Trading update

Cello Group plc

('Cello' or the 'Group')

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 2015.

Summary

Cello has experienced good trading for the first six months to 30 June 2015, with strong headline revenue growth. Half year operating profits will be a little lower than the same period last year due to anticipated short term profit variance at the Signal division as indicated with the AGM statement of 12 May 2015. Based on current income pipelines the Board is confident that current full year market expectations will be met.

Operating Performance

Cello Health

Cello Health experienced strong headline revenue growth in the first half of the year. Following investment in resource, margins will be marginally lower than the same period last year, but will still be around the 20% level.

Of particular note in the first half of the year has been the opening of a new Boston office with the recruitment of several experienced senior consulting professionals in the US to establish Cello Health BioConsulting Inc. This initiative is targeting the growing Biotech community and has already generated project income. Further investment has also been made to grow Cello Health's presence in San Francisco, again to capitalise on the growth area of Biotech.

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 slight headline revenue growth in the first half of the year. As indicated in the AGM statement of 12 May 2015, the first half of 2015 has produced lower profit margins than the same period in 2014 due to headcount addition in the high growth US market research business. There was also a particularly strong first half 2014 comparator due to a one off high margin contract which ran from 2013 to April 2014. The full year for Signal is expected to reflect the normal second half seasonality and as a result show good year-on-year progress at both the revenue and profit line.

Cello Signal is now working increasingly closely with Cello Health to facilitate the building of digital and social media capability relevant to the pharmaceutical and biotech client base. The Group views this as a particularly large opportunity which can be captured with better use of the existing capabilities of the group and without the need for acquisition. Signal also has strong capabilities in the area of social health, and particularly charities, which is relevant to this mission. The Group expects to announce further progress in this area with the full year results as the Group accelerates its clear positioning in the healthcare market

VAT

Following extensive recent dialogue with the Charity Tax Group and the Direct Marketing Association, HMRC has recently published updated guidance on several areas which have been contested by the charities industry, (Revenue and Customs Brief 10 (2015)).The Board welcomes this new guidance, which appears to be the basis for settlement of this issue. In the absence of any further issues being raised by HMRC, the Board believes that the disclosure already made for historical VAT exposure in the 2014 accounts remains appropriate.

Balance Sheet

At the half year stage, net debt is in line with expectations.

Full year outlook

The Board is confident of meeting current full year market expectations.

Mark Scott, Cello Chief Executive, commented:

"The Group is making pleasing progress in its strategy of evolving into a global healthcare player. The transition to a more digital proposition for Cello Health has begun to create close and productive bonds between Cello Health and Signal which we will build on quickly to create further value for shareholders".

The Group will announce its full interim results on 16 September 2015

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