A 10 per cent increase in underlying pre-tax profits at Cello Group (CLL) was undone by a £2.1m provision for the taxman, following a review of the VAT status of various services provided by the healthcare marketing group to its charity clients. But the plunge in reported profits masks a strong year for the company's core health marketing division, Cello Health.
The division, which makes three-quarters of its sales in the US, maintained its 21 per cent operating profit margin despite substantial investment in senior consultants. Cello says these are essential to making commercial inroads into the major US pharmaceutical companies. A contract win worth $7m in annual gross profit at the end of the year would suggest the strategy is working.
Growth was slower at Cello Signal, the company's software-focused marketing platform. Revenues there rose 4.2 per cent to £39.5m, but that didn't stop operating profits falling from £3.9m to £3.4m. Chief executive Mark Scott's energy is now focused on the division, where "the time has come" to cut deadwood. He thinks profits should be "nearer the £6m mark".
Broker N+1 Singer forecasts adjusted full-year pre-tax profits of £10.6m and earnings per share of 8.6p (from 7.9p in 2014).
| CELLO GROUP (CLL) | ||||
|---|---|---|---|---|
| ORD PRICE: | 89p | MARKET VALUE: | £75m | |
| TOUCH: | 87-89p | 12-MONTH HIGH: | 99p | LOW: 83p |
| DIVIDEND YIELD: | 2.9% | PE RATIO: | 33 | |
| NET ASSET VALUE: | 82p* | NET DEBT: | 10% | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 125 | 4.9 | 5.9 | 1.43 |
| 2011 | 128 | 1.2 | -0.9 | 1.72 |
| 2012 | 135 | 1.4 | 0.2 | 2.00 |
| 2013 | 160 | 5.5 | 4.4 | 2.25 |
| 2014 | 170 | 3.8 | 2.7 | 2.60 |
| % change | +6 | -31 | -39 | +16 |
Ex-div: 30 Apr Payment: 29 May *Includes intangible assets of £74.9m, or 88p a share | ||||
