Revenue Growth, Flat Profits for Cello

The Research and Consulting arm of UK-based Cello has delivered a headline operating profit of £6.1m (2007: £6.2m) for the year to 31 December 2008, from operating income of £39.1m (2007: £32.m) and revenue of £66.4m, up 30% on the year. The group describes this as a 'good year' given the economic context.

The division includes MR firms Insight Research Group, Leapfrog, 2CV, MRUK, RS Consulting, Face and MSI.

CEO Mark Scott said that whereas demand for marketing services continues to decline 'in the face of global recession', the requirement for specialist research capabilities has remained 'broadly static in response to ever more complex market related issues for clients'.

In the research division, the group has targeted growth in multinational client contracts, which it says offer higher growth opportunities. Revenue from its overseas clients grew by 25% during the year, and its agency 2CV recently opened an office in San Francisco.

Performance remained strong in healthcare, which accounted for approximately 36% of operating income for the division (2007: 35%), and public sector work represented 11% of divisional activity (2007: 6%); an area which Cello expects to grow further.

During the year, the group invested just over £0.5m in strengthening its online research capabilities, through Blonde, Digital People, Face and Oomph. Scott said all these digital businesses are now trading profitably.

Operating margins slipped in the research area of the business to 15.7% (2007: 18.9%) as a result of investment in an online research product - Digital People which develops data analysis sites for clients - and reduced profit performance in its business intelligence unit. That, however, is expected to recover thanks to rationalisation initiatives including the redeployment of staff towards higher growth and more defensive areas, as well as cost-cutting.

During 2008, the group continued to integrate its research and consulting capability, while consolidating its field force and online data capture capacity to improve utilisation levels; which it says represent a more competitive outsourcing solution for larger research groups.

Overall for the group, operating income was up 17.2% to £66.6m (2007: £56.8m), while headline operating profit dropped to £7.8m (2007: £8.1m). Non-research side Tangible added 26.7% to its 2007 revenue to reach £72.7m, giving group revenue of £139.1m.

Headcount was reduced in areas of the business 'exposed to financial services', and the effect is that the number of staff is now around 4% lower than at the end of December 2007.

'Our focus on research and direct marketing holds us in excellent stead against an increasingly challenging economic backdrop' Scott stated. 'It also produced higher profits and a lower debt level than anticipated, better than market consensus as a result of extremely strong operating cash flow conversion. In four years we have built up a very solid, profitable, cash generative £67m gross profit business.'

Web site: www.cellogroup.co.uk .

All articles 2006-23 written and edited by Mel Crowther and/or Nick Thomas, 2024- by Nick Thomas, unless otherwise stated.

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