Source - RNS
RNS Number : 7477J
Cello Group plc
14 September 2016
 

 

For Immediate Release

14 September 2016

 

 

Cello Group plc

('Cello' or the 'Group')

 

Interim Results for the six months to 30 June 2016

 

 

Progress with growth strategy

 

Cello Group plc (AIM: CLL; "Cello", "The Group"), the healthcare focused strategic marketing group, today announces its interim results for the six month period to 30 June 2016.

 

 

Group Financial Highlights

 

·      Revenue up 5.0% to £80.9m (2015: £77.0m)

·      Gross profit up 4.0% to £43.5m (2015: £41.9m)

·      Like-for-like1 gross profit growth of 2.7%

·      Headline profit before tax2 £4.2m (2015: £4.2m)

·      Headline operating margin3 10.2% (2015: 10.5%)

·      Headline basic earnings per share 3.54p (2015: 3.61p)

·      Statutory operating loss of £0.8m (2015: profit of £1.9m) after additional provision for VAT of £2.1m (2015: £1.1m)

·      Statutory basic loss per share 1.08p (2015: earnings of 1.18p)

·      Net debt reduced to £4.8m (June 2015: £9.8m)

·      VAT dispute with HMRC fully settled

·      Interim dividend up 19.0% to 1.00p (2015: 0.84p), reflecting new dividend policy now in place - full year pay out ratio to increase to c.40% of headline earnings per share

 

Divisional Financial Highlights

 

H1

Cello Health

Cello Signal

£'000

2016

2015

% Growth

2016

2015

% Growth

Segmental gross profit

22,162

21,683

2.21%

20,774

19,993

3.91%

Headline operating profit

3,906

4,310

(9.4)%

1,641

950

72.7%

Headline operating margin

17.6%

19.9%


7.9%

4.8%


 

Operating Highlights

 

·      Continued rapid evolution of Cello Health as a global business

·      Ongoing expansion of Cello Health US as the primary growth driver

·      Successful consolidation of Cello Signal behind a single client facing brand

·      Large new Signal clients won in 2015 flowing through into 2016 results

·      Pulsar, the Group's social media analytic software product, growing strongly and operationally profitable

 

Mark Scott, Chief Executive, commented: "Following the resolution of the long standing VAT dispute with HMRC, the Group is energetically pursuing its growth ambitions, supported by a strong balance sheet. Cello Health has the potential to become a global leader in the growing healthcare advisory services space and rapid progress is being made towards this goal. Cello Signal's potential as a powerful growth and profit engine for the Group in the digital solutions space is now also taking shape. Overall, the Group is well placed to fulfil its growth ambitions."

 

 

This announcement contains inside information

Like-for-like comparisons remove the impact of acquisitions and results from start-ups in 2015

2 Headline measures are stated before non-headline charges (see note 3)

3 Headline operating margin is defined as headline operating profit as a percentage of segmental gross profit

 

Enquiries:

 

Cello Group plc (www.cellogroup.com)


Mark Scott, Chief Executive

020 7812 8460

Mark Bentley, Group Finance Director




Cenkos Securities


Bobbie Hilliam

020 7484 4040



Buchanan


Sophie McNulty, Jamie Hooper, Madeleine Seacombe

020 7466 5000

 

 

Notes to Editors (www.cellogroup.com)

Cello is a healthcare-focused strategic marketing group.

The Group's strategy is to create value for shareholders by building a leading global healthcare advisory business under the Cello Health brand, and a leading digital communications solutions business under the Cello Signal brand.

Cello has annualised revenues in excess of £150m, annualised gross profit in excess of £85m and employs over 900 professional staff.

 

 

 

 



 

Chairman's Statement

 

Overview

 

The Group has continued to make solid progress in pursuing its growth strategy. The building blocks to more rapidly expand both Cello Health and Cello Signal are now firmly established.

 

Cello Health continues to grow its core pharmaceutical offer behind the Cello Health brand, adding significant new blue chip clients in both the US and the UK. The operational benefits of closer integration are beginning to be realised, in the form of shared property and back office integration. The strategy of establishing Cello Health US as the primary driver of future growth is making rapid progress.

 

Cello Signal has successfully integrated its core client proposition behind the Cello Signal brand, developing its digital and data offer which is being purchased by large corporates globally. Pulsar, Cello Signal's proprietary social media analytic software product, continues to grow at an impressive pace and is now profitable. 2017 will see the product launched in the US market.

 

Financially, debt levels remain moderate and continue to drop following an excellent working capital performance in the period. Accordingly, we are pleased to increase returns to shareholders in the form of higher dividends.

 

Financial Review

 

Gross profit for the six months to 30 June 2016 increased 4.0% to £43.5m (2015: £41.9m) on revenue up 5.0% to £80.9m (2015: £77.0m). Like-for-like gross profit growth was 2.7%. Headline operating profit was £4.4m (2015: £4.4m). Headline operating margins were 10.2% (2015: 10.5%). Headline pre-tax profit was £4.2m (2015: £4.2m). Further detail on these numbers is provided in the operating review.

 

The reported tax charge is £0.1m (2015: £0.7m). This represents a headline tax rate of 27.6% (2015: 26.4%).

 

Headline basic earnings per share were 3.54p (2015: 3.61p). Statutory loss per share was 1.08p (2015: earnings of 1.18p).

 

The Group currently earns around $3.5m a year in operating profits from US domiciled businesses. In addition, some UK domiciled Group businesses also do work in the US, with a proportion of this work billed in US Dollars. Accordingly, there is some foreign exchange risk, and such risk is hedged by the Group's debt being largely denominated in US Dollars, as well as the maintenance of a US Dollar denominated overdraft. There remains some residual US Dollar exposure, and over the first half of the year the average US Dollar/Pound rate strengthened from 1.51 to 1.41. The Group calculates that the benefit of this in the first half of the year is around £0.3m of operating profit.

 

The Group's net debt at 30 June 2016 was £4.8m (31 December 2015: £4.2m; 30 June 2015: £9.8m). This is a strong performance which reflects excellent working capital management over the period. Total debt facilities are £24.0m.

 

Following a review of the dividend policy and in view of the robust financial position, the expectation is that the full year payout ratio will be increased to around 40% of headline earnings per share. Accordingly, the interim dividend rises 19.0% to 1.00p (2015: 0.84p). The interim dividend is payable on 4 November 2016 to all shareholders on the register on 7 October 2016. The Group continues an unbroken record of annual dividend growth since it began paying dividends in 2006.

 

On 16 May 2016, the Group was pleased to announce that the dispute with HMRC regarding the VAT status of certain suppliers to charity clients had been resolved, and the uncertainty generated by the issue had been removed. It was also announced that a charge of £2.1m would be recognised in the period. The total amount due to HMRC has been settled in full in the second half of the year. The Group is now in ongoing discussions with clients regarding recovery of these balances.

 

Costs of £0.5m were incurred from continued investment in start-up activity. This is disclosed below headline operating profit. The majority of the losses relate to the investment in Cello Health Bioconsulting Inc., which is currently loss making but which has a good pipeline of projects and proposals for the second half of the year. In addition, as disclosed previously, the Group made a payment of £0.9m to the prior employer of the senior staff hired to establish this business. Legal costs associated with resolving this issue were £0.2m.

 

Restructuring costs of £0.7m were incurred within the Cello Health Consumer business, and Cello Signal. In the case of Cello Signal, operating margins have improved as a result of the elimination of redundant roles following consolidation of the business behind the Signal brand. In the case of the Cello Health Consumer business, corrective cost action following the cessation of certain client contracts has left this business now trading profitably on a monthly basis.

 

The following table summarises the adjustments made to calculate headline operating profit. The acquisition related costs of £0.5m (2015: £0.5m) relate to necessary accounting charges arising from the acquisition of iS Healthcare Dynamics Limited in 2014.

 


2016

£m

 

2015

£m

Headline operating profit

4.4

4.4

VAT provision

(2.1)

(1.1)

Restructuring costs

(0.7)

(0.3)

Start-up losses

(0.5)

(0.2)

Bio Consulting settlement

(1.1)


Share option charges

(0.1)

(0.1)

Acquisition related costs

(0.5)

(0.5)

Amortisation

(0.2)

(0.3)

Statutory operating (loss)/profit

(0.8)

1.9

Net finance costs

(0.1)

(0.2)

Statutory (loss)/profit before tax

(0.9)

1.7

 

Operating Review

 

Cello Health


H1 2016

H1 2015

Full year 2015


£'000

£'000

£'000

Segmental gross profit

22,162

21,683

44,496

Headline operating profit

3,906

4,310

8,779

Headline operating margin

17.6%

19.9%

19.7%

 

The four underlying capabilities of Cello Health are Cello Health Insight, Cello Health Consulting, Cello Health Communications and Cello Health Consumer. Cello Health overall had a good six months, with the core pharmaceutical orientated offer performing very well both in the UK and in the US. All capabilities have therefore performed well with the exception of certain aspects of Cello Health Consumer. The client base is stable and consists of the vast majority of all large global pharmaceutical businesses. There is also a growing Bio-tech client base, particularly in the US, which represents a major source of potential growth for Cello Health. Overall, segmental gross profit increased by 2.2% to £22.2m (2015: £21.7m) and like-for-like gross profit growth in the first half of 2016 was 1.5%.

 

Cello Health Insight in particular had an excellent first six months of the year both in the US and the UK, with new clients coming into the income pipeline as well as a notable increase in quantitative research which is more long term and recurring in nature than the more project based nature of the qualitative research offering.

 

Following the cessation of certain contracts within the Cello Health Consumer division in the UK, action has been taken to align the cost base with current demand. The early signs are that the UK business has stabilised and it is now trading in monthly profit, albeit at a reduced margin that will affect Group profits both this year and next. In the US, this same activity area has continued to trade strongly and resource is being reallocated to further develop this opportunity behind new contract wins.

 

If the restructured UK element of Cello Health Consumer is excluded from the calculations, then the like-for-like gross profit growth from the three other core clinically-led capabilities of Cello Health, where the client base is predominantly large pharmaceutical organisations, was 6.0%. On this basis, operating margins from this part of the business were 20.8%. Despite the negative impact of the consumer unit, operating margins across the whole of Cello Health remained healthy and competitive at 17.6% (H1 2015: 19.9%, FY 2015: 19.7%). Operating profits were therefore £3.9m for the first half (2015: £4.3m).

 

Cello Health US has continued to grow well, with strong performances from the Research and Communications capabilities in New York, Philadelphia, Chicago and San Francisco. Several new material clients have commenced work during this period. The Consulting business is smaller, but getting good traction as the investment in the new Cello Health BioConsulting business starts to generate returns and the business pitches for and wins new projects for new clients. Cello Health intends to build a strong practice in the Biotech area, which will account for a material proportion of the overall healthcare market. Cello Health BioConsulting in the US continued to be loss making in the first half but is gaining momentum with a robust pipeline of proposals and prospects. With further planned investment in this territory, the strategic goal of the US being the largest geographical revenue contributor to Cello Health is within reach.

 

Cello Health has also recently added significant professional resource in the digital solutions area, enabling provision of digital services to clients, both in the US and UK. The recent launch of Pulsar Health as a focused social media research offering to clients has already shown rapid traction.

 

Cello Health continues to extract the benefits of being a unified business. In the second half of the year, the Consulting and Communications businesses in the UK will move to a single office in Farnham housing over 120 people. This will encourage collaboration as well as being more efficient.

 

Cello Signal

 


H1 2016

H1 2015

Full year 2015


£'000

£'000

£'000

Segmental gross profit

20,774

19,993

41,555

Headline operating profit

1,641

950

3,952

Headline operating margin

7.9%

4.8%

9.5%

 

The benefits of the integration process behind the Cello Signal brand are beginning to flow, after an extended period of rationalisation. This is reflected in solid growth and an improved profit margin. The core proposition of Cello Signal of solving complex digital communications and social media challenges is proving to be powerful with large clients. Segmental gross profit increased by 3.9% to £20.8m (2015: £20.0m) and like-for-like gross profit growth in the first half of 2016 was 4.1%.

 

In the UK the business is now clustered into three office hubs, located in Edinburgh, Cheltenham and London, enabling development of more integrated client solutions and greater efficiency of delivery. This is now allowing the business to look to expand into the US market more energetically, with 2017 set to see a focused push to accelerate this US organic expansion process.

 

In the first half of the year, the Edinburgh hub traded very well, with income secured from new clients won in the final quarter of 2015 flowing well into 2016. In the Cheltenham hub, a further new material client has delivered significant incremental income in the first half of the year although some of this income will not be repeatable in the future. The improvement in these two locations has significantly driven the considerable overall improvement in first half performance. Performance in Signal's research division based in London has also been very strong.

 

Pulsar, the Group's proprietary social media intelligence platform has continued to grow software sales very strongly, making a first contribution to operating profits in the period. It now has over 240 licence holding clients. Plans are in development to launch Pulsar in the US and this is likely to happen in 2017. Renewals rates are good, and the product continues to evolve with the social media environment. We therefore expect Pulsar to continue to be profitable going forward, and to sustain a high growth rate.

 

Cello Signal is also building an impressive franchise in the tech client community with clients including Facebook, Spotify, EA, Activision, and HP in addition to its broader blue chip client base.

 

Full year Trading Outlook

 

The Group has had a solid first half, and expects to benefit from the usual second half weighting that has occurred in the past due to the nature of the work done for its clients. The Group also expects to benefit from the recent strengthening of the US Dollar against the Pound.

 

Overall momentum in both Cello Health and Cello Signal is strong, with clear growth strategies and the Board believes that full year expectations will be broadly achieved.

 

Allan Rich,

Chairman

13 September 2016

Condensed Consolidated Income Statement

For the six months ended 30 June 2016

 


 

 

 

Notes

Unaudited

Six months ended

30 June 2016

£'000

Unaudited

Six months ended

30 June 2015

£'000

Audited

Year ended

 31 December 2015

£'000






Continuing operations





Revenue

4

80,855

77,030

157,315

Cost of sales


(37,320)

(35,150)

(70,634)



              

              

                              

Gross profit

4

43,535

41,880

86,681






Administration expenses


(44,301)

(40,007)

(81,543)



              

              

                      

Operating (loss)/profit

4

(766)

1,873

5,138






Finance income

5

-

1

3

Finance costs

5

(126)

(184)

(387)



              

              

                            

(Loss)/profit before taxation

4

(892)

1,690

4,754






Taxation

6

(47)

(675)

(1,707)



              

              

                            






(Loss)/profit for the period


(939)

1,015

3,047



=======

=======

======

Attributable to:





Owners of the parent


(939)

1,010

3,042

Non-controlling interests


-

5

5



              

              

                          



(939)

1,015

3,047



=======

=======

=======













Unaudited

Six months ended

30 June 2016

£'000

Unaudited

Six months ended

30 June 2015

£'000

Audited

Year ended

31 December 2015

£'000

(Loss)/earnings per share





Basic (loss)/earnings per share

8

(1.08)p

 1.18p

3.54p

Diluted (loss)/earnings per share

8

(1.08)p

1.15p

3.44p






 



Condensed Consolidated Statement of Comprehensive Income

For the six months ended 30 June 2016

 



Unaudited

Six months ended

30 June 2016

£'000

Unaudited

Six months ended

30 June 2015

£'000

Audited

Year ended

31 December 2015

£'000






(Loss)/profit for the period


 (939)

1,015

3,047






Other comprehensive income:





Exchange differences on translation of foreign operations

38

18

89



              

              

              

Total comprehensive (loss)/income for the period


(901)

1,033

3,136



======

======

======

Total comprehensive (loss)/income attributable to:





Owners of the parent


(901)

1,028

3,131

Non-controlling interests


-

5

5



              

              

              

Total comprehensive (loss)/income for the period


(901)

1,033

3,136



======

======

======

 



Condensed Consolidated Balance Sheet

As at 30 June 2016

 

 


 

 

Notes

 

Unaudited

At 30 June 2016

£'000

Unaudited

At 30 June 2015

£'000

Audited

At 31 December 2015

£'000






Goodwill

9

74,237

73,364

73,673

 

Intangible assets


786

1,140

1,050

 

Property, plant and equipment


2,347

2,089

1,950

 

Deferred tax assets


765

992

879

 



               

               

               

 

Non-current assets


78,135

77,585

77,552

 



               

               

               

 






 

Trade and other receivables


41,193

37,824

43,683

 

Cash and cash equivalents


3,976

1,176

5,249

 



               

               

               

 

Current assets


45,169

39,000

48,932

 



               

               

               

 






 

Trade and other payables


(42,141)

(29,794)

(39,392)

 

Current tax liabilities


(1,296)

(1,858)

(1,823)

 

Borrowings


(155)

(692)

(232)

 

Provisions

10

-

(3,209)

(3,209)

 

Obligations under finance leases


(21)

(24)

(24)

 



               

               

               

 

Current liabilities


(43,613)

(35,577)

(44,680)

 



              

               

               

 

Net current assets


1,556

3,423

4,252

 



               

               

               

 

Total assets less current liabilities


79,691

81,008

81,804

 



               

               

               

 






 

Trade and other payables


(2,218)

(1,225)

(1,693)

 

Borrowings


(8,564)

(10,216)

(9,127)

 

Obligations under finance leases


(24)

(61)

(33)

 

Deferred tax liabilities


(105)

(155)

(133)

 



               

               

               

 

Non-current liabilities


(10,911)

(11,657)

(10,986)

 



               

               

               

 

Net assets


68,780

69,351

70,818

 



=====

=====

=====

 






 

Equity





 

Share capital

11

8,726

8,558

8,576

 

Share premium


19,099

18,796

18,834

 

Merger reserve


28,807

28,807

28,807

 

Capital redemption reserve


50

50

50

 

Retained earnings


11,451

12,587

13,860

 

Share-based payment reserve


603

568

635

 

Foreign currency reserve


44

(65)

6

 



              

              

              

 

Equity attributable to equity holders of parent


68,780

69,301

70,768

 






 

Non-controlling interests


-

50

50

 



              

              

              

 

Total equity


68,780

69,351

70,818

 



======

======

======

 

 

 

 

 

 



Condensed Consolidated Cash Flow Statement

For the six months ended 30 June 2016


 

 

 

Notes

Unaudited

Six months ended

30 June 2016

£'000

Unaudited

Six months ended

30 June 2015

£'000

Audited

Year ended

31 December 2015

£'000






 

Net cash from/(used in) operating activities before taxation

12

3,269

(428)

8,247






Tax paid


(459)

(156)

(1,220)



              

              

              

 

Net cash from/(used in) operating activities after taxation


2,810

(584)

7,027



              

              

              






Investing activities





Interest received


-

1

3

Purchase of property, plant and equipment


(957)

(391)

(814)

Sale of property, plant and equipment


17

9

16

Expenditure on intangible assets


(62)

(124)

(366)

Purchase of subsidiary undertakings


(248)

25

(200)



              

              

              

 

Net cash used in investing activities


(1,250)

(480)

(1,361)



              

              

              






Financing activities





Proceeds from issuance of shares


192

61

117

Dividends paid to equity holders


(1,727)

(1,529)

(2,244)

Repayment of borrowings


(3,681)

(8,209)

(12,749)

Repayment of loan notes


(77)

(68)

(68)

Drawdown of borrowings


2,509

6,165

9,165

Increase in overdrafts


-

460

-

Capital element of finance lease payments


(12)

(14)

(42)

Interest paid


(105)

(148)

(325)



              

              

              

Net cash used in financing activities


(2,901)

(3,282)

(6,146)



              

              

              

Movements in cash and cash equivalents





Net decrease in cash and cash equivalents


(1,341)

(4,346)

(480)






Exchange gains/(losses) on cash and bank overdrafts


68

(44)

163

Cash and cash equivalents at the beginning of the period


5,249

5,566

5,566



              

              

              

Cash and cash equivalents at end of the period


3,976

1,176

5,249



=====

=====

=====

 

 

 

Condensed Consolidated Statement of Changes in Equity

For the six months ended 30 June 2016

 

Statement of changes in equity for the six months ended 30 June 2016:


Share

Capital

£'000

Share

 Premium

£'000

Merger Reserve

£'000

Capital Redemption Reserve

£'000

Retained Earnings

£'000

Share-based Payment Reserve

£'000

Foreign Currency

Exchange Reserve

£'000

Total Attributable to Equity Shareholders

£'000

Non-Controlling Interest

£'000

Total

Equity

£'000



At 1 January 2016

8,576

18,834

28,807

50

13,860

635

6

70,768

50

70,818


          

          

          

          

          

          

          

                

          

            












Loss for the period

-

-

-

-

(939)

-

-

(939)

-

(939)

Other comprehensive income:











Currency translation

-

-

-

-

-

-

38

38

-

38


          

          

          

          

          

          

          

                

          

            


          

          

          

          

          

          

          

                

          

            

Shares issued

150

265

-

-

-

-

-

415

-

415

Acquisition of non-controlling interest

 

-

 

-

 

-

 

-

 

25

 

-

 

-

 

25

 

(50)

 

(25)

Credit for share-based incentives

 

-

 

-

 

-

 

                   -

 

-

 

138

 

-

 

138

 

-

 

138

Tax on share-based payments recognised directly in equity

 

 

-

 

 

-

 

 

-

 

 

-

 

 

62

 

 

-

 

 

-

 

 

62

 

 

-

 

 

62

Transfer between reserves in respect of share options

 

-

 

-

 

-

 

-

 

170

 

(170)

 

-

 

-

 

-

 

-

Dividends paid (note 7)

-

-

-

-

(1,727)

-

-

(1,727)

-

(1,727)


          

          

          

          

          

          

          

                

          

              


          

          

          

          

          

          

          

                

          

             












As at 30 June 2016

8,726

19,099

28,807

50

11,451

603

44

68,780

-

68,780


=====

======

======

======

======

=====

=======

=========

========

========

 

Statement of changes in equity for the six months ended 30 June 2015:


Share

Capital

£'000

Share

 Premium

£'000

Merger Reserve

£'000

Capital Redemption Reserve

£'000

Retained Earnings

£'000

Share-based Payment Reserve

£'000

Foreign Currency

Exchange Reserve

£'000

Total Attributable to Equity Shareholders

£'000

Non-Controlling Interest

£'000

Total

Equity

£'000



At 1 January 2015

8,530

18,663

28,807

50

12,923

544

(83)

45


          

          

          

          

          

          

          

              

          

          










Profit for the period

-

-

-

-

1,010

-

-

5

Other comprehensive income:









Currency translation

-

-

-

-

-

-

18

18

-

18


          

          

          

          

          

          

          

           

          

          


          

          

          

          

          

          

          

           

          

           

Shares issued

28

133

-

-

-

-

-

-

Credit for share-based incentives

 

-

 

-

 

-

 

-

 

-

 

111

 

-

 

-

Deferred tax on share-based payments recognised directly in equity

 

 

-

 

 

-

 

 

-

 

 

-

 

 

96

 

 

-

 

 

-

 

 

-

Transfer between reserves in respect of share options

 

-

 

-

 

-

 

-

 

87

 

(87)

 

-

 

-

 

-

 

-

 

Dividends paid (note 7)

-

-

-

-

(1,529)

-

-

(1,529)

-   

(1,529)


          

          

          

          

          

          

          

             

          

           


          

          

          

          

          

          

          

              

          

          



As at 30 June 2015

18,796


======

 

 

 

Statement of changes in equity for the year ended 31 December 2015:

 


Share

Capital

£'000

Share Premium

£'000

Merger Reserve

£'000

Capital Redemption Reserve

£'000

Retained Earnings

£'000

Share-based Payment Reserve

£'000

Foreign Currency Exchange Reserve

£'000

Total Attributable to Equity Shareholders

£'000

Non-Controlling Interest

£'000

Total

Equity

£'000










At 1 January 2015

8,530

18,663

28,807

50

12,923

544

(83)

69,434

45

69,479


          

              

              

          

               

          

          

               

          

               












Profit for the year

-

-

-

-

3,042

-

-

3,042

5

3,047











Other comprehensive income:





Currency translation

-

-

-

-

-

-

89

89

-

89


          

              

              

          

               

          

          

               

          

               

Total comprehensive income for the period

 

-

 

-

 

-

 

-

 

3,042

 

-

 

89

 

3,131

 

5

 

3,136


          

              

              

          

               

          

          

               

          

               










Transactions with owners:




Shares issued

46

171

-

-

-

-

-

217

-

217

Credit for share-based incentives

 

-

 

-

 

-

 

-

 

-

 

204

 

-

 

204

 

-

 

204

Tax on share-based payments recognised directly in equity

 

 

-

 

 

-

 

 

-

 

 

-

 

 

26

 

 

-

 

 

-

 

 

26

 

 

-

 

 

26

Transfer between reserves in respect of share options

 

-

 

-

 

-

 

-

 

113

 

(113)

 

-

 

-

 

-

 

-

Dividends paid (note 7)

-

-

-

-

(2,244)

-

-

(2,244)

-

(2,244)


          

              

              

          

               

          

          

               

          

               

Total transactions with owners

 

46

 

171

 

-

 

-

 

(2,105)

 

91

 

-

 

(1,797)

 

-

 

(1,797)


          

              

              

          

               

          

          

               

          

               

 

As at 31 December 2015

 

13,860

 

635

 

6

 

70,768

 

70,818


======

====

=====

=======

======

 

 

 



Notes to the Financial Information

For the six months ended 30 June 2016

 

1.   ACCOUNTING POLICIES AND BASIS OF PREPARATION

 

The condensed consolidated financial information for the six months ended 30 June 2016 has been prepared in accordance with IAS 34 Interim Financial Reporting, as adopted by the European Union. The condensed consolidated financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2015, which have been prepared in accordance with IFRSs as adopted by the European Union.

 

The condensed consolidated financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2015 were approved by the Board of directors on 16th March 2016 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.

 

The condensed consolidated financial information was approved for issue on 13 September 2016 and has not been audited.

 

The accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2015, as described in those annual financial statements.

 

There are no new IFRSs or IFRICs that are effective for the first time for the interim period that would be expected to have a material impact on the Group.

 

2.   SEASONALITY OF OPERATIONS

 

The Cello Health division is not materially influenced by seasonal factors. However, there are a number of clients in the Cello Signal division who traditionally commission activity in the second half of the year leading to increased revenues for that period with respect to those clients.

 

3.   HEADLINE MEASURES

 

The Group believes that reporting non-GAAP or headline measures provides a useful comparison of business performance and reflects the way the business is controlled.  Non-headline gains and losses 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.  Accordingly headline measures exclude, where applicable, the effect of the following items:

 

i.              Restructuring costs - these costs principally relate to redundancy costs.

ii.    Charge for VAT payable and related costs - these costs relate to the VAT payable to HMRC in respect of certain charity clients.  Further details are provided in note 10.

iii.   Bioconsulting settlement and related costs - these costs relate to the payment made to the prior employer of senior staff hired to establish the business, in respect of post-employment restrictions.

iv.   Start-up losses - these 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.

v.     Amortisation of intangible assets - this is in respect of amortisation charged against separately indentifiable intangible assets acquired as part of a business combination.

vi.    Acquisition related employee remuneration expense - costs with regards to deferred payments payable to vendors and certain employees of a company in accordance with the share purchase agreement of the acquired company.  In accordance with IFRS 3 Business Combinations, these costs are recognised in the income statement by virtue of employment conditions in the relevant share purchase agreement

vii.          Share option charges

 

Headline measures in this report are not defined terms under IFRS, and may not be comparable with similarly titled measures reported by other companies.

 

A reconciliation between statutory and headline profit before taxation is presented in below:

 


Unaudited

Six Months ended

 30 June 2016

£'000

Unaudited

Six Months ended

 30 June 2015

£'000

Audited

Year ended

 31 December 2015

£'000





(Loss)/profit from continuing operations before taxation

(892)

1,690

4,754

 

Restructuring costs

 

693

 

318

 

694

Charge for VAT payable and related costs

2,053

1,100

1,301

Post-employment restrictions settlement and related costs

1,067

-

-

Start-up losses

518

157

1,037

Amortisation of intangible assets

146

301

445

Acquisition related employee remuneration expense

525

525

1,591

Share option charges

138

111

204


              

              

              

Headline profit before taxation

4,248

4,202

10,026


======

======

======

Headline profit before tax is made up as follows:




Headline operating profit

4,374

4,385

10,410

Headline finance income

-

1

3

Headline finance costs

(126)

(184)

(387)


              

              

              


4,248

4,202

10,026


======

======

======

 

In addition, a reconciliation between statutory and headline earnings per share is presented in note 8.

 

4.   SEGMENTAL INFORMATION

 

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

 

Six months ended 30 June 2016





 

 

 

 

Cello Health

£'000

 

Cello Signal

£'000

Consolidated and Unallocated

£'000

 

Group
£'000

 

Revenue





 

External sales

32,906

47,178

771

80,855

 

Intersegment revenue

11

16

(27)

-

 


                

                

              

                

 

Total revenue

32,917

47,194

744

80,855

 


=====

=====

====

=====

 






 

Gross profit

22,162

20,774

599

43,535

 


=====

=====

====

=====

 






 






 

Operating profit





 

Headline operating profit (segment result)

3,906

1,641

(1,173)

4,374

 


                

                

               


 

Restructuring costs




(693)

 

Charge for VAT payable and related costs




(2,053)

 

Post-employment restrictions settlement and related costs




(1,067)

 

Start-up losses




(518)

 

Amortisation of intangible assets




(146)

 

Acquisition related employee remuneration expense




(525)

 

Share option charges




(138)

 





                

 

Operating loss




(766)

 






 

Finance costs




(126)

 





                

 

Loss from continuing operations before taxation




 

(892)
======

 






 

Other information





 






 

Capital expenditure

686

271

-

957

 


                

                

                

                

 

Capitalisation of intangible assets

3

59

-

62

 


                

                

                

                 

 

Depreciation of property plant and equipment

218
_______

377
_______

3
_______

598
_______

 

 


 



 

 

Six months ended 30 June 2015





 

 

 

Cello Health

£'000

 

Cello Signal

£'000

Consolidated and Unallocated
£'000

 

Group
£'000

Revenue





External sales

30,453

46,290

287

77,030

Intersegment revenue

24

27

(51)

-


                 

               

               

               

Total revenue

30,477

46,317

236

77,030


=====

=====

=====

=====











Gross profit

21,683

19,993

204

41,880


=====

=====

=====

=====






Operating profit





Headline operating profit (segment result)

4,310

950

(875)

4,385


               

               

               


Restructuring costs




(318)

Charge for VAT payable and related costs




(1,100)

Start-up losses




(157)

Amortisation of intangible assets




(301)

Acquisition related employee remuneration expense




(525)

Share option charges




(111)





               

Operating profit




1,873






Financing income




1

Finance costs




(184)





               

Profit from continuing operations before taxation




1,690





=====






Other information










Capital expenditure

220

171

-

391


               

               

               

               

Capitalisation of intangible assets

4

120

-

124


               

               

                

               

Depreciation of property plant and equipment

214

400

3

617


              

               

               

               

 

 

Year ended 31 December 2015





 

 

 

Cello Health
£'000

 

Cello Signal £'000

Consolidated and Unallocated
£'000

 

Group
£'000

Revenue





External sales

63,553

92,768

994

157,315

Intersegment revenue

49

36

(85)

-


               

               

               

                

Total revenue

63,602

92,804

909

157,315


======

======

=====

=====






Gross profit

44,496

41,555

630

86,681


======

======

=====

=====

Operating profit





Headline operating profit (segment result)

8,779

3,952

(2,321)

10,410


               

               

                


Restructuring costs




(694)

Charge for VAT payable and related costs




(1,301)

Start-up losses




(1,037)

Amortisation of intangible assets




(445)

Acquisition related employee remuneration expense




(1,591)

Share option charges




(204)





               

Operating profit




5,138






Financing income




3

Finance costs




(387)





               

Profit from continuing operations before taxation




4,754





=====






Other information










Capital expenditure

412

401

1

814


               

                

               

               

Capitalisation of intangible assets

16

350

-

366


               

                

               

              

Depreciation of property plant and equipment

411

773

6

1,190


               

               

               

               






 

5.   FINANCE INCOME AND COSTS

 


Unaudited

Six months ended

30 June 2016

£'000

Unaudited

Six months ended

30 June 2015

£'000

Audited

Year ended

31 December 2015

£'000

Finance income:




Interest receivable on bank deposits

-

1

3


======

======

======





Finance costs:




Interest payable on bank loans and overdrafts

124

182

383

Interest payable in respect of finance leases

2

2

4


             

             

             

Total finance costs

126

184

387


====

=====

=====

 

6.   TAXATION ON PROFIT ON ORDINARY ACTIVITIES

 

The tax charge for the period ended 30 June 2016 is based on management's estimate of weighted average annual tax rate expected for the full financial year. The estimated average annual tax rate used is 27.6% (2015: 26.4%).

 

7.   DIVIDEND 


 

 

 

Date Paid

Unaudited

Six months ended  30 June 2016

£'000

Unaudited

Six months ended  30 June 2015

£'000

Audited

Year ended

31 December 2015

£'000











Final dividend 2014 - 1.80p per share

29 May 2015

-

1,529

1,529

Interim dividend 2015 - 0.84p per share

27 November 2015

-

-

715

Final dividend 2015 - 2.02p per share

27 May 2016

1,727

--

-



                 

                 

                 



1,727

1,529

2,244



======

======

======

 

An interim dividend of 1.00p (2015: 0.84p) per ordinary share is declared and will be paid on 4 November 2016 to all shareholders on the register on 7 October 2016. In accordance with IAS 10 Events after the Balance Sheet Date, this dividend has not been recognised in the accounts at 30 June 2016, but will be recognised in the accounting period ending 31 December 2016.

 

8.   EARNINGS PER SHARE


Unaudited

Six months ended

30 June 2016

£'000

Unaudited

Six months ended

30 June 2015

£'000

Audited

Year ended

31 December 2015

£'000









(Loss)/profit attributable to owners of the parent

(939)

1,010

3,042





Adjustments to earnings:




Restructuring costs

693

318

694

Charge for VAT and related costs

2,053

1,100

1,301

Post-employment restrictions settlement and related costs

1,067

-

-

Start-up losses

518

157

1,037

Amortisation of intangible assets

146

301

445

Acquisition related employee remuneration expenses

525

525

1,591

Share-based payments charge

138

111

204

Tax thereon

(1,125)

(434)

(907)


                 

                 

                 

Headline earnings for the period

3,076

3,088

7,407


=======

=======

=======






30 June 2016

number of shares

30 June 2015

number of shares

30 December 2015

number of shares





Weighted average number of ordinary shares used in basic earnings per share

 

86,903,491

 

85,497,199

 

86,023,367





Dilutive effect of securities:




Share options

705,469

1,926,031

1,558,219

Deferred consideration shares

473,958

241,379

748,750


                 

                 

                 

Weighted average number of ordinary shares used in diluted earnings per share

 

88,082,918

 

87,664,609

 

88,330,336


=======

=======

=======





(Loss)/earnings per share




Basic (loss)/earnings per share

(1.08)p

1.18p

3.54p

Diluted (loss)/earnings per share

(1.08)p

1.15p

3.44p





In addition to basic and diluted (loss)/earnings per share, headline earnings per share, which is a non-GAAP measure, has also been presented.





Headline earnings per share




Headline basic earnings per share

3.54p

3.61p

8.61p

Headline diluted earnings per share

3.49p

3.52p

8.39p

 

Basic (loss)/earnings per share is calculated by dividing the (loss)/profit attributable to ordinary shareholders by the weighted average number of ordinary shares in issue 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 (loss)/earnings per share is calculated by dividing (loss)/profit attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year adjusted for the potentially dilutive ordinary shares for which the conditions of issue have substantially been met but not issued at the end of the year.

 

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 earnings for the period, which excludes the effect of restructuring costs, start-up losses, amortisation of intangibles, impairments charges, acquisition accounting adjustments, share option charges, fair value gains and losses on derivative financial instruments and the charge for VAT and related costs.

 

9.   GOODWILL

 


Unaudited

Six months ended

30 June 2016

£'000

Unaudited

Six months ended

30 June 2015

£'000

Audited

Year ended

31 December 2015

£'000

Cost




At the beginning of period

86,052

85,775

85,775

Additions

-

-

-

Exchange differences

564

(32)

277


                 

                 

                  

At the end of the period

86,616

85,743

86,052


                 

                 

                 

Amortisation




At the beginning and the end of the period

12,379

12,379

12,379


                 

                 

                 

Net book value




At the end of the period

74,237

73,364

73,673


=======

=======

=======

 

At the beginning of the period

 

73,673

 

73,396

 

73,396


=======

=======

=======

 

 

10.   PROVISIONS

 


Unaudited

Six months ended

30 June 2016

£'000

Unaudited

Six months ended

30 June 2015

£'000

Audited

Year ended

31 December 2015

£'000





At the beginning of period

3,209

2,109

2,109

Additions

1,979

1,100

1,100

Utilised in the period

(5,188)

-

-


                  

                 

                 

At the end of the period

-
=======

3,209
=======

3,209
=======


 

 

The whole provision relates to VAT payable 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.

 

During the period, agreement has been reached with HMRC with regards to the amount payable and this has now been substantially settled.  Given this agreement the provision has been recognised and the amount payable has been included in trade and other payables on the balance sheet.

 

11.   SHARE CAPITAL

 


Unaudited

At 30 June 2016

£'000

Unaudited

At 30 June 2015

£'000

Audited

At 31 December 2015

£'000

Allotted, issued and fully paid




87,262,162 ordinary shares of 10p each

8,726

8,558

8,576


=====

=====

=====

 

Between 1 January 2015 and 30 June 2016 the following shares were issued:

 

During the six months ended 30 June 2016 1,275,248 (year ended 31 December 2015: 347,001) were issued to certain employees of the Group in relation to the share option schemes at exercise prices of althoughbetween 31.5p and 42.0p per share.

 

The Group owned 453,000 of its own shares over the whole period and these shares are held as treasury shares. The company has a right to re-issue these shares at a later date.

 

On 14 May 2015, 109,529 new ordinary shares of 0.10p each were issued at 91.3p to vendors of iS Healthcare Dynamics Limited, pursuant to the terms of the share purchase agreement of that company. 

 

On 6 June 2016, 226,642 new ordinary share of 0.10p each were issued at 98.4p to vendors of Opticomm Media Limited pursuant to the terms of the share purchase agreements of that company.

 

 

12.   CASH GENERATED FROM OPERATIONS

 


Unaudited

Six months ended

30 June 2016

£'000

Unaudited

Six months ended

30 June 2015

£'000

Audited

Year ended

31 December 2015

£'000





(Loss)/profit on continuing operations before taxation

(892)

1,690

4,754





Financing income

-

(1)

(3)

Finance costs

126

184

387

Depreciation

598

617

1,190

Amortisation of intangible assets

334

479

818

Share-based payment expense

138

111

204

Profit on disposal of property, plant and equipment

(15)

(5)

(6)

Increase in acquisition related employee remuneration payable

525

125

1,039

(Decrease)/increase in provisions

(3,209)

1,100

1,100


             

            

             

Operating cash flow before movements in working capital

(2,395)

4,300

9,483





Decrease/(increase) in trade and other receivables

2,463

2,193   

(3,693)

Increase/(decrease) in trade and other payables

3,201

(6,921)

2,457


             

             

             

Net cash from/used in operating activities before taxation

3,269
 ======

(428)
======

8,247
======


 



13.   NET DEBT





Net debt comprises of:

Unaudited

Six months ended

30 June 2016

£'000

Unaudited

Six months ended

30 June 2015

£'000

Audited

Year ended

31 December 2015

£'000





Bank overdraft

-

460

-

Bank loans

8,564

10,216

9,127

Loan notes

155

232

232

Finance leases

45

85

57

Cash and cash equivalents

(3,976)

(1,176)

(5,249)


                

                

                

Net debt

4,788

9,817

4,167


=======

=======

=======





Movements in net debt can be analysed as follows:








Net decrease in cash and cash equivalents

1,341

4,346

480

Repayment bank loans

(3,681)

(8,209)

(12,749)

Repayment loan notes

(77)

(68)

(68)

Drawdown of bank loans

2,509

6,165

9,165

Increase in overdrafts

-

460

-

Capital element of finance lease payments

(12)

(14)

(42)


                

                

                

Movements in net debt from cash flows

80

2,680

(3,214)





Other movements:




Foreign exchange

541

(55)

189


                

                

                

Total movement in net debt in the period

621

2,625

(3,025)





Net debt at the beginning of the period

4,167

7,192

7,192


                

                

                 

Net debt at the end of the period

4,788

9,817

4,167


=======

=======

=======

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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