27th Sep 2005 07:02
Cello Group plc27 September 2005 Cello Group plc Interim Results 2005 for the six months ended 30 June 2005 Cello Group plc, the marketing services group, today announces its maideninterim results for the six months ended 30 June 2005, the first since itsadmission to AIM in November 2004. • Turnover £20.9m, Gross profit £10.3m, Pre tax profits £1.32m • Group structure established - consists of three platforms and seven operating companies including three acquisitions completed post period end • Further acquisitive and organic growth initiatives in hand • Current trading remains strong and good forward visibility Kevin Steeds, Chairman, commented: "I am pleased to announce that the Group has delivered excellent results -comfortably ahead of expectations, with all businesses performing well. "Current trading remains strong across all three platforms. Given the currentvisibility of revenues and the contribution that the three companies recentlyacquired will make, we are confident about the outcome for the full year. "We continue to look at a range of initiatives designed to further strengthenour existing businesses as well as a selected number of acquisitionopportunities." 27 September 2005 Enquiries: Cello Group plc (www.cellogroup.co.uk)Kevin Steeds - Chairman 020 7457 2020 (today)Mark Scott - Chief Executive 020 7812 8460 (thereafter)Mark Bentley - Finance Director College HillAdrian Duffield/Clare Warren 020 7457 2020 Chairman's Statement Strategic overview We are pleased to announce our first full interim results for the six monthsended 30 June 2005. The period since the Group's creation and listing lastNovember has been one of fast growth for Cello, with strong organic growthcoupled with the subsequent addition of three new businesses to the Cellofamily, in line with our strategy. In less than a year, Cello has established itself as a leading player in itsthree chosen areas; market research, brand development, and direct marketing anddatabase management. At the core of what we do is research, data, associatedinsight and the ability to measure return on investment to our clients. The seven companies that now form Cello are all well established, having been inexistence for an average of fifteen years. This has given Cello the strongfoundation necessary to strive for innovation and enhanced growth, across allmedia. The Group has developed an excellent international blue chip client listacross a range of industry sectors. Our 400 professional staff, many of whomare shareholders, are amongst the very best and are strongly motivated to drivethe organic expansion of the Group. Our strategy remains to create value for shareholders through the building of aportfolio of companies in the UK marketing services sector around specialistplatforms in market research, brand development, and direct marketing anddatabase management. Cello's objective is to provide its platform businesses with increased resourcesto accelerate their growth. By focusing on core platforms and sticking tightlyto the strategy of building these businesses, we can achieve scale withoutsacrificing coherence or the benefits of specialism. All the businesses acquired by Cello operate in different niches of themarketing services sector but share the following characteristics: • Significant organic and acquisitive growth potential• Blue chip client base with a record of client loyalty• Experienced, high quality management teams• A track record of profitability• Potential for enhancing gross margins The Group will continue to examine possible further acquisitions and earningsenhancing initiatives that meet the Board's stringent acquisition criteria andreinforce the three existing platforms. Results In the six months ended 30 June, turnover was £20.9m, gross profit £10.3m andprofit before taxation was £1.32m. As we only started trading as a Group lastNovember, there are no comparative figures for the equivalent six month period.The comparative figures which are the results for the audited period from 5 May2004, the date of incorporation of Cello Group plc, to 31 December 2004 coveronly two months trading. The operating margin for group companies, excluding head office costs, hasreached 15.7% in the six month period, which is highly competitive and amongstthe best performances in the marketing service sector. This is testimony toCello's positioning in high value added and higher growth areas of the marketingmix. Given the seasonal nature of Target, our direct marketing business, and themargins being achieved in the recently acquired companies, we expect theoperating margin to improve in the second half. Basic earnings per share for the period were 3.17p and fully diluted earningsper share were 2.53p. In line with our dividend policy outlined at the time ofour listing, the Board is not paying an interim dividend. Review of Operations Cello has built a strong market position within three specialist, high margin,high growth platforms. These platforms each have a single board structurecomprising one or two founders of each of the underlying businesses. Thesethree boards, with their respective chairmen, meet regularly and report to theplc board. In the six months ended 30 June, we focused all efforts on bedding down themanagement structure of the platforms, as well as consolidating the organicgrowth effort. This focus has paid off well and positioned the Group for growthfrom a sound foundation. Market Research At 30 June 2005 the market research platform was represented by Insight, whichspecialises in healthcare market research, a highly specialist and fast growingniche market. In the six months ended June, Insight steadily increased itsmarket share. This was driven primarily by an increased share of existingclients' budgets, and a growth in spend from international clients. New clientsacquired in the period include Altana and UCB Pharma. We are pleased with theperformance of the recently opened New Jersey office, with Genzyme andMillennium included as new clients. In July, the market research platform was augmented by the acquisition ofLeapfrog. Leapfrog specialises in consumer market research and brand planningwork. The company employs around 25 people and major clients include Tesco, GSK,BBC, Scottish Courage, AA, RHM and Wyeth. On 1 August the Group also acquired RS Consulting, a quantitative marketresearch and business consultancy. Based in London, the company employs approx70 people across its three subsidiaries. Major clients include HP, Xerox, Sony,FedEx, Department of Work & Pensions, AXA, Yell, RBS, AON and BUPA. The combined market research capability of Cello is now very strong, and a rangeof profitable synergies are already being exploited. This includes a fastdeveloping web-based set of products. Brand Development At 30 June this platform was represented by Leith, a leading brand developmentagency. In the first six months, Leith progressed strongly with the winning ofmajor accounts with The Scottish Executive and Silentnight. Leith achieved anoperating margin at the higher end of its peer group reflecting the increasingamount of consultancy work being undertaken for its clients. In July the platform was further strengthened by the acquisition of The ValueEngineers, a leading marketing and brand consultancy. This is in line with ourstrategy of moving into high value added areas of advisory work where the Groupwill be able to establish a pre eminent position serving clients internationallyfrom the UK. The company employs around 40 people and major clients includeUnilever, Carlsberg, Diageo, Sony Ericsson, ICI, Visa, T-Mobile, BP and Britvic. Direct Marketing and Database Management The direct marketing and database management platform comprises Target Direct(which encompasses Target Direct Print), Navigator and Talking Numbers. TargetDirect specialises in direct marketing for charities and not for profitorganisations where it has a leading market position in the UK. It also has afast developing proposition in the over 50's or grey market. This has combinedpowerfully with Navigator's highly commercial orientation which is particularlyfocused on financial services. Talking Numbers, the database subsidiary, hasunderpinned this expansion with a deepening data competence. Target DirectPrint has had a particularly strong first half. Major new clients won in the first six months include Which?, Abbey and Nestle.The platform continues to complement traditional direct media with use of webbased formats and mobile applications. We have launched the Target Direct brand in Scotland, which has immediatelycontributed positively to these results with the win of Abbey. Board In May 2005, Mark Bentley was appointed Group Finance Director. Mark waspreviously Chief Operating Officer and Finance Director of Citigate DeweRogerson Limited. In June, Allan Rich joined the Group as Non Executive Director. Allan was theExecutive Group Chairman of Mediacom UK until 2003 and brings over 40 yearsexperience of the media planning, buying and advertising world. I would like to take this opportunity to thank all of the staff within all ourcompanies who have participated in this excellent maiden set of interim resultsfor the Group. We are looking forward to many more positive developments in thefuture. Outlook Since the end of June the Group has continued to trade well, with a number ofsignificant new client wins. Given the strength of the third quarter'sperformance and current revenue visibility, the Board remains confident of thefull year outcome. The addition of three acquisitions in the second half further reinforces theGroup's position with clients. This is already translating into a number ofshared profitable activities which will further contribute to the performance ofthe Group as we move into 2006. Overall, the Group is well positioned for further expansion at a sensible andprofitable pace. Kevin SteedsChairman Cello Group plcConsolidated Profit and Loss Accountfor the six months ended 30 June 2005 Audited Unaudited Period from six months ended 5 May 2004 Notes 30 June 2005 to 31 December 2004 £ £ TURNOVER 2a 20,936,122 9,400,558 Cost of sales (10,674,593) (5,473,229) GROSS PROFIT 2b 10,261,529 3,927,329 Administrative expenses (9,088,978) (2,665,925) OPERATING PROFIT 1,172,551 1,261,404 Interest receivable and similar income 4 192,737 63,311Interest payable 5 (48,922) (27,891) PROFIT ON ORDINARY ACTIVITIES BEFORE 1,316,366 1,296,824TAXATION Tax on profit on ordinary activities 6 (443,853) (437,581) PROFIT FOR THE PERIOD 872,513 859,243 Basic earnings per share 7 3.17 15.06Diluted earnings per share 7 2.53 7.23 The operating profit for the six months arises from the group's continuingoperations. No separate statement of Total Recognised Gains and Losses has been presented asall such gains and losses have been dealt with in the profit and loss account. Cello Group plcConsolidated Balance Sheet30 June 2005 Unaudited Audited 30 June 31 December 2005 2004 £ £ FIXED ASSETSIntangible assets 36,104,001 36,104,001Tangible assets 1,241,752 1,137,033 37,345,753 37,241,034CURRENT ASSETSWork in progress 5,440,702 5,583,826Debtors 7,407,936 8,924,507Cash at bank and in hand 7,430,569 9,718,919 20,279,207 24,227,252 CREDITORS: Amounts falling due within one year (16,468,143) (20,208,117) NET CURRENT ASSETS 3,811,064 4,019,135 TOTAL ASSETS LESS CURRENT LIABILITIES 41,156,817 41,260,169 CREDITORS: Amounts falling due after more than one year (61,203) (97,167) PROVISIONS FOR LIABILITIES AND CHARGES (6,768,099) (7,658,000) NET ASSETS 34,327,515 33,505,002 CAPITAL AND RESERVESCalled up share capital 2,754,189 2,804,189Share premium account 12,323,417 12,323,417Shares to be issued 7,022,000 7,022,000Profit and loss account 1,731,756 859,243Merger reserve 10,496,153 10,496,153 EQUITY SHAREHOLDERS' FUNDS 34,327,515 33,505,002 Cello Group plcConsolidated Cash Flow Statementfor the six months ended 30 June 2005 Audited Unaudited Period from six months ended 5 May 2004 Notes 30 June 2005 to 31 December 2004 £ £ Net cash (outflow) / inflow from 9a (17,442) 2,998,810operating activities Returns on investments and servicing of 143,815 35,420finance Taxation (67,364) (60,240) Capital expenditure and financial (302,081) (92,309)investment Acquisitions and disposals (889,900) (7,720,144) Cash (outflow) before financing (1,132,972) (4,838,463) Financing (487,294) 13,799,385 (DECREASE) / INCREASE IN CASH IN THE (1,620,266) 8,960,922PERIOD Reconciliation of net cash flow to movement in net funds Audited Unaudited Period from six months ended 5 May 2004 30 June 2005 to 31 December 2004 Notes £ £ (Decrease) / Increase in cash in the 9b (1,620,266) 8,960,922period Cash outflow from decrease in debt and 437,295 196,820lease financing Change in net debt resulting from cash (1,182,971) 9,157,742flows New finance leases - (15,432) New loan notes (246,100) (2,305,362) Loans and finance leases acquired with - (390,116)subsidiary (1,429,071) 6,446,832 NET FUNDS AT 1 JANUARY 2005 6,446,832 - NET FUNDS AT 30 June 2005 9b 5,017,761 6,446,832 1. BASIS OF PREPARATION The consolidated interim financial statements, which were approved by the boardon 26 September 2005, have been prepared under the accounting policies set outon pages 26 and 27 of the Group's 2004 Annual Report. The information relating to the half year ended 30 June 2005 is unaudited anddoes not constitute statutory accounts but has been reviewed by the company'sauditors in accordance with the auditing practices board bulletin, "Review ofInterim financial information". The accounts for the period ended 31 December2004 have been reported on by the company's auditors and delivered to theRegistrar of Companies. The report of the auditors was unqualified and did notcontain a statement under section 237(2) or (3) of the Companies Act 1985. Thecomparative figures include the results of subsidiary undertakings from 9November 2004, being the date of their acquisition by Cello Group plc. 2. SEGMENTAL INFORMATION The Group's turnover, gross profit and profit on ordinary activities beforetaxation were all derived from the following activities: 2a. Turnover Audited Unaudited Period from six months to 5 May 2004 30 June 2005 to 31 December 2004 £ £ Market research 4,883,328 1,870,692Brand development 5,701,600 4,634,622Direct marketing and database management 10,351,194 2,895,244 20,936,122 9,400,558 2b. Gross Profit Audited Unaudited Period from six months to 5 May 2004 30 June 2005 to 31 December 2004 £ £ Market research 2,908,996 1,228,570Brand development 3,315,677 1,204,800Direct marketing and database management 4,036,856 1,493,959 10,261,529 3,927,329 2c. Profit on ordinary activities before taxation Audited Unaudited Period from six months to 5 May 2004 30 June 2005 to 31 December 2004 £ £ Market research 687,728 157,567Brand development 554,820 314,480Direct marketing and 365,342 949,307database managementCentral (291,524) (124,530) 1,316,366 1,296,824 2d. Net assets Unaudited Audited 30 June 2005 31 December 2004 £ £ Market research 3,820,816 3,371,448Brand development 706,609 358,593Direct marketing and database management 1,548,478 1,336,924Central 28,251,612 28,438,037 34,327,515 33,505,002 3. DIVIDEND The Board has not declared an interim dividend for the period. 4. INTEREST RECEIVABLE AND SIMILAR INCOME Audited Unaudited Period from six months to 5 May 2004 30 June 2005 to 31 December 2004 £ £Interest receivable:Bank deposits 192,737 63,311 5. INTEREST PAYABLE Audited Unaudited Period from six months to 5 May 2004 30 June 2005 to 31 December 2004 £ £ on bank loans and overdrafts 12,726 14,926on loan notes 28,861 10,042in respect of finance leases 7,335 2,923 48,922 27,891 6. TAXATION ON PROFIT ON ORDINARY ACTIVITIES The tax charge for the half year ended 30 June 2005 has been based on anestimated effective tax rate on profit on ordinary activities for the full yearof 30% (period ended 31 December 2004 - 30%). 7. EARNINGS PER SHARE Unaudited Audited six months to Period from 30 June 2005 5 May 2004 to 31 December 2004 Profit Pence per Profit Pence per £ Weighted share £ Weighted share average average number of number of shares sharesBasicEarnings 872,513 27,541,892 3.17 859,243 5,705,692 15.06attributable toordinaryshareholdersDilutive effect ofsecurities:Share options 763,266 600,000Contingentconsideration:shares to be 6,132,751 5,573,045issued Diluted earnings 872,513 34,437,909 2.53 859,243 11,878,737 7.23 per share Basic earnings per share is calculated by dividing the earnings attributable toordinary shareholders by the weighted average number of ordinary shares in issueduring the period, determined in accordance with the provisions of FRS22: "Earnings per Share". Diluted earnings per share is calculated by adjusting the weighted averagenumber of ordinary shares in issue on the assumption of conversion of all thepotentially dilutive ordinary shares. The Group has two categories of dilutivepotential shares, being share options granted where the exercise price is lessthan the average price of the Company's ordinary shares during the period andshares to be issued as contingent consideration on acquisition during the year. 8. RECONCILIATION OF MOVEMENT IN EQUITY SHAREHOLDERS' FUNDS Audited Unaudited Period from six months to 5 May 2004 30 June 2005 to 31 December 2004 £ £ Profit for the period 872,513 859,243Redemption of redeemable shares (50,000) -New share capital subscribed - 2,804,189Premium on shares issued in period - 22,819,570(net of expenses)Movements in value of shares to be issued - 7,022,000 Net addition to equity shareholders' funds 822,513 33,505,002Opening equity shareholders' funds 33,505,002 - Closing equity shareholders' funds 34,327,515 33,505,002 9. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT (a) Reconciliation of operating profit to net cash (outflow) / inflow fromoperating activities Audited Unaudited Period from six months to 5 May 2004 30 June 2005 to 31 December 2004 £ £ Operating profit 1,172,551 1,261,404Depreciation and amortisation 223,561 63,454Profit on sale of fixed assets (26,200) -Decrease in work in progress 143,124 1,617,553Decrease in debtors 1,516,571 976,693(Decrease) in creditors (3,047,049) (920,294) Net cash (outflow) / inflow from operating activities (17,442) 2,998,810 (b) Analysis of net funds At 31 December Cash flow Other non cash At 30 June 2004 changes 2005 £ £ £ £ Cash at bank and in hand 9,718,919 (2,288,350) - 7,430,569Overdrafts (757,997) 668,084 - (89,913) 8,960,922 (1,620,266) - 7,340,656 Loan notes due within one year (2,305,362) 371,825 (246,100) (2,179,637)Finance leases (208,728) 65,470 - (143,258) 6,446,832 (1,182,971) (246,100) 5,017,761 10. POST BALANCE SHEET EVENTS - ACQUISITIONS (a) Leapfrog Research and Planning On 1 July 2005 the company purchased the entire issued share capital of LeapfrogResearch and Planning Limited for a maximum total consideration of £6 million.The initial consideration comprised £3 million, of which £1.74 million was incash and loan notes and the allotment and issue of 1,007,819 ordinary shares. Amaximum deferred consideration of up to £3 million is dependent on the financialperformance of Leapfrog Research and Planning Limited for the four and a halfyears period to 31 December 2009. (b) The Value Engineers On 18 July 2005 the company purchased the entire share capital of The ValueEngineers Limited for a maximum total consideration of £7.15 million. Theinitial consideration comprised £4.48 million of which £2.24 million was in cashand loan notes and the allotment and issue of 1,877,619 ordinary shares. Amaximum deferred consideration of £2.67 million is dependent on the financialperformance of The Value Engineers Limited for the three and a half year periodto 31 December 2008. (c) RS Consulting On 1 August 2005 the company purchased the entire share capital of RS Consulting(Holdings) Limited for a maximum total consideration of £4.75 million. Theinitial consideration comprised £2.4 million of which £1.2 million was in cashand loan notes and the allotment and issue of 987,655 ordinary shares. Amaximum deferred consideration of £2.35 million is dependent on the financialperformance of RS Consulting (Holdings) Limited for the four and a half yearperiod to 31 December 2009. 11. This report does not include any comparatives for the six month period to30 June 2004 as the group listed on the Alternative Investment Market inNovember 2004, simultaneously completing its three initial acquisitions. 12. Copies of the interim statement are being sent to shareholders and will beavailable from the company's registered office at 11-13 Charterhouse Buildings,London EC1M 7AP. INDEPENDENT REVIEW REPORT TO CELLO GROUP PLC Introduction We have been instructed by the company to review the financial information setout on pages 5 to 13 and we have read the other information in the interimstatement and considered whether it contains any apparent misstatements ormaterial inconsistencies with the financial information. This report, including the conclusion, has been prepared for and only for thecompany for the purpose of their interim statement and for no other purpose. Wedo not, therefore, in producing this report, accept or assume responsibility forany other purpose or to any other person to whom this report is shown or intowhose hands it may come save where expressly agreed by our prior consent inwriting. Directors' responsibilities The interim statement, including the financial information contained therein, isthe responsibility of, and has been approved by the directors. The directorsare responsible for preparing the Interim Statement in accordance with the AIMMarket Rules which require that the accounting policies and presentation appliedto the interim figures must be consistent with those that will be adopted in thecompany's annual accounts. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board as if that Bulletin applied. A reviewconsists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand based thereon assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with Auditing Standards and therefore provides a lowerlevel of assurance than an audit. Accordingly we do not express an auditopinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2005. BAKER TILLY Chartered Accountants2 Bloomsbury StreetLondonWC1B 3ST 26 September 2005 Notes to Editors (www.cellogroup.co.uk) Cello Group plc is a marketing services group which listed on AIM in November2004. The Group's strategy is to create value for shareholders by building a portfolioof companies around three specialist platforms, each operating within adifferent niche of the UK marketing services sector: market research, branddevelopment, and direct marketing and database management. Each platform hassignificant organic and acquisitive growth potential; blue chip clientrelationships with a history of client loyalty; experienced, high qualitymanagement teams; and a track record of profitability. Market Research * Insight Research Group - London and New York Insight is a specialist healthcare market research business which offers a broadrange of quantitative and qualitative research based solutions. Its clientsinclude GlaxoSmithKline, Novartis, AstraZeneca, Shire Pharmaceuticals,NovoNordisk, Boehringer Ingleheim, Lundbeck, Pfizer, Roche and Merck, Sharp andDohme. * Leapfrog Research and Planning - Windsor Leapfrog is a leading consumer market research and planning consultancy offeringqualitative and quantitative research in the UK and internationally. It actsfor a number of blue chip clients including Tesco, GSK, BBC, Scottish Courage,AA, RHM and Wyeth. * RS Consulting - London RS Consulting, a quantitative market research and business consultancy. Based inLondon, the company employs approx 70 people across its three subsidiaries.Major clients include HP, Xerox, Sony, FedEx, Department of Work & Pensions,AXA, Yell, RBS, AON and BUPA. Brand Development * Leith - Edinburgh and London Leith is the largest and most successful advertising agency in Scotland. Theagency has been voted Scottish Agency of the Year for the last five years.Leith opened a London office in 2000. Leith's major clients include Irn Bru,Scottish Executive, Carling, Standard Life Bank, Hotpoint, Standard Life,Silentnight and Goodfellas Pizza. * The Value Engineers - Beaconsfield TVE is a leading strategic brand consultancy focused on four core disciplines;branding, strategy, insight and innovation. Clients include Unilever,Carlsberg, Diageo, Sony Ericsson, ICI, Visa, T-Mobile and Britvic. Direct Marketing and Database Management * Target Group - Cheltenham and Cirencester Target is the leading direct and database marketing consultancy specialising inthe "not-for-profit" and charity sector. The agency works for five of the top20 charities in the UK. Target is expanding into the "grey sector" of productsand services for older people for clients such as National Trust, Saga andWhich? Limited. * Navigator Responsive Advertising - Edinburgh Navigator Responsive Advertising, Scotland's leading direct marketing agency,provides responsive communication solutions for a wide range of clientsincluding HBOS Group, De Vere Resort Ownership, ScottishPower, Scottish Widows,Intelligent Finance and Remy Martin. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
CLL.L