Outsourcing is a rapidly growing trend in the global healthcare industry. The increased complexity in the development of a new drug – a result of the huge growth in the biotechnology sector – has seen the market grow at roughly 6 per cent a year. Marketing and support services company Cello (CLL) hasn’t quite managed to keep up with that growth in the first six months of 2017. Underlying gross profit rose by just 2.4 per cent, after stripping out the contributions from recently acquired companies and foreign currency movements.
But management isn’t worried. Although chief executive Mark Scott admits that the group will struggle to compete with its massive global peers when it comes to growing via acquisition, he is confident that creating a good culture and reputation will help the group win larger contracts with big pharmaceutical companies.
The outlook is slightly better for the second half of the year. Underlying operating margins, which slipped slightly to 10 per cent in the first half, are expected to be up by the year-end, while biotech consultancy group Advantage Health – which was acquired in July – will make its first contributions to revenue and profit. Broker N+1 Singer therefore expects pre-tax profit to rise to £11.5m in the year to December 2017, although EPS is due to fall to 8.1p because of the issue of equity in February (from £10.2m and 8.4p in 2016).
| CELLO (CLL) | ||||
| ORD PRICE: | 132p | MARKET VALUE: | £137m | |
| TOUCH: | 131-133p | 12-MONTH HIGH: | 136p | LOW: 95p |
| DIVIDEND YIELD: | 2.6% | PE RATIO: | 574 | |
| NET ASSET VALUE: | 78.9p* | NET DEBT: | 8.3% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 80.7 | -0.79 | -0.97 | 1.00 |
| 2017 | 78.7 | 2.70 | 2.16 | 1.05 |
| % change | -3 | - | - | +5 |
| Ex-div: | 05 Oct | |||
| Payment: | 03 Nov | |||
| *Includes intangible assets of £73.8m, or 71p a share | ||||
