Roughly two-thirds of global pharma sales come from the US, according to Mark Scott, chief executive of Cello Health (CLL) – which extended its name earlier this year to reflect the fact that most its gross profit now comes from pharmaceutical services. Over 45 per cent of gross profits came from America in the first half of 2018, and Cello has been investing heavily in its stateside operations. Mr Scott said that any future acquisitions “will certainly be in the US”.
But finding those acquisitions is easier said than done. Two large US consolidators have ramped up the valuations of pharmaceutical outsourcing companies in recent months, making it hard for Cello to find reasonable deals. Constant-currency gross profit growth of 7 per cent in the first half of 2018 was therefore largely organic.
Mr Scott isn’t worried that a lack of acquisitions will make it tough for Cello to compete. The group already serves 24 of the top 25 global pharma companies and regularly wins work from smaller biotech companies. It’s also maintaining financial discipline and headline operating margins expanded to 18 per cent in the period, while solid cash conversion means Cello should be out of debt by the end of the financial year.
House broker Cenkos expects pre-tax profit of £12.2m and EPS of 8.6p in the year to December 2018, up from £11.4m and 7.8p in 2017.
| CELLO HEALTH (CLL) | ||||
| ORD PRICE: | 134p | MARKET VALUE: | £140m | |
| TOUCH: | 132-136p | 12-MONTH HIGH: | 137p | LOW: 109p |
| DIVIDEND YIELD: | 2.6% | PE RATIO: | 31 | |
| NET ASSET VALUE: | 79p* | NET DEBT: | 6% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 78.7 | 2.7 | 2.16 | 1.05 |
| 2018 | 78.5 | 3.3 | 2.36 | 1.10 |
| % change | -0.2 | +23 | +9 | +5 |
| Ex-div: | 4 Oct | |||
| Payment: | 2 Nov | |||
| *Includes intangible assets of £74.3m, or 71p a share | ||||
