25 May 2012

Cello playing louder

13/09/2011 Ben Jaglom

Marketing services concern Cello Group (CLL) has unveiled a 7.7 per cent increase in pre-tax profits due to a rise in pharma clients.

The AIM-quoted venture declared profits of £3.1 million (2010: £2.8 million) on sales of £62.9 million (2010: £61.5 million) for the six months to June. The interim dividend rose from 0.525p to 0.55p while net debt fell £500,000 to £11.2 million. The results follow a profit warning in July in which Cello said that due to the loss of a 'single large retail research contract' results for the year would be 'slightly lower' than expectations.

Cello noted that 45 per cent of work in its research and consulting division came from pharmaceutical clients. Its marketing business 'Tangible' saw profits slip from £11.4 million to £10.9 million while its research division reported a climb in profits £18.5 million to £19.6 million. Key pharma clients included Johnson and Johnson, Pfizer and Novartis.

In an interview with Growth Company Investor chief executive Mark Scott remarked the company noted that its pharma market in particular was performing well. Scott said that big pharma 'is having a tough time with a lack of blockbusters (extremely profitable drugs) and patents are running out' and that as a result they are 'hungry for data, something that is driving our business.'

Looking forward Scott he identified key opportunities for Cello in territories across Asia and Brazil and to increase the percentage of sales from both non-UK sources (currently 55 per cent of revenue) and pharma clients (currently 45 per cent.)

Analysts at Altium are forecasting profits of £7.2 million (EPS: 6.6p) on sales of £66.5 million for the year to December 2011. In 2012 profits of £7.8 million (EPS: 6.7p) on revenues of £69.4 million are expected.

Growth Company Investor last recommended shares in Cello this March at 55p and they have since slumped to 35p. At the current price we can see upside with the business growing organically in its pharma division despite the loss of its 'single large retail research contract.' Speculative buy.

Tags: Marketing business, Media companies on AIM, Pharma research

Sector: Media

Companies: Cello

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