Interim Results

Cello Group plc

Delivering on the strategy

Cello Group plc ("Cello" AIM: CLL, "The Group"), the insight and strategic marketing group, today announces its interim results for the six month period to 30 June 2013.

Group Highlights

· Revenue up 14.3% to £71.5m (2012: £62.6m)

· Gross profit up 7.9% to £34.4m (2012: £31.9m)

· Like-for-like1 gross profit growth of 4.7%

· Headline profit before tax2 up 11.0% to £3.5m (2012: £3.2m)

· Statutory operating profit up 9.0% to £2.1m (2012: £1.9m)

· Headline basic earnings per share up 5.2% to 3.05p (2012: 2.90p)

· Statutory basic earnings per share up 22.6% to 1.30p (2012: 1.06p)

· Interim dividend up 10.3% to 0.64p (2012: 0.58p)

· Successful acquisition of Mash Healthcare in January 2013

Divisional Highlights

· Continued solid performance from Cello Health

· Significant improvement in Cello Consumer

1 Like-for-like comparisons remove the impact of acquisitions and discontinued operations

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

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

 Mark Scott, Chief Executive, commented:

"The refocusing of the Group last year into Cello Health and Cello Consumer has begun to demonstrate its potential to deliver strong performance. The Group had an excellent first six months of the year in both overseas and domestic markets. We look forward to continued progress in the second half and a strong full year outcome."

Enquiries:

Notes to Editors (www.cellogroup.com)

Cello is an insight and 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 £130m, annualised gross profit in excess of £65m and employs over 700 professional staff.

Chairman's Statement

Overview

The Group performed strongly in the first six months of the year, with good growth in both revenues and profits. Cello Health performed well and in line with management expectations, with margins remaining highly competitive. Cello Consumer delivered the anticipated recovery in performance, following the refocusing of the business last year.

As well as seeing strong performances in its core businesses, operations that were new in 2012 (start-up activities) have also done well, with the majority of them becoming profitable in the first half of the year. The Group continues to benefit from its investment in innovation and digital capacity with a particular focus on contracted revenue streams. The proportion of the Group's income generated by sale of multi-year product-based services continues to rise.

The Group's strategy to increase its international footprint continues to make progress, with the opening of new offices in Chicago, Los Angeles and Hong Kong. The Singapore office opened last year has now moved into profit.

The Group acquired Mash Healthcare Limited ("Mash") in January 2013. The Board is pleased with the performance of the business post acquisition as part of Cello Health.

Cash flow has been strong for the first six months of the year. The balance sheet remains robust, with net debt being in line with management expectations. The Group has low deferred consideration obligations.

As a result, the Group is proposing to increase the interim dividend by over 10%.

Financial Review

Revenue for the six months to 30 June 2013 was up 14.3% to £71.5m (2012: £62.6m) and gross profit was up 7.9% to £34.4m (2012: £31.9m). Like-for-like growth in gross profit was 4.7%. Headline operating profit was up 9.0% to £3.8m (2012: £3.5m). Headline operating margins were 11.1% (2012: 11.1%). Headline pre-tax profit was up 11.0% to £3.5m (2012: £3.2m).

Headline basic earnings per share were up 5.2% to 3.05p (2012: 2.90p).

The reported tax charge is £0.7m (2012: £0.5m). This represents a headline tax rate of 28.4% (2012: 30.2%) which has fallen due to falling UK tax corporation tax rates.

The Group's net debt at 30 June 2013 was £11.4m (31 December 2012: £8.7m; 30 June 2012: £13.7m). This debt figure reflects normal seasonal working capital outflows, and is in line with management expectations. Total debt facilities of £29.0m expire in March 2016.

The interim dividend has been increased 10.3% to 0.64p (2012: 0.58p). It is payable on 6 January 2014 to all holders on the register on 6 December 2013. The Group continues a seven year unbroken record of annual dividend growth.

The Group incurred a restructuring charge of £0.3m as a result of redundancies created by the increasing convergence of businesses within both Cello Health and Cello Consumer, as the Group pursues efficiency gains. Costs of £0.2m were incurred from continued investment in start-up activity, including software development, and the opening of new overseas offices to support future growth. The following table details the adjustments made to calculate headline operating profit. The acquisition related remuneration charge of £0.6m (2012: £nil) relates to necessary accounting charges arising from the acquisition of Mash.

Operating Review

Cello Health

Cello Health had a good six months, with overall client spending patterns continuing to be robust. The addition of Mash Healthcare to Cello Health in January 2013 has enhanced the Group's ability to service consumer facing healthcare products.

Gross profit increased by 5.5% to £17.3m (2012: £16.4m). After accounting for the impact of the Mash acquisition, this gross profit performance was flat on a like-for-like basis. Like-for-like income growth in the first half of 2012 was 11.1%. This 2013 performance represents a return to more normal levels of margin and profitability for the first half of the year. Margins remained healthy and competitive at 21.6% (H1 2012: 25.0%, FY 2012: 20.6%)). Operating profit fell slightly to £3.7m (2012: £4.1m).

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 introduction of the central new business team in Cello Health has borne fruit, with some notable incremental cross-Group projects that would not otherwise have been won.

Cello Health's digital product suite continues to trade strongly, with eVillage (its online community health research product) contributing over £0.5m of revenue in the period. Cello Business Sciences launched its web-based product suite formally in January and has had excellent client uptake in the first six months, with encouraging signs of growth in recurring licence based revenues.

Overall, good progress has been made within the organic start-up initiatives that were reported in 2012, as follows:

· In 2012 Cello Health invested in the development of a specialist quantitative research offer, IQ, incurring costs of £0.2m in 2012. In 2013 there have been 28 projects which have included this offer within them, with a gross profit value of £0.8m.

· In 2012 Cello Health started a Consumer Health business within its Brand Consulting Business, The Value Engineers, incurring start-up losses in 2012 of £0.1m. The business has won several clients in 2013, and is sustainably profitable looking forward. This development complements the recent acquisition of Mash Healthcare, continuing to expand Cello Health's exposure to the Consumer Health marketplace.

· Within its consulting offer, Cello Health started Cello Business Sciences in 2012, with associated start-up losses. This business has now developed award winning proprietary software to enable clients to evaluate and track the return on investment achieved by marketing campaigns. Uptake has been good from a wide range of clients who buy services on a project consultancy basis and by buying software licences.

Cello Health has also commenced further expansion activity in 2013 with the opening of a Chicago office and with the commencement in the US of an early stage market access consultancy. Both these initiatives have had early client project wins and the Group is confident of profitable outcomes in future years from these activities.

Considerable internal progress has been made regarding brand consolidation, with a view to external launch in early 2014. The continued growth of Cello Health is a key strategic priority for the Group, and opportunities for further investment in the form of start-up ventures and acquisitions are being actively appraised.

The major new business wins achieved in the first six months of 2013 included: Abellio, Ahlstrom, Avia, Bauer Media, BI Global and Domestic, Biogen Idec, Chamberlain, Colgate Palmolive, Eisai, FCA, GSK Oncology, House Foods, Hug, Johnson & Johnson, Kimberly Clark, Medtronic, Nexus, NHS Blood Transfusions, NHS Business Services Authority, Otsuka, Pfizer, PruHealth, Saint Gobain, Sanofi, Shire and Terumo.

Cello Consumer

Cello Consumer had a strong six months, reflecting the benefit of the focused growth strategy implemented in 2012. This was driven by continued recovery in core activity areas, including improved consumer market research spend, improved client activity in financial services and an increasingly strong strategic position in Scotland. It was also a reflection of Cello Consumer's growing strength in digital products, and the increasing proportion of its revenues won and serviced in the US and Asia.

Gross profit increased by 11.6% to £16.7m (2012: £15.0m). The improvement that was seen in the second half of 2012 has been maintained into the first half of 2013, consequently like-for-like growth in gross profit was 9.7%. Operating profit rose to £1.2m (2012: £0.3m), and operating margins recovered to more normal levels at 7.3% (2012: 1.8%).

The digital orientation of Cello Consumer is strengthening rapidly. Pulsar TRAC (www.pulsarplatform.com), Cello Consumer's advanced social intelligence platform, has been formally launched to an excellent client response. This product analyses and interprets social media data and allows the user to mine data by topic, by audience, and by content.

Brightsource, the Group's data-driven marketing communications consultancy, has continued to grow strongly, with technological and digital solutions to client problems being at the fore of the offer. In addition, Cello Consumer's organically started pure digital agency, Blonde, has experienced significant gross profit growth this year, and has recently been appointed to the digital roster for the Scottish Government.

Cello Consumer's international profile continues to make rapid strides. The Group's research business in Singapore is now profitable and is regularly securing new mandates. An additional office has been opened in Hong Kong. Cello Consumer's research business on the West Coast of the USA has opened a Los Angeles office and gross profit has broken through the £1.0m barrier in the first six months of the year. This office is expected to be profitable by the end of the year. Cello Consumer continues to review new office opportunities in Asia, the USA and Africa.

Cello Consumer has made good progress in moving from a project based revenue profile to a more contracted, recurring revenue profile. The retained income base of Cello Consumer has grown considerably so far this year, with the addition of several large tracker research clients, as well as the extension of a core retained financial services client.

With the recovery in performance, the Group is once again prepared to back the accelerated growth of Cello Consumer through a mixture of selected start-up ventures, investment in software and focused acquisitions. As an example, Cello Consumer's offer in Scotland has been enhanced in June 2013 by the acquisition of the trade and certain assets of Newhaven Communications.

The major new business wins achieved in the first six months of 2013 include: Anheuser Busch, Audi (Asia), Barnes & Noble, Bauer Media, Border Biscuits, British Red Cross, CBRE, Disney (Asia), Costa, Economist, Electrical Safety Council, Eurostar, Fantasy Football Manager, Halo Foods, HALO Trust, Hearst Magazines, Hilti, International Cancer Research, Michelmores, Nestle, Nokia, Oliver Bonas, ONS, Pizza Express, Prostate Cancer UK, Quality Meat Scotland, Reckitt Benckiser, Royal British Legion, Russell Brands, Scottish Government, SingTel (Asia), Spar, The Ritz Carlton, Unilever, Visit England and Wells and Young.

Talking Taboos Foundation

Building on its 2012 research programme into the area of self-harm amongst teenagers, the Group has invested in the launch of an independent charity to support the continuation of such activity on a sustainable basis. The Talking Taboos Foundation will be launched later in 2013, chaired by Vincent Nolan.

Current Trading and Outlook

The robust trading that the Group has experienced in the first half of the year has continued over the summer period. The Board remains confident that full year expectations will be met.

Allan Rich,

Chairman

18 September 2013

Condensed Consolidated Income Statement

For the six months ended 30 June 2013

Condensed Consolidated Statement of Comprehensive Income

For the six months ended 30 June 2013

Condensed Consolidated Balance Sheet

As at 30 June 2013

Condensed Consolidated Cash Flow Statement

For the six months ended 30 June 2013

Condensed Consolidated Statement of Changes in Equity

For the six months ended 30 June 2013

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

Statement of changes in equity for the six months ended 30 June 2012:

Statement of changes in equity for the year ended 31 December 2012:

Notes to the Financial Information

For the six months ended 30 June 2013

1. ACCOUNTING POLICIES AND BASIS OF PREPARATION

The condensed consolidated financial information for the six months ended 30 June 2013 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 2012, 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 2012 were approved by the Board of directors on 12 March 2013 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 18 September 2013 and has not been audited.

The accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2012, 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 11. 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 Consumer 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

5. SEGMENTAL INFORMATION

For management purposes, the Group is organised into two operating groups; Cello Health and Cello Consumer. 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.