Share Name Share Symbol Market Type Share ISIN Share Description
Cello Health Plc LSE:CLL London Ordinary Share GB00B0310763 ORD 10P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  0.50 0.39% 129.50 128.00 131.00 129.50 129.00 129.00 54,168 15:59:55
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Media 165.6 8.4 6.3 20.7 137

Cello Health PLC Interim Results

18/09/2019 7:00am

UK Regulatory (RNS & others)


Cello Health (LSE:CLL)
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RNS Number : 6719M

Cello Health PLC

18 September 2019

 
   18 September 2019 
 

Cello Health plc

('Cello' or the 'Group')

Interim Results for the six months to 30 June 2019

Cello Health continues to deliver strong growth

Cello Health plc (AIM: CLL), the healthcare-focused advisory group, today announces its interim results for the six month period to 30 June 2019.

Group Financial Highlights

   --      Net revenue up 6.8% to GBP54.5m (H1 2018: GBP51.0m) 
   --      Like-for-like(1) constant currency net revenue growth of 4.5% 

-- Cello Health divisional net revenue growth of 11.6% (like for like constant currency growth of 8.2%)

-- Cello Signal divisional net revenue decline of 0.1% (like for like constant currency decline of 1.0%)

   --      Headline profit before tax(2) up 12.7% to GBP5.7m (H1 2018: GBP5.1m) 
   --      Headline operating margin(3) improves to 10.9% (H1 2018: 10.4%) 
   --      Headline basic earnings per share up 12.7% to 4.08p (H1 2018: 3.62p) 
   --      Statutory profit before tax up 39.7% to GBP4.7m (H1 2018: GBP3.3m) 
   --      Statutory basic earnings per share up 40.3% to 3.31p (H1 2018: 2.36p) 
   --      Strong cash flow for the period 
   --      Net funds(4) at 30 June 2019 of GBP2.2m (30 June 2018: net debt of GBP5.4m) 
   --      Interim dividend up 4.5% to 1.15p (H1 2018: 1.10p) 

(1) Like-for-like comparisons remove the impact of acquisitions and results from start-ups in 2017 (see note 3)

(2) Headline measures are stated before non-headline charges (see note 3)

(3) Headline operating margin is defined as headline operating profit as a percentage of segmental net revenue

(4) Net funds excludes lease liabilities that arise as a result of the adoption of IFRS 16

Divisional Financial Highlights

 
 H1                              Cello Health                 Cello Signal 
 GBP'000                    2019     2018   % Growth     2019     2018   % Growth 
                         -------  -------  ---------  -------  -------  --------- 
 Segmental net revenue    35,006   31,378      11.6%   19,446   19,459     (0.1%) 
                         -------  -------  ---------  -------  -------  --------- 
 Headline operating 
  profit                   6,521    5,659      15.2%    1,219    1,244     (2.0%) 
                         -------  -------  ---------  -------  -------  --------- 
 Headline operating 
  margin                   18.6%    18.0%                6.3%     6.4% 
                         -------  -------  ---------  -------  -------  --------- 
 

-- New segmental presentation for Cello Signal from 1 January 2020 separating out Pulsar, the Group's software business

Operating Highlights

   --      Strong growth across Cello Health, particularly in the US 
   --      New Berlin office now fully servicing European clients 
   --      Acquisition of ISS in August 2019 further strengthens Cello Health's US advisory capability 

Mark Scott, Chief Executive, commented:

"The first half of 2019 has continued to see strong growth from Cello Health, notably in the US market. Cello Health Communications and Cello Health Consulting have made particularly pleasing progress. The addition of ISS in August will help contribute to this momentum and has added critical regulatory expertise. Good revenue visibility for the remainder of the year gives us confidence for a strong full year outcome."

Enquiries:

 
 Cello Health plc 
 Mark Scott, Chief Executive               020 7812 8460 
 Mark Bentley, Group Finance Director 
 www.cellohealthplc.com 
 
 Cenkos Securities 
 Giles Balleny, Harry Hargreaves           020 7397 8900 
 
 Buchanan 
 Mark Court, Jamie Hooper, Sophie Wills    020 7466 5000 
 cello@buchanan.uk.com 
 

Notes to Editors

Cello Health plc is a global healthcare-focused advisory Group comprised of a set of leading clinical, commercial advisory and digital delivery capabilities. Cello Health plc currently services 24 of the top 25 pharmaceutical clients globally, as well as a wide range of biotech, diagnostics, devices and other key non-healthcare clients.

Cello Health plc enables clients to commercialise, differentiate their assets, and drive brand success in ever more complex global markets. The business delivers its services through nearly 1,000 highly skilled professionals, utilising latest thinking, technology and digital solutions.

Cello Health plc delivers its services from an office network in the UK, USA, and Asia, with hub offices in New York City, Philadelphia PA, London, Edinburgh, Farnham and Cheltenham.

For further information, please visit: https://cellohealthplc.com

Chairman's Statement

Overview

The Group has had an excellent first half of the year as it continues to execute its strategy of building and growing a global healthcare-focused advisory group. Constant currency like-for-like net revenue growth was very good at 4.5%, and the Cello Health division grew constant currency like-for-like net revenue by 8.2%. The client base of the Group remains robust: 24 of the top 25 global pharmaceutical businesses are clients, complemented by a wide range of biotech and other clients.

The Group now earns 34.1% of its net revenue from US domiciled businesses (2018: 29.8%) and the Cello Health division derives 49.5% (2018: 45.2%) of its net revenue from its US based businesses. The relative strength of the US dollar has helped reported operating profit in the first half by around GBP0.2m, and this effect is expected to continue for the rest of 2019. The Group was pleased to complete the acquisition of ISS, a scientific consulting firm specialising in strategic counsel and regulatory support for the healthcare industry in the US, in August 2019. This acquisition will further strengthen the US presence of the Group as well as adding key complementary regulatory expertise.

Cello Signal had a satisfactory first half, with good performances in a number of underlying core activities where margins have continued to rise. This improvement is somewhat masked by the ongoing investment profile of Pulsar, the Group's social media software sales business, which is more capex intensive. We intend to enhance our disclosure of the performance of Signal and Pulsar by disclosing Pulsar separately as a separate segment from 1 January 2020.

The Group has continued to trade well over the summer months, and the Board is confident about meeting its upgraded expectations for the full year. The Group's cash flow remains strong, which means the business is in a strong position to accelerate its growth rate with ongoing acquisition opportunities.

Financial Review

Net revenue for the six months to 30 June 2019 increased 6.8% to GBP54.5m (2018: GBP51.0m) on revenue which increased 3.0% to GBP79.5m (2018: GBP77.2m). Reported like-for-like net revenue growth was 6.7% and the constant currency growth rate was 4.5%. Headline operating profit was up 12.3% to GBP5.9m (2018: GBP5.3m). The headline operating margin increased to 10.9% (2018: 10.4%). Headline profit before tax was up 12.7% to GBP5.7m (2018: GBP5.1m). Further detail on these numbers is provided in the operating review.

Reported operating profit was up 37.4% to GBP4.9m (2018: GBP3.5m). The reported operating margin increased to 9.0% (2018: 7.0%).

The Group earned 34.1% (2018: 29.8%) of its total net revenue from US domiciled businesses, which is therefore denominated in dollars. As such the Group carries a certain amount of foreign exchange risk. The average dollar conversion rate into sterling in the period was $1.29 (2018: $1.38). If exchange rates had been constant in the period, net revenue from the Group US domiciled entities would have been approximately GBP1.1m lower, and operating profits would also have been approximately GBP0.2m lower. For the full year, with the dollar continuing its recent strength, the Group expects this impact to continue. Our current forecast average rate for the full year of 2019 is $1.26 (2018 full year $1.34).

The reported tax charge for the period is GBP1.1m (2018: GBP0.8m), which incorporates a headline effective tax rate of 23.7% (2018: 24.7%).

Headline basic earnings per share were up 12.7% to 4.08p (2018: 3.62p). Statutory earnings per share were up 40.3% to 3.31p (2018: 2.36p).

The Group's net funds at 30 June 2018 were GBP2.2m (31 December 2018: net funds of GBP6.3m; 30 June 2018: net debt of GBP5.4m). This decrease in net funds in the period is consistent with management expectations and relates to normal seasonality. The Group expects to experience strong positive cash flow in the second half as it has done in the past. Total debt facilities are GBP24.0m and expire in March 2022.

The Group has deferred consideration obligations in respect of the acquisitions in 2017 of Defined Health Research Inc and Cancer Progress LLC ("Defined Health") and Advantage Health Inc ("Advantage Healthcare"). During the period $2.25m of these obligations were settled by the payment of $1.71m in cash and the issue of $0.54m in new ordinary shares. Remaining obligations are contingent on future performance and are forecast to reach a further $3.4m, of which $2.0m has been provided for by 30 June 2019. Post this period, in August 2019, the Group acquired the assets of ISS for initial consideration of $6.4m, and a deferred contingent consideration of up to $4.1m.

The Group has adopted IFRS 16 Leases for the first time on 1 January 2019. The impact of this adoption on the balance sheet is that the Group recognised total right of use assets of GBP11.9m, and associated lease liabilities of GBP11.3m. The right of use assets are depreciated over the length of the leases, and rent payable is treated as a capital payment against the lease liability. After these movements in the period, the lease liability at 30 June 2019 is GBP10.5m, and the related value of the right of use assets is GBP11.0m. The net impact of all these adjustments compared with the results before adoption of IFRS 16 is a negligible impact on operating profit and a GBP0.1m reduction in profit before tax. The detailed impact of this change in accounting standards is disclosed in note 13.

The following table is a reconciliation between headline operating profit and statutory profit before tax.. Restructuring costs of GBP0.2m in Cello Signal (2018: GBPnil) relate to redundancy costs in Signal. As anticipated, losses of GBP0.2m were incurred from continued investment in start-up activity. This activity is disclosed below headline operating profit. The start-up losses in 2019 relate solely to the recent launch of the Berlin office within the Cello Health division. The Group expects start-up losses of this type to continue to be minimal in 2019. Results from start-up operations are not allocated to a segment.. The acquisition related costs of GBP0.3m (2018: GBP1.0m) relate to necessary accounting charges for the deferred consideration arising from the acquisition of Defined Health and Advantage Healthcare in 2017.

 
                                         2019    2018 
                                         GBPm    GBPm 
 Headline operating profit                5.9     5.3 
                                       ------  ------ 
 Restructuring costs                    (0.2)       - 
                                       ------  ------ 
 Start-up losses                        (0.1)   (0.5) 
                                       ------  ------ 
 Share option charges                   (0.2)   (0.2) 
                                       ------  ------ 
 Acquisition related costs              (0.3)   (1.0) 
                                       ------  ------ 
 Amortisation of acquired intangible 
  assets                                (0.2)   (0.1) 
                                       ------  ------ 
 Statutory operating profit               4.9     3.5 
                                       ------  ------ 
 Net finance costs                      (0.2)   (0.2) 
                                       ------  ------ 
 Statutory profit before tax              4.7     3.3 
                                       ------  ------ 
 

Interim Dividend

The interim dividend rises 4.5% to 1.15p (2018: 1.10p). The interim dividend is payable on 1 November 2019 to all shareholders on the register on 4 October 2019. The Group has a progressive dividend policy and an unbroken record of annual dividend growth since it began paying dividends in 2006.

Operating Review

Cello Health

 
                          H1 2019   H1 2018   Full year 
                                                   2018 
                          GBP'000   GBP'000     GBP'000 
                         --------  --------  ---------- 
 Segmental net revenue     35,006    31,378      64,308 
                         --------  --------  ---------- 
 Headline operating 
  profit                    6,521     5,659      11,890 
                         --------  --------  ---------- 
 Headline operating 
  margin                    18.6%     18.0%       18.5% 
                         --------  --------  ---------- 
 

The Cello Health division had an excellent first half, in particular in the US. Overall net revenue increased by 11.6% to GBP35.0m (2018: GBP31.4m). On a constant currency basis like-for-like net revenue grew by 8.2%. Headline operating profit also grew by 15.2% to GBP6.5m (2018: GBP5.7m). On a constant currency basis this growth rate was 10.9%. The core positioning of the business with large pharmaceutical and biotech clients has continued to develop strongly.

The Consulting and Communication capabilities both had very strong periods. This was driven by existing clients spending more in the UK and the US, and also by a number of large biotech projects being won. The new Philadelphia office is now running fully utilised and the early stage Boston office will shortly be expanded. The business has also significantly enlarged its space commitment in Yardley PA.

The Insight capability has had a slower first half in 2019 against a tough comparative. However, this area is traditionally second half weighted and this trend looks set to continue in 2019. During the period the Berlin office was opened and incremental project work is now being won successfully from it under the new team.

On 15 August 2019 the Group completed the acquisition of the trade and assets of Innovative Science Solutions LLP ("ISS"), a scientific consulting firm specialising in strategic counsel and regulatory support for the healthcare industry in the US. Initial consideration was $6.4m paid in cash, with a further deferred consideration of up to $5.4m payable over the period of 1 August 2019 to 31 July 2024. The acquisition reflects the Group's strategy of expanding further into the US and adds a key incremental component to the offering of strategic counsel and regulatory support to the healthcare industry.

Overall, visibility and momentum remains strong across Cello Health, supporting a strong outlook for 2019 and beyond.

Cello Signal

 
                          H1 2019   H1 2018   Full year 
                                                   2018 
                          GBP'000   GBP'000     GBP'000 
                         --------  --------  ---------- 
 Segmental net revenue     19,446    19,459      39,971 
                         --------  --------  ---------- 
 Headline operating 
  profit                    1,219     1,244       3,739 
                         --------  --------  ---------- 
 Headline operating 
  margin                     6.3%      6.4%        9.4% 
                         --------  --------  ---------- 
 

Overall Cello Signal had a flat first six months. Overall segmental revenue was almost identical to 2018 at GBP19.4m (2018: GBP19.5m). Headline operating profit was also flat at GBP1.2m (2018: GBP1.2m).

However, strong results have been achieved across a large proportion of Signal's core business, with notable improvements in core operating profit margins. Signal's Edinburgh based communications business and London based research business are now at improved and competitive margin levels. Client spend from the long standing blue-chip client list has been robust during the period.

This positive result has been masked by Pulsar which as a software business has very different performance characteristics from the core Signal business. Pulsar is impacted by higher levels of amortisation than occur in the rest of the Group. Post the exit of Facebook in 2017 as a data provider, general growth in this social media analytics market has been slower.

In order to reflect the revised management operating and reporting structure, the results of Pulsar will be presented separately from 1 January 2020. If this presentation was adopted for these interim results, the segmental split of Signal Group would have been as follows:

 
                             Current Cello 
                            Signal divisional         Proposed segmental disclosure 
                            segmental result               from 1 January 2020 
                                                      Cello Signal         Pulsar 
                         ----------  ---------  ------------------  ------------------- 
                            H1 2019    H1 2018   H1 2019   H1 2018   H1 2019   H1 2018* 
                         ----------  ---------  --------  --------  --------  --------- 
                            GBP'000    GBP'000   GBP'000   GBP'000   GBP'000    GBP'000 
                         ----------  ---------  --------  --------  --------  --------- 
 Segmental net revenue       19,446     19,459    17,549    17,589     1,897      2,043 
                         ----------  ---------  --------  --------  --------  --------- 
 Headline operating 
  profit                      1,219      1,244     1,625     1,386     (406)      (607) 
                         ----------  ---------  --------  --------  --------  --------- 
 Headline operating 
  margin                       6.3%       6.4%      9.3%      7.9%   (21.4%)    (29.7%) 
                         ----------  ---------  --------  --------  --------  --------- 
 

(*) This data includes the financial performance of Pulsar US in 2018 which was treated as a start-up in that period.

The above analysis shows the underlying headline operating margin improvement in core Cello Signal (exc. Pulsar) from 7.9% to 9.3%. Due to historic client spending patterns, this business structurally has higher levels of activity in the second half of the year and this trend is expected to continue.

The Pulsar results for 2019 include the results from the US operation, which is loss making. In the prior years this loss was disclosed as a start-up and not within headline operating profit. The operating losses in Pulsar US have dropped from GBP0.6m in 2018 to GBP0.4m in 2019.

Central and unallocated Costs

Central and unallocated costs include PLC central costs and the impact of the adoption IFRS 16, which is negligible. These costs have risen from GBP1.6m to GBP1.8m in the first half of 2019 reflecting the increased costs of running the necessary central functions of the Group, particularly in the US which is now a significant component of the Group.

Outlook

The Group has continued to trade well over the summer period and overall net revenue visibility remains good. The Group is already beginning to see some of the earnings enhancing benefits from acquiring ISS, and further acquisitions are being appraised. Accordingly, the Board remains confident of delivering a full year result at least in line with market expectations.

Chris Jones

Chairman

18 September 2019

Condensed Consolidated Income Statement

For the six months ended 30 June 2019

 
                                                              Restated (note 
                                                  Unaudited              14)         Audited 
                                                 Six months        Unaudited      Year ended 
                                     Notes            ended       Six months     31 December 
                                               30 June 2019            ended            2018 
                                                    GBP'000     30 June 2018         GBP'000 
                                                                     GBP'000 
 
  Continuing operations 
  Revenue                             4              79,523           77,188         165,573 
  Third-party project costs                        (25,061)         (26,177)        (60,757) 
 
  Net revenue                         3              54,462           51,011         104,816 
 
  Administrative expenses                          (49,585)         (47,462)        (96,058) 
 
  Operating profit                                    4,877            3,549           8,758 
 
  Finance income                      5                   2                -               1 
  Finance costs                       5               (224)            (218)           (340) 
 
  Profit before taxation                              4,655            3,331           8,419 
 
  Taxation                            6             (1,119)            (840)         (1,801) 
 
  Profit attributable to owners 
   of the parent                                      3,536            2,491           6,618 
 
 
 
 
 
  Basic earnings per share            8               3.31p            2.36p           6.27p 
 
  Diluted earnings per share          8               3.25p            2.32p           6.14p 
 
 

Condensed Consolidated Statement of Comprehensive Income

For the six months ended 30 June 2019

 
                                            Unaudited       Unaudited        Audited 
                                           Six months      Six months     Year ended 
                                                ended           ended    31 December 
                                         30 June 2019    30 June 2018           2018 
                                              GBP'000         GBP'000        GBP'000 
 
 Profit for the period                          3,536           2,491          6,618 
 
 Other comprehensive income: 
 Exchange differences on translation 
  of foreign operations                           127             104            590 
 
 Total comprehensive income for 
  the period                                    3,663           2,595          7,208 
 
 
 

Condensed Consolidated Balance Sheet

As at 30 June 2019

 
                                                             Restated (note 
                                                 Unaudited              14)             Audited 
                                    Notes     30 June 2019        Unaudited         31 December 
                                                   GBP'000     30 June 2018                2018 
                                                                    GBP'000             GBP'000 
 Goodwill                            9              73,703           73,172              73,623 
 Intangible assets                                   1,256            1,155               1,388 
 Property, plant and equipment                       2,671            2,946               2,931 
 Right-of-use assets                13              11,017                -                   - 
 Deferred tax assets                                 1,670            1,352               1,513 
 
 Non-current assets                                 90,317           78,625              79,455 
 
 
 Trade receivables                                  24,477           26,933              35,260 
 Contract assets                                    11,868            7,895               6,798 
 Other receivables                                   6,747            8,951               5,800 
 Cash and cash equivalents                           3,745            1,868              10,424 
 
 Current assets                                     46,837           45,647              58,282 
 
 
 Trade and other payables                         (22,026)         (23,199)            (30,949) 
 Contract liabilities                             (11,876)          (8,977)            (14,004) 
 Current tax liabilities                             (884)            (412)               (389) 
 Borrowings                                           (19)            (112)                (42) 
 Lease liabilities                  13             (2,692)             (11)                (11) 
 
 Current liabilities                              (37,497)         (33,711)            (45,395) 
 
 Net current assets                                  9,340           12,936              12,887 
 
 Total assets less current 
  liabilities                                       99,657           91,561              92,342 
 
 
 Trade and other payables                            (945)          (1,125)             (1,246) 
 Borrowings                                        (1,551)          (7,136)             (4,000) 
 Lease liabilities                  13             (7,763)             (29)                (30) 
 Provisions                                          (557)                -                   - 
 Deferred tax liabilities                            (240)            (127)               (233) 
 
 Non-current liabilities                          (11,056)          (8,417)             (5,509) 
 
 Net assets                                         88,601           83,144              86,833 
 
 
 Equity 
 Share capital                      10              10,654           10,516              10,516 
 Share premium                                      33,186           32,758              32,759 
 Merger reserve                                     25,446           25,446              25,446 
 Capital redemption reserve                             50               50                  50 
 Retained earnings                                  17,747           13,294              16,237 
 Share-based payment reserve                           822              997               1,256 
 Foreign currency reserve                              696               83                 569 
 
 Total equity                                       88,601           83,144              86,833 
 
 
 

Condensed Consolidated Cash Flow Statement

For the six months ended 30 June 2019

 
                                                      Unaudited       Unaudited        Audited 
                                                     Six months      Six months     Year ended 
                                                          ended           ended    31 December 
                                          Notes    30 June 2019    30 June 2018           2018 
                                                        GBP'000         GBP'000        GBP'000 
 Net cash generated from/(used 
  in) operating activities 
  before taxation                         11              1,312         (2,071)         13,418 
 
 Tax paid                                                 (554)         (1,166)        (2,239) 
 
 Net cash generated from/(used 
  in) operating activities 
  after taxation                                            758         (3,237)         11,179 
 
 
 Investing activities 
 Interest received                                            2               -              1 
 Purchase of property, plant 
  and equipment                                           (450)           (649)        (1,312) 
 Sale of property, plant and 
  equipment                                                   1              32             38 
 Purchase of intangible assets                            (298)           (302)          (672) 
 Purchase of subsidiary undertakings                          -               -          (256) 
 
 Net cash used in investing 
  activities                                              (745)           (919)        (2,201) 
 
 
 Financing activities 
 Proceeds from issuance of 
  shares                                                    142              68             69 
 Dividends paid to equity 
  holders                                               (2,881)         (2,563)        (3,714) 
 Net repayment of borrowings                            (2,444)         (4,497)        (7,686) 
 Repayment of loan notes                                   (23)            (17)           (17) 
 Increase in overdrafts                                       -              70              - 
 Principal element of lease 
  payments (2018: Capital element 
  of finance lease payments)                            (1,345)            (36)           (35) 
 Interest paid                                            (211)           (237)          (348) 
 
 Net cash used in financing 
  activities                                            (6,762)         (7,212)       (11,731) 
 
 Movements in cash and cash 
  equivalents 
 Net decrease in cash and 
  cash equivalents                                      (6,749)        (11,368)        (2,753) 
 
 Effect of foreign exchange 
  fluctuations                                               70             215            156 
 Cash and cash equivalents 
  at the beginning of the period                         10,424          13,021         13,021 
 
 Cash and cash equivalents 
  at end of the period                                    3,745           1,868         10,424 
 
 
 

Condensed Consolidated Statement of Changes in Equity

For the six months ended 30 June 2019

Statement of changes in equity for the six months ended 30 June 2019 (unaudited):

 
                                                                                               Foreign          Total 
                                                         Capital               Share-based    Currency   Attributable 
                      Share       Share     Merger    Redemption    Retained       Payment    Exchange      to Equity 
                    Capital     Premium    Reserve       Reserve    Earnings       Reserve     Reserve   Shareholders 
                    GBP'000     GBP'000    GBP'000       GBP'000     GBP'000       GBP'000     GBP'000        GBP'000 
 
 At 1 January 
  2019               10,516      32,759     25,446            50      16,237         1,256         569         86,833 
 
 
 Profit for the 
  period                  -           -          -             -       3,536             -           -          3,536 
 
 Other 
 comprehensive 
 loss: 
 Currency                 -           -          -             -           -             -         127              - 
 translation 
 
 Total 
  comprehensive 
  income in the 
  period                  -           -          -             -      3,536              -         127          3,663 
 
 Transactions 
 with 
 owners: 
 Shares issued 
  (note 10)             138         427          -             -           -             -           -            565 
 Credit for 
  share-based 
  incentives                                                                           195                        195 
 Tax on 
  share-based 
  payments 
  recognised 
  directly in 
  equity                  -           -          -             -       226               -           -     226 
 Transfer 
  between 
  reserves in 
  respect 
  of share 
  options                 -           -          -             -         629         (629)           -              - 
 Dividends paid 
  (note 7)                -           -          -             -     (2,881)             -           -        (2,881) 
 
 Total 
  transactions 
  with owners           138         427          -             -     (2,026)         (434)           -        (1,895) 
 
 
 At 30 June 
  2019               10,654      33,186     25,446            50    17,747            822          696         88,601 
 
 
 

Statement of changes in equity for the six months ended 30 June 2018 (unaudited):

 
                                                                                                   Foreign          Total 
                                                             Capital               Share-based    Currency   Attributable 
                      Share       Share     Merger        Redemption    Retained       Payment    Exchange      to Equity 
                    Capital     Premium    Reserve           Reserve    Earnings       Reserve     Reserve   Shareholders 
                    GBP'000     GBP'000    GBP'000           GBP'000     GBP'000       GBP'000     GBP'000        GBP'000 
 
 At 1 January 
  2018               10,501      32,705     25,446                50      13,368           824        (21)         82,873 
 
 
 Profit for the 
  period                  -           -          -                 -       2,491             -           -          2,491 
 
 Other 
 comprehensive 
 loss: 
 Currency 
  translation             -           -          -                 -           -             -         104            104 
 
 Total 
  comprehensive 
  income in the 
  period                  -           -          -                 -       2,491             -         104          2,595 
 
 Transactions 
 with 
 owners: 
 Shares issued 
  (note 10)              15          53          -                 -           -             -           -             68 
 Credit for 
  share-based 
  incentives              -           -          -                 -           -           203           -            203 
 Tax on 
  share-based 
  payments 
  recognised 
  directly in 
  equity                  -           -          -                 -        (32)             -           -           (32) 
 Transfer 
  between 
  reserves in 
  respect 
  of share 
  options                 -           -          -                 -          30          (30)           -              - 
 Dividends paid 
  (note 7)                -           -          -                 -     (2,563)             -           -        (2,563) 
 
 Total 
  transactions 
  with owners            15          53          -                 -     (2,565)           173           -        (2,324) 
 
 
 At 30 June 
  2018               10,516      32,758     25,446                50    13,294             997          83         83,144 
 
 
 

Statement of changes in equity for the year ended 31 December 2018 (audited):

 
                                                                                                   Foreign 
                                                            Capital               Share-based     currency 
                          Share      Share     Merger    redemption    Retained       payment     exchange       Total 
                        capital    premium    reserve       reserve    earnings       reserve      reserve      equity 
                        GBP'000    GBP'000    GBP'000       GBP'000     GBP'000       GBP'000      GBP'000     GBP'000 
 
   At 1 January 2018     10,501     32,705     25,446            50      13,368           824         (21)      82,873 
 
 Comprehensive 
  income: 
  Profit for the 
  financial 
  year                        -          -          -             -       6,618             -            -       6,618 
 Other comprehensive expense: 
 Currency 
  translation                 -          -          -             -           -             -          590         590 
 
 Total comprehensive 
  income for the 
  year                        -          -          -             -       6,618             -          590       7,208 
 
 Transactions with 
  owners: 
 Shares issued (note 
  10)                        15         54          -             -           -             -            -          69 
 Credit for 
  share-based 
  incentives                  -          -          -             -           -           464            -         464 
 Tax on share-based 
  payments 
  recognised 
  directly in equity          -          -          -             -        (67)             -            -        (67) 
 Transfer between 
  reserves in 
  respect 
  of share options            -          -          -             -          32          (32)            -           - 
 Dividends (note 7)           -          -          -             -     (3,714)             -            -     (3,714) 
 
 Total transactions 
  with owners                15         54          -             -     (3,749)           432            -     (3,248) 
 
 
 
 
   At 31 December 
   2018                  10,516     32,759     25,446            50      16,237         1,256          569      86,833 
 
 

Notes to the Financial Information

For the six months ended 30 June 2019

   1.   ACCOUNTING POLICIES AND BASIS OF PREPARATION 

The condensed consolidated financial information for the six months ended 30 June 2019 has been prepared in accordance with IAS 34 Interim Financial Reporting, as adopted by the European Union. The condensed consolidated financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2018, which have been prepared in accordance with IFRSs as adopted by the European Union.

The condensed consolidated financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2018 were approved by the Board of Directors on 21 March 2019 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.

The condensed consolidated financial information was approved for issue on 18 September 2019 and has not been audited.

The accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2018, as described in those annual financial statements, except for the adoption of IFRS 16 Leases. The impact of the adoption of IFRS 16 is included in note 13.

   2.   SEASONALITY OF OPERATIONS 

The Cello Health division is not materially influenced by seasonal factors. However, there are a number of clients in the Cello Signal division who traditionally commission activity in the second half of the year leading to increased revenues for that period with respect to those clients.

   3.   NON-GAAP MEASURES 

The Group believes that reporting non-GAAP measures provides a meaningful assessment of underlying business performance reflecting the way the business is managed and reported internally. The Group reports two types of non-GAAP measure, headline measures and like-for-like net revenue.

Headline measures of performance

Non-headline gains and losses are items that, in the opinion of the Directors, are required to be disclosed separately, by virtue of their size, nature or incidence, to enable a full understanding of the Group's underlying financial performance. Accordingly headline measures exclude, the effect of the following items:

i. Restructuring costs - these costs principally relate to business relocation and redundancies.

ii. Start-up losses - these are defined as the net operating result in the period of the trading activities that relate to new offices, new products or new organically started businesses. Activities so defined will cease being separately identified where, in the opinion of the Directors, the activities show evidence of becoming sustainably profitable or are closed, whichever is earlier. In any event start-up losses will cease being separately identified after two years from the commencement of the activity.

iii. Acquisition costs - these are costs that are directly related to acquisitions completed in the year.

iv. Amortisation of intangible assets - this is in respect of amortisation charged against separately identifiable intangible assets acquired as part of a business combination.

v. Acquisition-related employee remuneration expense - costs with regards to deferred payments payable to vendors and certain employees of a company in accordance with the share purchase agreement of the acquired company. In accordance with IFRS 3 Business Combinations, these costs are recognised in the income statement by virtue of employment conditions in the relevant share purchase agreement.

vi. Share option charges - these costs represent the fair value of share options charged to the income statement and are separately identified due to their nature.

Headline measures in this report are not defined terms under IFRS, and may not be comparable with similarly titled measures reported by other companies.

A reconciliation between statutory and headline profit before taxation is presented in below:

 
                                          Unaudited     Unaudited        Audited 
                                         Six months    Six months     Year ended 
                                              ended         ended    31 December 
                                       30 June 2019       30 June           2018 
                                            GBP'000          2018        GBP'000 
                                                          GBP'000 
 
 Headline profit before tax is 
  made up as follows: 
 Headline operating profit                    5,944         5,294         12,494 
 Headline finance income                          2             -              1 
 Headline finance costs                       (224)         (218)          (340) 
 
 Headline profit before taxation              5,722         5,076         12,155 
 
 Restructuring costs                          (194)             -          (204) 
 Start-up losses                              (156)         (465)        (1,150) 
 Acquisition costs                                -             -           (22) 
 Amortisation of intangible assets            (180)         (131)          (325) 
 Acquisition related employee 
  remuneration expense                        (342)         (946)        (1,571) 
 Share option charges                         (195)         (203)          (464) 
 
 Total non-headline gains/losses            (1,067)       (1,745)        (3,736) 
 
 Reported profit before taxation              4,655         3,331          8,419 
 
 
 

In addition, a reconciliation between statutory and headline earnings per share is presented in note 8.

 
 Like-for-like net revenue measures: 
                  Like-for-like net revenue measures adjusts reported net revenue for 
                                                                 the following items: 
                   i. They exclude the results of companies or businesses acquired in 
                                                                   the current period 
                     ii. They exclude the results of acquired companies or businesses 
               in the current period to the extent that those companies or businesses 
                                          were not in the Group in that prior period. 
                  iii. They exclude the results from start-ups in the current period. 
                   iv. They include the results from start-up operations in the prior 
                   period to the extent they are included within an operating segment 
                                                               in the current period. 
                     Like-for-like measures are also calculated both with and without 
                    the impact of movements in currency. These measures are disclosed 
                                                                  in the table below. 
                                                            Unaudited       Unaudited 
                                                           Six months      Six months 
                                                                ended           ended 
                                             Growth %    30 June 2019    30 June 2018 
                                                              GBP'000         GBP'000 
 
 Reported net revenue                            6.8%          54,462          51,011 
 
 Acquisitions                                                       -               - 
 Start-ups                                                       (10)               - 
 
 Like-for-like net revenue                       6.7%          54,452          51,011 
 
 Currency impact                                              (1,133)               - 
 
 Currency adjusted like-for-like 
  net revenue                                    4.5%          53,319          51,011 
 
 
 These measures can be allowed to the Group's operating segments (note 
  4) as follows: 
 
 Reported net revenue 
 Cello Health                                   11.6%          35,006          31,378 
 Cello Signal                                   -0.1%          19,446          19,459 
 Other                                                             10             174 
 
 Total                                           6.8%          54,462          51,011 
 
 
 Like-for-like net revenue: 
 Cello Health                                   11.6%          35,006          31,378 
 Cello Signal                                   -1.0%          19,446          19,633 
 
                                                 6.7%          54,452          51,011 
 
 
 Currency adjusted like-for-like 
  net revenue: 
 Cello Health                                    8.2%          33,948          31,378 
 Cello Signal                                   -1.3%          19,371          19,633 
 
 Total                                           4.5%          53,319          51,011 
 
 
 
 
   4.   SEGMENTAL INFORMATION 

For management purposes, the Group is organised into two operating segments, Cello Health and Cello Signal. These segments are the basis on which the Group reports internally to the plc's Board of Directors, who have been identified as the chief operating decision makers. Revenue and costs not included in one of these operating segments, for example central overheads, the impact of IFRS 16 and results from start-up operations, have not been allocated to an operating segment in-line with the way they are reported to the chief operating decision makers.

The principal activities of the operating segments are as follows:

Cello Health

The Cello Health Division provides market research, consulting and communications services principally to the Group's pharmaceutical and healthcare clients.

Cello Signal

The Cello Signal Division provides market research and direct communications services principally to the Group's consumer-facing clients.

Revenues

Sales between segments are carried out at arms-length. The revenue from external parties reported to the chief operating decision maker is measured in a manner consistent with that in the income statement.

The Group derives revenue from the transfer of goods and services over time and at a point in time based on the location of the client and from the following geographical segments.

 
 Revenue 
 
   for the period ended 30 June 
   2019: 
                                                                         Consolidated 
                                     Cello Health     Cello Signal    and Unallocated       Group 
                                          GBP'000          GBP'000            GBP'000     GBP'000 
 
 External sales                            46,443           33,044                 36      79,523 
 Intersegment revenue                           3              291              (294)           - 
 
 Total revenue                             46,446           33,335              (258)      79,523 
 
 
 Timing of revenue recognition 
 Revenue recognised over time              46,443           22,225                 36      68,704 
 Revenue recognised at a point 
  in time                                       -           10,819                  -      10,819 
 
 Total revenue from external 
  customers                                46,443           33,044                 36      79,523 
 
 
 
 
 for the period ended 30 June 2018 (restated 
  - note 14): 
                                                                        Consolidated 
                                    Cello Health     Cello Signal    and Unallocated       Group 
                                         GBP'000          GBP'000            GBP'000     GBP'000 
 
 External sales                           42,827           33,736                625      77,188 
 Intersegment revenue                         16               55               (71)           - 
 
 Total revenue                            42,843           33,791                554      77,188 
 
 
 Timing of revenue recognition 
 Revenue recognised over time             42,827           23,101                625      66,553 
 Revenue recognised at a point 
  in time                                      -           10,635                  -      10,635 
 
 Total revenue from external 
  customers                               42,827           33,736                625      77,188 
 
 
 
 
 for the year ended 31 December 
  2018: 
                                                                         Consolidated 
                                     Cello Health     Cello Signal    and Unallocated       Group 
                                          GBP'000          GBP'000            GBP'000     GBP'000 
 
 External sales                            88,483           74,897              2,193     165,573 
 Intersegment revenue                          62              482              (544)           - 
 
 Total revenue                             88,545           75,379              1,649     165,573 
 
 
 Timing of revenue recognition 
 Revenue recognised over time              88,483           47,191              2,193     137,867 
 Revenue recognised at a point 
  in time                                       -           27,706                  -      27,706 
 
 Total revenue from external 
  customers                                88,545           74,897              2,193     165,573 
 
 
 
 
 Segmental net revenue and headline 
  operating profit 
 
 for the period ended 30 June 
  2019: 
                                                                       Consolidated 
                                   Cello Health     Cello Signal    and Unallocated       Group 
                                        GBP'000          GBP'000            GBP'000     GBP'000 
 
 Net revenue                             35,006           19,446                 10      54,462 
 
 Headline operating profit                6,521            1,219            (1,796)       5,944 
 
 
 
 
 for the period ended 30 June 
  2018: 
                                                                       Consolidated 
                                   Cello Health     Cello Signal    and Unallocated       Group 
                                        GBP'000          GBP'000            GBP'000     GBP'000 
 
 Net revenue                             31,378           19,459                174      51,011 
 
 Headline operating profit                5,659            1,244            (1,609)       5,294 
 
 
 
 
 for the year ended 31 December 
  2018: 
                                                                         Consolidated 
                                     Cello Health     Cello Signal    and Unallocated       Group 
                                          GBP'000          GBP'000            GBP'000     GBP'000 
 
 Net revenue                               64,308           39,971                537     104,816 
 
 Headline operating profit                 11,890            3,739            (3,135)      12,494 
 
 
 

A reconciliation of Group headline operating profit to profit before taxation on the income statement is presented in note 3.

   5.   FINANCE INCOME AND COSTS 
 
                                    Unaudited       Unaudited        Audited 
                                   Six months      Six months     Year ended 
                                        ended           ended    31 December 
                                 30 June 2019    30 June 2018           2018 
                                      GBP'000         GBP'000        GBP'000 
 Finance income: 
 Interest receivable on bank 
  deposits                                  2               -              1 
 
 
 Finance costs: 
 Interest payable on bank 
  loans and overdrafts                     91             217            338 
 Interest payable in respect 
  of lease liabilities                    133               1              2 
 
 Total finance costs                      224             218            340 
 
 
   6.   TAXATION ON PROFIT ON ORDINARY ACTIVITIES 

The tax charge for the period ended 30 June 2019 is based on management's estimate of weighted average annual tax rate expected for the full financial year. The estimated average annual tax rate used is 24.0% (2018: 25.2%), which incorporates a headline effective tax rate of 23.7% (2018: 24.7%).

   7.    DIVID 
 
                                              Unaudited        Unaudited        Audited 
                                             Six months       Six months     Year ended 
                                          ended 30 June    ended 30 June    31 December 
                             Date Paid             2019             2018           2018 
                                                GBP'000          GBP'000        GBP'000 
 
 
 Final dividend 2017 
  - 2.45p per share        25 May 2018                -            2,563          2,563 
 Interim dividend 2018      2 November 
  - 1.10p per share               2018                -                -          1,151 
 Final dividend 2018       24 May 2019            2,881                -              - 
  - 2.75p per share 
 
                                                  2,881            2,563          3,714 
 
 

An interim dividend of 1.15p (2018: 1.10p) per ordinary share is declared and will be paid on 1 November 2019 to all shareholders on the register on 4 October 2019. In accordance with IAS 10 Events after the Balance Sheet Date, this dividend has not been recognised in the accounts at 30 June 2019, but will be recognised in the accounting period ending 31 December 2019.

   8.   EARNINGS PER SHARE 
 
                                             Unaudited           Unaudited             Audited 
                                      Six months ended          Six months          Year ended 
                                          30 June 2019               ended         31 December 
                                               GBP'000        30 June 2018                2018 
                                                                   GBP'000             GBP'000 
 
 Profit attributable to owners 
  of the parent                                  3,536               2,491               6,618 
 
 Adjustments to profits: 
 Non-headline charges                            1,067               1,745               3,736 
 Tax on non-headline charges                     (239)               (416)               (830) 
 
 Headline earnings for the period                4,364               3,820               9,524 
 
 
                                          30 June 2019        30 June 2018         31 December 
                                      number of shares    number of shares                2018 
                                                                              number of shares 
 Weighted average number of 
  ordinary shares used in basic 
  earnings per share                       106,975,582         105,618,591         105,592,302 
 
 Dilutive effect of securities: 
 Share options                               1,296,758           1,474,249           1,459,481 
 Deferred consideration shares                 364,933             476,706             663,308 
 
 Weighted average number of 
  ordinary shares used in diluted 
  earnings per share                       108,637,273         107,569,546         107,715,091 
 
 
 Basic earnings per share                        3.31p               2.36p               6.27p 
 
 Diluted earnings per share                      3.25p               2.32p               6.14p 
 

In addition to basic and diluted earnings per share, headline earnings per share, which is a non-GAAP measure, has also been presented.

 
 Headline earnings per share 
 Headline basic earnings per share      4.08p   3.62p   9.02p 
 Headline diluted earnings per share    4.02p   3.55p   8.84p 
 
 

Basic earnings per share is calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year, excluding treasury shares, determined in accordance with the provisions of IAS 33 Earnings per Share.

Diluted earnings per share is calculated by dividing profit attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year adjusted for the potentially dilutive ordinary shares for which the conditions of issue have substantially been met but not issued at the end of the year.

The Group's potentially dilutive shares are shares expected to be issued as deferred consideration on acquisitions and share options issued.

Headline earnings per share is calculated using headline earnings for the period, which excludes the effect of non-headline gains/losses (see note 3).

   9.   GOODWILL 
 
                                   Unaudited       Unaudited        Audited 
                                  Six months      Six months     Year ended 
                                       ended           ended    31 December 
                                30 June 2019    30 June 2018           2018 
                                     GBP'000         GBP'000        GBP'000 
 Cost 
 At the beginning of period           90,939          90,270         90,270 
 Additions                                 -               -            146 
 Exchange differences                     80             218            523 
 
 At the end of the period             91,019          90,488         90,939 
 
 Amortisation 
 At the beginning and the 
  end of the period                   17,316          17,316         17,316 
 
 Net book value 
 At the beginning of the 
  period                              73,623          72,954         72,954 
 
 At the end of the period             73,703          73,172         73,623 
 
 
   10.   SHARE CAPITAL 
 
                                       Unaudited           Unaudited             Audited 
                                 At 30 June 2019     At 30 June 2018      At 31 December 
                                         GBP'000             GBP'000                2018 
                                                                                 GBP'000 
 
 Allotted, issued and fully 
  paid                                    10,654              10,516              10,516 
 
 
                                    30 June 2019     At 30 June 2018      At 31 December 
                                number of shares    number of shares                2018 
                                                                        number of shares 
 
 Ordinary shares 10p each            106,541,917         105,163,342         105,164,241 
 
 
 

The Company has one class of ordinary shares which carry no right to fixed income.

During the six months ended 30 June 2019 1,057,433 (six months ended 30 June 2018: 151,185 and year ended 31 December 2018: 152,084) were issued to certain employees of the Group in relation to the share option schemes at exercise prices of between 10.0p and 85.5p per share.

The Group owns 453,000 (2018: 453,000) of its own shares and these shares are held as treasury shares. The Company has the right to re-issue these shares at a later date. The purchase of treasury shares is recorded in equity as a deduction in retained earnings.

On 20 May 2019, 320,243 new ordinary shares of 10p each were issued at 132.2p to the vendors of Defined Health Research Inc. and Cancer Progress LLC and certain employees of the Group, pursuant to the terms of the share purchase agreement of those companies.

   11.   CASH GENERATED FROM/(USED IN) OPERATING ACTIVITIES BEFORE TAXATION 
 
                                                   Unaudited       Unaudited        Audited 
                                                  Six months      Six months     Year ended 
                                                       ended           ended    31 December 
                                                30 June 2019    30 June 2018           2018 
                                                     GBP'000         GBP'000        GBP'000 
 
 Profit on continuing operations 
  before taxation                                      4,655           3,331          8,419 
 
 Finance income                                          (2)               -            (1) 
 Finance costs                                           224             218            340 
 Depreciation of property plant 
  and equipment                                          647             615          1,305 
 Depreciation of right-of-use assets                   1,447               -              - 
 Amortisation of intangible assets                       430             346            769 
 Share-based payment expense                             195             203            464 
 Profit on disposal of property, 
  plant and equipment                                    (1)            (28)           (17) 
 (Increase)/decrease in acquisition related 
  employee remuneration payable                      (1,041)             946          1,543 
 
                                                  __________                     __________ 
 Operating cash flow before movements 
  in working capital                                   6,554           5,631         12,822 
 
 Decrease in trade and other receivables               4,229           8,194          4,592 
 Decrease in trade and other payables                (9,471)        (15,896)        (3,996) 
                                                  __________                     __________ 
 Net cash generated from/(used in) 
  operating activities before taxation                 1,312         (2,071)         13,418 
 
 
 
   12.   NET FUNDS/(DEBT) 
 
 
 Net funds/(debt) is a non-statutory measure, which does not include 
  lease liabilities that arise on the adoption of IFRS 16 Leases, however 
  the Group considers it helpful to the users of accounts for it to 
  be disclosed. 
 
  Under the Group's definition, net funds/(debt) comprises of: 
                                         Unaudited       Unaudited        Audited 
                                        Six months      Six months     Year ended 
                                             ended           ended    31 December 
                                      30 June 2019    30 June 2018           2018 
                                           GBP'000         GBP'000        GBP'000 
 
 Cash and cash equivalents                   3,745           1,868         10,424 
 Bank loans                                (1,551)         (7,136)        (4,000) 
 Bank overdraft                                  -            (70)              - 
 Loan notes                                   (19)            (42)           (42) 
 
 Net debt                                    2,175         (5,380)          6,382 
 
 
 Movements in net funds/(debt) 
  can be analysed as follows: 
                                         Unaudited       Unaudited        Audited 
                                        Six months      Six months     Year ended 
                                             ended           ended    31 December 
                                      30 June 2019    30 June 2018           2018 
                                           GBP'000         GBP'000        GBP'000 
 
 Net decrease in cash and cash 
  equivalents                              (6,749)        (11,368)        (2,753) 
 Net repayment bank loans                    2,444           4,497          7,686 
 Repayment loan notes                           23              17             17 
 Increase/(decrease) in overdraft                -            (70)              - 
 
 Other movements: 
 Foreign exchange                               75            (85)          (197) 
 
 Movements in net funds/(debt) 
  in the year                              (4,207)         (7,009)          4,753 
 
 Net funds at the beginning of 
  the period                                 6,382           1,629          1,629 
 
 Net funds/(debt) at the end of 
  the period                                 2,175         (5,380)          6,382 
 
 
   13.   Adoption of IFRS 16 Leases 

On 1 January 2019 the Group adopted IFRS 16 Leases ("IFRS 16") using the simplified transition approach and accordingly has not restated comparative figures. IFRS 16 supersedes the current lease guidance under IAS 17 Leases and related interpretations. IFRS 16 removes the distinction between operating leases and finance leases, replacing with a model where a right-of-use asset and corresponding lease liability is recognised for all leases except for short-term or low value leases.

Leases previously classified as operating leases with less than 12 months remaining or with low value have continued to be expensed in the income statement on a straight line basis. For remaining leases previously classified as operating leases the Group has recognised right-of-use assets and lease liabilities at 1 January 2019, the transition date. There was no material effect on the financial statements with regards to leases previously classified as finance leases under IAS 17.

Lease liabilities were measured at the present value of the remaining lease payments, discounted using the Group's incremental borrowing rate. The weighted average borrowing rate applied to the lease liabilities on 1 January 2019 was 2.5%

A reconciliation of operating commitments under operating leases disclosed in the financial statements as at 31 December 2018 to the lease liability recognised at the transition date is presented below:

 
                                       Properties   Equipment      Total 
                                          GBP'000     GBP'000    GBP'000 
 
 Operating lease commitments at 
  31 December 2018                         12,328          86     12,414 
 
 Less low-value leases                          -        (86)       (86) 
 Less short-term leases                     (424)           -      (424) 
 Finance leases at 31 December 
  2018                                          -          41         41 
 Adjustment in respect to variable 
  lease payments                              127           -        127 
 Discount using Group's incremental 
  borrowing rate                            (791)           -      (791) 
 
 Lease liability at 1 January 2019         11,240          41     11,281 
 
 
 
 Current lease liabilities                  2,595          11      2,606 
 Non-current lease liabilities              8,645          30      8,675 
 
                                           11,240          41     11,281 
 
 
 
   Movements in the lease liabilities in the 
   period to 30 June 2019 are as follows: 
                                       Properties   Equipment      Total 
                                          GBP'000     GBP'000    GBP'000 
 
 Recognition of lease liabilities 
  at 1 January 2019                        11,240          41     11,281 
 
 Interest on lease liabilities                132           1        133 
 Lease payments during the period         (1,476)         (2)    (1,478) 
 New leases commenced in the period           506           -        506 
 Exchange differences                          13           -         13 
 
 Lease liability at the end of 
  the period                               10,415          40     10,455 
 
 
 Current lease liabilities                  2,681          11      2,692 
 Non-current lease liabilities              7,734          29      7,763 
 
                                           10,415          40     10,455 
 
 
 

Right-of-use assets were measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments recognised at 31 December 2018. In addition the right-of-use asset includes a provision of GBP557,000 for restoration costs in relation to some of these leases. This provision has been recognised as a result of a reassessment of these provisions as a result of the adoption of IFRS 16.

 
 Right-of-use assets recognised relate and movements in 
  the period to 30 June 2019 are as follows: 
                                       Properties   Equipment      Total 
                                          GBP'000     GBP'000    GBP'000 
 
 Recognition of right-of-use assets 
  at 1 January 2019                        11,877           -     11,877 
 
 Right-of-use assets previously 
  included in property, plant and 
  equipment                                     -          57         57 
 Additions                                    524           -        524 
 Depreciation                             (1,447)         (6)    (1,453) 
 Exchange differences                          12           -         12 
 
 Net book amount at 30 June 2019           10,966          51     11,017 
 
 
   14.   PRIOR PERIOD ADJUSTMENT 

The adoption of IFRS 15 Revenue from contracts with customers ("IFRS 15"), resulted in changes in the timing of recognition of certain third-party project costs where the Group acted as principle with respect to services provided. This change was identified after the preparation of the interim statement for 2018 and has resulted in equal and opposite adjustments to revenue and third-party project costs. There was no change to net revenue, operating profit, profit before tax, profit attributable to owners of the parent or equity as a result of this restatement.

The impact on the consolidated income statement for the period ended 30 June 2018 and the consolidated balance sheet at 30 June 2018 are presented below:

 
 Consolidated income statement for the period ended 30 
  June 2018: 
                                 Previously 
                                   reported     Restatement     Restated 
                                    GBP'000         GBP'000      GBP'000 
 
 Revenue                             78,514         (1,326)       77,188 
 Third-party project costs         (27,503)           1,326     (26,177) 
 
 Net revenue                         51,011               -       51,011 
 
 
 
 Consolidated balance sheet at 30 June 2018: 
                                          Previously 
                                            reported     Restatement     Restated 
                                             GBP'000         GBP'000      GBP'000 
 
 Non-current assets                           78,625               -       78,625 
 
 
 Trade and other receivables excluding 
  accrued income                              33,265           2,619       35,884 
 Accrued income/contract asset                11,044         (3,149)        7,895 
 Cash and cash equivalents                     1,868               -        1,868 
 
 Total current assets                         46,177           (530)       45,647 
 
 
 Trade and other payables excluding 
  deferred income                           (24,050)             851     (23,199) 
 Deferred Income/contract Liabilities        (8,656)           (321)      (8,977) 
 Other current liabilities                     (535)               -        (535) 
 
 Total current liabilities                  (33,241)             530     (33,711) 
 
 
 Net current assets/(liabilities)             12,936               -       12,936 
 
 
 Total assets less current liabilities        91,561               -       96,561 
 
 
 Non-current liabilities                     (8,417)               -      (8,417) 
 
 Net assets                                   83,144               -       83,144 
 
 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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