TIDMCLL
RNS Number : 1846B
Cello Health PLC
19 September 2018
For Immediate Release 19 September 2018
Cello Health plc
('Cello' or the 'Group')
Interim Results for the six months to 30 June 2018
Global Cello Health brand delivers strong growth
Cello Health plc (AIM: CLL), the healthcare-focused advisory
group, today announces its interim results for the six month period
to 30 June 2018.
Group Financial Highlights
-- Revenue unchanged at GBP78.5m (2017: GBP78.7m)
-- Gross profit up 3.9% to GBP51.0m (2017: GBP49.1m)
-- Constant currency gross profit growth of 7.3%
-- Like-for-like(1) constant currency gross profit growth of 3.0%
-- Cello Health gross profit growth of 11.7%
-- Headline profit before tax(2) up 9.3% to GBP5.1m (2017: GBP4.6m)
-- Headline operating margin(3) improves to 10.4% (2017: 10.0%)
-- Headline basic earnings per share up 5.5% to 3.62p (2017: 3.43p)
-- Statutory profit before tax up 23.5% to GBP3.3m (2017: GBP2.7m)
-- Statutory basic earnings per share up 9.3% to 2.36p (2017: 2.16p)
-- Net debt at 30 June 2018 of GBP5.4m (30 June 2017: GBP6.8m)
-- Interim dividend up 4.8% to 1.10p (2017: 1.05p)
(1) Like-for-like comparisons remove the impact of acquisitions
and results from start-ups in 2017 (see note 3)
(2) Headline measures are stated before non-headline charges
(see note 3)
(3) Headline operating margin is defined as headline operating
profit as a percentage of segmental gross profit
Divisional Financial Highlights
H1 Cello Health Cello Signal
GBP'000 2018 2017 % Growth 2018 2017 % Growth
------- ------- --------- ------- ------- ---------
Segmental gross
profit 31,378 28,087 11.7% 19,459 19,851 -2.0%
------- ------- --------- ------- ------- ---------
Headline operating
profit 5,659 4,876 16.1% 1,244 1,197 3.9%
------- ------- --------- ------- ------- ---------
Headline operating
margin 18.0% 17.4% 6.4% 6.0%
------- ------- --------- ------- ------- ---------
Operating Highlights
-- Increasing profile of the Cello Health brand
-- Continued strong like-for-like constant currency growth in Cello Health
-- Planned office openings in Philadelphia, Boston and Germany
-- Signal successfully building healthcare capability and client base
-- Board changes deepen health focus
-- Acquisition of the healthcare assets of First Light
Mark Scott, Chief Executive, commented: "Cello Health is
successfully building its early stage asset development advisory
platform for biotech clients, as well as growing its core later
stage and post launch franchise with pharmaceutical clients. The
depth and breadth of client relationships held by Cello Health
under Master Service Agreements (MSAs) is impressive, underpinning
revenue visibility. The leadership team is actively engaged with
increasing the size of the global service platform, including
Signal's communications capabilities. Signal, and particularly
Pulsar, is rapidly building its healthcare franchise. The vision of
developing Cello Health into a leading global advisor to healthcare
and related clients is taking shape. As the Board goes through a
substantial change, I wish to thank Allan Rich, Will David and Paul
Hamilton for their key contributions to the development of the
business from its founding to today."
Analyst meeting
A meeting for analysts will be held at 11am at the offices of
Buchanan, 107 Cheapside, London EC2V 6DN, on 19 September 2018. For
further information, please contact Buchanan on 020 7466 5000.
Enquiries:
Cello Health plc (www.cellohealthplc.com)
Mark Scott, Chief Executive 020 7812 8460
Mark Bentley, Group Finance Director
Cenkos Securities
Mark Connelly/Harry Hargreaves 020 7397 8900
Buchanan
Mark Court, Jamie Hooper, Sophie Wills 020 7466 5000
Notes to Editors
Cello Health plc is a global healthcare-focused advisory Group
comprised of a set of leading clinical, commercial advisory and
digital delivery capabilities. Cello Health plc currently services
24 of the top 25 pharmaceutical clients globally, as well as a wide
range of biotech, diagnostics, devices and other key non-healthcare
clients.
Cello Health plc enables clients to commercialise, differentiate
their assets, and drive brand success in ever more complex global
markets. The business delivers its services through nearly 1,000
highly skilled professionals, utilising latest thinking, technology
and digital solutions.
Cello Health plc delivers its services from an office network in
the UK, USA, and Asia, with hub offices in New York City,
Philadelphia PA, London, Edinburgh, Farnham and Cheltenham.
For further information, please visit:
https://cellohealthplc.com
Chairman's Statement
Overview
During the half year, the Group has continued to make good
progress in delivering its strategy. The renaming of the Group to
Cello Health plc has given increased focus to the business, which
continues to develop and extend its broad client base comprising a
wide range of global pharmaceutical clients and earlier stage
biotech businesses. Revenue visibility remains good, underpinned by
a wide range of MSAs, the majority of which are in the large
pharmaceutical or biotech community. The proportion of business
being won and serviced in the core US market continues to increase
as planned.
The senior team is focused on attracting and retaining top-class
talent in order to expand the capacity of the business and, at the
same time, targeting acquisitions that can be incorporated into the
Cello Health brand. Cello Signal continues to make good inroads
into the health sector to complement its non-health activities.
Cello Signal provides digital, social media and branding expertise,
which complements Cello Health's scientifically led commercial
capabilities. The combination of scientifically led commercial
advisory skills with an increasing early stage asset development
capability and communications delivery skills, enables Cello to
differentiate itself in the global market for healthcare
services.
Following the retirement of Paul Hamilton and Will David as
Non-Executive Directors, we recently welcomed Clifford Tompsett and
Jo LeCouilliard as Non-Executive Directors of the Group. Clifford
and Jo bring a wealth of experience of the pharmaceutical sector to
the Group, which will help shape the growth ambitions of the
business. I am also pleased to announce that Julia Ralston, CEO of
Cello Health in the US, will shortly be appointed to the Board,
bringing the executive team up to four people. Julia's presence on
the Board will ensure appropriate levels of governance and control
around our expanding US business.
Finally, after 13 years as a Non-Executive Director, and over
ten years as Chairman, it is with much regret that I also wish to
announce my planned retirement from the Board in the coming
months.
Following almost two years as a Non-Executive Director, Chris
Jones will in due course be appointed Chairman of the Group to help
guide the next stage of the Group's growth plan. In the meantime,
the Board has commenced the search process for an additional
Non-Executive Director to fill Chris' current role, which will
maintain the number of non-executives at four.
I am personally very proud of what we have achieved over the
past 13 years and am confident that the Group can fulfil its full
potential over the coming years.
Financial Review
Gross profit for the six months to 30 June 2018 increased 3.9%
to GBP51.0m (2017: GBP49.1m) on unchanged revenue of GBP78.5m
(2017: GBP78.7m). Reported like-for-like gross profit growth was
0.4% (constant currency growth rate of 3.0%). Headline operating
profit was up 10.3% to GBP5.3m (2017: GBP4.8m). The headline
operating margin was 10.4% (2017: 10.0%). Headline pre-tax profit
was GBP5.1m (2017: GBP4.6m). Further detail on these numbers is
provided in the operating review.
The reported tax charge for the period is GBP0.8m (2017:
GBP0.5m). This incorporates a headline tax rate of 24.7% (2017 full
year: 28.2%). The headline tax rate has dropped to reflect the
lower US tax rate in the period. This headline tax rate is expected
to remain at this level for the foreseeable future.
The Group has 29.8% of its total gross profit earned in the US
from US domiciled businesses, and which is therefore denominated in
dollars. As such the Group carries a certain amount of foreign
exchange risk. The average dollar conversion rate into sterling in
the period was $1.38 (2017: $1.26). Given the relative weakness of
the dollar in the period, gross profit would have been
approximately GBP1.4m higher in constant currency, and operating
profits would also have been approximately GBP0.3m higher. For the
full year, with the dollar recently strengthening, the Group
expects this impact to reduce. The average rate for the whole of
2017 was $1.29, and our current forecast average rate for 2018 is
$1.32.
Headline basic earnings per share were up 5.5% to 3.62p (2017:
3.43p). Statutory earnings per share were up 9.3% to 2.36p (2017:
2.16p).
The Group's net debt at 30 June 2018 was GBP5.4m (31 December
2017: net cash of GBP1.6m; 30 June 2017: net debt of GBP6.8m). This
increase in net debt in the period is consistent with management
expectations and relates to seasonal cash flows that occur in the
Signal business. The Group expects to experience strong positive
cash flow in the second half as it has done in the past. Total debt
facilities are GBP24.0m and expire in March 2022.
The acquisition of certain assets and staff contracts of First
Light Public Relations Limited ("First Light"), a UK based
healthcare communications business, was completed on 7 September
2018 for an undisclosed sum. The team of ten are now part of Cello
Health Communications and are based in London. The First Light team
delivers communication programmes for pharmaceutical and medical
technology clients both in the UK and Internationally.
The Group has deferred consideration obligations in respect of
the acquisitions in 2017 of Defined Health Research Inc and Cancer
Progress LLC ("Defined Health") and Advantage Health Inc
("Advantage Healthcare") Such obligations are estimated to total
around $6.3m, payable substantially in cash between 2019-2021.
The interim dividend rises 4.8% to 1.10p (2017: 1.05p). The
interim dividend is payable on 2 November 2018 to all shareholders
on the register on 5 October 2018. The Group continues an unbroken
record of annual dividend growth since it began paying dividends in
2006.
As anticipated, losses of GBP0.5m were incurred from continued
investment in start-up activity. This is disclosed below headline
operating profit. The start-up losses in 2018 relate solely to the
recent launch of Pulsar in the US market. The Group expects
start-up losses of this type to be minimal in 2019. Results from
start-up operations are not allocated to a segment.
Restructuring charges were nil in the first half of the year and
are currently expected to be low in the second half. In 2017 as a
whole, such charges amounted to GBP1.9m.
The following table summarises the adjustments made to calculate
headline operating profit. The acquisition related costs of GBP1.0m
(2017: GBP0.6m) relate to necessary accounting charges for the
deferred consideration arising from the acquisition of Defined
Health and Advantage Healthcare in 2017.
2018 2017
GBPm GBPm
Headline operating profit 5.3 4.8
VAT provision - 0.3
Restructuring costs - (0.3)
Start-up losses (0.5) (0.8)
Share option charges (0.2) (0.2)
Acquisition related costs (1.0) (0.6)
Amortisation (0.1) (0.3)
------ ------
Statutory operating profit 3.5 2.9
Net finance costs (0.2) (0.2)
------ ------
Statutory profit before tax 3.3 2.7
====== ======
Operating Review
Cello Health
H1 2018 H1 2017 Full year 2017
GBP'000 GBP'000 GBP'000
Segmental gross profit 31,378 28,087 60,150
Headline operating profit 5,659 4,876 10,639
Headline operating margin 18.0% 17.4% 17.7%
Cello Health had a strong first half of the year, with strong
performances in both the UK and the US. Overall, segmental gross
profit increased by 11.7% to GBP31.4m (2017: GBP28.1m) and
like-for-like constant currency gross profit growth was 7.2%. The
business combines a core focus on growing its position with large
pharmaceutical clients, underpinned by MSAs, with a growing
capability in the early stage biotech area.
The Consulting and Insight capabilities of Cello Health grew
like-for-like gross profit by more than 10.0%. Insight in the UK
had a very strong first half as record levels of bookings from the
prior year were delivered in the period. This level of activity has
now normalised in the second half, with some slowing of bookings as
a consequence of the new GDPR regime coming into force. The
Consulting practice also had a very busy first half in the UK.
Investment in additional capacity in both these capabilities is
ongoing and is a priority in the second half to enable continued
fast rates of growth in 2019.
The Communications capability has continued to grow strongly
particularly in the US, with core clients continuing their
long-term pre-launch communications development programmes. A
ten-person team from First Light were recently acquired to enlarge
the UK-based servicing capacity of the Communications capability,
based in one of our existing London offices.
Following the expiry of a lease, we recently completed our
consolidation of operations into our core London office structures,
ensuring full utilisation of all central office space and
maximising coordination of client teams. This will help with margin
enhancement efforts across the business.
The US acquisitions made in 2017 continue to perform in line
with expectations and are contributing fully to the ongoing
programme of enhancing the client offer under the Cello Health
brand. Investment will be also be made in the US in the second half
with the opening of a central Philadelphia office to complement the
existing hub office in Yardley, PA. A permanent office in Boston is
also planned to open shortly. Overall, the US domiciled operations
contributed 45.2% of Cello Health's gross profits in the first half
(H1 2017: 42.6%).
Plans are also progressing for the opening of a German office in
the near future to further develop the European client base of
Cello Health.
The investment made in new business activity has continued to
drive awareness of the Cello Health brand. The Cello Health brand
was present at a number of industry conferences during the period,
notably at the 2018 BIO International Convention in Boston. This
programme of brand development is ongoing, alongside a vigorous
programme of client outreach. Cello Health continues to invest in a
global new business team which continues to successfully grow the
market share of the business.
The management team of Cello Health continue to focus on growing
the professional capacity of the business, with headcount globally
increasing by 5% over the past 12 months. Supported by a graduate
recruitment programme and training process under the Cello Academy
banner, Cello Health continues to successfully attract and retain
top talent from the industry.
Cello Signal
H1 2018 H1 2017 Full year 2017
GBP'000 GBP'000 GBP'000
Segmental gross profit 19,459 19,851 40,961
Headline operating
profit 1,244 1,197 3,872
Headline operating
margin 6.4% 6.0% 9.5%
Cello Signal has had a good first six months and is on track to
meet financial expectations of increased productivity and hence a
raised operating profit margin. The slight decline in gross profit
is attributable largely to the reduction in unprofitable activity
on the West Coast of the US in 2017. This has also contributed to
an overall increase in operating margin.
The development of the Cello Signal offer for health clients
continues to make progress, with a pleasing number of new
health-related clients won across the business, ranging from
regulatory clients (EFPIA), to government and social health work
(Scottish Government), to consumer health work (Reckitt Benckiser;
BUPA), to work on prescription pharmaceuticals (Novo Nordisk;
Celgene; Sanofi). An increasing number of joint pitches are being
made and won in cooperation with Cello Health. In particular,
Pulsar, in partnership with Cello Health Logic, has been an
instrumental element within cross-Group client activity in the
health area, as pharmaceutical and biotech clients begin to engage
with social media as a key data source.
Client activity across the rest of Cello Signal was as expected,
with the wide range of charity, financial services, government and
utility clients all committing to solid levels of activity, largely
driven by regulatory communications requirements. Overall
visibility remains good, despite some evidence of slower decision
making by certain UK clients.
Central Costs
Central costs, which are not allocated to a segment, have risen
from GBP1.3m to GBP1.6m in the first half of 2018 to reflect the
increased costs of running the necessary central functions in the
US domiciled operations of the Group.
Outlook
The Group has continued to trade well over the summer period and
overall visibility remains good. Accordingly, the Board remains
confident of delivering a full year result in line with current
market expectations.
Allan Rich,
Chairman
19 September 2018
Condensed Consolidated Income Statement
For the six months ended 30 June 2018
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended 31 December
Notes 30 June 2018 30 June 2017 2017
GBP'000 GBP'000 GBP'000
Continuing operations
Revenue 4 78,514 78,653 169,292
Cost of sales (27,503) (29,569) (66,807)
Gross profit 4 51,011 49,084 102,485
Operating expenses (47,462) (46,229) (96,309)
Operating profit 4 3,549 2,855 6,176
Finance income 5 - - 1
Finance costs 5 (218) (157) (360)
Profit from continuing operations
before taxation 3,331 2,698 5,817
Taxation 6 (840) (513) (1,589)
Profit from continuing operations
after taxation 2,491 2,185 4,228
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended 31 December
30 June 2018 30 June 2017 2017
GBP'000 GBP'000 GBP'000
Basic earnings per share 8 2.36p 2.16p 4.09p
Diluted earnings per share 8 2.32p 2.13p 4.03p
Condensed Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2018
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended 31 December
30 June 2018 30 June 2017 2017
GBP'000 GBP'000 GBP'000
Profit for the period 2,491 2,185 4,228
Other comprehensive income/(expense):
Exchange differences on translation
of foreign operations 104 (138) (238)
Total comprehensive income for
the period 2,595 2,047 3,990
Condensed Consolidated Balance Sheet
As at 30 June 2018
Unaudited Unaudited Audited
30 June 2018 30 June 2017 31 December
Notes GBP'000 GBP'000 2017
GBP'000
Goodwill 9 73,172 72,998 72,954
Intangible assets 1,155 813 1,192
Property, plant and equipment 2,946 2,753 2,840
Deferred tax assets 1,352 1,239 1,081
Non-current assets 78,625 77,803 78,067
Trade and other receivables 44,309 45,284 54,520
Cash and cash equivalents 1,868 2,144 13,021
Current assets 46,177 47,428 67,541
Trade and other payables (32,706) (32,823) (49,378)
Current tax liabilities (412) (1,143) (438)
Borrowings (112) (8,906) (59)
Obligations under finance
leases (11) (14) (14)
Current liabilities (33,241) (42,886) (49,889)
Net current assets 12,936 4,542 17,652
Total assets less current
liabilities 91,561 82,345 95,719
Trade and other payables (1,125) (486) (1,400)
Borrowings (7,136) - (11,333)
Obligations under finance
leases (29) (10) (3)
Deferred tax liabilities (127) (77) (110)
Non-current liabilities (8,417) (573) (12,846)
Net assets 83,144 81,772 82,873
Equity
Share capital 10 10,516 10,412 10,501
Share premium 32,758 32,673 32,705
Merger reserve 25,446 25,446 25,446
Capital redemption reserve 50 50 50
Retained earnings 13,294 12,160 13,368
Share-based payment reserve 997 952 824
Foreign currency reserve 83 79 (21)
Total equity 83,144 81,772 82,873
Condensed Consolidated Cash Flow Statement
For the six months ended 30 June 2018
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended 31 December
Notes 30 June 2018 30 June 2017 2017
GBP'000 GBP'000 GBP'000
Net cash (used in)/generated
from operating activities
before taxation 11 (2,071) (8,263) 4,792
Tax paid (1,166) (409) (2,066)
Net cash generated (used
in)/from operating activities
after taxation (3,237) (8,672) 2,726
Investing activities
Interest received - - 1
Purchase of property, plant
and equipment (649) (653) (1,462)
Sale of property, plant and
equipment 32 13 30
Expenditure on intangible
assets (302) (182) (409)
Purchase of subsidiary undertakings - (4,127) (5,259)
Net cash used in investing
activities (919) (4,949) (7,099)
Financing activities
Proceeds from issuance of
shares 68 14,267 14,388
Dividends paid to equity
holders (2,563) (2,478) (3,575)
Net repayment of borrowings (4,497) (3,000) (100)
Repayment of loan notes (17) (96) (96)
Increase in overdrafts 70 - -
Capital element of finance
lease payments (36) (9) (16)
Interest paid (237) (157) (362)
Net cash generated (used
in)/from financing activities (7,212) 8,527 10,239
Movements in cash and cash
equivalents
Net (decrease)/increase in
cash and cash equivalents (11,368) (5,094) 5,866
Exchange gains/(losses) on
cash and bank overdrafts 215 (228) (311)
Cash and cash equivalents
at the beginning of the period 13,021 7,466 7,466
Cash and cash equivalents
at end of the period 1,868 2,144 13,021
Condensed Consolidated Statement of Changes in Equity
For the six months ended 30 June 2018
Statement of changes in equity for the six months ended 30 June
2018:
Foreign Total
Capital Share-based Currency Attributable
Share Share Merger Redemption Retained Payment Exchange to Equity
Capital Premium Reserve Reserve Earnings Reserve Reserve Shareholders
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2018 10,501 32,705 25,446 50 13,368 824 (21) 82,873
Profit for the
period - - - - 2,491 - - 2,491
Other
comprehensive
loss:
Currency
translation - - - - - - 104 104
Total
comprehensive
income in the
period - - - - 2,491 - 104 2,595
Transactions
with
owners:
Shares issued 15 53 - - - - - 68
Credit for
share-based
incentives - - - - - 203 - 203
Tax on
share-based
payments
recognised
directly in
equity - - - - (32) - - (32)
Transfer
between
reserves in
respect
of share
options - - - - 30 (30) - -
Dividends paid
(note 7) - - - - (2,563) - - (2,563)
Total
transactions
with owners 15 53 - - (2,565) 173 - (2,324)
At 30 June
2018 10,516 32,758 25,446 50 13,294 997 83 83,144
Statement of changes in equity for the six months ended 30 June
2017:
Foreign Total
Capital Share-based Currency Attributable
Share Share Merger Redemption Retained Payment Exchange to Equity
Capital Premium Reserve Reserve Earnings Reserve Reserve Shareholders
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2017 8,760 19,162 25,446 50 12,159 760 217 66,554
Profit for the
period - - - - 2,185 - - 2,185
Other
comprehensive
loss:
Currency
translation - - - - - - (138) (138)
Total
comprehensive
income in the
period - - - - 2,185 - (138) 2,047
Transactions
with
owners:
Shares issued 1,652 13,511 - - - - - 15,163
Credit for
share-based
incentives - - - - - 229 - 229
Tax on
share-based
payments
recognised
directly in
equity - - - - 257 - - 257
Transfer
between
reserves in
respect
of share
options - - - - 37 (37) - -
Dividends paid
(note 7) - - - - (2,478) - - (2,478)
Total
transactions
with owners 1,652 13,511 - - (2,184) 192 - 13,171
At 30 June 2017 10,412 32,673 25,446 50 12,160 952 79 81,772
Statement of changes in equity for the year ended 31 December
2017:
Foreign Total
Capital Share-based Currency Attributable
Share Share Merger Redemption Retained Payment Exchange to Equity
Capital Premium Reserve Reserve Earnings Reserve Reserve Shareholders
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2017 8,760 19,162 25,446 50 12,159 760 217 66,554
Profit for the
year - - - - 4,228 - - 4,228
Other
comprehensive
loss:
Currency
translation - - - - - - (238) (238)
Total
comprehensive
profit for
the
period - - - - 4,228 - (238) 3,990
Transactions
with owners:
Shares issued 1,741 13,543 - - - - - 15,284
Credit for
share-based
incentives - - - - - 430 - 430
Tax on
share-based
payments
recognised
directly in
equity - - - - 190 - - 190
Transfer
between
reserves in
respect
of share
options - - - - 366 (366) - -
Dividends paid
(note 7) - - - - (3,575) - - (3,575)
Total
transactions
with owners 1,741 13,543 - - (3,019) 64 - 12,329
At 31
December
2017 10,501 32,705 25,446 50 13,368 824 (21) 82,873
Notes to the Financial Information
For the six months ended 30 June 2018
1. ACCOUNTING POLICIES AND BASIS OF PREPARATION
The condensed consolidated financial information for the six
months ended 30 June 2018 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 2017, 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 2017 were approved by the Board of Directors on 21 March
2018 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 18 September 2018 and has not been audited.
The accounting policies applied are consistent with those of the
annual financial statements for the year ended 31 December 2017, as
described in those annual financial statements, except for the
adoption of IFRS 9 Financial Instruments and IFRS 15 Revenue from
Contracts with Customers. The adoption of IFRS 9 and IFRS 15 have
not had a material impact on this interim financial
information.
2. 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.
3. NON-GAAP 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. The Group reports two types of
non-GAAP measure, headline measures and like-for-like gross
profit.
Headline measures
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, nature or incidence, to enable a full understanding
of the Group's underlying financial performance. Accordingly,
headline measures exclude, where applicable, the effect of the
following items:
i. Restructuring costs - these costs principally relate to redundancy costs.
ii. Net (credit)/charge for VAT payable and related costs -
these costs relate to the VAT payable to HMRC in respect of certain
charity clients. This is reported net of recovery from clients
iii. Employment settlement and related costs - these costs
relate to the payment made to the prior employer of senior staff
hired to establish the Cello Health BioConsulting business, in
respect of post-employment restrictions.
iv. Start-up losses - these 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.
v. Amortisation of intangible assets - this is in respect of
amortisation charged against separately identifiable intangible
assets acquired as part of a business combination.
vi. Acquisition related employee remuneration expense - costs
with regards to deferred payments payable to vendors and certain
employees of a company in accordance with the purchase agreement of
the acquired company or business. In accordance with IFRS 3
Business Combinations, these costs are recognised in the income
statement by virtue of employment conditions in the relevant share
purchase agreement.
vii. Share option charges - these costs represent the fair value
of share options charged to the income statement and are separately
identified due to their nature.
Headline measures in this report are not defined terms under
IFRS, and may not be comparable with similarly titled measures
reported by other companies.
A reconciliation between statutory and headline profit before
taxation is presented in below:
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended 31 December
30 June 2018 30 June 2017
GBP'000 2017 GBP'000
GBP'000
Profit from continuing operations
before taxation 3,331 2,698 5,817
Restructuring costs - 281 1,916
Net credit for VAT payable and
related costs - (259) (259)
Post-employment restrictions
settlement and related costs - 37 48
Start-up losses 465 832 1,350
Acquisition costs - 139 243
Amortisation of intangible assets 131 261 510
Acquisition related employee
remuneration expense 946 425 1,364
Share option charges 203 229 430
Headline profit before taxation 5,076 4,643 11,419
Headline profit before tax is
made up as follows:
Headline operating profit 5,294 4,800 11,778
Headline finance income - - 1
Headline finance costs (218) (157) (360)
5,076 4,643 11,419
In addition, a reconciliation between statutory and headline
earnings per share is presented in note 8.
Like-for-like gross profit follows:
Like-for-like gross profit measures adjusts reported gross profit
for the following items:
i. They exclude the results of companies or businesses acquired in
the current period
ii. They exclude the results of acquired companies or businesses
in the current period to the extent that those companies or businesses
were not in the Group in that prior period.
iii. They exclude the results from start-ups in the current period.
iv. They include the results from start-up operations in the prior
period to the extent they are included within an operating segment
in the current period.
Like-for-like measures are also calculated both with and without
the impact of movements in currency. These measures are also disclosed
in the table below.
Unaudited Unaudited
Six months Six months
ended ended
Growth 30 June 2018 30 June 2017
GBP'000 GBP'000
Reported gross profit 3.9 % 51,011 49,084
Acquisitions (1,658) -
Start-ups (174) (118)
Like-for-like gross profit 0.4 % 49,179 48,966
Currency impact 1,278 -
Currency adjusted like-for-like
gross profit 3.0 % 50,457 48,966
These measures can be allowed to the Group's operating segments (note
4) as follows:
Reported gross profit
Cello Health 11.7 % 31,378 28,087
Cello Signal (2.0)% 19,459 19,851
Other 174 1,146
Total 3.9 % 51,011 49,084
Like-for-like gross profit:
Cello Health 3.1 % 29,720 28,817
Cello Signal (3.4)% 19,459 20,149
0.4 % 49,179 48,966
Currency adjusted like-for-like
gross profit:
Cello Health 7.2 % 30,902 28,817
Cello Signal (2.9)% 19,555 20,149
Total 3.0 % 50,457 48,966
4. 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.
Revenue and costs not included in one of these operating
segments, for example central overheads and results from start-up
operations, have not been allocated to an operating segment in line
with the way they are reported to the chief operating decision
makers.
Six months ended 30 June 2018
Consolidated
Cello Health Cello Signal and Unallocated Group
GBP'000 GBP'000 GBP'000 GBP'000
Revenue
External sales 42,766 35,124 624 78,514
Intersegment revenue 16 55 (71) -
Total revenue 42,782 35,179 553 78,514
Gross profit 31,378 19,459 174 51,011
Operating profit
Headline operating profit
(segment result) 5,659 1,244 (1,609) 5,294
Start-up losses (465)
Amortisation of intangible
assets (131)
Acquisition related employee
remuneration expense (946)
Share option charges (203)
Operating profit 3,594
Finance costs (218)
Profit from continuing operations
before taxation 3,331
Other information
Capital expenditure 354 331 23 708
Capitalisation of intangible
assets - 302 - 302
Depreciation of property plant
and equipment 344 268 3 615
Six months ended 30 June 2017
Consolidated
Cello Health Cello Signal and Unallocated Group
GBP'000 GBP'000 GBP'000 GBP'000
Revenue
External sales 39,875 37,506 1,272 78,653
Intersegment revenue - 25 (25) -
Total revenue 39,875 37,531 1,247 78,653
Gross profit 28,087 19,851 1,146 49,084
Operating profit
Headline operating profit
(segment result) 4,876 1,197 (1,273) 4,800
Restructuring costs (281)
Recovery of VAT from clients 259
Post-employment restrictions
settlement and related costs (37)
Start-up losses (832)
Acquisition costs (139)
Amortisation of intangible
assets (261)
Acquisition related employee
remuneration expense (425)
Share option charges (229)
Operating profit 2,855
Finance costs (157)
Profit from continuing operations
before taxation 2,698
Other information
Capital expenditure 456 196 1 653
Capitalisation of intangible
assets - 182 - 182
Depreciation of property plant
and equipment 303 337 9 649
Year ended 31 December 2017
Consolidation
Adjustments
Cello Health Cello Signal and Unallocated Group
GBP'000 GBP'000 GBP'000 GBP'000
Revenue
External sales 85,465 81,905 1,922 169,292
Intersegment revenue 25 133 (158) -
Total revenue 85,490 82,038 1,764 169,292
Gross profit 60,150 40,961 1,374 102,485
Operating profit
Headline operating profit
(segment result) 10,639 3,872 (2,733) 11,778
Restructuring costs (1,916)
Net charge for VAT payable
and related costs 259
Employment settlement and
related costs (48)
Start-up losses (1,350)
Amortisation of intangible
assets (243)
Acquisition-related employee
remuneration expense (510)
Share option charges (1,364)
Impairment of goodwill (430)
Operating profit 6,176
Financing income 1
Finance costs (360)
Profit before tax on continuing
operations 5,817
Other information
Capital expenditure 851 608 3 1,462
Capitalisation of intangible
assets - 409 - 409
Depreciation of property,
plant and equipment 646 647 11 1,304
5. FINANCE INCOME AND COSTS
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended 31 December
30 June 2018 30 June 2017 2017
GBP'000 GBP'000 GBP'000
Finance income:
Interest receivable on bank
deposits - - 1
Finance costs:
Interest payable on bank
loans and overdrafts 217 156 357
Interest payable in respect
of finance leases 1 1 3
Total finance costs 218 157 360
6. TAXATION ON PROFIT ON ORDINARY ACTIVITIES
The tax charge for the period ended 30 June 2018 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 24.7% (2017: 25.2%).
7. DIVID
Unaudited Unaudited Audited
Six months Six months Year ended
ended 30 June ended 30 June 31 December
Date Paid 2018 2017 2017
GBP'000 GBP'000 GBP'000
Final dividend 2016
- 2.40p per share 26 May 2017 - 2,478 2,478
Interim dividend 2017 3 November
- 1.05p per share 2017 - - 1,097
Final dividend2017 25 May 2018 2,563 - -
- 2.45p per share
2,563 2,478 3,575
An interim dividend of 1.10p (2017: 1.05p) per ordinary share is
declared and will be paid on 2 November 2018 to all shareholders on
the register on 5 October 2018. In accordance with IAS 10 Events
after the Balance Sheet Date, this dividend has not been recognised
in the accounts at 30 June 2018, but will be recognised in the
accounting period ending 31 December 2018.
8. EARNINGS PER SHARE
Unaudited Unaudited Audited
Six months ended Six months Year ended
30 June 2018 ended 31 December
GBP'000 30 June 2017 2017
GBP'000 GBP'000
Profit attributable to owners
of the parent 2,491 2,185 4,228
Adjustments to earnings:
Restructuring costs - 281 1,916
Net credit for VAT and related
costs - (259) (259)
Post-employment restrictions
settlement and related costs - 37 48
Start-up losses 465 832 1,350
Acquisition costs - 139 243
Amortisation of intangible
assets 131 261 510
Acquisition related employee
remuneration expenses 946 425 1,364
Share-based payments charge 203 229 430
Impairment of goodwill - - -
Tax thereon (416) (658) (1,629)
Headline earnings for the period 3,820 3,472 8,201
30 June 2018 30 June 2017 31 December
number of shares number of shares 2017
number of shares
Weighted average number of
ordinary shares used in basic
earnings per share 105,618,591 101,128,482 103,373,430
Dilutive effect of securities:
Share options 1,474,249 1,459,014 1,370,660
Deferred consideration shares 476,706 77,790 216,243
Weighted average number of
ordinary shares used in diluted
earnings per share 107,569,546 102,665,286 104,960,333
Basic earnings per share 2.36 p 2.16 p 4.09 p
Diluted earnings per share 2.32 p 2.13 p 4.03 p
In addition to basic and diluted earnings/(loss) 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 3.62 p 3.43 p 7.93 p
Headline diluted earnings per share 3.55 p 3.38 p 7.81 p
Basic earnings per share is calculated by dividing the profit
attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding 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 profit
attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding 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 period, 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 charge for VAT and related costs.
9. GOODWILL
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended 31 December
30 June 2018 30 June 2017 2017
GBP'000 GBP'000 GBP'000
Cost
At the beginning of period 90,270 87,149 87,149
Additions - 3,626 3,946
Exchange differences 218 (461) (825)
At the end of the period 90,488 90,314 90,270
Amortisation
At the beginning and the
end of the period 17,316 17,316 17,316
Net book value
At 31 December 2017 73,712 72,998 72,954
At 1 January 2016 72,954 69,833 69,833
10. SHARE CAPITAL
Unaudited Unaudited Audited
At 30 June 2018 At 30 June 2017 At 31 December
GBP'000 GBP'000 2017
GBP'000
Allotted, issued and fully
paid
105,163,342 ordinary shares
of 10p each 10,516 10,412 10,501
Between 1 January 2017 and 30 June 2018 the following shares
were issued:
During the six months ended 30 June 2018 151,185 (year ended 31
December 2017: 1,148,939) were issued to certain employees of the
Group in relation to the share option schemes at exercise prices of
between 10.0p and 85.0p 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.
On 1 February 2017, 5,154,640 new ordinary shares of 10.0p each
were issued at a placing price of 97.0p to new and existing
shareholders.
On 1 February 2017, 398,904 new ordinary shares of 10.0p each
were issued at 100.3p to vendors of Defined Health Research Inc.
and Cancer Progress LLC, pursuant to the terms of the asset
purchase agreement with those companies.
On 17 February 2017, 10,309,279 new ordinary shares of 10.0p
each were issued at a placing price of 97.0p to new and existing
shareholders.
On 2 May 2017, 403,903 new ordinary shares of 10.0p each were
issued at 123.0p to vendors of iS Healthcare Dynamics Limited and
certain employees of the Group, pursuant to the terms of the share
purchase agreement of iS Healthcare Dynamics Limited.
11. CASH GENERATED FROM OPERATIONS
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended 31 December
30 June 2018 30 June 2017 2017
GBP'000 GBP'000 GBP'000
Profit on continuing operations
before taxation 3,331 2,698 5,817
Financing income - - (1)
Finance costs 218 157 360
Depreciation 615 649 1,304
Amortisation of intangible assets 346 470 912
Share-based payment expense 203 229 430
Profit on disposal of property,
plant and equipment (28) (13) (21)
(Decrease)/increase in acquisition
related employee remuneration
payable 946 (1,879) (940)
__________
Operating cash flow before movements
in working capital 5,631 2,311 7,861
Decrease/(increase) in trade and
other receivables 9,720 2,463 (6,105)
(Decrease)/increase in trade and
other payables (17,422) (13,037) 3,036
__________
Net cash (used in)/generated from
operating activities before taxation (2,071) (8,263) 4,792
12. NET DEBT
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended 31 December
30 June 2018 30 June 2017 2017
GBP'000 GBP'000 GBP'000
Net debt comprises of:
Bank loans 7,136 8,847 11,333
Loan notes 42 59 59
Finance leases 40 24 17
Bank overdraft 70 - -
Cash and cash equivalents (1,868) (2,144) (13,021)
Net debt 5,420 6,786 (1,612)
Movements in net debt can be analysed
as follows:
Net increase/(decrease) in cash
and cash equivalents 11,368 5,094 (5,866)
Net repayment bank loans (4,497) (3,000) (100)
Repayment loan notes (17) (96) (96)
Increase in overdraft 70 - -
Capital element of finance lease
payments (36) (9) (16)
Other movements:
New finance leases 59 - -
Foreign exchange 85 (275) (606)
Movements in net debt/(funds)
in the year 7,032 1,714 (6,684)
Net debt at the beginning of the
period (1,612) 5,072 5,072
Net debt/(funds) at the end of
the period 5,420 6,786 (1,612)
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR FKFDDKBKBFCD
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