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Cello Health PLC

Cello Group plc - Interim Results

RNS Number : 1665Z
Cello Group plc
16 September 2015
 

 

For Immediate Release

16 September 2015

 

 

Cello Group plc

 

Interim Results for the six months ending 30 June 2015

 

A solid first half

 

Cello Group plc ("Cello" AIM: CLL, "The Group"), the healthcare focused strategic marketing group, today announces its interim results for the six month period to 30 June 2015.

 

Group Financial Highlights

 

·      Revenue £77.0m (2014: £78.3m)

·      Gross profit £41.9m (2014: £39.5m)

·      Like-for-like1 gross profit growth of 1.8%

·      Headline profit before tax2 £4.2m (2014: £4.4m)

·      Statutory operating profit £1.9m (2014: £3.6m) after additional provision for VAT of £1.1m (2014: £nil)

·      Headline operating margin3 10.5% (2014: 12.0%)

·      Headline basic earnings per share 3.61p (2014: 3.87p)

·      Statutory basic earnings per share 1.18p (2014: 2.81p)

·      Net debt of £9.8m (June 2014: £10.2m)

·      Interim dividend up 5% to 0.84p (2014: 0.80p)

Divisional Financial Highlights

 

H1

Cello Health

Cello Signal

£'000

2015

2014

% Growth

2015

2014

% Growth

Segmental gross profit

21,683

19,667

10.3%

19,993

19,410

3.0%

Headline operating profit

4,310

4,168

3.4%

950

1,469

(35.3)%

Headline operating margin3

19.9%

21.2%

 

4.8%

7.6%

 

 

Operating Highlights

·      Successful establishment of national US healthcare office network: New York, Philadelphia, Boston, San Francisco, Chicago

·      Strong overall growth from the US health business, allowing ongoing addition of senior professionals

·      Increased penetration of US biotech client community on East and West Coasts

·      Alignment of Cello Signal to support the digital health communications proposition underway

·      Continued strong growth of core social media software product Pulsar

Like-for-like comparisons remove the impact of acquisitions and results from start-ups in 2014

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

3 Headline operating margin is defined as headline operating profit as a percentage of segmental gross profit

 

Mark Scott, Chief Executive, commented: "Cello's emergence as a global provider of advisory services to the pharmaceutical and biotech industry is progressing at a rapid pace, with continuing strong growth from our core healthcare business, most notably in the US where our primary investments are being made. Cello Signal's strong digital and social media expertise will prove an invaluable addition to the Group's capabilities in the healthcare space and represents a key source of future organic growth."

 

 

Enquiries:

 

Cello Group plc (www.cellogroup.com)

 

Mark Scott, Chief Executive

020 7812 8460

Mark Bentley, Group Finance Director

 

 

 

Cenkos Securities

 

Bobbie Hilliam

020 7484 4040

 

 

Buchanan

 

Mark Edwards, Sophie McNulty, Robbie Ceiriog-Hughes

020 7466 5000

 

 

Notes to Editors (www.cellogroup.com)

Cello is a healthcare focussed strategic marketing group.

The Group's strategy is to create value for shareholders by building an international marketing advisory business able to advise blue chip clients globally, with a primary focus on the pharmaceutical and biotech sectors.

 

Cello has annualised revenues in excess of £170m, annualised gross profit in excess of £80m and employs over 900 professional staff.

 

 

 

Chairman's Statement

 

Overview

 

For the first six months the Group has delivered in line with expectations, with a particularly strong performance from the core healthcare business in the US.

 

The Group has now successfully established the US office footprint necessary to service US domestic and international pharmaceutical and biotech clients, in New York, Philadelphia, San Francisco, Chicago and Boston. This has been achieved with the recruitment of senior professionals to further the ongoing expansion of the business.

 

The first half of this year has seen the successful bedding in of acquisitions made in 2014, both in the UK and USA.

 

Good headway is being made in the application of the digital and social media capabilities of Cello Signal to the growth agenda of Cello Health, as well as building on the existing communications capabilities of Cello Signal in the healthcare space.

 

Following detailed analysis of the recent HMRC industry guidance that relates to the Charity activities of Cello Signal, it is prudent to make a further provision for VAT liabilities. This provision largely reflects the same activities captured in the contingent liability recognised in the 2014 accounts. More recently, other industry wide issues have been informally raised by HMRC that contradict their recent policy guidance. If these issues are eventually upheld by HMRC Policy, then the Group and its advisors will vigorously contest them.

 

Ongoing solid cash flow together with confidence in the operational momentum of the Group has allowed a further increase in the Interim Dividend of 5% to 0.84p (2014: 0.80p). This represents a continuation of a nine year record of increasing dividends.

 

Financial Review

 

Gross profit for the six months to 30 June 2015 was up 6.1% to £41.9m (2014: £39.5m) on revenue of £77.0m (2014: £78.3m). Like-for-like gross profit growth was 1.8%. Headline operating profit was £4.4m (2014: £4.7m). Headline operating margins were 10.5% (2014: 12.0%). Headline pre-tax profit was £4.2m (2014: £4.4m). Further detail on these numbers is provided in the operating review.

 

The reported tax charge is £0.7m (2014: £1.0m). This represents a headline tax rate of 26.4% (2014: 27.0%) which has fallen slightly due to reduced UK tax corporation tax rates.

 

Headline basic earnings per share were 3.61p (2014: 3.87p). Statutory earnings per share were 1.18p (2014: 2.81p).

 

The Group's net debt at 30 June 2015 was £9.8m (31 December 2014: £7.2m; 30 June 2014: £10.2m). The operating cash outflow reflects normal seasonal working capital outflows and is in line with management expectations. Total debt facilities are £24.0m.

 

The interim dividend has been increased 5% to 0.84p (2014: 0.80p). The interim dividend is payable on 27 November 2015 to all shareholders on the register on 22 October 2015. The Group continues an unbroken nine year record of annual dividend growth.

 

The Group has incurred operating losses of £0.1m in the first half in relation to the development of the Pulsar suite of products. As these losses do not fit the Group's tight definitions of 'start-up' activity, these losses have been absorbed within headline operating profit.

 

On 17 July 2015, the Group announced that HMRC had published further guidance (Revenue and Customs Brief 10 (2015)) regarding the industry-wide VAT issues affecting the charities sector that emerged in late 2014. Following detailed analysis of the application of the guidance it is prudent to make a further provision of £1.1m, taking the total provision made to date to £3.2m. This additional provision includes some items which were previously disclosed in the 2014 accounts as contingent liabilities. This provision includes a prudent assessment of penalties and interest, as well as professional costs incurred in dealing with the matter, but it excludes any assumption of client recovery. Preliminary conversations have taken place with clients regarding recovery of these costs.Any recovery from clients will be recognised in future periods as balances are settled.

 

Even more recently, further industry wide VAT issues have been informally raised by HMRC. If confirmed by HMRC's policy unit, the approach and treatment now being informally suggested will be vigorously contested by the Group with its advisors.

 

Costs of £0.2m were incurred from continued investment in start-up activity. This is disclosed below headline operating profit. The vast majority of previous start-up activities are now profitable, albeit currently operating at lower margins than the core business.

 

Restructuring costs of £0.3m were incurred as part of the ongoing efficiency drive with Cello Signal, necessary both to raise profitability and also to support its migration towards the healthcare space.

 

The following table details the other adjustments made to calculate headline operating profit. The acquisition related costs of £0.5m (2014: £0.5m) relate to necessary accounting charges arising from the acquisition of iS Healthcare Dynamics Limited.

 

£m

2015

2014

Headline operating profit

4.4

4.7

VAT provision

(1.1)

-

Restructuring costs

(0.3)

-

Start-up losses

(0.2)

(0.1)

Share option charges

(0.1)

(0.1)

Acquisition related costs

(0.5)

(0.5)

Amortisation

(0.3)

(0.4)

Statutory operating profit

1.9

3.6

Net finance costs

(0.2)

(0.2)

Statutory profit before tax

1.7

3.4

 

 

Operating Review

 

Cello Health

 

H1 2015

H1 2014

Full year 2014

 

£'000

£'000

£'000

Segmental gross profit

21,683

19,667

39,966

Headline operating profit

4,310

4,168

8,464

Headline operating margin

19.9%

21.2%

21.2%

 

Cello Health had a good six months, with overall client spending patterns continuing to be robust.

 

Segmental gross profit increased by 10.3% to £21.7m (2014: £19.7m), including a full period contribution from iS Health, which was acquired by the Group in May 2014. Like-for-like gross profit growth in the first half of 2015 was 2.1%. Margins remained healthy and competitive at 19.9% (H1 2014: 21.2%, FY 2014: 21.2%). Operating profits therefore rose to £4.3m (2014: £4.2m).

 

Cello Health continues to work with a wide range of healthcare enterprises. The client base includes 22 of the top 25 Global pharmaceutical businesses; a growing portfolio of biotech clients; and a number of significant consumer health organisations.

 

The four underlying capabilities of Cello Health are Cello Health Insight, Cello Health Consulting, Cello Health Communications and Cello Health Consumer. While Cello Health Consumer has had a slower six months than in the prior period, all other capabilities have performed well, with particular gross profit strength from Cello Health Communications and good performance from Cello Health Insight and Cello Health Consulting against tough prior period comparators. The like-for-like gross profit growth from these three core clinically-led capabilities, where the client base is predominantly large pharmaceutical organisations, was 7.0%.

 

The fastest growing geographical area in Cello Health has been the US. All capabilities in the US have had a strong period, especially Cello Health Insight and Cello Health Consulting. Following further investment in headcount, Cello Health now has offices in all the major Pharmaceutical centres in the US namely, New York, Philadelphia, San Francisco, Boston and Chicago. To further capitalise on the biotech and biopharma opportunity in the US, Cello Health has launched a new business based in Boston, Cello Health BioConsulting Inc, with the recruitment of four experienced consultants in this area. This business is accounted for as a start-up, and headcount of ten is expected by the end of the year.

 

The major new business wins achieved in the first six months of 2015 included:  AbbVie, Boehringer Ingelheim, Boston Scientific, Cooper Vision Craft, Fiona McAndrew Research, Gilead, Janssen Cilag, Janssen Pharmaceuticals, Lundbeck, Market Metrics, Merz, Reckitt Benckiser, Sanofi, and Vertex Pharma.

 

Cello Signal

 

 

H1 2015

H1 2014

Full year 2014

 

£'000

£'000

£'000

Segmental gross profit

19,993

19,410

39,469

Headline operating profit

950

1,469

3,433

Headline operating margin

4.8%

7.6%

8.7%

 

Segmental gross profit increased by 3.0% to £20.0m (2014: £19.4m). On a like-for-like basis gross profit growth was 1.0%. Operating profit was £1.0m (2014: £1.5m), and operating margins were 4.8% (2014: 7.6%).

 

Overall, and although operating profits are lower than last year, Cello Signal has performed as expected. The US Consumer research business into which senior staff were hired in 2014 is not yet reaping the benefit and this reduced operating margins in the first half. Additionally, as previously announced, the first half of 2014 was unusually profitable, as a high margin project came to an end in April 2014. Both these factors are key to understanding Cello Signal's relative profit performance in the first half of 2015.

 

Pulsar, Cello Signal's advanced social intelligence platform, has continued to grow strongly in the period and now has over 150 clients. The recent update to the product means that Facebook data is now incorporated into the analysis available to clients. This is a new enhancement, and provides clear competitive advantage. Annualised licence revenue is now over £2.0m and, while the product remains loss making, such losses are dropping and Cello Signal expects Pulsar to be making monthly operating profit by the end of the year. 

 

As the strategy for Cello Health has developed, it has become clear that the cutting-edge digital and social media capabilities of Cello Signal are in rapidly growing demand by the healthcare industry and Cello Signal's capabilities will be harnessed quickly by Cello Health to capitalise on this large revenue opportunity. Additionally, over the next twelve months, the Group is committed to develop the health agenda and client base within Cello Signal itself. There are already considerable health-orientated activities within Cello Signal which contribute approximately 10% of current gross profits, including working for health charities and providing communications advice to social health organisations. This existing experience will be important in expanding the overall Group offer.

 

Major new business wins achieved in the first six months of 2015 include: City of Glasgow College, Courtyard Hotels, EC English, Famous Grouse Global BTL, Genesis Housing Association, Hershey's China, Holiday Inn Express, Home Retail Group (Financial Services, Habitat & Argos), Jim Beam, Leprino, Mixxit, Musgrave Group (SuperValu & Wholesale), Nairn's, Police Scotland, RBS, Renaissance Hotels, Thames Water, UK2 and Unilever.

 

Full year Trading Outlook

 

Cello's goal of becoming a leading global supplier of services to the pharmaceutical and biotech sector is being progressively met, on the back of a very focused growth strategy. The utilisation of the digital skills of Signal against this agenda opens up a whole new area of growth for the Group and offers the Group a real competitive advantage in the global healthcare space. The organic investment in additional healthcare resource in the US is an essential element of this overall growth strategy and is beginning to bear fruit. Our management team is successfully balancing the need for organic investment in resource to fulfil the Group's corporate goals with the short term delivery of profit despite the inevitable short term impact of the investment programme. The Board is optimistic that this will not materially affect the full year outcome for the Group and that expectations will be met.

 

Allan Rich,

Chairman

16 September 2015

 

Condensed Consolidated Income Statement

For the six months ended 30 June 2015

 

 

 

 

 

Notes

Unaudited

Six months ended

30 June 2015

£'000

Unaudited

Six months ended

30 June 2014

£'000

Audited

Year ended

 31 December 2014

£'000

 

 

 

 

 

Continuing operations

 

 

 

 

Revenue

5

77,030

78,301

169,866

Cost of sales

 

(35,150)

(38,836)

(88,882)

 

 

 

 

 

Gross profit

5

41,880

39,465

80,984

 

 

 

 

 

Administration expenses

 

(40,007)

(35,827)

(76,769)

 

 

 

 

 

Operating profit

5

1,873

3,638

4,215

 

 

 

 

 

Finance income

6

1

3

5

Finance costs

6

(184)

(229)

(430)

 

 

 

 

 

Profit before taxation

5

1,690

3,412

3,790

 

 

 

 

 

Taxation

7

(675)

(1,054)

(1,508)

 

 

 

 

 

 

 

 

 

 

Profit for the period

 

1,015

2,358

2,282

 

 

 

 

Attributable to:

 

 

 

 

Owners of the parent

 

1,010

2,356

2,283

Non-controlling interests

 

5

2

(1)

 

 

 

 

 

 

 

1,015

2,358

2,282

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited

Six months ended

30 June 2015

£'000

Unaudited

Six months ended

30 June 2014

£'000

Audited

Year ended

31 December 2014

£'000

Earnings per share

 

 

 

 

Basic earnings per share

10

1.18p

 2.81p

2.70p

Diluted earnings per share

10

1.15p

2.74p

2.63p

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statement of Comprehensive Income

For the six months ended 30 June 2015

 

 

 

Unaudited

Six months ended

30 June 2015

£'000

Unaudited

Six months ended

30 June 2014

£'000

Audited

Year ended

31 December 2014

£'000

 

 

 

 

 

Profit for the period

 

1,015

2,358

2,282

 

 

 

 

 

Other comprehensive income:

 

 

 

 

Exchange differences on translation of foreign operations

18

(27)

75

 

 

 

 

 

Total comprehensive income for the period

 

1,033

2,331

2,357

 

 

 

 

 

Total comprehensive income attributable to:

 

 

 

 

Owners of the parent

 

1,028

2,329

2,358

Non-controlling interests

 

5

2

(1)

 

 

 

 

 

Total comprehensive income for the period

 

1,033

2,331

2,357

 

 

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheet

As at 30 June 2015

 

 

 

 

 

Notes

 

Unaudited

At 30 June 2015

£'000

Unaudited

At 30 June 2014

£'000

Audited

At 31 December 2014

£'000

 

 

 

 

 

Goodwill

11

73,364

72,522

73,396

 

Intangible assets

 

1,140

1,878

 

Property, plant and equipment

 

2,089

2,506

2,321

 

Deferred tax assets

 

992

910

898

 

 

 

 

 

 

 

Non-current assets

 

77,585

77,816

78,107

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade and other receivables

 

37,824

40,789

40,044

 

Cash and cash equivalents

 

1,176

2,452

5,566

 

 

 

 

 

 

 

Current assets

 

39,000

43,241

45,610

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade and other payables

 

(29,794)

(34,781)

(37,181)

 

Current tax liabilities

 

(1,858)

(2,174)

(1,241)

 

Borrowings

 

(692)

(829)

(300)

 

Provisions

12

(3,209)

-

(2,109)

 

Obligations under finance leases

 

(24)

(26)

(34)

 

 

 

 

 

 

 

Current liabilities

 

(35,577)

(37,810)

(40,865)

 

 

 

 

 

 

 

Net current assets

 

3,423

5,431

4,745

 

 

 

 

 

 

 

Total assets less current liabilities

 

81,008

83,247

82,852

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade and other payables

 

(1,225)

-

(700)

 

Borrowings

 

(10,216)

(11,754)

(12,359)

 

Obligations under finance leases

 

(61)

(74)

(65)

 

Deferred tax liabilities

 

(155)

(361)

(249)

 

 

 

               

               

               

 

Non-current liabilities

 

(11,657)

(12,189)

 

 

 

               

               

               

 

Net assets

 

69,351

71,058

69,479

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

Share capital

13

8,558

8,462

8,530

 

Share premium

 

18,796

18,530

18,663

 

Merger reserve

 

28,807

28,807

 

Capital redemption reserve

 

50

50

50

 

Retained earnings

 

12,587

14,825

12,923

 

Share-based payment reserve

 

568

521

544

 

Foreign currency reserve

 

(65)

(185)

(83)

 

 

 

 

 

 

 

Equity attributable to equity holders of parent

 

69,301

71,010

69,434

 

 

 

 

 

 

 

Non-controlling interests

 

50

48

45

 

 

 

 

 

 

 

Total equity

 

69,351

71,058

69,479

 

 

 

 

 

 

 

 

 

Condensed Consolidated Cash Flow Statement

For the six months ended 30 June 2015

 

 

 

 

Notes

Unaudited

Six months ended

30 June 2015

£'000

Unaudited

Six months ended

30 June 2014

£'000

Audited

Year ended

31 December 2014

£'000

 

 

 

 

 

 

Net cash (used in)/from operating activities before taxation

14

(428)

(4,668)

4,763

 

 

 

 

 

Tax paid

 

(156)

(884)

(2,372)

 

 

 

 

 

 

Net cash (used in)/from operating activities after taxation

 

(584)

(5,552)

2,391

 

 

 

 

 

 

 

 

 

 

Investing activities

 

 

 

 

Interest received

 

1

3

5

Purchase of property, plant and equipment

 

(391)

(731)

(1,103)

Sale of property, plant and equipment

 

9

29

29

Expenditure on intangible assets

 

(124)

(167)

(374)

Purchase of subsidiary undertakings

 

25

302

(1,549)

 

 

 

 

 

 

Net cash used in investing activities

 

(480)

(564)

(2,992)

 

 

 

 

 

 

 

 

 

 

Financing activities

 

 

 

 

Proceeds from issuance of shares

 

61

129

330

Dividends paid to equity holders

 

(1,529)

(531)

(2,559)

Repayment of borrowings

 

(8,209)

(2,000)

(4,000)

Repayment of loan notes

 

(68)

(73)

(73)

Drawdown of borrowings

 

6,165

4,800

6,800

Increase in overdrafts

 

460

529

-

Capital element of finance lease payments

 

(14)

(26)

(36)

Interest paid

 

(148)

(171)

(449)

 

 

 

 

 

Net cash (used in)/from financing activities

 

(3,282)

2,657

13

 

 

 

 

 

Movements in cash and cash equivalents

 

 

 

 

Net decrease in cash and cash equivalents

 

(4,346)

(3,459)

(588)

 

 

 

 

 

Exchange (losses)/gains on cash and bank overdrafts

 

(44)

(73)

170

Cash and cash equivalents at the beginning of the period

 

5,566

5,984

5,984

 

 

 

 

 

Cash and cash equivalents at end of the period

 

1,176

2,452

5,566

 

 

 

 

 

 

 

 

 

 

             

 

 

 

Condensed Consolidated Statement of Changes in Equity

For the six months ended 30 June 2015

 

Statement of changes in equity for the six months ended 30 June 2015:

 

Share

Capital

£'000

Share

 Premium

£'000

Merger Reserve

£'000

Capital Redemption Reserve

£'000

Retained Earnings

£'000

Share-based Payment Reserve

£'000

Foreign Currency

Exchange Reserve

£'000

Total Attributable to Equity Shareholders

£'000

Non-Controlling Interest

£'000

Total

Equity

£'000

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2015

8,530

18,663

28,807

50

12,923

544

(83)

69,434

45

69,479

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit for the period

-

-

-

-

1,010

-

-

1,010

5

1,015

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

Currency translation

-

-

-

-

-

-

18

18

-

18

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income in the period

 

-

 

-

 

-

 

-

 

1,010

 

-

 

18

 

1,028

 

5

 

1,033

 

 

 

 

 

 

 

 

 

 

 

Transactions with owners:

 

 

 

 

 

 

 

 

 

 

Shares issued

28

133

-

-

-

-

-

161

-

161

Credit for share-based incentives

 

-

 

-

 

-

 

             -

 

-

 

111

 

-

 

111

 

-

 

111

Deferred tax on share-based payments recognised directly in equity

 

-

 

-

 

-

 

-

 

96

 

-

 

-

 

96

 

-

 

96

Transfer between reserves in respect of share options

 

-

 

-

 

-

 

-

 

87

 

(87)

 

-

 

-

 

-

 

-

Dividends paid (note 8)

-

-

-

-

(1,529)

-

-

(1,529)

-

(1,529)

 

 

 

 

 

 

 

 

 

 

 

Total transactions with owners

 

28

 

133

 

-

 

-

 

(1,346)

 

24

 

-

 

(1,161)

 

-

 

(1,161)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at 30 June 2015

8,558

18,796

28,807

50

12,587

568

(65)

69,301

50

69,351

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Statement of changes in equity for the six months ended 30 June 2014:

 

Share

Capital

£'000

Share

 Premium

£'000

Merger Reserve

£'000

Capital Redemption Reserve

£'000

Retained Earnings

£'000

Share-based Payment Reserve

£'000

Foreign Currency

Exchange Reserve

£'000

Total Attributable to Equity Shareholders

£'000

Non-Controlling Interest

£'000

Total

Equity

£'000

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2014

8,348

18,368

28,345

50

12,810

455

(158)

68,218

46

68,264

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit for the period

-

-

-

-

2,356

-

-

2,356

2

2,358

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

Currency translation

-

-

-

-

-

-

(27)

(27)

-

(27)

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income in the period

 

-

 

-

 

-

 

-

 

2,356

 

-

 

(27)

 

2,329

 

2

 

2,331

 

 

 

 

 

 

 

 

 

 

 

Transactions with owners:

 

 

 

 

 

 

 

 

 

 

Shares issued

114

162

462

-

-

-

-

738

-

738

Credit for share-based incentives

 

-

 

-

 

-

 

-

 

-

 

102

 

-

 

102

 

-

 

102

Deferred tax on share-based payments recognised directly in equity

 

 

-

 

 

-

 

 

-

 

 

-

 

 

154

 

 

-

 

 

-

 

 

154

 

 

-

 

 

154

Transfer between reserves in respect of share options

 

-

 

-

 

-

 

-

 

36

 

(36)

 

-

 

-

 

-

 

-

Dividends paid (note 8)

-

-

-

-

(531)

-

-

(531)

-   

(531)

 

 

 

 

 

 

 

 

 

 

 

Total transactions with owners

 

114

 

162

 

462

 

-

 

(341)

 

66

 

-

 

463

 

-

 

463

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at 30 June 2014

8,462

18,530

28,807

50

14,825

521

(185)

71,010

48

71,058

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Statement of changes in equity for the year ended 31 December 2014:

 

 

Share

Capital

£'000

Share Premium

£'000

Merger Reserve

£'000

Capital Redemption Reserve

£'000

Retained Earnings

£'000

Share-based Payment Reserve

£'000

Foreign Currency Exchange Reserve

£'000

Total Attributable to Equity Shareholders

£'000

Non-Controlling Interest

£'000

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2014

8,348

18,368

28,345

50

12,810

455

(158)

68,218

46

68,264

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit for the year

-

-

-

-

2,283

-

-

2,283

(1)

2,282

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

Currency translation

-

-

-

-

-

-

75

75

-

75

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income for the period

 

-

 

-

 

-

 

-

 

2,283

 

-

 

75

 

2,358

 

(1)

 

2,357

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transactions with owners:

 

 

 

 

 

 

 

 

 

 

Shares issued

182

295

462

-

-

-

-

939

-

939

Credit for share-based incentives

 

-

 

-

 

-

 

-

 

-

 

212

 

-

 

212

 

-

 

212

Tax on share-based payments recognised directly in equity

 

 

-

 

 

-

 

 

-

 

 

-

 

 

266

 

 

-

 

 

-

 

 

266

 

 

-

 

 

266

Transfer between reserves in respect of share options

 

-

 

-

 

-

 

-

 

123

 

(123)

 

-

 

-

 

-

 

-

Dividends paid (note 8)

-

-

-

-

(2,559)

-

-

(2,559)

-

(2,559)

 

 

 

 

 

 

 

 

 

 

 

Total transactions with owners

 

182

 

295

 

462

 

-

 

(2,170)

 

89

 

-

 

(1,142)

 

-

 

(1,142)

 

 

 

 

 

 

 

 

 

 

 

 

As at 31 December 2014

 

8,530

 

18,663

 

28,807

 

50

 

12,923

 

544

 

(83)

 

69,434

 

45

 

69,479

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes to the Financial Information

For the six months ended 30 June 2015

 

1.   ACCOUNTING POLICIES AND BASIS OF PREPARATION

 

The condensed consolidated financial information for the six months ended 30 June 2015 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 2014, 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 2014 were approved by the Board of directors on 18 March 2015 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 16 September 2015 and has not been audited.

 

The accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2014, as described in those annual financial statements.

 

There are no new IFRSs or IFRICs that are effective for the first time for the interim period that would be expected to have a material impact on the Group.

 

2.   HEADLINE MEASURES

 

The Group believes that reporting non-GAAP or headline measures provides a useful comparison of business performance and reflects the way the business is controlled. Accordingly headline measures of operating profit, finance income, finance costs, profit before taxation and earnings per share exclude, where applicable, restructuring costs, start-up losses, amortisation of intangible assets, impairment charges, acquisition accounting adjustments, share option charges, fair value gains and losses on derivative financial instruments and other exceptional costs. 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 or incidence, to enable a full understanding of the Group's financial performance.

 

A reconciliation between statutory and headline profit before taxation is presented in note 4. In addition to this a reconciliation between statutory and headline earnings per share is presented in note 10. Headline measures in this report are not defined terms under IFRS, and may not be comparable with similarly titled measures reported by other companies.

 

3.   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.

 

4.   RECONCILIATION OF PROFIT FROM CONTINUING OPERATIONS BEFORE TAXATION TO

      HEADLINE PROFIT BEFORE TAX

 

 

Unaudited

Six Months ended

 30 June 2015

£'000

Unaudited

Six Months ended

 30 June 2014

£'000

Audited

Year ended

 31 December 2014

£'000

 

 

 

 

Profit from continuing operations before taxation

1,690

3,412

3,790

 

Restructuring costs

 

318

 

-

 

534

Provision for VAT payable

1,100

-

2,109

Start-up losses

157

99

446

Acquisition costs

-

152

106

Amortisation of intangible assets

301

383

965

Acquisition related employee remuneration expense

525

300

1,200

Share option charges

111

102

212

 

 

 

 

Headline profit before taxation

4,202

4,448

9,362

 

 

 

 

Headline profit before tax is made up as follows:

 

 

 

Headline operating profit

4,385

4,674

9,787

Headline finance income

1

3

5

Headline finance costs

(184)

(229)

(430)

 

 

 

 

 

4,202

4,448

9,362

 

 

 

 

 

5.   SEGMENTAL INFORMATION

 

For management purposes, the Group is organised into two operating groups; Cello Health and Cello Signal. These groups 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.

 

 

Six months ended 30 June 2015

 

 

 

 

 

 

 

Cello Health

£'000

 

Cello Signal

£'000

Consolidated and Unallocated

£'000

 

Group £'000

Revenue

 

 

 

 

External sales

30,453

46,290

287

77,030

Intersegment revenue

24

27

(51)

-

 

 

 

 

 

Total revenue

30,477

46,317

236

77,030

 

 

 

 

 

 

 

 

 

 

Gross profit

21,683

19,993

204

41,880

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit

 

 

 

 

Headline operating profit (segment result)

4,310

950

(875)

4,385

 

 

 

 

 

Restructuring costs

 

 

 

(318)

Provision for VAT

 

 

 

(1,100)

Start-up losses

 

 

 

(157)

Amortisation of intangible assets

 

 

 

(301)

Acquisition related employee remuneration expense

 

 

 

(525)

Share option charges

 

 

 

(111)

 

 

 

 

 

Operating profit

 

 

 

1,873

 

 

 

 

 

Financing income

 

 

 

1

Finance costs

 

 

 

(184)

 

 

 

 

 

Profit from continuing operations before taxation

 

 

 

1,690
 

 

 

 

 

 

Other information

 

 

 

 

 

 

 

 

 

Capital expenditure

220

171

-

391

 

 

 

 

 

Capitalisation of intangible assets

4

120

-

124

 

 

 

 

 

Depreciation of property plant and equipment

214

400

3

617

 

 

 

 

 

 

 

Six months ended 30 June 2014

 

 

 

 

 

 

 

Cello Health

£'000

 

Cello Signal

£'000

Consolidated and Unallocated £'000

 

Group £'000

Revenue

 

 

 

 

External sales

28,149

49,604

548

78,301

Intersegment revenue

-

14

(14)

-

 

 

 

 

 

Total revenue

28,149

49,618

534

78,301

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

19,667

19,410

388

39,465

 

 

 

 

 

 

 

 

 

 

Operating profit

 

 

 

 

Headline operating profit (segment result)

4,168

1,469

(963)

4,674

 

 

 

 

 

Start-up losses

 

 

 

(99)

Acquisition costs

 

 

 

(152)

Amortisation of intangible assets

 

 

 

(383)

Acquisition related employee remuneration expense

 

 

 

(300)

Share option charges

 

 

 

(102)

 

 

 

 

 

Operating profit

 

 

 

3,638

 

 

 

 

 

Financing income

 

 

 

3

Finance costs

 

 

 

(229)

 

 

 

 

 

Profit from continuing operations before taxation

 

 

 

3,412
 

 

 

 

 

 

Other information

 

 

 

 

 

 

 

 

 

Capital expenditure

237

490

4

731

 

 

 

 

 

Capitalisation of intangible assets

30

137

-

167

 

 

 

 

 

Depreciation of property plant and equipment

210

384

1

595

 

 

 

 

 

 

 

Year ended 31 December 2014

 

 

 

 

 

 

 

 

Cello Health £'000

 

Cello Signal £'000

Consolidated and Unallocated
£'000

 

Group £'000

Revenue

 

 

 

 

External sales

57,948

108,985

2,933

169,866

Intersegment revenue

56

42

(98)

-

 

 

 

 

 

Total revenue

58,004

109,027

2,835

169,866

 

 

 

 

 

Gross profit

39,966

39,469

1,549

80,984

 

 

 

 

 

Operating profit

 

 

 

 

Headline operating profit (segment result)

8,464

3,433

(2,110)

9,787

 

 

 

 

 

Restructuring costs

 

 

 

(534)

Provision of VAT payable

 

 

 

(2,109)

Start-up losses

 

 

 

(446)

Acquisition costs

 

 

 

(106)

Amortisation of intangible assets

 

 

 

(965)

Acquisition related employee remuneration expense

 

 

 

(1,200)

Share option charges

 

 

 

(212)

 

 

 

 

 

Operating profit

 

 

 

4,215

 

 

 

 

 

Financing income

 

 

 

5

Finance costs

 

 

 

(430)

 

 

 

 

 

Profit before tax on continuing operations

 

 

 

3,790

 

 

 

 

 

Other information

 

 

 

 

 

 

 

 

 

Capital expenditure

422

776

14

1,212

 

 

 

 

 

Capitalisation of intangible assets

49

325

-

374

 

 

 

 

 

Depreciation of property plant and equipment

423

764

3

1,190

 

 

 

 

 

 

 

 

 

 

 

6.   FINANCE INCOME AND COSTS

 

 

Unaudited

Six months ended

30 June 2015

£'000

Unaudited

Six months ended

30 June 2014

£'000

Audited

Year ended

31 December 2014

£'000

Finance income:

 

 

 

Interest receivable on bank deposits

1

3

5

 

 

 

 

 

 

 

 

Finance costs:

 

 

 

Interest payable on bank loans and overdrafts

182

227

425

Interest payable in respect of finance leases

2

2

5

 

 

 

 

Total finance costs

184

229

430

 

 

 

 

 

7.   TAXATION ON PROFIT ON ORDINARY ACTIVITIES

 

The tax charge for the period ended 30 June 2015 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 26.4% (2014: 27.0%).

 

8.   DIVIDEND

 

 

 

 

Date Paid

Unaudited

Six months ended  30 June 2015

£'000

Unaudited

Six months ended  30 June 2014

£'000

Audited

Year ended

31 December 2014

£'000

 

 

 

 

 

Interim dividend 2013 - 0.64p per share

6 January 2014

-

531

531

Final dividend 2013 - 1.61p per share

4 July 2014

-

-

1,351

Interim dividend 2014 - 0.80p per share

7 November 2014

-

-

677

Final dividend 2014 - 1.80p per share

29 May 2015

1,529

-

-

 

 

 

 

 

 

 

1,529

531

2,559

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

An interim dividend of 0.84p (2014: 0.80p) per ordinary share is declared and will be paid on 27 November 2015 to all shareholders on the register on 22 October 2015. In accordance with IAS 10 Events after the Balance Sheet Date, this dividend has not been recognised in the accounts at 30 June 2015, but will be recognised in the accounting period ending 31 December 2015.

 

9.   RESTRUCTURING COSTS, START-UP LOSSES AND ACQUISITION COSTS

 

Restructuring costs, start-up losses and acquisition costs have been separately disclosed in order to assist in understanding the financial performance of the Group.

 

Restructuring costs principally relate to redundancy costs.

 

Start-up losses 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.

 

Acquisition costs relate to professional costs incurred in relation to acquisitions.

 

 

10.   EARNINGS PER SHARE

 

Unaudited

Six months ended

30 June 2015

£'000

Unaudited

Six months ended

30 June 2014

£'000

Audited

Year ended

31 December 2014

£'000

 

 

 

 

Earnings attributable to owners of the parent

1,010

2,356

2,283

Non-controlling interests

-

2

-

 

 

 

 

Earnings from continuing operations

1,010

2,358

2,283

 

 

 

 

Adjustments to earnings:

 

 

 

Restructuring costs

318

-

534

Provision for VAT

1,100

-

2,109

Start-up losses

157

99

446

Acquisition costs

-

152

106

Amortisation of intangible assets

301

383

965

Acquisition related employee remuneration expenses

525

300

1,200

Share-based payments charge

111

102

212

Tax thereon

(434)

(149)

(976)

 

 

 

 

Headline earnings attributable to ordinary shareholders

3,088

3,245

6,879

 

 

 

 

 

 

 

 

 

30 June 2015

number of shares

30 June 2014

number of shares

30 December 2014

number of shares

 

 

 

 

Weighted average number of ordinary shares used in basic earnings per share

 

85,497,199

 

83,785,620

 

84,548,170

 

 

 

 

Dilutive effect of securities:

 

 

 

Share options

1,926,031

2,284,866

2,094,597

Deferred consideration shares

241,379

19,223

69,387

 

 

 

 

Weighted average number of ordinary shares used in diluted earnings per share

 

87,664,609

 

86,089,709

 

86,712,154

 

 

 

 

 

 

 

 

Earnings per share

 

 

 

Basic earnings per share

1.18p

2.81p

2.70p

Diluted earnings per share

1.15p

2.74p

2.63p

 

 

 

 

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

3.61p

3.87p

8.14p

Headline diluted earnings per share

3.52p

3.77p

7.93p

 

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

 

Diluted earnings per share is calculated by dividing earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue 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 year, which excludes the effect of restructuring costs, start-up losses, amortisation of intangibles, impairments charges, acquisition accounting adjustments, share option charges, fair value gains and losses on derivative financial instruments and the provision for VAT. The calculation also excludes non-controlling interests over which the Group has exclusive options to acquire in the future.

 

 

11.   GOODWILL

 

 

Unaudited

Six months ended

30 June 2015

£'000

Unaudited

Six months ended

30 June 2014

£'000

Audited

Year ended

31 December 2014

£'000

Cost

 

 

 

At the beginning of period

85,775

83,571

83,571

Additions

-

1,463

1,911

Exchange differences

(32)

(133)

293

 

 

 

 

At the end of the period

85,743

84,901

85,775

 

 

 

 

Amortisation

 

 

 

At the beginning and the end of the period

12,379

12,379

12,379

 

 

 

 

Net book value

 

 

 

At the end of the period

73,364

72,522

73,396

 

 

 

 

 

At the beginning of the period

 

73,396

 

71,192

 

71,192

 

 

 

 

 

 

12.   PROVISIONS

 

 

Unaudited

Six months ended

30 June 2015

£'000

Unaudited

Six months ended

30 June 2014

£'000

Audited

Year ended

31 December 2014

£'000

 

 

 

 

At the beginning of period

2,109

-

-

Additions

1,100

-

2,109

 

 

 

 

At the end of the period

3,209

-

2,109

 

 

 

 

 

The provisions for VAT payable is in relation to amounts payable, including an estimate for interest and penalties, to HMRC in respect of certain supplies to charity clients. In accordance with IAS 37 Provisions, contingent liabilities and contingent assets potential recovery from clients has not been recognised.

 

13.   SHARE CAPITAL

 

 

Unaudited

At 30 June 2015

£'000

Unaudited

At 30 June 2014

£'000

Audited

At 31 December 2014

£'000

Allotted, issued and fully paid

 

 

 

85,579,670 ordinary shares of 10p each

8,558

8,462

8,530

 

 

 

 

 

 

 

 

 

Between 1 January 2014 and 30 June 2015 the following shares were issued:

 

On 7 May 2014, 123,588 new ordinary shares of 10.0p each were issued at 88.5p to vendors of Mash Health Limited and certain employees of the Group, pursuant to the terms of the share purchase agreement of Mash Health Limited.

 

On 13 May 2014, 567,376 new ordinary shares of 10.0p each were issued at 88.5p to vendors iS Health Dynamics Limited pursuant to the terms of the share purchase agreement of that company.  

 

On 14 May 2015, 109,529 new ordinary shares of 10.0p each were issued at 109.5p to certain employees of the Group pursuant to the terms of the share purchase agreement of iS Healthcare Dynamics Limited.

 

During the six months ended 30 June 2015 166,449 (year ended 31 December 2014: 1,129,676) were issued to certain employees of the Group in relation to the share option schemes at exercise prices between of between 31.5p and 42.0p per share.

 

The Group owned 453,000 of its own shares over the whole period and these shares are held as treasury shares. The company has a right to re-issue these shares at a later date. 

 

 

14.   CASH GENERATED FROM OPERATIONS

 

 

Unaudited

Six months ended

30 June 2015

£'000

Unaudited

Six months ended

30 June 2014

£'000

Audited

Year ended

31 December 2014

£'000

 

 

 

 

Profit on continuing operations before taxation

1,690

3,412

3,790

 

 

 

 

Financing income

(1)

(3)

(5)

Finance costs

184

229

430

Depreciation

617

595

1,190

Amortisation of intangible assets

479

519

1,274

Share-based payment expense

111

102

212

Profit on disposal of property, plant and equipment

(5)

(9)

(8)

Increase in acquisition related employee remuneration payable

125

38

820

Increase in provisions

1,100

-

2,109

 

 

 

 

Operating cash flow before movements in working capital

4,300

4,883

9,812

 

 

 

 

Decrease/(increase) in receivables

2,193

(2,925)

(2,102)

Increase in payables

(6,921)

(6,626)

(2,947)

 

 

 

 

Net cash (used in)/ from operating activities before taxation

 

(428)

 

(4,668)

 

4,763

 

 

 

 

 

 

15.   NET DEBT

 

 

 

 

Net debt comprises of:

Unaudited

Six months ended

30 June 2015

£'000

Unaudited

Six months ended

30 June 2014

£'000

Audited

Year ended

31 December 2014

£'000

 

 

 

 

Bank overdraft

460

529

-

Bank loans

10,216

11,754

12,359

Loan notes

232

300

300

Finance leases

85

100

99

Cash and cash equivalents

(1,176)

(2,452)

(5,566)

 

 

 

 

Net debt

9,817

10,231

7,192

 

 

 

 

 

 

 

 

Movements in net debt can be analysed as follows:

 

 

 

 

 

 

 

Net decrease in cash and cash equivalents

4,346

3,459

588

Repayment bank loans

(8,209)

(2,000)

(4,000)

Repayment loan notes

(68)

(73)

(73)

Drawdown of bank loans

6,165

4,800

6,800

Increase in overdrafts

460

529

-

Capital element of finance lease payments

(14)

(26)

(36)

 

 

 

 

Movements in net debt from cash flows

2,680

6,689

3,279

 

 

 

 

Other movements:

 

 

 

New finance leases

-

100

109

Foreign exchange

(55)

(119)

243

 

 

 

 

Total movement in net debt in the period

2,625

6,670

3,631

 

 

 

 

Net debt at the beginning of the period

7,192

3,561

3,561

 

 

 

 

Net debt at the end of the period

9,817

10,231

7,192

 

 

 

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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