Marketing services small cap Cello (CLL:AIM) rises 8.9% to 86p following news of better-than-forecast 2013 results. The year-end trading update has prompted broker Sanlam Securities to raise its target price from 79p to 94p.


The real star of the show was the Cello Consumer division which has delivered double-digit sales growth, versus Sanlam’s forecast of 9%. This is perhaps reflective of the early-cycle nature of marketing services running into a much stronger UK economic recovery.

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Management appears to have been savvy at controlling the cost base as the new business at Cello Consumer has fed through into ‘very strong profit growth’, not to mention cash flows. The company says ‘a single large, non-recurring contract from an existing client expanded rapidly in the second half of 2013, contributing to this particularly high level of profit growth’.


While management cautions that this one-off project ‘will not recur’, it is breaks like this which can be really important for a business of Cello’s size and will no doubt buoy spirits to make the most of the ‘several opportunities to replace it during 2014’. The extra cash has relieved some of the pressure of the net debt balance sheet. Sanlam estimates that net borrowings will have finished 2013 at less than £4 million, versus its estimate of £5.7 million, a source of relief.

Issue Date: 22 Jan 2014