Preliminary Results

Cello Group plc

('Cello' or the 'Group')

Preliminary Results for the twelve months ending 31 December 2015

Strong 2015 performance - robust gross profit growth.

Cello Group plc (AIM:CLL, "Cello" or "the Group"), the pharmaceutical and consumer strategic marketing group, today announces its final audited results for the year to 31 December 2015.

Financial Highlights

· Revenue £157.3m (2014: £169.9m)

· Gross profit up 7.0% to £86.7m (2014: £81.0m)

· Like-for-like1 gross profit growth of 4.2%

· Headline2 profit before tax up 7.1% to £10.0m (2014: £9.4m)

· Headline basic earnings per share3 up 5.8% to 8.61p (2014: 8.14p)

· Statutory basic earnings per share up 31.0% to 3.54p (2014: 2.70p)

· Net debt4 of £4.2m, down from £7.2m in 2014

• Full Year dividend up 10.0% to 2.86p per share (2014: 2.60p)

• Good start to 2016, with encouraging bookings momentum continuing from Q4 2015

Divisional Highlights

· Cello Health like-for-like gross profit growth of 4.7%, operating margin maintained at competitive levels.

· Cello Signal like-for-like gross profit growth of 3.7%, operating margins improving to 9.5%.

Operational Highlights

· Continued good progress executing the long term growth strategy of Cello Health

· Cello Health product offering expands in digital and quantitative products

· Robust second half performance from Cello Signal in line with growth strategy

· Pulsar continues to grow very strongly

Mark Scott, Chief Executive, commented:

"Cello continues to make encouraging progress against its core strategic goals. Cello Health continues to make pleasing progress in building its global footprint whilst maintaining a competitive margin. Signal has largely completed its migration to a unified brand structure, to support its digital proposition, whilst raising its margin. The Group's debt continues to reduce and, as a consequence, the Board continues to raise the dividend significantly. Above all else, the Group continues to invest in organically developing its talented base of outstanding professionals, providing a platform for future growth."

1 Like-for-like measures exclude the results from companies acquired in the year and results from start-ups which are defined in note 6.

2 Headline measures exclude, where applicable, restructuring costs, amortisation of intangible assets, impairment charges, acquisition accounting adjustments, start-up losses and the charge for VAT payable and related costs.

3 Headline earnings per share is defined in note 9.

4 Net debt is defined in note 16

5 Operating margin is calculated by expressing operating profit as a percentage of gross profit.

Enquiries:

Overview

2015 saw a continued strong financial and operational performance. The Group reported a 7.0% increase in gross profit to £86.7m (2014: £81.0m) with headline profit before tax up 7.1% to £10.0m (2014: £9.4m).

Both Cello Health and Cello Signal have continued to make great strides towards establishing themselves as leaders in their respective fields. Cello Health completed its integration behind a single brand almost two years ago and the benefits of this have visibly fed into growth prospects for the company. Whilst Cello Health continued to trade well in the UK and in the USA in 2015, the key features of the year were the development of new sources of future global growth based on the Cello Health brand. 2015 saw significant growth from the emerging client base on the West Coast of the USA. It also saw a marked increase in collaboration between the different capabilities of Cello Health to secure new client briefs. In order to secure future growth, the Group continued its significant investment in the development of its biotech offer in Boston, USA.

Cello Signal made significant progress in integrating its offer behind the client facing Signal brand. By the end of the year a number of larger clients had been won on the basis of the integrated Signal proposition. The fruits of this process also began to show through in revenue growth and margin improvement.

The Group ended the year with a strong balance sheet, with net debt at £4.2m. As a result, the Board has raised the full year dividend by 10.0%, reflecting confidence in the Group's cash flow potential.

Regarding the VAT issue relating to charitable clients of Signal, following the £1.1m provision taken at the half year stage, the Board continues to believe that the total provision of £3.2m is appropriate.

The New Year has started well, with good income visibility and a solid order book from 2015.

Financial Review

Total Group gross profit was £86.7m (2014: £81.0m) on revenues of £157.3m (2014: £169.9m). Headline profit before tax was £10.0m (2014: £9.4m). The Group's results reflect a strong performance by Cello Health and an improved performance by Cello Signal, especially in the second half of the year. Like-for-like gross profit growth for the whole Group was 4.2%.

The Group's headline operating margin was 12.1% (2014: 12.3%) with a headline operating margin of 19.7% in Cello Health (2014: 21.2%), and 9.5% in Cello Signal (2014: 8.7%).

Headline finance costs were £0.4m (2014: £0.4m).

The Group's tax charge was £1.7m (2014: £1.5m) with a headline tax rate of 26.1% (2014: 26.5%). The headline tax rate is dropping as the UK Corporation Tax rate drops.

Headline basic earnings per share was up 5.8% to 8.61p (2014: 8.14p).

Statutory profit before tax was £4.8m (2014: £3.8m) after the impact of acquisition related costs of £1.6m (2014: £1.3m); restructuring costs of £0.7m (2014: £0.5m); amortisation of £0.4m (2014: £1.0m); start-up losses of £1.0m (2014: £0.4m); and the £1.3m charge for VAT payable and related costs.

Total Group estimated future acquisition related obligations are £3.3m, payable from 2016 to 2017, with a maximum of £0.9m payable in new ordinary shares.

Cello Health produced headline operating profit growth of 3.7% on an increase in gross profit of 11.3%, reflecting continued robust demand from global clients for its highly specialist range of clinically led services. Like-for-like gross profit in Cello Health grew by 4.7%. Operating margins fell slightly to 19.7% (2014: 21.2%). This reflects the tougher trading environment within the consumer offering of Cello Health, where some projects were deferred or cancelled during the year.

Cello Signal continued to make solid progress in 2015. Headline operating profit grew by 15.1% to £4.0m (2014: £3.4m) on gross profits of £41.6m (2014: £39.5m). Like-for-like gross profit growth was 3.7%. Operating margins therefore improved from 8.7% to 9.5%. There was particular strength in the financial services and charity client base. Operating margins were reduced by continued investment in expansion of the business in the USA and in Pulsar. These areas are currently delivering lower operating margin as they continue to be expanded.

Pulsar continued to grow impressively, with 191 clients at the end of 2015 (2014: 88). The product continues to evolve. During 2015, Facebook data was incorporated for the first time, vastly increasing the size of the dataset that is analysed. Operating losses of £0.2m for 2015 are absorbed within headline operating profit. Pulsar achieved break-even on a monthly basis from November 2015. Sales and renewal rates have been strong so far in 2016.

The Group benefitted from a stronger dollar in 2015 compared with 2014, with average US$:£ exchange rates strengthening from 1.65 in 2014 to 1.53 in 2015. The Group currently generates around $3.5m of headline operating profit in the USA. So far in 2016 the dollar has continued to strengthen to around 1.40.

The Board is proposing a final dividend of 2.02p per share (2014: 1.80p), giving a total dividend for the year of 2.86p per share (2014: 2.60p) representing an increase of 10.0%. The dividend has grown every year since 2006 and has grown by 10.0% or more for the past six years. Subject to shareholder approval, the final dividend will be paid on 27 May 2016 to all shareholders on the register at 6 May 2016, and will be recognised in the year ending 31 December 2016.

The Group incurs a number of charges in the income statement below headline operating profit, which are:

During 2015, the Group incurred exceptional costs of £0.7m (2014: £0.5m). This related to redundancy payments, predominately within Cello Signal as structural changes were implemented to integrate the offer further and reduce operating costs.

Operating cash flow before tax of £8.2m (2014: £4.8m) during the year represented a 79.2% (2014: 48.7%) conversion of headline operating profit. The Group's net debt position at 31 December 2015 was £4.2m (2014: £7.2m). The net debt:ebitda6 ratio at 31 December 2015 was 0.35 (2014: 0.64). Group debt facilities are renewable in March 2018. Total debt facilities are £20.0m with a £4.0m overdraft facility.

The VAT issue within a subsidiary of Cello Signal is the subject of ongoing discussions with HMRC. The Board continues to believe the provision made of £3.2m is appropriate. Further updates will be given when there are material developments.

The Group continued to invest in organic start-up activity. The primary focus was investment in the Boston office of Cello Health which specialises in biotech. While this business has required heavier investment than was originally planned, the Group remains confident about the prospects for the business and the overall opportunity it represents for future growth. In addition an office in Asia, which was a start-up, was closed during the year. Total start-up costs were £1.0m (2014: £0.4m).

Operational Review

Cello Health (www.cellohealth.com)

Cello Health had another strong year, delivering headline operating profit of £8.8m (2014: £8.5m) from gross profit of £44.5m (2014: £40.0m). Like-for-like gross profit growth was 4.7%. The business continues to service 23 of the largest 25 pharmaceutical clients7 globally, of which 18 have been clients for 4 years or more, as well as a growing number of biotech clients, particularly in the USA.

The Board of Cello Health has made significant progress in executing its long term strategy, which consists of four key areas: branding, collaboration, global expansion, and innovation.

The migration to the Cello Health brand has now been successfully completed, allowing the business to add more value to each client relationship and enabling more collaboration. Collaboration across Cello Health continued to rise and collaborative projects were commissioned by established and new clients alike in the UK, in Europe, and in the USA. The two largest clients of Cello Health grew as the relationship spread to other capabilities. The average contract size of client jobs also continues to increase, improving visibility.

Cello Health has continued to expand in the USA, the primary market for such services globally. The business's presence on the West Coast of the USA continues to grow with a good first full year contribution from Promedica and material new client relationships organically secured during the year by Cello Health. The Group made a material investment in a new start-up venture 'Cello Health BioConsulting' in the Boston area to access the growing USA biotech marketplace. In addition, the office in Chicago continues to expand rapidly. Cello Health now has offices in all the locations required to support core clients' needs.

The progress achieved by Cello Health BioConsulting in growing our new Boston office has been inhibited by employment restrictions on key employees from their former employer. However, in March 2016, agreement was reached between Cello Health BioConsulting Inc, certain employees of Cello Health BioConsulting Inc and their previous employer, allowing the partial release of these employees from their post-employment restrictions. When this agreement is formally completed, a payment of £0.9m will be made, with additional payments contingent on the financial performance of the Cello Health BioConsulting business over the next 12 months. The Group believes this represents a sensible investment in an important growth area for Cello Health.

6 ebitda is defined as headline operating profit before depreciation and amortisation.

7 Source Pharmaceutical Executive June 2015.

The Cello Health product range has continued to expand and develop. 'IQ', Cello Health's quantitative research offering, has grown significantly. 'eVillage®', Cello Health's digital research community platform is rapidly becoming a material component of the client proposition. The business is expected to launch "Pulsar Health" as a social media based solution for clients requiring large data sets in 2016.

Areas of Cello Health's consumer business experienced a slower year due to deferral of key projects, negatively impacting the overall margin of Cello Health. Excluding this effect, Cello Health's operating margin was sustained at 20.9% for 2015 (2014: 21.8%) and like-for-like gross profit growth was 7.6%. Appropriate actions have already been taken to address exposure to slower areas of the consumer market.

Notable project wins in 2015 included the following: AbbVie, Abellio, Age UK, Ahlstrom, Algeos, Barchester Healthcare, Bellis-Jones Hill, Boehringer Ingelheim, Boston Scientific, British Lung Foundation, Cancer Research UK, Care Quality Commission, Clark Research, Cooper Vision, Gilead Sciences, Johnson & Johnson, Janssen, Lundbeck, Merz Pharma, NHS Leadership Academy, Reckitt Benckiser, Sanofi, Sennheiser, Sustrans, Symbiota, Tovera and Vertex Pharmaceuticals.

2016 will see further development of Cello Health's client offer. The business starts the year with a robust order book and is confident about the future growth prospects of the business as it pursues its focused investment strategy.

Cello Signal (www.cellosignal.com)

Cello Signal had a good year, with a strong second half. Cello Signal is traditionally a second half weighted business due to its presence in the charity sector whose activity is more weighted towards Christmas. The business delivered headline operating profit of £4.0m (2014: £3.4m) on gross profit of £41.6m (2014: £39.5m) and like-for-like gross profit growth of 3.7%. Operating margins improved from 8.7% to 9.5%.

Cello Signal is following the same path as Cello Health of integrating the core proposition behind a single client facing brand. This has already begun to bear fruit in the form of material new client wins in late 2015 in the financial services and utility sectors under the Cello Signal banner, underpinned by a digitally led proposition to clients. Growth in these sectors can be attributed to Cello Signal's increasing expertise in complex databases and regulated client markets. These sectors have a common requirement to communicate regularly to their large customer bases.

The connectivity of Cello Signal will take a major step forward in 2016 as the majority of the Cello Signal businesses will become connected under a single P&L and single senior bonus structure. This will enable the business to compete more effectively against its large technology led competitors, as well as other agency groups.

A particularly exciting element of Cello Signal's 2015 performance was the strengthening of licence sales and renewals for Pulsar, Cello Signal's social media monitoring and analytics software platform. The business grew its software license client base to 191 at the end of 2015 (2014: 88). While there was a headline operating loss of £0.2m, the business is not expected to make losses going forwards. A growing strategic relationship with Facebook may have a significant positive impact on the competitive advantage enjoyed by Pulsar.

In addition, a key strategic imperative for Cello Signal will be to partner with Cello Health to build on its expertise in the public health area, where Cello Signal has produced campaigns relating to cancer screening, alcohol abuse, and healthy eating. This will include the application of Cello Signal's expertise in digital media which can be readily applied to pharmaceutical solutions for clients. Cello Signal also intends to adapt the Pulsar Platform as a dedicated offer to the healthcare client community.

Major clients wins in 2015 included: AC Hotels (Marriott), Adidas, Autograph Hotels, Bowers & Wilkins, Coty, Courtyard Hotels, De Beers, Drinkaware, EDI Group, Famous Grouse Global BTL, Havas Media, Hershey's (China), Holiday Inn Express, Home Retail Group, HP, IHG Hotels Group, Jim Beam, Kinross House, Leprino Foods, Marriott, Maxxium Midori, Mazda, Microsoft, Musgrave Group, Nairn's, Prostate Cancer UK, RBS, Renaissance Hotels, Thames Water, The London Clinic, UK2, Unilever and Visit Scotland.

Current Trading and Outlook

The Group began 2016 with a robust level of secured forward bookings. It has also seen encouraging levels of new business wins so far this year. At this relatively early stage of the year, the Board is confident that expectations for 2016 will be met.

Allan Rich

Non-Executive Chairman

16 March 2016

CONSOLIDATED INCOME STATEMENT

for the year ended 31 December 2015

Profit for the year arises from continuing operations.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 31 December 2015

Total comprehensive income for the year arises from continuing operations.

CONSOLIDATED BALANCE SHEET

As at 31 December 2015

CONSOLIDATED CASH FLOW STATEMENT

for the year ended 31 December 2015

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

for the year ended 31 December 2015

SIGNIFICANT ACCOUNTING POLICIES

1. Basis of Preparation

The financial information included in this report does not amount to full financial statements within the meaning of Section 434 of Companies Act 2006. The financial information has been extracted from the Group's Annual Report and financial statements for the year ended 31 December 2015, on which an unqualified report has been made by the Company's auditors, PricewaterhouseCoopers LLP.

Financial statements for the year ended 31 December 2014 have been delivered to the Register of Companies; the report of the auditors on those accounts was unqualified and did not contain a statement under 498 of the Companies Act 2006. The 2015 statutory accounts are expected to be published on 15 April 2016.

2. Going Concern

During the year the Group generated a profit before tax on continuing activities of £4.8m and excluding non-recurring restructuring costs and other non-headline charges the Group generated a profit before tax of £10.0m.

The Group meets its day-to-day working capital requirements through its bank facilities. At 31 December 2015 the Group's bank facilities consisted of a £4.0m overdraft facility and a £20.0m revolving credit facility ("RCF"). The RCF is committed to March 2018. £10.9m of the RCF is undrawn at 31 December 2015 and the Groups forecasts and projections show that the Group is able to operate within the level of its current facilities and its covenants.

After reviewing the Group's performance and forecast future cash flows, the Directors consider the Group has adequate resources to continue in operational existence for the foreseeable future. The Group therefore continues to adopt the going concern basis in preparing the Group's financial statements.

3. Revenue, Cost of Sales and Revenue Recognition

Revenue comprises the fair value of the consideration received or receivable from services, provided by the Group in the ordinary course of the Group's activities. Services include fees, commissions, rechargeable expenses and sales of materials provided by the Group. Revenue is shown net of Value Added Tax and discounts.

Revenue derived from fees is recognised as contract activity progresses, in accordance with the terms of the contractual agreement and the stage of completion of the work. The stage of completion is assessed based on the proportion of costs incurred or milestone completed, as appropriate to the contract. Where recorded revenue exceeds amounts invoiced to clients, the excess is classified as accrued income and where recorded revenue is less than amounts invoiced to clients, the difference is classified as deferred income.

Revenue derived from retainers is recognised evenly over the contract period.

Revenue derived from commissions, rechargeable expenses and sale of materials is recognised when the risk and rewards have been transferred to the client in line with the individual contract.

Cost of sales include amounts payable to external suppliers where they are retained at the Group's discretion to perform part of a specific client project or service where the Group has full exposure to the benefits and risks of the contract with the client. Cost of sales does not include direct labour costs.

4. Headline Measures

The Group believes that reporting non-GAAP or headline measures provides a useful comparison of business performance and this reflects the way the business is reported internally and controlled. Accordingly headline measures of operating profit, finance income, finance costs, profit before taxation and earnings per share exclude, where applicable, restructuring costs, amortisation of intangible assets, impairment charges, acquisition accounting adjustments, start-up losses, share option charges, fair value gains and losses on derivative financial instruments and the provision for VAT payable. These 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 reported and headline profit before taxation is presented in note 1. In addition to this, a reconciliation between reported and headline operating profit is presented in note 2, a reconciliation between reported and headline finance income and costs is presented in note 3 and a reconciliation between reported and headline earnings per share is presented in note 9. Headline measures in this report are not defined terms under IFRSs and may not be comparable with similarly titled measures reported by other companies.

5. Accounting Estimates and Judgements

The Group makes estimates and judgements concerning the application of the Group's accounting policies and concerning the future. The resulting estimates may, by definition, vary from the actual results. Estimates are based on historical experience and various other assumptions that management and the Board of Directors believe are reasonable.

The Directors consider the critical accounting estimates and judgements used in the financial statements and concluded that the main areas of judgements are:

i. Revenue recognition policies in respect of contracts which straddle the year end.

The Group is required to make an estimate of the project completion levels in respect of contracts which straddle the year end for income recognition purposes. Estimates are based on expected total costs and revenues from each contract. This involves a level of judgement and therefore differences may arise between the actual and estimated result. Where immaterial differences arise they are recognised in the income statement for the following reporting period. Any material changes to these estimates would affect revenue recognised in the financial statements and the level of deferred or accrued income on the balance sheet.

ii. Contingent deferred consideration payments in respect of acquisitions and acquisition related employee remuneration.

The Group has estimated the value of future amounts payable in respect of acquisitions. The estimate is based on management's estimates of the relevant entities future performance. If these estimates change in the future as the earn out progresses, the amount of the provision will vary. Any changes to the carrying value of the provision are recognised in the income statement.

As part of a typical acquisition an amount is also payable to the employees of the acquired company. These acquisition related employee remuneration costs are calculated using the same estimates of the relevant entities future performance as the deferred consideration payable. If these estimates change in the future, as the earn out progresses, the amount of the employee liability, which is recognised over the earn out period, will vary. Any changes to the carrying value of these liabilities are recognised in the income statement.

iii. Valuation and amortisation period of separately identifiable intangible assets on acquisitions.

The Group is required to value the separately identifiable intangible assets acquired as part of a business combination. In order to value some of these intangible assets, the Group must make assumptions as to future cash flows derived from these costs and estimate the expected lives of these assets. Changes to these estimates would affect the resulting valuation of goodwill and the amortisation charge recognised in the financial statements.

iv. Impairment of goodwill and intangible assets acquired as part of a business combination.

The Group tests goodwill and intangible assets acquired as part of a business combination annually for impairment, in accordance with the Group's accounting policies. The recoverable amount is based on value-in-use calculations, which requires estimates of future cash flows and the discount rate to apply in order to calculate the present values of these cash flows. The estimates used and sensitivity of these assumptions is disclosed in note 10.

v. Provision for VAT payable.

The Group has recognised a £3.2m provision in relation to VAT payable in respect of supplies to some of its charity clients by one of its subsidiaries Brightsource. Discussions with HMRC continue. Further details in relation to this provision are disclosed in note 14.

NOTES TO THE PRELIMINARY ANNOUNCEMENT

1 Reconciliation of profit on before taxation to headline profit before tax

2 Segmental information

For management purposes, the Group is organised into two operating segments; Cello Health and Cello Signal. These segments 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.

Revenue and costs not included in one of these operating segments, for example central overheads and results from start-up operations, have not been allocated to an operating segment in line with the way they are reported to the chief operating decision makers.

The principal activities of the operating segments are as follows:

Cello Health

The Cello Health Division provides market research, consulting and communications services principally to the Group's pharmaceutical and healthcare clients.

Cello Signal

The Cello Signal Division provides market research and direct communications services principally to the Group's consumer facing clients.

Revenues derived from the Group's largest client are less than 10.0% of the Group's total revenue. Revenue derived from the largest client in each operating segment also represents less than 10.0% of external revenue in each segment.

Sales between segments are carried out at arms-length. The revenue from external parties reported to the chief operating decision maker is measured in a manner consistent with that in the income statement.

The Group's operations are materially located in the United Kingdom and the USA.

The following table provides an analysis of the Group's revenue by geographical market, based on the location of the client:

3 Finance income and costs

4 Administrative expenses

5 Restructuring costs

Restructuring costs comprise of cost saving initiatives including severance payments, property and other contract termination costs. They are included within administration costs and have been separately identified as a non-headline item because of their size or their nature or because they are non-recurring. In the opinion of the Directors, these costs are required to be separately identified, to enable a full understanding of the Group's financial performance.

6 Start-up losses

Start-up losses have been separately identified as a non-headline item because, in the opinion of the Directors, separate disclosure is required to enable a full understanding of the Group's financial performance.

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.

7 Taxation

The standard rate of corporation tax in the UK changed from 21.0% to 20.0% with effect from 1 April 2015. Accordingly the Group's profits from the UK are taxed at an effective rate of 20.25% (2014: 21.50%). Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdiction.

The charge for the year can be reconciled to the profit per the income statement.

8 Equity dividends

The dividends paid in the year were:

A 2015 final dividend of 2.02p has been proposed for approval at the Annual General Meeting in 2016. In accordance with IAS 10 Events after the reporting period these dividends have not been recognised in the consolidated financial statements at 31 December 2015.

9 Earnings per share

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders of the parent by the weighted average number of ordinary shares outstanding 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 of the parent by the weighted average number of ordinary shares outstanding during the year adjusted for the potentially dilutive ordinary shares.

The Group's potentially dilutive shares are shares expected to be issued as deferred consideration on acquisitions and share options issued.

Headline earnings per share is calculated using headline post-tax earnings for the year, which excludes the effect of restructuring costs, start-up losses, amortisation of intangibles, impairment 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.

10 Goodwill

The recoverable amount for each CGU is determined using a value-in-use calculation. This calculation uses pre-tax cash flow projections derived from 2016 budgets, as approved by management, with an underlying growth rate of 2.5% per annum in years 2 to 5. After year 5 a terminal value has been applied using an underlying long term growth rate of 2.5%. No additional Cello specific growth has been assumed beyond year 1. The pre-tax cash flows are discounted to present value using the Group's pre-tax weighted average cost of capital ("WACC"), which was 9.1% for 2015 (2014: 9.3%). This rate was calculated using the Capital Asset Pricing Model with an estimated cost of debt and equity, with appropriate small company risk factors.

Sensitivity to changes in assumptions

The value-in-use exceeds the total goodwill value across the Group by £122.1m.

The impairment review of the Group is sensitive to changes in the key assumptions, most notably the pre-tax discount rate, the terminal growth rate and projected operating cash flows. Reasonable changes to these assumptions are considered to be:

· 1.0% increase in the pre-tax discount rate.

· 1.0% decrease in the terminal growth rate.

· 10.0% decrease in projected operating cash flows.

Reasonable changes to the assumptions used, considered in isolation, would not result in impairment to goodwill for any of the Groups CGUs.

11 Trade and other receivables

The average credit period taken on the provision of services was 60 days (2014: 55 days).

The Directors consider that the carrying value of trade and other receivables approximates to fair value.

12 Trade and other payables

The Directors consider that the carrying value of trade and other payables approximates to fair value.

13 Borrowings

Bank loans

The Group has a multi-currency debt facility with the Royal Bank of Scotland plc ("RBS"). At 31 December 2015 this facility consisted of a £20.0m revolving credit facility ("RCF"). The RCF bears interest at a variable rate of 1.25% to 2.30% over LIBOR and is committed to March 2018. The average interest rate on the Group's bank loans in the year was 2.2% (2014: 2.4%). The debt facility is secured by a debenture held by RBS over the assets of the Group.

At 31 December 2015, the Group has drawn £9.1m (2014: £12.4m) under the RCF.

Loan notes

Loan notes have been issued as part of the consideration for certain acquisitions. Loan notes are initially secured by way of cash deposits and by guarantee. This security expires after a period of between 2 and 5 years in accordance with the terms of the relevant acquisition agreement. After this period the loan notes are unsecured. Loan notes bear interest at the following rates:

14 Provisions

The provision for VAT payable is in relation to amounts payable, including an estimate for interest and penalties, to HMRC in respect of certain supplies to charity clients. In accordance with IAS 37 Provisions, contingent liabilities and contingent assets, potential recovery from clients has not been recognised.

In addition to the provision, the Group incurred £201,000 (2014: nil) of legal and professional costs in relation to the ongoing discussions with HMRC on this matter.

15 Cash generated from operations

16 Net debt

Net debt at 31 December 2015 and 31 December 2014 comprises of

17 Post balance sheet events

In March 2016, agreement was reached between Cello Health BioConsulting Inc, certain employees of Cello Health BioConsulting Inc ("the employees"), and their previous employer, in relation to the partial release of the employees from ongoing post-employment restrictions. When this agreement is formally completed, a payment of £0.9m will be made, with additional payments contingent on the financial performance of the business over the next 12 months.