Cello Investment Hits Pre-Tax Profit

UK-based health and consumer marketing group Cello has reported a 50% drop in pre-tax profit to £1.7m for the six months to the end of June, driven by investment in its US operations and a £1.1m provision made for an ongoing case with the UK tax authorities.

Cello is made up of two divisions: Cello Health, which includes agencies MedErgy Health Group, iS Healthcare Dynamics and Promedica; and Cello Signal, which comprises 2CV, blonde digital, Brightsource, Face, The Leith Agency, Leithal Thinking, Opticomm, Stripe Communications, tangible and TMI.

Cello says half year pre-tax profit halved partly as a result of higher administrative expenses of £40.0m, up from £35.8m, and the £1.1m provision it has made in relation to the ongoing issue with HMRC over VAT charged to charity sector clients. H1 group revenue fell to £77.0m from £78.3m in the prior year period, gross profit was up 6.1% to £41.9m (2014: £39.5m), and headline profit before tax was £4.2m (2014: £4.4m). Cello Health saw gross profit climb 10.3% to £22.6m, and headline operating profit up 3.4% to £4.3m; while Cello Signal reported gross profit up 3.0% to £19.9m against a 35.3% fall in headline operating profit to £950k from £1.5m last year.

In addition, the group incurred operating losses of £0.1m in the first half, in relation to the development of its Pulsar suite of social media intelligence products, and these losses have been absorbed within headline operating profit. The product has recently been updated to include Facebook data, and its annual licence revenue is now more than £2.0m.

Chairman Allan Rich (pictured) says of the interim results: 'Cello's goal of becoming a leading global supplier of services to the pharmaceutical and biotech sector is being progressively met, on the back of a very focused growth strategy. The organic investment in additional healthcare resource in the US is an essential element of this overall growth strategy and is beginning to bear fruit. Our management team is successfully balancing the need for organic investment in resource to fulfil the group's corporate goals with the short term delivery of profit despite the inevitable short term impact of the investment programme. The Board is optimistic that this will not materially affect the full year outcome for the group and that expectations will be met'.

Web site: www.cellogroup.com .