In its first full year as a public company, acquisitive marketing services counter Cello chalked up sweet sounding numbers and ‘highly competitive’ profit margins.

For the year to December, Cello (which takes its name from a cellist friend of chairman Kevin Steeds) chimed in with pre-tax profits of £4.2m from sales of £52.1m, and earnings per share of 9.8p.

Steeds reported on a year in which six acquisitions were completed (Leapfrog, RS Consulting, The Value Engineers, TMI, Oomph, and FML) and ‘the essential foundations for a profitable, cash-generative and exciting future’ were laid. These acquisitions were swiftly integrated into Cello’s three ‘platforms’, business units within the group with fully empowered boards, all of which enjoyed above industry growth last year.

Cello Planning and Research is now a major market research outfit boasting clients such as Tesco and Pfizer; Cello Brand Consulting is a marketing consulting operation where Cello likes to be ‘senior adviser’ to clients on branding and marketing issues; while Cello Response is the group’s direct marketing and database arm, sporting HBOS and the British Red Cross on its client roster.

Investors have a selection of quoted marketing buy-and-build businesses to choose from; nevertheless, with all three Cello platforms winning an increasing proportion of revenues from overseas clients, acquisitions yet to come, and the group debt-free, handsomely cash generative, and intending to hit the dividend trail this year, the shares should not be ignored. Based on company broker Evolution’s 2006 pre-tax profit forecast of £5.7m and EPS of 12.2p, Cello’s forward p/e of 9.6 looks miserly. Buy.

Cello Group	AIM	£16.9m	38.00p	0.00p
Click here for interactive charting
Other company articles:
Cello			29/04/2008
Altium Securities			09/02/2007
Rubicon to flow onto AIM			05/09/2006
Cello			14/03/2006
Media matters, by Leslie Copeland			07/02/2006