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Cello Health expects "strong" full-year outcome

Snapshot

  • Two divisions: Cello Health and Cello Signal
  • The group's dividend has risen every year for the past 13 years
  • Expansion in the US is key to future growth
  • Suitable acquisitions are being mulled to speed this aim
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Quick facts: Cello Health PLC

Price: 145.5 GBX

AIM:CLL
Market: AIM
Market Cap: £154.7 m
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What it does

Cello Health PLC (LON:CLL) calls itself a healthcare-focused advisory group.

It has two arms: Health, which provides expertise, processes, intellectual property and market knowledge spanning the pharmaceutical, biotechnology, diagnostics, healthcare equipment and consumer health sectors.

And Signal, which provides “digital, social media and branding expertise” to companies, and is increasingly focused on health having previously been focused sectors such as technology and retail.

Cello’s big claim to fame is that it works with 24 of the top 25 pharmaceutical companies around the world.

 

How it is doing

In a pre-close trading update in January, Cello said it expects to report results for 2019 in line with consensus market expectations.

The group enjoyed strong cash flow in the second half of last year, as is the norm, and conversion of operating profit into cash flow was strong; as a result, the group ended the year with a better net cash position than the market was expecting.

The healthcare-focused advisory group said last year was one in which the group traded very well, with continued excellent like-for-like growth from the Cello Health division balanced against a weaker outcome from the Cello Signal arm.

Cello Health, which provides expertise, processes, intellectual property and market knowledge spanning the pharmaceutical, biotechnology, diagnostics, healthcare equipment and consumer health sectors, had “an excellent year”, with revenue growth that was ahead of plan, leading to “a very good headline operating profit performance”.

Cello Signal, which provides “digital, social media and branding expertise” to companies, had a slower year than anticipated, particularly in the final quarter, reflecting in part slower decision-making by some UK based clients who were affected by the UK election and uncertainty surrounding Brexit.

The group is now focusing on Cello Health, and after selling the Pulsar business in October it has decided to reorganise the structure of Cello Signal, extracting the Edinburgh-based digital and marketing communications operations and subsuming them into the Cello Health operating structure under the name Cello Connect.

It is expected that the reduced Signal business will constitute around 20% of the total net revenue and less than 10% of operating profit for the group for 2019. The restructuring costs of Cello Signal are likely to lead to an exceptional debit of around £500,000 in the first half of the current year.

Meanwhile, the company said that the disposal last year of Pulsar will result in a one-off non-cash impairment charge of around £1.5mln in the accounts for 2019.

 

Inflexion points

  • In February, Cello reduced the consideration for the sale of its social media analytics business to Access Intelligence PLC (LON:ACC). Cello will make a cash payment of £1.6mln to correspond to a shortfall in the net assets of Pulsar Platform below the agreed target level at the closing of the deal, with Access Intelligence also buying back 4,076,238 of its own shares to reduce the purchase price for one pound. 

  • In October, Cello sold social media analytics business Pulsar to Access Intelligence PLC (LON:ACC) in exchange for £4.5mln worth of shares.

 

What analysts say

House broker finnCap said in a note in January that Cello was trading a a "discount to peers" and that its valuation multiples were "underpinned with good upside".

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Watch

Full interview: Cello Health reports good growth in profits and strong cash flow

Cello Health PLC's (LON:CLL) Mark Scott tells Proactive London they've seen good growth in profits and strong cash flow for the first half of the year said that he's confident about the rest of the year too. The group delivered net revenue of £54.5mln for the first six months of the year,...

on 18/9/19

3 min read