NEWS19 September 2012

Cello sees 2.8% lift in H1 revenues despite research slowdown

Financials UK

UK— Cello Group, parent company of research agencies 2CV, Face, RS Consulting and Insight Research Group, has reported a 2.8% increase in first half revenues. The company says its healthcare division helped it overcome a marked slowdown in research spending.

The results are the first to be reported by the group since Cello aligned its various businesses under a new structure which divides the group into Cello Health and Cello Consumer. Businesses were previously managed along ‘research and consulting’ and ‘communications services’ lines.

The company says that Cello Consumer – made up of Leith Group, 2CV, Face and Brightsource Group – experienced an overall revenue decline in the first six months of 5.6%, and a consequent decline in profits. Operating profit fell to £55,000 from £1.2m in the same period last year. The company says that “this decline is largely attributable to a marked slowdown in client activity in qualitative and quantitative research during the period”.

However, it adds: “More recently, a modest recovery in client activity has commenced. It is expected that this recovery will continue through the remainder of the year. As a result of this modest recovery in client spend, combined with the overhead actions, it is expected that profit recovery will occur quickly.”

Meanwhile, the Cello Health division – made up of The Value Engineers, Insight Research Group, RS Consulting, Cello Business Sciences, MedErgy, MSI and e-Village – reported a 50% increase in operating profits from £2.7m to £4.1m. The company says this has been possible because the new company structure “has enabled us to better leverage our professional resource and our existing client relationships”.

On research movements, the company notes: “Cello Health has made rapid progress in building a quantitative research offering to complement its qualitative research offering, bringing closer together Insight and RS. Cello Business Sciences, the data analytics and decision support arm of Cello Health, has also made rapid strides developing its suite of web-based tools and generating client activity.”

The re-organisation of Cello’s research division – which saw Leapfrog’s Windsor HQ shut down and the agency move in with sister company RS Consulting – cost the marketing services group approximately £700,000, the company confirmed. It said the “profit recovery process has required a reduction in headcount and property rationalisation”.

Overall, Cello Group announced an increase in revenue of 2.8% for the first half of 2012, reaching £63.3m, while gross profit increased by 7.2% to £31.7m.

Mark Scott, chief executive, commented: “Cello continues to make strong headway implementing its stated strategy. Cello Health is becoming established as a leading business in the global pharmaceutical market. The group’s international revenues are growing, the group’s value-added advisory revenues are growing and our web capabilities are cutting edge. This positions the group well for future expansion in line with the strategy. The group believes that management expectations for headline operating profits will be met.”