410

16,742

37,873

Headline operating profit

1,469

1,216

3,877

Headline operating margin

7.6%

7.3%

10.2%

 

Cello Signal also had an excellent six months.

 

Segmental gross profit increased by 15.9% to £19.4m (2013: £16.7m). The improvement that was seen in the second half of 2013 has been maintained into the first half of 2014, with like-for-like growth in Gross Profit of 16.2%. Operating profit rose to £1.5m (2013: £1.2m), and operating margins continued to rise slightly to 7.6% (2013: 7.3%).

 

This strong growth is a reflection of Cello Signal's core focus on delivering complex digital solutions and social media products, combined with the increasing proportion of its revenues won and serviced in the US and Asia. Cello Signal is now securing large and multi-year contracts on the basis of its integrated, digitally led proposition, in line with the stated growth strategy for the business.

 

Cello Signal's programming capability was augmented by the acquisition and full integration of Line Digital Limited during the first half. Pulsar TRAC (www.pulsarplatform.com), Cello Signal's advanced social intelligence platform, has had an encouraging first half and now has 60 clients, up from 14 clients at the start of the year. Annualised licence revenue from Pulsar TRAC is now over £1.1m up from £0.4m at the start of the year. Pulsar TRAC is currently loss making overall, as investment continues in developing the product suite and sales force capacity. These losses are absorbed within headline operating activity.

 

Cello Signal's international profile continues to make rapid strides. Of particular note is the like-for-like gross profit growth rate in the US, on both the West Coast and in New York, where Cello Signal's offices have grown gross profit organically by more than 50%. Cello Signal's research business in Singapore is also now profitable and we have opened an additional office in Hong Kong. All of these overseas activities are now accounted for with the headline activities of the Group. Despite the fast income growth rate, these businesses are still in the investment phase, so whilst these operations are profitable they are currently at low operating margin. Cello Signal continues to review new office opportunities.

 

Cello Signals operations in Edinburgh contribute around £10m of gross profit and around 10% of Cello Group's overall operating profit. In particular, the business reflects a world-class digital and technological capability which is growing quickly, servicing a diverse domestic and international client base, both in the public and private sectors. Cello Group PLC will keep under review the financial and economic consequences of the result of the Referendum. However, the Group intends to continue to invest in building its talent pool in Scotland, to service global client opportunity.

 

Major new business wins achieved in the first six months of 2014 include: AEGON, Alliance Trust Savings, Alzheimer's Society, Anthony Nolan, Apetito, Arthritis Research UK, Aviva, BBC Roster, Canon, Centro, Chamberlain, Christian Aid, Cofunds, Creative Clyde, Deloitte, E.ON, First Group, HP, Intercontinental Hotels Group, JP Morgan, Legg Mason Asset Management, National Audit Office, NEST, Nexus, NHS Greater East Midlands, NS&I, Reliance Mutual, Renaissance Hotels, RR Donnelley, Samsung, Scotland's House, Scottish Government, Sightsavers, Tesco, The Famous Grouse, and Worldpay.

 

 

Current Trading and Outlook

 

The robust trading experienced in the first half of the year, combined with a solid order book and new business pipeline, provides the Group with good momentum for the remainder of the year. The Board is confident that current full year expectations will be met.

 

 

Allan Rich,

Chairman

16 September 2014



Condensed Consolidated Income Statement

For the six months ended 30 June 2014

 

 

 

 

 

Notes

Unaudited

Six months ended

30 June 2014

£'000

Unaudited

 Six months ended

30 June 2013

£'000

Audited

Year ended

 31 December 2013

£'000






Continuing operations





Revenue

5

78,301

71,548

159,671

Cost of sales


(38,836)

(37,163)

(84,971)



              

              

                              

Gross profit

5

39,465

34,385

74,700






Administration expenses


(35,827)

(32,332)

(68,678)



              

              

                      

Operating profit

5

3,638

2,053

6,022






Finance income

6

3

10

16

Finance costs

6

(229)

(285)

(579)



              

              

                            

Profit before taxation

5

3,412

1,778

5,459






Taxation

7

(1,054)

(722)

(1,828)



              

              

                            






Profit for the period


2,358

1,056

3,631


              

              

                            

Attributable to:





Owners of the parent


2,356

1,059

3,634

Non-controlling interests


2

(3)

(3)



              

              

                          



2,358

1,056

3,631



              

              

                            













Unaudited

Six months ended

30 June 2014

£'000

Unaudited

Six months ended

30 June 2013

£'000

Audited

Year ended

31 December 2013

£'000

Earnings per share





Basic earnings per share

10

 2.81p

1.30p

4.41p

Diluted earnings per share

10

2.74p

1.29p

4.28p























 


 



 


 



 


 











 



Condensed Consolidated Statement of Comprehensive Income

For the six months ended 30 June 2014

 


 

Unaudited

Six months ended

30 June 2014

£'000

Unaudited

Six months ended

30 June 2013

£'000

Audited

Year ended

31 December 2013

£'000


 




Profit for the period

 

2,358

1,056

3,631


 




Other comprehensive income:

 




Exchange differences on translation of foreign operations

(27)

39

(34)


 

              

              

              

Total comprehensive income for the period

 

2,331

1,095

3,597


 

              

              

              

Total comprehensive income attributable to:

 




Owners of the parent

 

2,329

1,098

3,600

Non-controlling interests

 

2

(3)

(3)


 

              

              

              

Total comprehensive income for the period

 

2,331

1,095

3,597


 

              

              

              


 




 



Condensed Consolidated Balance Sheet

As at 30 June 2014

 

 


 

 

Notes

 

Unaudited

At 30 June 2014

£'000

Unaudited

At 30 June 2013

£'000

Audited

At 31 December 2013

£'000






Goodwill

11

72,522

71,498

71,192

 

Intangible assets


1,878

1,964

1,275

 

Property, plant and equipment


2,506

2,272

2,212

 

Deferred tax assets


910

566

792

 



               

               

               

 

Non-current assets


77,816

76,300

75,471

 



               

               

               

 






 

Trade and other receivables


40,789

28,013

36,320

 

Cash and cash equivalents


2,452

3,449

5,984

 



               

               

               

 

Current assets


43,241

31,462

42,304

 



               

               

               

 






 

Trade and other payables


(34,781)

(24,285)

(38,403)

 

Current tax liabilities


(2,174)

(1,306)

(1,271)

 

Borrowings


(829)

(2,030)

(373)

 

Provisions


-

(116)

-

 

Obligations under finance leases


(26)

(19)

(13)

 



               

               

               

 

Current liabilities


(37,810)

(27,756)

(40,060)

 



               

               

               

 

Net current assets


5,431

3,706

2,244

 



               

               

               

 

Total assets less current liabilities


83,247

80,006

77,715

 



               

               

               

 






 

Borrowings


(11,754)

(12,739)

(9,146)

 

Provisions


-

(230)

-

 

Obligations under finance leases


(74)

(13)

(13)

 

Deferred tax liabilities


(361)

(479)

(292)

 



               

               

               

 

Non-current liabilities


(12,189)

(13,461)

(9,451)

 



               

               

               

 

Net assets


71,058

66,545

68,264

 



               

               

               

 






 

Equity





 

Share capital

13

8,462

8,268

8,348

 

Share premium


18,530

18,224

18,368

 

Merger reserve


28,807

28,322

28,345

 

Capital redemption reserve


50

50

50

 

Retained earnings


14,825

11,302

12,810

 

Share-based payment reserve


521

418

455

 

Foreign currency reserve


(185)

(85)

(158)

 



              

              

              

 

Equity attributable to equity holders of parent


71,010

66,499

68,218

 






 

Non-controlling interests


48

46

46

 



              

              

              

 

Total equity


71,058

66,545

68,264

 



              

              

              

 

 

 

 

 

 



Condensed Consolidated Cash Flow Statement

For the six months ended 30 June 2014


 

 

 

Notes

Unaudited

Six months ended

30 June 2014

£'000

Unaudited

Six months ended

30 June 2013

£'000

Audited

Year ended

31 December 2013

£'000

 






 

 

Net cash (used in)/from operating activities before taxation

14

(4,668)

175

11,074

 






 

Tax paid


(884)

(372)

(1,738)

 



              

              

              

 

 

Net cash (used in)/from operating activities after taxation


(5,552)

(197)

9,336

 



              

              

              

 






 

Investing activities





 

Interest received


3

5

11

 

Purchase of property, plant and equipment


(731)

(503)

(1,047)

 

Sale of property, plant and equipment


29

2

27

 

Expenditure on intangible assets


(167)

(160)

(312)

 

Purchase of subsidiary undertakings


(2,191)

(1,406)

(1,471)

 

Cash acquired with subsidiary undertakings


2,493

694

694

 



              

              

              

 

 

Net cash used in investing activities


(564)

(1,368)

(2,098)

 



              

              

              

 






 

Financing activities





 

Proceeds from issuance of shares


129

-

112

 

Dividends paid to equity holders


(531)

(476)

(1,643)

 

Repayment of borrowings


(2,000)

(3,000)

(7,500)

 

Repayment of loan notes


(73)

(84)

(125)

 

Drawdown of borrowings


4,800

3,024

4,524

 

Increase in overdrafts


529

1,616

-

 

Capital element of finance lease payments


(26)

(17)

(23)

 

Interest paid


(171)

(253)

(498)

 

Purchase of own shares


-

-

(117)

 



              

              

              

 

Net cash from/(used in) financing activities


2,657

810

(5,270)



              

              

              

 






 

Movements in cash and cash equivalents





 

Net (decrease)/increase in cash and cash equivalents


(3,459)

(755)

1,968

 

Exchange (losses)/gains on cash and bank overdrafts


(73)

56

(132)

 

Cash and cash equivalents at the beginning of the period


5,984

4,148

4,148

 



              

              

              

 

Cash and cash equivalents at end of the period


2,452

3,449

5,984

 



              

              

              

 






 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statement of Changes in Equity

For the six months ended 30 June 2014

 

Statement of changes in equity for the six months ended 30 June 2014:


Share

Capital

£'000

Share

 Premium

£'000

Merger Reserve

£'000

Capital Redemption Reserve

£'000

Retained Earnings

£'000

Share-based Payment Reserve

£'000

Foreign Currency

Exchange Reserve

£'000

Total Attributable to Equity Shareholders

£'000

Non-Controlling Interest

£'000

Total

Equity

£'000

 












 

At 1 January 2014

8,348

18,368

28,345

50

12,810

455

(158)

68,218

46

68,264

 


          

          

          

          

          

          

          

                

          

              

 












 

Profit for the period

-

-

-

-

2,356

-

-

2,356

2

2,358

 












 

Other comprehensive income:











 

Currency translation

-

-

-

-

-

-

(27)

(27)

-

(27)

 


          

          

          

          

          

          

          

                

          

              

 

Total comprehensive income in the period

 

-

 

-

 

-

 

-

 

2,356

 

-

 

(27)

 

2,329

 

2

 

2,331

 


          

          

          

          

          

          

          

                

          

              

 

Transactions with owners:











 

Shares issued

114

162

462

-

-

-

-

738

-

738

 

Credit for share-based incentives

 

-

 

-

 

-

 

-

 

-

 

102

 

-

 

102

 

-

 

102

 

Deferred tax on share-based payments recognised directly in equity

 

 

-

 

 

-

 

 

-

 

 

-

 

 

154

 

 

-

 

 

-

 

 

154

 

 

-

 

 

154

 

Transfer between reserves in respect of share options

 

-

 

-

 

-

 

-

 

36

 

(36)

 

-

 

-

 

-

 

Dividends paid

-

-

-

-

(531)

-

-

(531)

-   

(531)


          

          

          

          

          

          

          

                

          

              

 

Total transactions with owners

 

114

 

162

 

462

 

-

 

(341)

 

66

 

-

 

463

 

-

 

463

 


          

          

          

          

          

          

          

                

          

              

 












 

As at 30 June 2014

8,462

18,530

28,807

50

14,825

521

(185)

71,010

48

71,058

 


          

          

          

          

          

          

          

                

          

              

 












 

 

Statement of changes in equity for the six months ended 30 June 2013:


Share

Capital

£'000

Share

 Premium

£'000

Merger Reserve

£'000

Capital Redemption Reserve

£'000

Retained Earnings

£'000

Share-based Payment Reserve

£'000

Foreign Currency

Exchange Reserve

£'000

Total Attributable to Equity Shareholders

£'000

Non-Controlling Interest

£'000

Total

Equity

£'000












At 1 January 2013

8,226

18,188

28,228

50

10,636

343

(124)

65,547

49

65,596


          

          

          

          

          

          

          

                

          

              

Profit for the period

-

-

-

-

1,059

-

-

1,059

(3)

1,056

Other comprehensive income:











Currency translation

-

-

-

-

-

-

39

39

-

39


          

          

          

          

          

          

          

                

          

              

Total comprehensive income in the period

 

-

 

-

 

-

 

-

 

1,059

 

-

 

39

 

1,098

 

(3)

 

1,095


          

          

          

          

          

          

          

                

          

              

Transactions with owners:











Shares issued

42

36

94

-

-

-

-

172

-

172

Credit for share-based incentives

 

-

 

-

 

-

 

-

 

-

 

75

 

-

 

75

 

-

 

75

Deferred tax on share-based payments recognised directly in equity

 

 

-

 

 

-

 

 

-

 

 

-

 

 

83

 

 

-

 

 

-

 

 

83

 

 

-

 

 

83

Dividends paid

-

-

-

-

(476)

-

-

(476)

-

(476)


          

          

          

          

          

          

          

                

          

              

Total transactions with owners

 

42

 

36

 

94

 

-

 

(393)

 

75

 

-

 

(146)

 

-

 

(146)


          

          

          

          

          

          

          

                

          

              

As at 30 June 2013

8,268

18,224

28,322

50

11,302

418

(85)

66,499

46

66,545


          

          

          

          

          

          

          

                

          

              

 

 

Statement of changes in equity for the year ended 31 December 2013:


Share

Capital

£'000

Share Premium

£'000

Merger Reserve

£'000

Capital Redemption Reserve

£'000

Retained Earnings

£'000

Share-based Payment Reserve

£'000

Foreign Currency Exchange Reserve

£'000

Total Attributable to Equity Shareholders

£'000

Non-Controlling Interest

£'000

Total

Equity

£'000












At 1 January 2013

8,226

18,188

28,228

50

10,636

343

(124)

65,547

49

65,596


          

              

              

          

               

          

          

               

          

               












Profit for the year

-

-

-

-

3,634

-

-

3,634

(3)

3,631












Other comprehensive income:











Currency translation

-

-

-

-

-

-

(34)

(34)

-

(34)


          

              

              

          

               

          

          

               

          

               

Total comprehensive income for the period

 

-

 

-

 

-

 

-

 

3,634

 

-

 

(34)

 

3,600

 

(3)

 

3,597


          

              

              

          

               

          

          

               

          

               












Transactions with owners:











Shares issued

122

180

117

-

-

-

-

419

-

419

Purchase of treasury shares

 

-

 

-

 

-

 

-

 

(117)

 

-

 

-

 

(117)

 

-

 

(117)

Credit for share-based incentives

 

-

 

-

 

-

 

-

 

-

 

179

 

-

 

179

 

-

 

179

Tax on share-based payments recognised directly in equity

 

 

-

 

 

-

 

 

-

 

 

-

 

 

233

 

 

-

 

 

-

 

 

233

 

 

-

 

 

233

Transfer between reserves in respect of share options

 

 

-

 

 

-

 

 

-

 

 

-

 

 

67

 

 

(67)

 

 

-

 

 

-

 

 

-

 

 

-

Dividends paid

-

-

-

-

(1,643)

-

-

(1,643)

-

(1,643)


          

              

              

          

               

          

          

               

          

               

Total transactions with owners

 

122

 

180

 

117

 

-

 

(1,460)

 

112

 

-

 

(929)

 

-

 

(929)


          

              

              

          

               

          

          

               

          

               

As at 31 December 2013

 

8,348

 

18,368

 

28,345

 

50

 

12,810

 

455

 

(158)

 

68,218

 

46

 

68,264


          

              

              

          

               

          

          

               

          

               

 

 

 



Notes to the Financial Information

For the six months ended 30 June 2014

 

1.   ACCOUNTING POLICIES AND BASIS OF PREPARATION

 

The condensed consolidated financial information for the six months ended 30 June 2014 has been prepared in accordance with IAS 34 Interim Financial Reporting, as adopted by the European Union. The condensed consolidated financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2013, which have been prepared in accordance with IFRSs as adopted by the European Union.

 

The condensed consolidated financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2013 were approved by the Board of directors on 19 March 2014 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.

 

The condensed consolidated financial information was approved for issue on 16 September 2014 and has not been audited.

 

The accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2013, as described in those annual financial statements.

 

There are no new IFRSs or IFRICs that are effective for the first time for the interim period that would be expected to have a material impact on the Group.



2.   HEADLINE MEASURES

 

The Group believes that reporting non-GAAP or headline measures provides a useful comparison of business performance and reflects the way the business is controlled. Accordingly headline measures of operating profit, finance income, finance costs, profit before taxation and earnings per share exclude, where applicable, restructuring costs, start-up losses, amortisation of intangible assets, impairment charges, acquisition accounting adjustments, share option charges, fair value gains and losses on derivative financial instruments and other exceptional costs. Non-headline gains and losses are items that, in the opinion of the directors, are required to be disclosed separately, by virtue of their size or incidence, to enable a full understanding of the Group's financial performance.

 

A reconciliation between statutory and headline profit before taxation is presented in note 4. In addition to this a reconciliation between statutory and headline finance income and costs is presented in note 6 and a reconciliation between statutory and headline earnings per share is presented in note 10. Headline measures in this report are not defined terms under IFRS, and may not be comparable with similarly titled measures reported by other companies.

 

3.   SEASONALITY OF OPERATIONS

 

The Cello Health division is not materially influenced by seasonal factors. However, there are a number of clients in the Cello Signal division who traditionally commission activity in the second half of the year leading to increased revenues for that period with respect to those clients.

 

4.   RECONCILIATION OF PROFIT FROM CONTINUING OPERATIONS BEFORE TAXATION TO

      HEADLINE PROFIT BEFORE TAX

 


Unaudited

Six Months ended

 30 June 2014

£'000

Unaudited

Six Months ended

 30 June 2013

£'000

Audited

Year ended

 31 December 2013

£'000





Profit from continuing operations before taxation

3,412

1,778

5,459

 

Restructuring costs

 

-

 

314

 

514

Start-up losses

99

217

373

Acquisition costs

152

66

66

Amortisation of intangible assets

383

545

1,190

Acquisition related employee remuneration expense

300

529

745

Share option charges

102

75

179

Fair value gain on derivative financial instruments

-

(5)

(5)


              

              

              

Headline profit before taxation

4,448

3,519

8,521


              

              

              

Headline profit before tax is made up as follows:




Headline operating profit

4,674

3,799

9,089

Headline finance income

3

5

11

Headline finance costs

(229)

(285)

(579)


              

              

              


4,449

3,519

8,521


              

              

              

 

 

5.   SEGMENTAL INFORMATION

 

For management purposes, the Group is organised into two operating groups; Cello Health and Cello Signal. These groups are the basis on which the Group reports internally to the plc's board of directors, who have been identified as the chief operating decision makers.



 

Six months ended 30 June 2014





 

 

 

Cello Health

£'000

 

Cello Signal

£'000

Consolidated and Unallocated £'000

 

Group £'000

Revenue





External sales

28,149

49,604

-

77,753

Intersegment revenue

-

14

(14)

-


                  

                  

                  

                  

Total segmental revenue

28,149

49,618

(14)

77,753


                  

                  

                  


Start-up revenue




548





                  

Total revenue




78,301





                  

Gross profit





Segmental gross profit

19,667

19,410

-

39,077


                  

                  

                  







Start-up gross profit




388





                  

Total gross profit




39,463





                  

Operating profit





Headline operating profit (segment result)

4,168

1,469

(963)

4,674


                  

                  

                  


Start-up losses




(99)

Acquisition costs




(152)

Amortisation of intangible assets




(383)

Acquisition related employee remuneration expense




(300)

Share option charges




(102)





                  

Operating profit




3,638






Financing income




3

Finance costs




(229)





                  

Profit from continuing operations before taxation




3,412
                  






Other information










Capital expenditure

237

490

4

731


                  

                  

                  

                  

Capitalisation of intangible assets

30

137

-

167


                  

                  

                  

                  

Depreciation of property plant and equipment

210

384

1

595


                  

                  

                  

                  

 



 

Six months ended 30 June 2013





 

 

 

Cello Health

£'000

 

Cello Signal

£'000

Consolidated and Unallocated £'000

 

Group £'000

Revenue





External sales

25,230

45,926

-

71,156

Intersegment revenue

-

28

(28)

-


                  

                  

                  

                  

Total segmental revenue

25,230

45,954

(28)

71,156


                  

                  

                  


Start-up revenue




392





                  

Total revenue




71,548





                  

Gross profit





Segmental gross profit

17,341

16,742

-

34,083


                  

                  

                  







Start-up gross profit




302





                  

Total gross profit




34,385





                  

Operating profit





Headline operating profit (segment result)

3,739

1,216

(1,156)

3,799


                  

                  

                  


Restructuring costs




(314)

Start-up losses




(217)

Acquisition costs




(66)

Amortisation of intangible assets




(545)

Acquisition related employee remuneration expense




(529)

Share option charges




(75)





                  

Operating profit




2,053






Financing income




10

Finance costs




(285)





                  

Profit from continuing operations before taxation




1,778
                  






Other information










Capital expenditure

99

402

2

503


                  

                  

                  

                  

Capitalisation of intangible assets

70

90

-

160


                  

                  

                  

                  

Depreciation of property plant and equipment

223

333

2

558


                  

                  

                  

                  

 



 

Year ended 31 December 2013





 

 

 

 

Cello Health £'000

 

Cello Signal £'000

Consolidated and Unallocated
£'000

 

Group £'000

Revenue





External sales

52,330

105,694

-

158,024

Intersegment revenue

18

40

(58)

-


                  

                  

                  

                  

Total segmental revenue

52,348

105,734

(58)

158,024


                  

                  

                  


Start-up revenue




1,647





                  

Total revenue




159,671





                  

Gross profit





Segmental gross profit

35,632

37,873

-

73,505


                  

                  

                  







Start-up gross profit




1,195





                  

Total gross profit




74,700





                  

Operating profit





Headline operating profit (segment result)

7,560

3,877

(2,348)

9,089


                  

                  

                  


Restructuring costs




(514)

Start-up losses




(373)

Acquisition costs




(66)

Amortisation of intangible assets




(1,190)

Acquisition related employee remuneration expense




(745)

Share option charges




(179)





                  

Operating profit




6,022






Financing income




16

Finance costs




(579)





                  

Profit from continuing operations before taxation




5,459
                  






Other information










Capital expenditure

205

839

3

1,047


                  

                  

                  

                  

Capitalisation of intangible assets

131

181

-

312


                  

                  

                  

                  

Depreciation of property plant and equipment

438

683

3

1,124


                  

                  

                  

                  








6.   FINANCE INCOME AND COSTS

 


Unaudited

Six months ended

30 June 2014

£'000

Unaudited

Six months ended

30 June 2013

£'000

Audited

Year ended

31 December 2013

£'000

Finance income:




Interest receivable on bank deposits

3

5

11


              

              

              

Headline finance income

3

5

11





Fair value gains on derivative financial instruments

-

5

5


              

              

              

Total finance income

3

10

16


              

              

              





Finance costs:




Interest payable on bank loans and overdrafts

227

278

569

Interest payable in respect of finance leases

2

3

5

Finance costs paid on derivative financial instruments

-

4

5


              

              

              

Total and headline finance costs

229

285

579


              

              

              

 

7.   TAXATION ON PROFIT ON ORDINARY ACTIVITIES

 

The tax charge for the period ended 30 June 2014 is based on management's estimate of weighted average annual tax rate expected for the full financial year. The estimated average annual tax rate used is 27.0% (2013: 28.4%).

 

8.   DIVIDEND


 

 

 

Date Paid

Unaudited

Six months ended  30 June 2014

£'000

Unaudited

Six months ended  30 June 2013

£'000

Audited

Year ended

31 December 2013

£'000






Interim dividend 2012 - 0.58p

6 January 2013

-

476

476

Final dividend 2012 - 1.42p per share

5 July 2013

-

-

1,167

Interim dividend 2013 - 0.64p per share

6 January 2014

531

-

-








                  

                  

                  



531

476

1,643



                  

                  

                  











An interim dividend of 0.80p (2013: 0.64p) per ordinary share is declared and will be paid on 7 November 2014 to all shareholders on the register on 3 October 2014. In accordance with IAS 10 Events after the Balance Sheet Date, this dividend has not been recognised in the accounts at 30 June 2014, but will be recognised in the accounting period ending 31 December 2014. A final dividend of 1.61p (2013: 1.42p) per ordinary share was paid to all shareholders on the register on 31 May 2014.

 

9.   RESTRUCTURING COSTS, START-UP LOSSES AND ACQUISITION COSTS

 

Restructuring costs, start-up losses and acquisition costs have been separately disclosed in order to assist in understanding the financial performance of the Group.

 

Restructuring costs principally relate to redundancy costs.

 

Start-up losses are defined as the net operating result in the period of the trading activities that relate to new offices, new products, or new organically started businesses. Activities so defined will cease being separately identified where, in the opinion of the directors, the activities show evidence of becoming sustainably profitable or are closed, whichever is earlier. In any event start-up losses will cease being separately identified after two years from the commencement of the activity.

 

Acquisition costs relate to professional costs incurred in relation to acquisitions.



 

10.   EARNINGS PER SHARE


Unaudited

Six months ended

30 June 2014

£'000

Unaudited

Six months ended

30 June 2013

£'000

Audited

Year ended

31 December 2013

£'000





Earnings attributable to owners of the parent

2,356

1,059

3,634

Non-controlling interests

2

(3)

(3)


                

                

                

Earnings from continuing operations

2,358

1,056

3,631





Adjustments to earnings:




Restructuring costs

-

314

514

Start-up losses

99

217

373

Acquisition costs

152

66

66

Amortisation of intangible assets

383

545

1,190

Acquisition related employee remuneration expense

300

529

745

Share-based payments charge

102

75

179

Fair value gain on derivative financial instruments

-

(5)

(5)

Tax thereon

(149)

(318)

(712)


                

                

                

Headline earnings attributable to ordinary shareholders

3,245

2,479

5,981


                

                

                



 


 



30 June 2014

number of shares

30 June 2013

number of shares

30 December 2013

number of shares





Weighted average number of ordinary shares used in basic earnings per share

 

83,785,620

 

82,568,384

 

82,444,872





Dilutive effect of securities:




Deferred consideration shares

19,223

129,674

198,540

Share options

2,284,866

295,872

2,231,510


                       

                       

                       

Weighted average number of ordinary shares used in diluted earnings per share

 

86,089,709

 

81,787,816

 

84,874,922


                       

                       

                       





Earnings per share




Basic earnings per share

2.81p

1.30p

4.41p

Diluted earnings per share

2.74p

1.29p

4.28p





In addition to basic and diluted earnings per share, headline earnings per share, which is a non-GAAP measures, has also been presented.





Headline earnings per share




Headline basic earnings per share

3.87p

3.05p

7.25p

Headline diluted earnings per share

3.77p

3.03p

7.05p

 

 

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year, excluding treasury shares and shares in employee benefit trusts, determined in accordance with the provisions of IAS 33 Earnings per Share.

 

Diluted earnings per share is calculated by dividing earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year adjusted for the potentially dilutive ordinary shares for which the conditions of issue have substantially been met but not issued at the end of the year.

 

The Group's potentially dilutive shares are shares expected to be issued as deferred consideration on acquisitions and share options issued but not exercised.

 

Headline earnings per share is calculated using headline earnings for the year, which excludes the effect of restructuring costs, start-up losses, amortisation of intangibles, impairments charges, acquisition accounting adjustments, share option charges, fair value gains and losses on derivative financial instruments and other exceptional costs. The calculation also excludes non-controlling interests over which the Group has exclusive options to acquire in the future.

 

 

 

 

11.   GOODWILL

 


Unaudited

Six months ended

30 June 2014

£'000

Unaudited

Six months ended

30 June 2013

£'000

Audited

Year ended

31 December 2013

£'000

Cost




At beginning of period

83,571

83,407

83,407

Additions

1,463

133

248

Exchange differences

(133)

337

(84)


                  

                  

                  

At the end of the period

84,901

83,877

83,571


                  

                  

                  

Amortisation




At the beginning and the end of the period

12,379

12,379

12,379


                  

                  

                  

Net book value




At the end of the period

72,522

71,498

71,192


                  

                  

                  

 

At the beginning of the period

 

71,192

 

71,028

 

71,028


                  

                  

                  

 

 

12.   ACQUISITIONS

 

iS Healthcare Dynamics

On 12 May 2014, the Group acquired the entire share capital of iS Healthcare Dynamics Limited ("iS"), a healthcare communications consulting company based in the UK.

 

iS has contributed £0.6m to revenue and £0.2m to profit before tax for the period between the date of acquisition and the balance sheet date. Had iS been consolidated from 1 January 2014, the consolidated income statement for the period ended 30 June 2014 would show revenue of £81.3m and profit before tax of £4.3m.

 

The provisional fair value of the net assets at the acquisition date is as follows:

 


Fair value

£'000



Client relationships

903

Property, plant and equipment

49

Trade and other receivables

1,414

Cash and cash equivalents

2,351

Trade and other payables

(2,085)

Deferred tax liability

(186)


                  

Net assets acquired

2,446



Goodwill arising on acquisition

1,234


                  


3,680


                  



 

 

The fair value of trade and other receivables include trade receivables with a fair value of £1,002,000. The gross contractual amount of trade receivables is equal to the fair value.

 

Goodwill comprises the value of expected synergies and other opportunities arising from the acquisition, management know how, the skilled work force employed by iS and other intangible assets that do not qualify for separate recognition. None of the goodwill recognised is expected to be deductible for tax purposes.

 

 

 

 

The fair value of the consideration paid is as follows:

 


£'000



Cash consideration

2,000

Issue of ordinary shares

500

Deferred consideration

1,180


                  


3,680


                  

 

In addition to the deferred consideration, acquisition related employee remuneration of up to £3,300,000 is also payable to the vendors and employees of iS.  This remuneration is dependent on the profits earned by iS in the three years to 31 December 2016 and is recognised in the income statement over that period.

 

 

Line Digital

On 24 April 2014, the Group acquired the entire share capital of Line Digital Limited. The net assets acquired and consideration paid do not have a material effect on the result or position of the Group.

 

 

13.   SHARE CAPITAL

 


Unaudited

At 30 June 2014

£'000

Unaudited

At 30 June 2013

£'000

Audited

At 31 December 2013

£'000

Allotted, issued and fully paid




84,618,037 ordinary shares of 10p each

8,462

8,268

8,348


                  

                  

                  





 

 

Between 1 January 2013 and 30 June 2014 the following shares were issued:

 

On 28 January 2013, 333,332 new ordinary shares of 10p each were issued at 38.20p to vendors of Mash Health Limited pursuant to the terms of the share purchase agreement of that company.

 

On 10 May 2013, 89,122 new ordinary shares of 10p each were issued at 50.00p to certain employees of the Group. These shares were issued pursuant to the share purchase agreements in relation to Red Kite Consulting Group Limited.

 

On 13 September 2013, 196,188 new ordinary shares of 10p each were issued at 68.50p to vendors of Mash Health Limited and certain employees of the Group. These shares were issued pursuant to the terms of the share purchase agreement of that company.

 

On 7 May 2014, 123,588 new ordinary shares of 10p each were issued at 88.50p to vendors of Mash Health Limited and certain employees of the Group. These shares were issued pursuant to the terms of the share purchase agreement of that company.

 

On 13 May 2014, 567,376 new ordinary shares of 10p each were issued at 88.125p to vendors of iS Healthcare Limited and certain employees of the Group. These shares were issued pursuant to the terms of the share purchase agreement of that company.

 

During the year ended 31 December 2013, 602,905 new ordinary shares of 10p each were issued to staff in relation to share option schemes, with exercise prices between 10.00p and 31.50p.

 

During the period ended 30 June 2014, 444,021 new ordinary shares of 10p each were issued to staff in relation to share option schemes, with exercise prices between 10.00p and 50.00p.

 

The group owns 453,000 (30 June 2013: 237,000 and 31 December 2013: 453,000) of its own shares and these shares are held as treasury shares.  The company has the right to re-issue these shares at a later date.  The purchase of equity shares is recorded in equity as a deduction in retained earnings.

 

 

14.   CASH GENERATED FROM OPERATIONS

 


Unaudited

Six months ended

30 June 2014

£'000

Unaudited

Six months ended

30 June 2013

£'000

Audited

Year ended

31 December 2013

£'000





Profit on continuing operations before taxation

3,412

1,778

5,459





Financing income

(3)

(10)

(16)

Finance costs

229

285

579

Depreciation

595

558

1,124

Amortisation of intangible assets

519

659

1,437

Share-based payment expense

102

75

179

Profit on disposal of property, plant and equipment

(9)

-

(16)

Decrease/(increase) in receivables

(2,925)

2,599

(5,747)

(Decrease)/increase in payables

(6,626)

(6,248)

7,642

Decrease in acquisition related employee remuneration payable

38

479

433


                 

                 

                 

Net cash inflow/(outflow) from operating activities

(4,668)

175

11,074


                 

                 

                 

 

15.   NET DEBT

 


 At 1 January            2014

Cash Flow

New Finance leases

Foreign Exchange

At 30 June 2014


£'000

£'000

£'000

£'000

£'000







Cash and cash equivalents

5,984

(3,459)

-

(73)

2,452

Overdrafts

-

(529)

-

-

(529)

Loan notes

(373)

73

-

-

(300)

Bank loans

(9,146)

(2,800)

-

192

(11,754)

Finance leases

(26)

26

100

-

100


                 

                 

                 

                 

                 


(3,561)

(6,689)

100

119

(10,231)


                 

                 

                 

                 

                 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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