Cello Health Share Discussion Threads

[welsheagle] 04/7/2008 07:04

Half year trading update (Cello)




RNS Number : 3113Y
Cello Group plc
04 July 2008


4 July 2008
Cello Group plc
Trading update - six months to 30 June 2008

Cello Group plc ("Cello" AIM: CLL), the research and consulting group, today provides the
following trading update for the six months to
30 June 2008.

The Group has continued to make good progress across both of its operating divisions
during the first half of 2008, with healthy
like-for-like operating income growth. The Group will therefore deliver headline first half
profits in line with expectations.

Divisional Trading

Our research and consulting business has performed well in the first six months. Most
notably, our healthcare and public sector
practices (which comprise approx 33% of the operating income of the Group) have delivered
encouraging levels of growth and have a healthy
pipeline going into the second half. Our consumer research businesses have also made an
excellent contribution with growth being aided by a
number of significant new international client wins and new continuous research projects.

We have continued our organic, client led international growth plan with the establishment
of an office in San Francisco and we plan to
open shortly in Germany. We have also continued our investment in digital and online research
initiatives. Notwithstanding this investment,
the Group expects its underlying operating margins in this division to be maintained at
previous full year levels.

Our response business, which was rebranded as Tangible Group at the start of the year, has
also performed well in the first half. The
business is traditionally second half weighted as a substantial number of our charity clients
have marketing budgets with a significant
second half bias. Revenue visibility from such clients is generally very good. The division
also has a growing number of public sector
clients with committed spend. Our financial services clients continue to migrate budget to the
more accountable elements of marketing spend.
The Group expects underlying operating margins in this division to be at least one percentage
point higher than the comparable period in
2007.

Headcount

The overall headcount of the Group has risen by 3% in the first six months of the year to
over 820 people. We have invested in our
growing digital, data, and UK qualitative research businesses. In some other areas of the
Group headcount has been reduced as a matter of
due prudence given the general economic outlook. As part of our regular review of our fixed
cost structure, we have reduced annualised
salary costs by £1.0m at a cost of £0.5m during the first half.

Debt and Earn Out Obligations

In line with the Group's prudent funding policy, we have maintained a relatively low level
of net debt and future cash obligations under
earn out commitments. We expect net debt at 30 June 2008 to be c.£15.0m, and well within our
agreed banking facilities.

In April 2008, the Group settled £14.4m of earn out and deferred consideration payments
to over 80 vendors and employees of businesses
acquired in 2004 and also some deferred initial consideration in respect of an acquisition
made in 2007. This was satisfied by the payment
of £8.0m in cash or loan notes and the issue of 5.6m shares at 114.5p.

Following this substantial settlement, the Group estimates that its future earn out
liabilities have almost halved since 31 December
2007 to around £15.0m. The Group estimates that these future earn out obligations, payable
between 2009 and 2013, will be settled by a
minimum of £5.8m payable in loan notes and up to £9.2m payable by the issue of new shares.

Full Year Outlook

As stated at the time of the Annual General Meeting on 20 May 2008, the board is mindful
of the macro economic environment and its
potential impact on our business. We have good revenue visibility for the next quarter and
subject to further conversion of existing
opportunities and market conditions, we remain cautiously optimistic for the full year. We
continue to actively manage our cost base across
the Group.

We plan to announce our interim results on Tuesday 17 September 2008 and will further
update the market on the trading outlook for the
full year at that time.

[coopstock] 02/7/2008 11:12

SP falls are in line with hits on small caps across the media sector in current market - see Creston, Chime, M&C Saatchi. Altium still rate this as a 'buy', albeit with a lower target. This from their MMNs of June 26th.
' Positive read across. Although we do not formally cover Creston (CRE, N/R),
analysis of yesterday's preliminary results allied to comments at the group's analyst
meeting suggest a number of positive read across points for Cello.
Robust trading. Specifically, we note CRE's assertion that it has yet to feel "any
tangible effects" of weaker economic conditions and that, in contrast to any signs of
cut backs or delayed expenditure, its revenue increased by 6% during Q1 of the
current calendar year. There was also a good performance from research activities -
an area in which Cello has invested significantly in recent years.
Structural change. These sentiments tie in with our longstanding view that a tougher
trading backdrop across the media industry as a whole will accelerate the on-going
shift in spend towards value added areas that offer a tangible ROI proposition. They
are also consistent with CLL's AGM statement of 20 May which cited "good progress"
in trading terms YTD, confidence regarding the half year outcome, and cautious
optimism for the full year. We expect a further update in mid July.
Fundamental attractions. We expect Cello's exposure to research and direct
marketing to drive attractive medium-term organic growth. We also regard the quality
of its underlying business units and the experience of its management team as
additional positives that should further differentiate it at a time when consumer-facing
media companies look set to struggle.
Adjusting target price. We have decided to reduce our target price from 150p to
130p (10.1x PER FY 2008E) to reflect a general re-basing of ratings across the sector
over the last 12 months. However, this target still suggests very attractive upside of
upside of 44% from current levels.
Reiterating BUY recommendation. We do not believe the attractions highlighted
above are reflected in CLL's very modest valuation, strongly reiterate our BUY
recommendation and view yesterday's 8.3% share price fall as an excellent
opportunity.'

[wcjan26] 30/6/2008 17:38

seems like the market agrees

[kirs] 24/6/2008 15:06

Cashflow is more important. They will be forced to write of a lot of goodwill given the number of deals that they have done. Given the nature of the assests - this could be considerable. To me - the question is how much can the leverage from a central team, and how is the revenue going to dip as people run from reasearch and advertising as they realise their return on money spent goes down. Buying a lot of small companies in different parts of the country, means a lot of small infrastructures, and a lot of property costs. I want to see these guys succeed, but I am yet to be convinced by the model.

Not holding.

[wcjan26] 23/6/2008 10:21

welsheagle

might be worth considering that the 14.9p cash per share is rather overshadowed by £40m of debt and that operating and net margins have gone through the floor as the turnover has increased, which has been largely by acquision. most of the assets are intangible - so your 115p nav looks more like -50p when you look at net tangible assets

the main worry though has to be the sector and subsequent impact of a slow-down on their earnings. it does not take a big stretch seeing this co starting to make a loss and the large debt being hard to cover

i am also suprised this has taken much less of a battering

[coopstock] 20/6/2008 10:22

And yet the share price keeps slipping - and has done for nearly a year now. New low today of 1.05 (how does that square with your net asset figure of 1.15?). I don't know much about investing in AIM companies, but I just can't see what it will take to turn this share price around.

[coopstock] 17/6/2008 11:30

Why do you say that?

[hsbcpremier] 16/6/2008 12:42

surprised this isnt 30p now

[tole] 03/6/2008 11:28

03-Jun-08 Cello Group CLL Altium Capital Buy 114.00p 150.00p - Reiteration

[hsbcpremier] 02/6/2008 21:31

statement said they were concerned by macro economic outlook

[grahamite2] 20/5/2008 09:53

Often good companies have the quietest threads.

This is one of the few AIM stocks you could hold long term with any confidence, which gives it extra value from a tax planning point of view.

[maniac3] 20/5/2008 09:49

V. quiet here ... still looks like a great buy, seems to have been totally ignored!

[welsheagle] 31/3/2008 19:44

Altium Capital reiterated their 'buy' recommendation today, with a target price of 150p.

[maniac3] 31/3/2008 08:26

Cello do seem like a blatant buy at these levels to be fair. Obviously out of favour though at present.

[welsheagle] 27/3/2008 20:46

Director buying

[deadly] 18/3/2008 15:38

Excellent results which make this company even more ridiculously cheap.

[welsheagle] 11/2/2008 21:41

From February's 'Company Refs', when price was 114p:-
a/ Prospective PE ratio of 8.55 (based on four broker forecasts, two recommending 'buy', one recommending 'overweight', and one with no recommendation).
b/ Forecast growth in eps of 15.8%.
c/ Positive cash flow per share of 7.75p.
d/ Net cash per share of 14.9p.
e/ Positive gearing of 2.47%.
f/ Price to sales ratio of 0.51.
g/ Turnover up from £14.7m to £74.7m in two years.
h/ Net asset value per share of 115p.
i/ Three directors buying in last six months.

[welsheagle] 04/2/2008 19:11

Is that the forecast eps, SmashingGuy.

[welsheagle] 21/1/2008 20:30

Why would the directors buy if it was overvalued.

[welsheagle] 21/1/2008 20:29

LONDON (Thomson Financial) - Cello Group PLC said its chairman Kevin Steeds and chief executive Mark Scott bought 4,000 shares each at 115 pence per share and 116.5 pence per share respectively, lifting their holdings to 697,510 shares each, or 1.8 pct.

The market research and consulting company also said non-executive director Chris Outram bought 12,711 shares at 118 pence per share, raising his holding to 48,705 shares, or 0.13 pct.

[imprima2] 21/1/2008 15:36

Media
IPA Bellwether report
�� Summary: The IPA published its quarterly 'Bellwether' survey of marketing spend on the 14th of
January 2008. The report revealed that in Q4 2007 marketing budgets were revised down for
the first time in a year, representing the steepest fall in nearly two years, as a result of 'weaker
than expected sales revenues, disappointing profits and concerns about the economic
environment'.

This is on 13x, creston is on 5x, so the same rating is a target of 43p for cello