NEWS3 July 2009

Cello warns of mixed first half with gross profit down 10%

Financials UK

UK— Cello warned that gross profit will be down around 10% for the first half of 2009, in a mixed trading update released today.

Its pharmaceutical research and consultancy businesses “continued to perform well and in line with last year”, the company said, while UK quantitative and international research activities were “solid” during the six months ending 30 June.

Cello, which owns research agencies Insight Research Group, Leapfrog and RS Consulting, said it had recently renewed two of of its largest quant contracts in the UK. It would not name the clients but said they were in the retail and public sectors.

However, the group identified “weakness” in the qualitative sector, which Cello said was an “industry-wide trend”. It also cited “continued trading weakness” in both the business intelligence and HR research and training units.

Cello said the cost bases in these businesses had been “reduced accordingly” – although finance director Mark Bentley said the firm would not go into further detail about what action had been taken until the interim results are published in September.

Group-wide – including direct marketing activities – Cello said like-for-like professional costs had been reduced by “around 7%” to balance “profit protection with maintenance of professional capacity for recovery”.

Looking ahead to the full-year results, the group said it believes that a headline operating profit in line with the current market consensus is “achievable”.

“Core revenue visibility remains solid as contract retention has proved to be good,” Cello said. “The group has also continued to take prudent action to adjust the cost base and remains alert to taking further action where necessary.”