Cello Group

BUY

15/03/2011 Ben Jaglom

Marketing research venture Cello Group (CLL) has unveiled a strong set of results for the year to December, driven by a growing number of pharma customers as the company moves away from the public secort

The AIM-quoted concern unveiled a swing into the black, reporting pre-tax profits of £4.9m (2009: loss of £5.7m) on turnover up one per cent to £125m.

Cello's Oxford-educated CEO Mark Scott told Growth Company Investor that there had been a number of changes that had taken place of late at Cello. 'Public Sector revenue has fallen from 20 to six per cent yet we have shown revenue growth.'

Scott added the company was focusing on growing in two areas: pharmaceuticals and the US. Opining that pharma was an area that was 'interesting, stimulating and driven by entry barriers' he remarked the target was to generate half of Cello's revenue from the healthcare and pharmaceuticals market in the coming years.

The Clerkenwell-headquartered outfit also announced the acquisition of MedErgy HealthGroup, a 'healthcare communications consultancy' based in Pennsylvania in a deal worth $5.5m. Scott remarked that with 20 employees already in San Francisco and 20 in New York, the deal represented a further step towards Cello's aim of growing further in the US.

Cello also announced that it would be issuing 5.33 million new shares at 52.5p to raise £2.8m, the placing shares have been taken up by new and existing institutional investors.

Following the results, analysts at Altium held their existing forecasts. For 2011 the analysts are forecasting pre-tax profits of £7.6m on sales of £67.3m. In 2011 Altium expects growth in profits to £8.5m on turnover up £3.4m to £70.7m. EPS forecasts of 7.3p and 7.5p are pencilled in for 2011 and 2012, respectively.

Last recommended by Growth Company Investor in January at 57.5p as a speculative buy following an encouraging trading update, the shares are currently trading at 55p.

Trading on less than eight times earnings and with some ambitious plans for growth in the US, we think the shares continue to represent good value. Following the latest results we now rate the shares as a buy.