Trading Update

CELLO GROUP PLC

Trading update

Cello Group plc (AIM: CLL, "Cello", or "the Group"), the leading healthcare and consumer strategic marketing group, publishes a trading update for the six months to 30 June 2014.

Summary

Cello has experienced robust trading for the first six months to 30 June 2014. Like-for-like gross profit growth (which excludes the impact of acquisitions) has been in excess of 10% for the period. The Group has increased its investment in professional resource to service this high level of gross profit growth. Despite this increased investment overall Group operating margins have also grown slightly in the period.

The Board is therefore pleased to announce that trading for the first six months of 2014 will be well ahead of the same period in 2013 and that it expects to at least meet current full year market expectations.

Operating Performance

Cello Health

Like-for-like growth in Cello Health has been strong for the first six months of 2014. Operating margins have been maintained in excess of 20%. The fastest growing discipline within Cello Health has been Cello Health Consulting, which has experienced a very strong period of growth as it expands into the US market. The Insight and Communications disciplines of Cello Health have also performed well in both the UK and the US.

The acquisition of iS Health occurred in May 2014. Integration with Cello Health is going to plan, and the business is performing in line with expectations.

Cello Health continues to add senior professionals to its global team. Whilst the primary focus is continued organic expansion, the Group remains actively engaged in seeking targeted acquisitions to complement Cello Health's client offer, particularly in the US.

Cello Signal

Cello Signal has experienced a very strong period of like-for-like gross profit growth, as core clients have continued to spend robustly, and the enhanced service offering of Cello Signal has gained rapid market traction.

Cello Signal's digital services remain the primary growth engine, both in web services, social media insight, strategy and execution and managed services. The addition of the team from Line Digital in May has reinforced this momentum. The overseas network of Cello Signal has also made good progress in the first six months, particularly in the US.

Many of the core growth areas within Cello Signal are still in the investment phase of their development. However, operating margins have improved slightly compared to the same period last year.

Organic Growth Initiatives

In 2012 and 2013, the Group invested in several start up initiatives by opening up new offices overseas, launching new products and starting new businesses. The majority of these initiatives have been successful, and they have developed into profitable offerings within the Group. As expected, the operating margin in these areas is not yet optimised as investment is still on-going. In 2014, the Group is focusing on beginning to optimise the returns from these investments. Most notably this year, the Group is investing in Pulsar, the social media analytics software product, which is being expanded as a licence offering into a wider set of client solutions as a standalone business within Cello Signal, following its successful launch.

Balance Sheet

At the half year stage, net debt is in line with expectations, and reflects normal seasonal movements.

Full Year Outlook

Trading for the first six months of 2014 will be well ahead of the same period in 2013 and the Board expects the Group to at least meet current full year market expectations.

Mark Scott, Cello Chief Executive, commented:

"The growth strategies for Cello Health and Cello Signal are clearly established. Both businesses are well positioned in their respective markets. The Group continues to execute against these growth strategies in a focused and energetic manner".

The Group will announce its full interim results on 17 September 2014.

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