A tax settlement with HMRC may have pushed Cello Group' s (CLL) half-year statutory profits into the red, but these results for the healthcare marketing and media group should give investors a lot to cheer about. Firstly, with the additional £2.1m VAT provision accounted for and no further penalties on the horizon, management confidently upped its dividend commitment to 40 per cent of adjusted earnings per share.
Chief executive Mark Scott told us that some shareholders had petitioned for greater returns, but it is also hoped that a higher yield will leverage the share price. That's never a bad idea in the consolidating healthcare sector, in which every company is a potential target. Indeed, Mr Scott said the group's falling debt and the tax debacle's resolution had increased the prospect of Cello doing some acquiring of its own.
Expansion in the US - the globe's largest market for new drug launches - would be a good place to start, as the health division targets a 65 per cent sales weighting to the country. The US could also soon be a strong source of growth for the company's social media analytic software, Pulsar, which is now profitable and should help Cello Signal book headline operating profits of £4.5m this year. That supports Cenkos Securities forecast for full-year adjusted pre-tax profits of £10.2m and EPS of 8.4p, rising to £10.8m and 8.9p in 2017.
CELLO (CLL) | ||||
|---|---|---|---|---|
| ORD PRICE: | 107p | MARKET VALUE: | £92.4m | |
| TOUCH: | 105-108p | 12-MONTH HIGH: | 114p | LOW: 78p |
| DIVIDEND YIELD: | 2.8% | PE RATIO: | 86 | |
| NET ASSET VALUE: | 79p* | NET DEBT: | 7% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 77.0 | 1.69 | 1.18 | 0.84 |
| 2016 | 80.9 | -0.89 | -1.08 | 1.0 |
| % change | +5 | - | - | +19 |
Ex-div: 6 Oct Payment: 4 Nov *Includes intangible asset of £75m, or 86p a share. | ||||
