Adjust for exceptionals, including a £0.75m restructuring cost, and half-year underlying pre-tax profits at marketing group Cello (CLL) actually edged up slightly to £3m. There's also an attractive dividend yield, leaving the shares looking too modestly rated.
The consumer operation explains the restructuring charge. That was hit by a slowdown in research-based client activity and management responded by rationalising property and cutting headcount. Divisional sales fell 6 per cent and the operating profit slumped to £55,000 from £1.27m a year earlier. However, management say there's now evidence of some recovery here.
The health operation, meanwhile, is growing quickly as Cello benefits from the ongoing trend towards outsourcing within the pharmaceuticals sector. Indeed, operating profit jumped 50 per cent to £4.1m and the operating margin rose 4.3 percentage points to 25 per cent. Around two-thirds of divisional revenue comes from outside the UK - largely the key US market - and Cello plans to open further office there in the next year. Cello already boasts 31 of the world's top 50 pharmaceutical companies as clients and can point to an impressive list of contract wins during the period.
Broker Singer Capital Markets expects full-year adjusted pre-tax profit of £7.5m and EPS of 6.4p (from £7.1m and 6.3p in 2011).
CELLO (CLL) | ||||
|---|---|---|---|---|
| ORD PRICE: | 40.5p | MARKET VALUE: | £33m | |
| TOUCH: | 40-41p | 12-MONTH HIGH: | 45.5p | LOW: 32.5p |
| DIVIDEND YIELD: | 4.3% | PE RATIO: | na | |
| NET ASSET VALUE: | 83p* | NET DEBT: | 20% | |
| Half-year to 30 Jun | Turnover (£m) | Pretax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 61.6 | 2.03 | 1.79 | 0.55 |
| 2012 | 63.3 | 1.38 | 1.16 | 0.58 |
| % change | +3 | -32 | -35 | +5 |
Ex-div: 7 Dec Payment: 4 Jan *Includes intangible assets of £75.8m, or 92p a share | ||||
