Cello Group

Market research and consulting counter Cello endured a demanding 2009. But having cut costs and noted recent trading improvements, the company is making more positive noises about 2010.

Calendar year numbers from Cello, whose clients include Kraft, L’Oreal and Swiss Re, did not make for good reading, with qualitative and quantitative market research activity having slowed sharply in the first half of 2009, before recovering to more normal levels in the latter part of the year, particularly in the fourth quarter.

Hampered by this initial slowdown, revenues eased off to £126.6m (2008: £137.6m) while Cello's headline pre-tax profits fell by an alarming 30% to £5.1m. After exceptional costs and impairment charges, Cello swung into the red to the tune of £5.8m.

Nevertheless, the full year dividend was lifted by 4% to 1.3p, with CEO Mark Scott drawing confidence from rapid cost cutting as well as a better final six months from the core research and consulting operations, where it has particular strengths in healthcare research and direct marketing and is benefiting from its ‘increasing orientation towards large contracts’.

Boasting robust and long-standing client relationships (the group's top 20 customers have remained largely unchanged and speak for 38% of operating income) and still winning new clients, Cello has a good base from which to expand again. But for now, given recent performance and with the timing of economic recovery uncertain, the unloved shares, which traded north of 150p in 2007, are likely to prove a volatile market and are probably best avoided.