Trading update

19 January 2011

Cello Group plc

Pre-close trading update - year ended 31 December 2010

Cello Group plc (AIM: CLL, 'the Group'), the insight and strategic marketing group, today publishes the following pre-close trading update for the year ended 31 December 2010.

Summary

The Group has experienced strong profit growth backed by strong cash conversion. The Board expects that full-year headline pre-tax profits will be ahead of expectations and net debt will be better than expected at less than £9.0m.

Operating performance

Research and Consulting

The Group's market research and consulting business has experienced a strong second half, with robust like-for-like revenue growth. Operating profits are expected to have risen by more than 20% on a like-for-like annual basis, reflecting continued strong spending patterns from the Group's broad, international blue-chip client base, and improving operating margins.

Performance has been particularly strong in the pharmaceutical and health related client sectors, which now constitute the primary area of the Group's research and consulting activity and which operate at a higher margin than the Group's other client sectors.

Non-UK revenues are growing faster than UK revenues and now comprise almost half of the Group's research and consulting activity. In particular, the Group's pharmaceutical offering based in the New York office has performed very strongly and is expanding rapidly. In addition, following significant blue-chip client wins in 2010, the Group intends to expand its US West Coast office more aggressively in 2011.

As indicated in the Group's interim results, which were announced on 14 September 2010, the Group has incurred an exceptional charge of approximately £0.8m relating to the material reduction of the Group's exposure to public sector client spend. This process is now complete.

Notable project wins in the research and consulting area came from our long established blue chip client list and include Nokia, TFL, News International, EBay, MTV, Travis Perkins, Adidas, Kellogg's, KPMG, P&G, HP, RIM, PWC, Pfizer, Novartis, Novo Nordisk, Eurostar, GSK Global, Unilever, 3M, Visa, Wrigleys, BUPA, RBS, Citi and Nestle.

Tangible

Tangible's developing position in web-based social media research and communications has continued to benefit the network, as well as the Group's overall research offering. Approximately 20% of Tangible's activity is now in the research and consulting area, a transition which the Group anticipates continuing rapidly in 2011.

Tangible has delivered a solid result, against the headwind of UK public sector marketing cuts. The Board anticipates that, whilst revenues have declined year on year reflecting the reduction in public sector spend, profits will have grown by more than 10% with improved margins driven by good cost management.

International revenues in Tangible have grown in 2010, with some significant new client wins. Tangible is opening an office in Beijing which may also serve as a hub for the research and consulting business. We continue to appraise expansion options in the Asia-Pacific region.

Notable new business wins by Tangible came from both the commercial and charity sectors, and include Ben & Jerry's, Dettol, O2, Pfizer, Dove, IFAW, SPX, First Great Western, NHS, Tesco Bank, Cancer Research UK, British Red Cross, Sony, Royal Mail, Scottish & Southern Energy, Sainsbury's Finance, Scottish Government, Nestle Purina, Macmillan Cancer Support, Salvation Army and the Stroke Association.

Net debt

Net debt for the year end will be better than expected, having fallen below £9.0m, reflecting strong cash flow conversion. The Group's overall debt facilities stand at £17.0m, providing financial flexibility and giving the Group scope to prudently expand as appropriate.

Outlook

Revenue momentum experienced in the research and consulting business in the last quarter of 2010 means that the Group is carrying forward a healthy pipeline of activity into the first quarter of 2011. At this early stage of the year, the Group is currently trading in line with management's expectations. The Board remains optimistic for the prospects in 2011.

The Group expects to announce its preliminary results for the year ended 31 December 2010 on Wednesday 15 March 2011.

Enquiries:

Notes to Editors

Cello is an insight and strategic marketing group. The Group's strategy is to create value for shareholders by building an international research and consulting business able to advise blue-chip clients globally, along with a marketing business capable of delivering world class solutions.

Cello has annualised revenue in excess of £125m, annualised operating income in excess of £60m and employs just under 800 professional staff.

www.cellogroup.co.uk