Cello Health sees strong like-for-like growth in 2018

Healthcare-led advisory group Cello Health updated the market for the year ended 31 December on Thursday, reporting that it traded “well” in 2018, with continued strong like-for-like growth from Cello Health somewhat offset by a slower outcome from Cello Signal.

The AIM-traded firm said that as a result, it expected to report full-year results in line with market expectations.

It said Cello Health had an “excellent” year, with good like-for-like gross profit growth combined with “healthy” operating margin improvement.

Headline operating profit performance was described as good from all three core capabilities - namely consulting, insight and communications.

Contributions from the businesses acquired in 2017 continued to be in line with the board's expectations, extending the reach of Cello Health into the biotech community to complement the pharmaceutical core of the business, and increasing the focus on the US market.

Cello Health continued to expand organically both in Europe and the US.

The board said a new office was opened in central Philadelphia, with Cello Health planning to continue to expand in Boston in the first half of 2019.

A Berlin office would also be opened in the first half, with a focus on building the group's domestic German client base, as well as servicing existing global work from European clients.

“As anticipated, Cello Signal had a slower year, reflecting decision making by some UK-based clients,” the Cello board said in its statement.

“Operations in Edinburgh performed well, countered by slower levels of client activity in other operations elsewhere.”

The company said there would be a continued focus in 2019 towards developing health-orientated opportunities for the digital and creative capacity of Signal.

“Signal Health had an encouraging first year of operation, gaining a range of significant client contracts in the pharmaceutical and wider health area, and Pulsar has traded well with Cello Health on a range of large client opportunities.”

The group said it was continuing to invest in new offices and accelerated extensions to the existing business, as a low-risk complement to the group's acquisition programme.

It said the costs of those new activities were separately disclosed as start-up losses during their initial period of a maximum of two years.

“In 2018 such start-up losses were attributable to the continued investment in Pulsar in the US, to the investment in growing the health offer of Cello Signal, and to the start-up investment in the new Boston office of Cello Health.

“The total combined losses attributable to these activities is approximately £1.2m.

“All ongoing profits or losses attributable to Pulsar US will come into headline results for 2019.”

Other non-headline cash items were described as “minimal” in 2018, with Cello saying that in Signal there would be a restructuring charge of about £0.3m in the first half of 2019, reflecting reduction in capacity in Cheltenham to maintain a competitive margin.

The group said it experienced “strong” cash inflows in the second half of the year, in line with normal seasonal patterns of cash flow.

Conversion of operating profit into cash flow was said to be strong.

“Accordingly, the board is pleased to confirm that the group was in a strong net cash position at the end of the year.

“Overall, the group has had a strong year and is well placed to continue to execute its growth strategy in 2019 and beyond.”