NEWS15 September 2009

Cello income and profits down, but group positive on second half

Financials UK

UK— Cello’s research and consulting business reported income and profit declines today for the first six months of 2009, though the firm is hopeful for operating profit growth in the second half.

Research and consulting turnover was down 10% year-on-year to £30m while operating income fell by almost £2m to £18.2m.

Headline operating profit declined 37% to £2.3m. “This was nearly all due to a significant fall in our non-research businesses supplying HR/training and competitor/business intelligence,” said Richard Gilmore, chairman of Cello’s research and consulting division.

He added: “In research, we maintained and grew our strong position in healthcare and wellbeing. There was a slight decline in business and margins in UK qualitative research. Fortunately, we saw most of this coming in 2008 and have been ahead of the game in selectively reducing overheads.”

Across the group – which includes Cello’s direct marketing business Tangible – staff costs have been reduced by 8.1%. Of the 500 people in the research and consulting division, Gilmore said 50 employees had left – though the majority was “natural wastage”.

“I do not take the loss of anyone’s job lightly,” he said, “and most of our savings have been by realignment.”

Cost-cutting will continue into the second half of 2009, Cello said, with savings coming from the “rationalisation” of its property portfolio – particularly in London – and a focus on creating “bigger operating hubs”.

Group turnover was down 12% to £58m while operating income declined 10.9% to £30.2m. Reported operating loss was £3.4m, which includes £5.5m in impairment charges relating to a write-down in the carrying value of the HR consultancy and competitor intelligence businesses.

Chairman Allan Rich noted that while 2009 had “so far been a challenging year”, he said the company was encouraged that the rate of decline in income experienced in the first half had appeared to stabilise.

“Against this background, the board currently expects the headline operating profit in the second half of 2009 to exceed the second half of 2008, reflecting the reduced cost base and increased operational focus,” Rich said.

Cello’s research agencies include Insight Research Group, Leapfrog and RS Consulting.