ANNUAL REPORT AND
FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2012
HIGHLIGHTS
Financial Highlights
Operational Highlights
2012
2011
Gross profit
£65.1m
1
Headline operating profit
£7.7m
Headline profit before tax
£7.0m
Headline operating margin2
12.1%
Basic headline earnings per share3 6.37p
Reported profit before tax
£1.4m
Reported basic loss per share
0.49p
Proposed full year dividend
2.00p
Net debt
£8.7m
£61.8m
£7.8m
£7.1m
12.6%
6.82p
£1.2m
0.81p
1.72p
£7.7m
• Strong cash conversion of 88.5% (2011: 90.6%)
• Earn out settlement in the year of £2.0m
• Successful restructuring of the Group into Cello
Health and Cello Consumer
• Strong performance from Cello Health,
underpinned by a unified client proposition
• Good recovery in H2 from Cello Consumer
• International gross profit increase from 40.6% to
46.1% of total Group gross profit
• International gross profit in Cello Health increase
from 68.2% to 72.3%
• Strong performance from digital products and
brands within Cello Consumer
• Acquisition of Mash Health Limited in January 2013
and integration into Cello Health
• Forward looking deferred consideration minimal
• Gross profit in Cello Health up 7.2%; like-for-like 4
gross profit up 2.6%
• Headline operating margin in Cello Health 20.8%
(2011: 20.9%)
1
Headline measures exclude, where applicable, restructuring
costs, amortisation of intangible assets, impairment charges,
acquisition accounting adjustments, start-up losses, share
option charges and fair value gains and losses on derivative
financial instruments.
2
Operating margin is calculated by expressing operating profit
as a percentage of gross profit.
3
Headline earnings per share is defined in note 12.
4
Like-for-like measures exclude discontinued operations and
the impact of any reclassification of business between
reporting segments.
• Gross profit and like-for-like in Cello Consumer
maintained at similar levels, despite challenging H1
• Headline operating margin in Cello Consumer of
9.1% (2011: 10.4%)
• Good start to 2013, with strong bookings
momentum continuing from Q4 2012
CONTENTS
Chairman’s Statement
2
Cello Health Companies
8
Cello Consumer Companies
10
Case Histories
12
Cello People
14
Talking Taboos
16
Directors’ Report
18
Corporate Governance
22
Report of Remuneration Committee
24
Independent Auditor’s Report – Group
27
Consolidated Financial Statements
28
Accounting Policies
33
Notes to the Consolidated Financial Statements
40
Independent Auditor’s Report – Company
71
Company Balance Sheet
72
Accounting Policies
73
Notes to the Company Financial Statements
75
Notice of Annual General Meeting
80
Directors
84
Group Directory
86
Advisors
88
1
CHAIRMAN’S STATEMENT
Overview
2012 saw a solid per formance with the Group
reporting a 5.3% increase in gross profi t to £65.1m
(2011: £61.8m) and headline prof it before tax1
of £7.0m (2011: £7.1m). The restructuring of the
Group into Cello Health and Cello Consumer was
successfully completed and the benef its of this
are already evident in new client activity. The last
quarter of 2012 showed good momentum in forward
bookings for the first quarter of 2013, providing good
visibility for the start of the current year.
Cello Health produced headline operating profit
grow th of 6.7% on an increase in gross prof it
of 7.2% , ref lecting robust demand from global
clients for its highly specialist range of services.
Cello Health enjoyed a full year contribution from
MedErgy which was acquired in April 2011. This top
line growth has allowed for continued investment
in qualified staff, the initiation of a range of new
services and expansion of international offices to
sustain future revenue growth. Like-for-like2 gross
profit in Cello Health grew by 2.6%.
Cello Health’s profile with global clients continues
to grow rapidly, with the recent addition of a central
business development team reporting to the Board
of Cello Health. The Board of Cello Health are
working rapidly to deliver a fully integrated global
service, promoted under the Cello Health brand,
enabling it to compete effectively against larger US
based competitors.
The Group’s strategy of increasing the proportion
of work won or serviced outside the UK has also
made continued progress with international work
now accounting for 46.1% of total Group gross
profit (2011: 40.6%). Within Cello Health 72.3%
of the gross profi t was secured from international
clients (2011: 68.2%). The Group now has overseas
offices in New York, Philadelphia, San Francisco, Los
Angeles, Singapore and Hong Kong. There are plans
to open an office in Chicago during the course of
the current year.
The Group’s top 20 clients accounted for 40.0% of
Cello’s overall gross profit (2011: 38.3%) and remain
largely unchanged from the prior year. Cello Health
continues to benefit from accredited supplier status
with the majority of its large pharmaceutical clients,
enabling it to increase its service offering to these
clients. The Group saw significant new business
wins in the last quarter of 2012 which will be active
in 2013.
Following strong operating cash f low and the
settlement of the earn out commitments during
the year, net debt at year end was £8.7m (2011:
£7.7m). As a consequence of the vastly reduced
deferred consideration profile, and continued strong
operating cash flow, the Board is pleased to propose
Cello Consumer enjoyed a strong recover y in
the second half after a marked slowdown in the
first half caused by a hiatus in research activity
by clients. Cello Consumer’s rapid transition into
a dominantly digital proposition suppor ted by a
range of web-centric services has enabled it to
continue to develop its wide range of blue chip
client relationships. With headline operating profi t
of £3.0m (2011: £3.4m) on gross profi t of £32.7m
(2011: £32.6m), Cello Consumer achieved operating
margins of 3 9.1% (2011: 10.4%). Like-for-like gross
profit in Cello Consumer grew by 0.6%.
1
Headline measures exclude, where applicable, restructuring costs, amortisation of intangible assets, impairment charges, acquisition
accounting adjustments, start-up losses, share option charges and fair value gains and losses on derivative financial instruments.
2
Like-for-like measures exclude discontinued operations and the impact of any reclassification of business between reporting segments.
2
CHAIRMAN’S STATEMENT
Overview
continued
an increase in the full year dividend of 16.3% to
2.00p per share (2011: 1.72p). The dividend has
now grown every year since 2006.
In January 2013 the Group completed the acquisition
of Mash Health Limited ( “Mash” ), for a total
maximum consideration of £1.5m, payable over the
next 18 months. Mash has joined the Consumer
Health division of Cello Health.
Financial Review
Total Group gross profit was £65.1m (2011: £61.8m)
on revenues of £135.1m (£127.7m). Headline profit
before tax was £7.0m (2011: £7.1m). The Group’s
results reflect a solid performance by Cello Health
and a markedly improved performance by Cello
Consumer in the second half.
Reported profit before tax was £1.4m (2011: £1.2m)
after the impact of restructuring costs of £1.3m
(2011: £0.9m); amortisation of £0.9m (2011: £1.2m);
s tar t-up losses of £0.8m (2011: £0.2m) ; and
impairment charges of £2.5m (2011: £2.5m). The
Group’s headline operating margin was 12.1% (2011:
12.6%) with a headline operating margin of 20.8%
in Cello Health (2011: 20.9%), and 9.1% in Cello
Consumer (2011: 10.4%).
Headline finance costs were £0.7m (2011: £0.7m).
The Group’s tax charge was £1.2m (2011: £1.6m)
reflecting a normalised tax rate on taxable profi ts
of 31.5% (2011: 31.7%). Headline basic earnings per
share4 was 6.37p (2011: 6.82p).
The Board is proposing a final dividend of 1.42p per
share (2011: 1.17p), giving a total dividend per share
of 2.00p (2011: 1.72p), an increase of 16.3% . The
final dividend will be paid, subject to shareholder
approval, on 5 July 2013 to all shareholders on the
register at 31 May 2013 and will be recognised in
the year ending 31 December 2013.
The Group’s net debt position at 31 December
2012 was £8.7m (2011: £7.7m). This debt figure is
well within existing debt facilities of £29.0m which
are in place until March 2016. Operating cash flow
before tax of £6.8m (2011: £7.0m) during the
year represented an 88.5% conversion of headline
operating profit (2011: 90.6%).
In April and May 2012 £3.3m of acquisition related
liabilities were settled. These were settled by £2.0m
in cash and loan notes and £1.3m in shares issued at
an average price of 37p per share. Following these
3
Operating margin is calculated by expressing operating profit as a percentage of gross profit.
4
Headline earnings per share is defined in note 12.
3
CHAIRMAN’S STATEMENT
Financial Review
continued
payments, deferred consideration commitments
now stand at £0.4m, all payable in 2013. In January
2013, the Group acquired Mash for a maximum
potential consideration of £1.5m. This consideration
will all be paid by May 2014 with a maximum of
20% payable in shares.
The Group has invested in a number of new startup activities in 2012, most notably the start-up of
a quantitative research activity in Cello Health; the
opening of new offices in Singapore, Hong Kong and
Los Angeles; the creation of Cello Business Sciences,
a web-enabled analytics offering; and expansion
in New York. This incurred a net investment cost
of £0.8m which has been added back to earnings
for purposes of headline operating profit so as not
to distort the reporting of underlying operational
performance. We are confident about the majority
of these activities being profitable in 2013. We were
pleased to earn £1.0m of gross profi t from these
activities in their first year of operations.
As indicated in the interim results, Cello Consumer
suffered from a marked slowdown of cer tain
research activities in the first half of 2012. As a result
the Group took action to reduce costs in certain
areas, some of which have been closed and are
therefore accounted for as discontinued operations.
There was a restructuring charge of £1.3m for
2012 of which £0.6m related to a vacant property
provision. The restructuring also necessitated an
impairment charge of £2.5m.
4
The Group incurs a number of charges in the
income statement below headline operating profi t,
detailed below:
Headline operating profit
Net interest payable
Headline profit before tax
Acquisition costs
Restructuring costs
Start-up losses
Fair value gain on
financial instruments*
Acquisition related employee
remuneration expenses*
Share option charges*
Impairment of goodwill
and intangibles*
Amortisation of intangibles*
2012
£’000
2011
£’000
7,720
7,756
(686)
(694)
7,034
7,062
–
(211)
(1,328)
(928)
(787)
(163)
50
64
(82)
(631)
(134)
(97)
(2,497)
(2,499)
(876)
(1,198)
Finance costs on deferred
consideration*
–
(58)
Facility fees written off*
–
(111)
1,380
1,230
Reported profit before tax
*no cash flow impact
The Group monitors many financial measures on a
regular basis but our key performance indicators are
headline operating profit, headline operating margin,
like-for-like gross profit, headline operating cash flow
conversion and headline basic earnings per share.
CHAIRMAN’S STATEMENT
Operational Review
Cello Health
The Group’s healthcare business enjoyed another
year of strong performance, delivering headline
operating profit of £6.5m (2011: £6.1m) from gross
profit of £31.3m (2011: £29.2m). This has been
driven by continued spend from the business’s
large, long term, global client relationships. The
professional employee base has increased to 305
during the year (2011: 280) reflecting the addition of
senior resource, particularly in the USA, to enable
continued growth. Despite this senior headcount
increase, operating margins have remained static at
20.8% (2011: 20.9%) which represents competitive
levels versus the larger competitor set.
Cello Health has increased the propor tion of
pharmaceutical assignments won on the basis of
joint pitches across multiple Cello Health companies.
These are often won in competition with larger,
consolidated healthcare services providers, often
domiciled in the USA . It has also responded
effectively to the increasing demand by clients for
scientifically based data input into their marketing
efforts based on actual patient outcomes.
Cello Health is managed by a single executive Board
comprising Stephen Highley (Chair), Julia Ralston
(CEO USA) and Jane Shirley (CEO Europe and
Asia), supported by a leadership team. The business
has a central senior business development function.
During the course of 2013 the board of Cello Health
plans to transition its core operating brands into
a single brand format reflecting the Cello Health
positioning, as Cello Health transitions into the lead
client facing identity. This will enable it to compete
more effectively, with better sharing of professional
resource, and to raise Cello Health’s market profile.
The international prof ile of Cello Health has
progressed considerably. In July 2012 Cello Health
moved to new, enlarged premises in New York,
complemented by the Philadelphia of f ice of
MedErgy. During the course of 2013 the business
will open an office in Chicago to service the North
West of the US and the Philadelphia office is being
materially expanded to allow fur ther growth in
headcount. All of Cello Health’s core businesses are
now represented in the US market, which is by far
the largest market for such services globally.
The business continues to invest in organic expansion.
In 2012 investments were made in quantitative
research to complement the dominant qualitative
research focus of the business ; geogr aphical
expansion ; the development of an integrated
Market Access proposition; and the development
of a focused Consumer Health of fering. The
recent acquisition of Mash in ear ly 2013 has
been a significant addition to the effor t to build
a major global offering in the Consumer Health
space. The Board of Cello Health is charged with
demonstrating profi table revenue flow from these
investment activities.
Innovation is at the cor e of Cello Heal th’s
proposition. Cello Health’s digital capabilities
have continued to gain market traction. eVillage,
the division’s social media research product for
the pharmaceutical industr y, made a material
contribution to revenues in 2012. In 2012 Cello
Health also launched Cello Business Sciences,
5
CHAIRMAN’S STATEMENT
Operational Review
continued
a bespoke web-based analytical tool for marketing
directors in the pharmaceutical industry.
Notable, disclosable client wins in 2012 included:
Actelion, Ahlstrom, Airwave, Alix Partners, Allergan,
Amgen, AVEBE, Aver y Dennison, Boehringer
Ingelheim, Boots Opticians, Centro, CooperVision,
EE, GE Healthcare, General Mills, Infineum, Johnson
and Johnson, Mundiphar ma , NEST, Novar tis,
Shionogi, Synergy, TATA Group, Tunstall Healthcare,
and Vision Care.
Cello Consumer
Cello Consumer delivered headline operating profit
of £3.0m (2011: £3.4m) on gross profi t of £32.7m
(2011: £32.6m). This represented a solid recovery
following a challenging first half in 2012 caused by a
temporary slowdown of research activity by a range
of large clients, consistent with that experienced by
the market overall. Operating margins were 9.1%
(2011: 10.4%).
Cello Consumer is based on three core capabilities,
Insight: helping clients identify market and customer
issues and oppor tuni ties ; Cr eative : helping
clients solve their customer issues and capture
opportunities through communications processes;
and Logistics: helping clients execute these plans
mos t cos t ef fec tively. These capabilities ar e
represented by 2CV and Face on the research side;
Leith Group on the creative side; and by Bright
Group on the logistics side. These core brands are in
turn supported by a number of specialist sub brands.
Cello Consumer is managed by an executive Board
led by Mark Scott (Chair) and John Rowley (CEO)
along with six other executives. The mission of the
Board is to establish Cello Consumer as a leading
global advisor to marketing clients, enabling them
to better manage relationships with customers in
an increasingly digital context. Cello Consumer
responds to clients increasing need for speed of
response, need to drive down cost and need to
show immediate return on marketing investment.
As par t of this process Cello Consumer will be
6
changing its name in 2013 into a client facing brand
to help drive additional revenue into the core
branded engines of the business.
Cello Consumer has a very high quality, blue chip,
client list that will underpin global business growth.
The primar y client segments ser ved by Cello
Consumer are fmcg, mobile telephony, computer
games, financial services, as well as charities. The
largest client accounted for less than 3% of total
revenues for Cello Consumer.
Cello Consumer has continued to develop a strong
digital footprint. Through its brand Face, the Group
has established an industry leading capability in
social media based advisor y work , backed by
software enabled analytical products. Through its
brand Blonde, it also has a highly successful offering
in digital communications and web-based marketing.
In addition, through its brand Brightsource, it has
developed an industry leading capability in digital
based print management, communications planning
and delivery.
Cello Consumer has been rapidly transforming itself
from a UK focused business into a global business.
With offices in San Francisco, Los Angeles, New
York, Singapore and Hong Kong, it can truly offer
global coverage. International gross profits have
grown from 18.2% in 2011 to 20.6% in 2012 and this
trend is accelerating.
CHAIRMAN’S STATEMENT
Operational Review
continued
Notable, disclosable client wins in 2012 included: AB
Inbev, Aer Lingus, Air Malta, Airwick, Aldi, ANZ,
AOL, Arla, Asia Pacific Breweries, Avon, Bang and
Olufsen, Barnes and Noble, BBC Global business,
Ben & Jerry’s, Berry Bros, BHF furniture stores,
British Gas, British Red Cross, Britvic, Camelot,
Church & Dwight, Coutts, Dairy Crest, Debenhams,
Delhaize Group, Edring ton, Elec trolux, EMC ,
Eurostar, Fitflop, Forestry Commission, General
Motors, Glasgow 2014 Commonwealth Games,
Hallmark, Heathrow Express, HSBC, ING, Johnson
The Par tnership meets regularly and forms subgroups to address areas critical to the future of the
business, notably innovation, international expansion
and cross group wor king. Many Par tner s and
Associates are alumni of Cello Academy.
Cello Academy is the Group’s well respected and
proprietary training programme which has been
in place for seven years, and through which over
150 people have passed during that time. In addition
there is a Cello graduate forum for the substantial
annual graduate in-take of the Group. In 2012
33 new graduate trainees were recruited over the
course of the year (2011: 28).
In order to properly incentivise the Partnership the
Group administers a robust and demanding annual
bonus scheme that rewards based on performance.
As par t of making a difference, Cello invests in
he lping i t s pr ofes siona ls e ng age in socia lly
contributive activities with a health orientation.
In particular, Cello has invested in creating Talking
Taboos, a research programme aimed at supporting
selected charities to further develop their positions
and raise their profile supported by market data.
In 2013 Cello aims to launch Talking Taboos as a
charitable foundation led by Vincent Nolan.
& Johnson, Land Securities, Liberty Mutual, Lipton,
Magic Radio, Magnum, Malaysia Airlines, Marie Curie
Cancer Care, Marriott, Montpelier Group, Mortein,
NBC , NHS, Nokia, O2, Odeon, Pf izer, Philips,
Phones 4U, Powerade, Pronova, Quaker, RBK, RBS,
Royal Mail, Save the Children, Scottish Widows, Sky,
Skyscanner, Stansted Airpor t, Strategic Defence,
Tesco, The Alzheimers Society, Timberland, Toyota,
and Veolia Water.
People
Cello maintains a range of initiatives that span the
entire Group, encompassing both Cello Health and
Cello Consumer, which are aimed at developing and
retaining the Group’s professional resource. At the
heart of this is the Cello Partnership which comprises
44 Associates, 31 Partners and 13 Managing Partners.
Current Trading and Outlook
Cello began 2013 with a good level of secured
forward bookings and has also seen encouraging
levels of new business wins so far in 2013. This solid
start to 2013 means that the Group is in a good
position to progress against its growth goals. The
strong balance sheet position of the Group means
it is able to materially increase the full year dividend,
as well as further invest in the growth strategy of
the Group. At this early stage of the year, the Board
is confident that current expectations for 2013 can
be met.
Allan Rich
Non-Executive Chairman
12 March 2013
7
CELLO HEALTH COMPANIES
Insight Research Group
• Significant expansion of the US office including
50% growth in headcount and a move to bigger
offices in Manhattan.
• Closer and more sustained business relationships
with significant Swiss, German, US and UK based
pharmaceutical company clients.
• Major new multiple project wins within a client
base that continues to expand in Europe and the
Far East.
• A broadening and deepening of Insight’s digital
footprint with more than £1m revenue generated
from eVillage® projects started this year and a
range of digital innovations in the pipeline.
• Significant investment in quantitative research
capabilities and partnering with advanced analytics
company.
• I mpor t a nt developme nt s in Cello H eal t h
collaboration with MSI, MedErgy and The Value
Engineers.
MedErgy
• Ongoing geographic expansion, with the opening
of an office in New York, in addition to existing
European and main Philadelphia offices.
• Exceedingly strong growth year, suppor ted by
broadening of the existing client base.
• Broadening of the service offering with evidence
as core, including market access and sales training
in addition to medical communications.
• Cello Health collaboration led to more integrated
working with Insight and MSI to provide deeper,
insight-driven, and evidence-based strategies to
client assignments.
• Addition of a substantial number of professionals
to ensure support of both the current business and
the infrastructure necessary for ongoing growth.
MSI
• Global strategic business continued to increase
with 40% of revenues now generated from the
USA, following the opening of a US office.
8
• Focus on new client wins in areas of high growth
such as Specialit y Phar ma , Mar ket Access,
Biotechnology and Diagnostics.
• Continued success in collaboration in Cello Health
collaboration with significant work delivered with
MedErgy, Insight and Cello Business Sciences in
areas such as Positioning, Segmentation and Value
Proposition.
Cello Business Sciences
• Seamless Marketing Tools successfully deployed
on Plan Optimisation projects with three major
pharmaceutical partners.
• Launched Patient Flow Analysis App and ROI
Optimiser App, with Strategy and Forecast Apps
being completed in Q1 2013.
• New business opportunities realised with Cello
Health collaborations.
• Appointed Business Development professional as
Head of Europe.
• New cloud based Seamless Marketing Tools won
Wirehive Best Tech Award for 2012.
• Starting to expand offering into the USA.
CELLO HEALTH COMPANIES
The Value Engineers
• Establishment of The Value Engineers Consumer
Health brings proven brand consultancy tools and
techniques to OTC brand owners.
• Celebrated 20 years continuous track record of
delivery of successful projects for Unilever.
• Successful launch of new tools and techniques,
including a new approach to concept testing and
brand tracking.
• New York off ice continuing to f lourish and
increasingly winning and working for US domiciled
clients.
RS Consulting
• Work with NHS and the health sector grew
significantly, including large-scale and groundbreaking work on sensitive issues such as mental
health and wellbeing.
• Growing third sector business, with papers
delivered at the SRA and MRS Charity and Third
Sector conferences.
• The majority of work continued to be global in
scope, with emerging markets a key strength with
Turkey and South Africa joining the BRIC nations
in seeing considerable growth.
• Successful integration of Leapfrog, with significant
projects completed for GSK and Pfizer.
Kudos
• Kudos continued to consolidate their reputation
as the premium data-collection resource for highlevel business research internationally.
• 20 % increase in new business wins for 2012,
including Market Strategies.
• Increased business from wellbeing, healthcare and
corporate health clients.
• Significant growth in 2012 in emerging markets
China, Korea, Brazil, Russia, India and the Middle
East, with international work now accounting for
75% of overall revenue.
9
CELLO CONSUMER COMPANIES
Brightsource
2CV
• Very strong growth year, allowing the business to
compete for much larger contract sizes.
• Commitment to continued US grow th with
investment in senior sales personnel, together
with the opening of two fur ther sales offices
in New York and Los Angeles, complementing
s t r o n g g r ow t h f r o m co r e S a n F r a n ci s co
operations.
• Brightsource won Best in Print Production for
3rd year running at the Recommended Agency
Register Awards and won awards at the Financial
Services Forum and the DMA for its contribution
tow a r d s b u ild i ng a n ew co m m u n i c a t io ns
infrastructure for Lloyds Banking Group.
• Technolog y and other time-based ser vices
now account for 40% of GP, with a continued
diversification away from traditional ‘managed
services’ base.
• Continued investment in graduate recruitment,
18 graduates have now joined in the last two
years, bringing staff numbers up to 100.
Face
• Face US office achieved profit in first year of
trading, with major global client wins from
General Motors, NBC and Johnson and Johnson.
• Face successfully launched its new off ices in
Singapore and Hong Kong.
• Face’s proprietary social media insight platform,
Pulsar, helped it secure Tesco and Reck it t
Benckiser as new clients to join O2, ING, RBS,
Royal Mail and Unilever.
10
• Expanded focus on Asia with new sales office
opening in Hong Kong early 2013, supplementing
the existing Singapore base.
• A continued focus on emerging markets with
research projects conducted in Africa on behalf
of the Girl Hub Foundation in Rwanda and PZ
Cussons in Nigeria.
• EXP, 2CV’s experiential measurement product,
gained a significant upswing from 2012 London
Olympics and owing to clients’ wider interest in
establishing ROI on brand engagement.
CELLO CONSUMER COMPANIES
Leith Group
Stripe
The Leith Agency
• Won ‘Outstanding Consultancy of the Year’ at
the CIPR Awards 2012.
• Major new business wins included Aldi (Scotland),
Glasgow 2014 Commonwealth Games and
Scottish Widows.
• T he Sunday T imes B es t Compa nies 2013
shortlisted Leith under their “Ones to Watch”
category.
• Expanded the Stripe team – adding 9 new staff.
• Major new business wins included Scottish Power,
AG BARR, Glasgow 2014 and various Scottish
Government projects.
TMI
• Leith further strengthened its reputation outside
Scotland by winning Creative Agency of The Year
in the North of England.
• Another strong year for TMI, with significant
business wins including Britvic, Malaysia Airlines,
AER Lingus and the NHS.
• The brand consultancy arm of Leith, called Leithal
Thinking, opened offices in London and New York.
• Over half of revenue came from outside of UK.
Blonde
• 2012 saw a mar ked increase in the size of
contracts serviced.
• Doubled employees in Blonde London through
2012.
Tangible
• Multiple awards won for IRN-BRU and Royal Mail
digital campaigns.
• Secured a number of wins in 2012 including:
Multiple Sclerosis Society, Farm Africa, Visit
England, Vanguard Investments, Nestle and NCP.
• Launched MyRoyalMail employee portal for the
UK’s second largest employer.
• Delivered Social Media strateg y and digital
suppor t for Royal Mail’s Olympic gold medal
stamps and gold post box campaigns.
• Won the project to build the Glasgow 2014
Commonwealth Games website.
• Insight and data offering provided the focus
for new projects from Visit England, Nandos
and SEAT.
• Continued grow th in the Royal Mail account
saw Tangible engage with three of its business
areas – Philatellic, MarketReach and Internal
Communications.
• Tangible won a DMA Gold for its Royal British
Legion work, 2 FSF Commendations for BM
Savings and Lloyds Banking Group and has been
shortlisted for 5 data strategy awards in 2013.
Opticomm
• Established paid search engine marketing offering,
now actively managing Google campaigns both in
UK and localised across EMEA.
• Online media planning and buying platforms
established, allowing scalable growth and real
time optimisation and reporting for our clients.
• Secured major account win with British Red
Cross legacy.
11
CASE HISTORIES
Insight Research Group
Discovery
By using eVillage® over a 9 month
period, with carers of a very rare
condition, our client was better able
to understand the market and close
knowledge gaps, thereby shaping
the commercial strategy for their
product in this area.
Delivery
Topics were explored using a variety of tools and a mix of
private vs. public tasks. This community was open for one week
every month for nine months providing an opportunity to bring
together an otherwise hard-to-reach audience. This longerterm community allowed us to respond to our client’s evolving
objectives over time, and the flexibility in outputs offered
(newsletters/formal presentations/client access to platform)
helped to engage the broader client team in the results.
MSI
Discovery
Working in collaboration with Cello
Business Sciences, MSI won a project
with a diagnostic imaging brand in a
therapy area of huge growth, helping
them to define their global launch
strategy and segmentation for the
brand and providing an optimised
t ac tical plan including f inancial
forecasts.
Delivery
The Cello approach combined the strategic and commercial
skills of MSI with the analytics and web-based tools of Cello
Business Sciences. The project benefi ted from added depth,
using powerful processes to uncover insights and strategy,
complemented by rigorous research and modelling techniques
to add the robustness required by the client. The project was
under taken in a pivotal six month period where the client
turned their compound into a commercial asset. This resulted
in a clear direction for the brand, a fully engaged and aligned
internal team, and a new benchmark for product planning
within the organisation.
Cello Business Sciences
Discovery
Allergan, a global pharmaceutical
co m p a ny, w a n t e d t o l a u n c h a
medical aesthetic product in Europe
and invited Cello Business Sciences
to help optimise their marketing
strategy and develop a compelling
value proposition.
12
Delivery
Cello Business Sciences helped Allergan develop a differentiated
positioning and optimal route to market. Our new award
winning Seamless Marketing Tools were used to pinpoint
the opportunities and challenges for the brand and identify
the critical path to success.
“Fantastic work, you have really robustly given us what we needed”
– Caroline Van Hove: Senior Director, Allergan.
CASE HISTORIES
2CV
Discovery
As the proliferation and usage of smar tphones continues
to grow, brands see huge potential in apps – not just for
recruitment and retention of consumers, but also enabling them
to interact with the brand in a very personal way. However, it
can be difficult to understand the impact apps have in terms of
brand perceptions, consumer behaviour and ultimately purchase
and return on investment. Heineken Ireland developed an
app around the Murphy’s stout brand which gave consumers
the chance of a free pint when it rained – a first such foray
into apps for the brand. To establish the ROI, Heineken
commissioned the EXP (experiential) team at 2CV to research
what the app was achieving in terms of driving positivity around
the brand and delivering increased consumption.
Delivery
The approach
utilised EXP’s
bespoke digital platform; it looked
at the impact of the app for regular
versus non-regular consumers of the
brand, and delivered a unique insight
into the true consumer benefit of
the app in the competitive market
context. The research helped the
app win two initiative awards for
the Heineken team and is now the
standardised measurement tool of
choice for future app deployment.
Blonde
Discovery
The aspiration for MyRoyalMail.com
was to create a much more interactive
and engaging site, which improved
the provision of Royal Mail Group
information, operations and news
and also introduced and promoted a
two-way dialogue between Royal Mail
Group and its employees, in order
to create a truly vibrant site that
would become a genuine part of an
employee’s working life.
Delivery
“Blonde have proved themselves to be an absolute asset to the
Royal Mail Digital team. The experience and knowledge, which
they bring to every project, is second to none. The MyRoyalMail
project was incredibly sensitive with a number of unique challenges
and requirements which the team needed to overcome. Blonde
approached this project with enthusiasm and creativity, while at all
times staying true to the objectives of the project and the primary
audience the site was aimed at. The results speak for themselves,
Blonde have transformed the extranet and made it an engaging
place for frontline colleagues to engage with Royal Mail.”
Abby Guthkelch: Head of Digital Communications,
Royal Mail Group.
Face
Discovery
As a global business, General
Motors had identified a need for an
efficient and cost effective method of
screening, evaluating and optimising
ad concepts at script stage across
markets, in order to aid advertising
development.
Delivery
Face developed a streamlined global process
using its Global Community Platform. This
has now become a standard methodology for
General Motors, starting to replace traditional focus groups for
more multi-market qualitative advertising development. General
Motors especially value the cost effectiveness, speed, flexibility
and robustness of the method, enabling them to turn round
major multi-country projects (up to 10 countries and languages)
in just 2 weeks from recruit to report.
13
CELLO PEOPLE
A key focus for the Cello Group continues to
be our People and Talent which are core to our
success and future growth. The Group has a small
central team driving various Talent initiatives across
the company, and in 2012, this focused on a number
of initiatives:
The Cello Partnership
Since i t s beginning , Cello ha s placed gr eat
importance on the concept of Partnership, linking
like-minded peers around the Group to enable
collaboration at all levels. Cello believes this scheme
puts the Group at a distinct advantage. Our vision
for the Partnership is to:
allow collaboration of the best minds,
freshest ideas and breadth
and depth of skill sets, and to apply these
to our clients’ business challenges.
Currently the Par tnership represents 11% of the
Cello Group across 3 levels, Associate, Par tner
and Managing Par tner. The Group currently has
4 4 Associates, 31 Par tner s and 13 Managing
Par tners. Nomination to the Par tnership occurs
once a year through a formal appointment process.
Associates
Partners
Managing Partners
By bringing together this group of like-minded
individuals, Cello’s culture is being embedded
throughout the organisation and creating important
links between the different companies within the
Group. This scheme encompasses Cello Health
and Cello Consumer. The Par tnership enables
innovation to be driven at a cross company, cross
vocational level.
14
Member ship of the Par tner ship is something
the Group’s employees aspire to, and Cello is
committed to continuing to build the Partnership,
both as a tool enabling cross company interaction
and innovation, and as a retention tool.
CELLO PEOPLE
MasterClasses
An exciting development for Cello during 2012 has
been the development of a series of MasterClasses
designed to run alongside the Academy. These
are aimed at senior members around the Group,
offering a range of Master Classes in different
geographic locations. Recent MasterClasses included
‘Negotiating with Procurement’ and ‘Customer
Relationship Management’.
Each year, building on feedback from our operating
companies, the Group expands the scope of the
MasterClasses to ensure focus on local business
requirements and to suppor t employees growth
and personal development.
Graduate Intake
In 2011 the Group launched a ‘Class of ’ initiative,
designed to provide the annual Graduate intake with
both an overview of the organisation and effective
networking with fellow graduates. In 2012, the
Group employed 33 graduates, who, shortly after
they joined, met on the Leith barge in Edinburgh for
a networking event. A second event with Graduates
and Academy Alumni took place in November and
included an external Futurologist speaker.
Cello Academy
For the coming year the focus continues to be
to offer a varied and valuable range of events
and initiatives for those at different levels within
the organisation. Cellos’ people remain its key
differentiator and the Group will continue to ensure
a flow of initiatives motivate and help retain the
Talent with the Cello Group.
Under the Cello Talent umbrella, the Cello Academy
continues to flourish, with over 150 Cellists having
now passed through the Academy. Its reputation
has been cemented as a valuable training and
net wor k ing envir onment wor k ing alongside
individual company schemes. In preparation for its
launch in 2013, the Group commenced planning for
Cello Academy USA. This reflects the growing size
of the international business.
15
TALKING TABOOS
It’s called ‘Talking Taboos’
Talking Taboos, a campaigning brand, was born
out of a whole company view to give something
back to society and to tackle health and social
issues using Cello’s experience and resources in the
healthcare space.
Cello Group is a progressive business which takes
its responsibilities to society extremely seriously.
The Group aims to consider all the impacts of the
business, from environmental to social, and look
for ways in which it can minimise its environmental
impact and maximise the benefit it brings to society.
Cello gener ates consumer insight s , deliver s
marketing advice and communications in Health and
Consumer markets that touch many people’s lives.
The Group feels it is its duty to do this ethically and
responsibly.
Cello is for tunate to be able to use its skills to
have a positive impac t on society in its daily
activity; Leith’s award winning campaigns tackling
cancer screening, knife crime, drug and alcohol
abuse; 2CV’s insights delivering behaviour change
around teen road safety for TfL and teenage risk
behaviours for the Department of Health; Insight’s
extensive work into a range of new drugs that will
improve the lives of people with breast cancer, HIV
and diabetes; Brightsource/Tangible’s work with
numerous charitable organisations including British
Red Cross and British Heart Foundation.
Cello has developed an initiative that will allow
its skills and exper tise to be utilised in areas
where clients don’t currently have the resources
or remit...
It enables the best of our people to contribute
in an area where Cello believes it can have the
greatest impact. Maximising contribution to society,
but also building a stronger, more coherent,
motivated business.
For the initial project, Talking Taboos focused
on self-harm, par tnering with YoungMinds, the
UK’s leading young people’s mental health and
wellbeing charity. YoungMinds identified a clear lack
of knowledge and support out there about young
people and self-harm amongst parents, schools,
NHS staff and youth services.
Pooling resources across the Group, a groundbreaking research repor t ‘Talking self-harm’ was
produced. The research used a suite of services
including advanced qualitative research, professional
online community forums and social media discourse
research, integrated with a nationally representative
quantitative sample of 2, 50 0, maximising the
expertise of each operating company.
The report highlighted some astonishing statistics
which revealed a real problem surrounding the
perceptions of self-harm and young people in
the UK.
• 3 in 4 young people don’t know where to turn to
talk about self-harm.
• A third of parents would not seek professional
help if their child was self-harming.
• A l m os t ha l f of G Ps fe e l t ha t t h ey d o n’ t
understand young people who self-harm and
their motivations.
• 2 in 3 teachers don’t know what to say to young
people who self-harm.
16
TALKING TABOOS
President of the Royal College of Psychiatrists,
Professor Sue Bailey said “This report is a brave and
timely call to action for us to set aside the rhetoric
about self-harm.”
Engaging stakeholders was crucial to the success
of the project to help establish the credibility of
the research within the sector. A stakeholder
briefing event was held at the Houses of Parliament,
chaired by Claire Perry MP, which was attended
by 150 key stakeholders including the Samaritans,
Mental Health Foundation, Department of Health,
Stonewall and Paul Hamlyn Foundation. The event
included a compelling post presentation debate
around self-harm with opinion formers from across
the UK.
Creating a national conversation was one of the key
objectives of Talking Taboos. Stripe Communications
delivered a successful media strategy to get people
talking about self-harm and how to better support
young people. This led to cover age on BBC
Breakfast, BBC Newsbeat, ITV, The Times and
Metro, as well as sector coverage in the Lancet,
Special Education Needs and Net Doctor.
Social media played an impor tant par t in star ting
the dialogue online about self-harm – a Talking
Taboos twitter page and handle were created,
gaining 346 followers in the lead up to and following
the launch. High profile tweeters like Stephen Fry
and Dr Christina Jensen were targeted to increase
awareness about the project through their twitter
followers.
Cello staff were also key to the success contributing
to the conversation on social media and inviting key
clients to the event.
Talking Taboos has opened up a holistic dialogue
amongst professionals and young people about
self-harm. The project has been mentioned in the
Welsh Assembly, the Parenting UK conference
and Cello was invited to be a keynote speaker at
the Safeguarding Children conference in February
2013. This project has star ted a conversation
which wouldn’t have existed otherwise and that’s
something really exciting to replicate in the future.
“Thank you for bringing wider attention to the issue
of self-harming young people. Our daughter, now 16
has been engaged in self-harming for 2 years. She is
receiving counselling, etc but importantly your report
and the BBC coverage this morning should go a long
way towards helping parents better understand what
is going on and maybe why. Once again, thank you!”
Gerry
Cello Operating Companies involved in the
research:
2CV – Led and delivered the overall project from
design to delivery – specifically providing advanced
qualitative techniques to understand how teachers
respond to the issue in schools, analytics to analyse
helpline data, quantitative research to provide
direction and highlight the scale of the issues.
Blonde – Digital support and outbound invitation
design.
Face – Social media research focused on teens.
Leapfrog – Understanding the parental view on the
challenges of bringing up and caring for teens and
the way they view and would approach self-harm if
confronted with it.
Leith Agency – Design of Talking Taboo identity,
report and presentation animation.
MedErgy – Discourse analysis reviewing medical
journals and research internationally.
Stripe – Led and delivered PR media strategy and
internal communications.
Insight Research Group – Desk research leading to
longitudinal GP and HCP research using proprietary
tool and healthcare professional community eVillage.
RS/MRUK – Representative qualitative phase survey
of UK GPs to further explore issues identified and
to quantify attitudes, challenges and needs of GPs
when dealing with young patients who self-harm.
Tangible – Banners and launch event materials.
@talkingtaboos
‘talking self-harm’ report available from:
www.talkingtaboos.com
17
DIRECTORS’ REPORT
The directors present their report and the audited
consolidated fi nancial statements of Cello Group
plc for the year to 31 December 2012. To the best
of their knowledge the Directors’ Report includes a
fair view of the business and position of the Group,
together with a description of the principal risks and
uncertainties faced by the Group.
Principal Activities
The principal activity of the Group and subsidiary
undertakings during the year under review is that
of market research, consulting and direct marketing
services. The principle activity of the Company during
the year under review is that of a holding company.
Review of the Business and Future
Developments
The results for the profit year ended 31 December
2012 are set out in the consolidated income
statement on page 28. These show a loss for the
year of £0.3m (2011: loss of £0.3m). An interim
dividend of 0.58p per share was paid in January 2013
(2011: 0.55p) and a final dividend of 1.42p per share
is proposed (2011: 1.17p).
The directors are required by the Companies Act
to present a business review, repor ting on the
development and performance of the Group and
the Company during the year and their positions at
the end of the year. A review of the development
and future prospects of the business and key
performance indicators (“KPIs”) are given in the
Chairman’s Statement on pages 2 to 7 which are
incorporated in this report by reference.
The Group’s KPIs are outlined in various sections
of this review. Whilst there are many f inancial
measures that the Group monitors on a regular
basis our core financial objectives are:
18
The Company regularly reviews the risks and
uncertainties facing the business through a regular
series of board and operational meetings. The
directors believe the current largest risks are as
follows:
1. UK economy
The Group’s business is domiciled in the UK but
37.0 % of the Group’s revenues are from clients
based overseas. It is clear that the current economic
downturn and the reduction in public sector
spending continues to affect the Group and there
is a risk that further downturn in any of our markets
will have an additional effect. However, the mix of
services we are offering is proving resilient as the
economy stabilises.
2. Loss of the Group’s key clients
Client relationships are crucial to the Group and
the strength of them is key to its continued success.
The risk is mitigated by our client base being
broadly spread and by several of our pharmaceutical
clients being subject to longer term master service
agreements. The loss of any large client would
require replacement. The Group’s client review
programmes help mitigate this risk.
3. Loss of key staff
The Group’s directors and staff are critical to the
servicing of existing business and the winning of new
accounts, departure of key staff could be a risk to
maintaining client service. With that risk in mind all
senior staff are subject to financial lock-ins and long
term incentive arrangements, as well as being under
contractual non-compete and non-solicit clauses.
Directors
The directors of the company who were in office
during the year and up to the date of signing the
financial statements were:
• Headline operating profit
Mark Scott
• Headline operating margin
Mark Bentley
• Like-for-like gross profit
Paul Hamilton
• Headline operating cash flow conversion
Will David
• Headline basic earnings per share
Allan Rich
DIRECTORS’ REPORT
Biographical details of the directors at the date of this report are set out on pages 84 to 85.
Directors’ Interests in Shares and Options
Directors’ interests in the shares of the Company were as follows:
Number of ordinary
shares of 10p each
At 31 December 2012
Number of ordinary
shares of 10p each
At 31 December 2011
875,919
35,000
50,000
15,000
977,785
803,219
35,000
50,000
15,000
977,785
Mark Scott
Mark Bentley
Paul Hamilton
Will David
Allan Rich
Under the rules of the EMI Share Option Scheme (the “EMI Scheme”), the Unapproved Share Option
Scheme 2004 (the “Unapproved Scheme 2004”), the PSP Option Scheme 2010 (the “PSP 2010”) and the
Approved Share Option Plan 2009 (the “Approved Plan 2009”), the Executive Directors have been granted
an interest in options over ordinary shares of 10p each as follows:
Mark Scott
Mark Scott
Mark Scott
Mark Scott
Mark Scott
Mark Scott
Mark Bentley
Mark Bentley
Mark Bentley
Mark Bentley
Mark Bentley
Mark Bentley
(1)
(2)
(3)
(4)
(3)
(3)
(1)
(2)
(3)
(4)
(3)
(3)
At 1 January
2012
number of
ordinary
shares of
10p each
Granted
in the year
number of
ordinary
shares of
10p each
Lapsed in
the year
number of
ordinary
shares of
10p each
At 31
December
2012
number of
ordinary
shares of
10p each
Date from
which
exercisable
Expiry date
Exercise
price
(pence)
100,000
200,000
430,000
72,000
170,000
–
81,633
81,633
214,000
72,000
130,000
–
–
–
–
–
–
170,000
–
–
–
–
–
130,000
–
–
–
–
–
–
–
–
–
–
–
–
100,000
200,000
430,000
72,000
170,000
170,000
81,633
81,633
214,000
72,000
130,000
130,000
Nov 2004
Nov 2004
June 2013
June 2013
June 2014
July 2015
June 2008
June 2008
June 2013
June 2013
June 2014
July 2015
Nov 2014
Nov 2004
June 2020
June 2020
June 2021
July 2022
June 2015
June 2015
June 2020
June 2020
June 2021
July 2022
100.0
100.0
10.0
31.5
10.0
10.0
122.5
122.5
10.0
31.5
10.0
10.0
(1) Granted under the EMI Scheme
(2) Granted under the Unapproved Scheme 2004
(3) Granted under the PSP 2010
(4) Granted under the Approved Plan 2010
None of the options that have been granted were exercised in the year. There were no changes in directors
interests between the year end and the date of signing the Groups accounts.
19
DIRECTORS’ REPORT
Substantial Shareholdings
Other than the directors’ interests disclosed on
the previous page, the Company is aware of the
following shareholdings of 3% or more in the issued
share capital at 28 February 2013:
No. of shares
%
Ennismore Fund
Management Limited
6,367,560
7.71
Octopus Asset
Management Limited
5,790,689
7.01
Henderson Global Investors
5,322,555
6.44
Universities Superannuation
Scheme
4,012,952
4.86
Vincent Nolan
3,841,545
4.65
Hargreave Hale
3,725,000
4.51
Share Capital
Changes to the Company’s share capital during
the year are given in note 25 to the consolidated
financial statements.
Treasury Shares
T he tot al numbe r of sha r es in t r ea sur y at
31 December 2012 and 31 December 2011 was
237,000 (0.3% of the issued share capital). The
purpose of the treasury shares is to satisfy future
earn out payments and/or option awards.
Statement of Directors’ Responsibilities
The directors are responsible for preparing the
Annual Repor t and the f inancial statements in
accordance with applicable law and regulations.
Company law requires the directors to prepare
financial statements for each financial year. Under
that law the directors have prepared the Group
financial statements in accordance with International
Financial Reporting Standards (“IFRSs”) as adopted
by the European Union (“EU”), and the parent
20
company financial statements in accordance with
United Kingdom ( “ UK” ) Gener ally Accepted
Accounting Practice (United Kingdom Accounting
Standards and applicable law). Under company
law the directors must not approve the financial
statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Group
and the Company and of the profi t or loss of the
Group for that period. In preparing these financial
statements, the directors are required to:
• select suitable accounting policies and then apply
them consistently;
• make judgements and accounting estimates that
are reasonable and prudent;
• state whether IFRSs as adopted by the EU and
applicable UK Accounting Standards have been
followed, subject to any material depar tures
disclosed and explained in the Group and parent
company financial statements respectively;
• prepare the financial statements on the going
concern basis unless it is inappropriate to presume
that the Group and the Company will continue in
business.
The directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Group and the Company’s transactions
and disclose with reasonable accuracy at any
time the financial position of the Group and the
Company and enable them to ensure that the
financial statements comply with the Companies Act
2006. They are also responsible for safeguarding the
assets of the Group and the Company and hence
for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The directors are responsible for the maintenance
and integrity of the Company’s website. Legislation
in the United Kingdom governing the preparation
and dissemination of financial statements may differ
from legislation in other jurisdictions.
DIRECTORS’ REPORT
Employees
Research and Development Activities
It is the Company’s policy not to discriminate
between employees or potential employees on
any grounds. Full and fair consideration is given
to the recruitment, training and promotion of
disabled people and, should staff become disabled
during the course of their employment, effor ts
are made to provide appropriate re-training. The
Company places enormous impor tance on the
contributions of its employees and aims to keep
them informed of developments in the Company
through a combination of meetings and electronic
communication.
During the year the Group spent £358,000 (2011:
£38,000) on the development of new software
products which are expected to generate economic
benef its in the future. These amounts were
capitalised as intangible assets. £167,000 (2011:
£145,000) of amor tisation was charged to the
income statement during the year.
Directors Third Party Indemnity
Provisions
A qualifying third party indemnity provision was in
place for directors throughout the year and at the
date of approval of the financial statements.
Policy on Payment to Creditors
Statement as to Disclosure of
Information to the Auditors
The directors who were in off ice on the date
of approval of these f inancial statements have
confirmed that, as far as they are aware, there is
no relevant audit information of which the auditors
are unaware. Each of the directors has confirmed
that he, as far as he is aware, has taken all the steps
that he ought to have taken as a director in order to
make him aware of any relevant audit information
and to establish that the Company’s auditors are
aware of the information.
The Company agrees the terms and conditions
under which business transactions with suppliers are
conducted. It complies with these payment terms,
provided that it is satisfied that the supplier has
provided the goods or services in accordance with
agreed terms and conditions.
Independent Auditors
The effect of the Company’s payment policy is
that the number of days credit taken for purchases
represents 45 days at 31 December 2012 (2011:
53 days).
By order of the Board
A resolution to reappoint PricewaterhouseCoopers
LLP, Char tered Accountants, as auditors will be
proposed at the for thcoming Annual General
Meeting.
Mark Bentley
Company Secretary
12 March 2013
21
CORPORATE GOVERNANCE
The Board of Cello Group plc appreciates the value
of good corporate governance not only in the areas
of accountability and risk management but also as
a positive contribution to the business. The Board
considers that the Company, whilst trading on the
AIM Market, has adopted those requirements of
the UK Corporate Governance Code (2010) (the
“Code”) as best applicable to the Company given
its current size.
Board Structure
The Board comprises two Executive Directors
and three Non-Executive Directors. The roles
of Chairman and Chief Executive are separate.
The Non-Executive Directors are independent of
management and free from any business or other
relationship with the Company other than owning
shares. The directors’ biographies appear on pages
84 to 85.
The Board is scheduled to meet at leas t six
times a year and additionally when necessary. At
each scheduled meeting of the Board, the Chief
Executive and Finance Director repor t on the
Group’s operations. The Board is satisfied that it is
provided with information in an appropriate form
and quality to enable it to discharge its duties. All
directors are subject to re-election by shareholders
at the first opportunity after their appointment. All
directors are required to retire by rotation and one
third of the Board is required to seek re-election
each year. The Chairman ensures that the directors
are permitted to take independent professional
advice as required.
All directors have access to the advice and services
of the Company Secretary, who is responsible to
the Board for ensuring that Board procedures are
followed and that applicable rules and regulations
are complied with.
The following committees of the Board have been
established to deal with specific aspects of the
Company’s affairs.
22
Audit Committee
The Audit Committee consists of three NonExecutive Directors; Will David as Chairman, Paul
Hamilton and Allan Rich. Will David is considered
to have relevant financial experience to chair this
Committee. The Committee considers matters
relating to the financial accounting controls, the
repor ting of results, and the effectiveness and
cost of the ex ternal audit. It aims to meet at
least twice a year with the Company’s auditors in
attendance. Other directors attend as required. The
Company Secretary provides secretarial support to
the Committee. The terms of reference of the
Committee are available on request.
Nomination Committee
The Nomination Commit tee consis ts of t wo
Independent Non- E xecu tive Direc tor s ; Paul
Hamilton and Will David. The Committee is chaired
by Paul Hamilton and meets as necessary. The
Committee is formally constituted with written
terms of reference and is responsible for reviewing
and mak ing pr oposals to the B oar d on the
appointment of directors. The Company Secretary
provides secretarial support to the Committee. The
terms of reference of the Nominations Committee
are available on request.
Remuneration Committee
T h e R e m u n e r a t i o n C o m m i t t e e i s fo r m a ll y
constituted with written terms of reference and
makes recommendations to the Board with regard
to remuneration policy and related matters. The
Remuneration Committee consists solely of two
of the Independent Non-Executive Directors,
Paul H a mil ton , w ho chair s t he C om mi t te e
and Will David. However, the Chief Executive
attends as required and has the right to address
the Committee. The Committee aims to meet at
least twice a year. The terms of reference of the
Committee are available on request.
CORPORATE GOVERNANCE
Remuneration Committee
continued
Fur ther details of the Company’s policies on
remuneration, including details of directors’ share
options are given in the Report of the Remuneration
Committee on pages 24 to 26.
Shareholder Communications
T he Company believes in maint aining good
communications with shareholders. The Chief
Executive and Finance Director meet analysts and
institutional shareholders regularly with a view
to ensuring that the strategies and objectives of
the Company are well understood. The Senior
Independent Director will not ordinarily attend
such meetings other than at the request of the
relevant shareholder. However, he is available
to shareholders if they have concerns which the
Chairman, Chief Executive or the Finance Director
have failed to resolve or for which such contact is
inappropriate.
business, the Board does not consider it would be
appropriate to have its own internal audit function.
An internal audit function will be established as
and when the Group is of an appropriate size but
meanwhile the audit of internal fi nancial controls
forms par t of the responsibilities of the Group’s
finance function.
All the day-to-day operational decisions are taken
initially by the Executive Directors or subsidiary
directors, in accordance with the Group’s strategy.
Where appropriate, the Board or subsidiary directors
approve such decisions. The Executive Directors or
subsidiary directors are also responsible for initiating
all transactions and authorising all payments, save
for those relating to their employment. As such, the
internal controls primarily comprise:
• the segregation of duties;
• the review of per tinent f inancial and other
information by the Board on a regular basis;
• the prior approval of all signif icant strategic
decisions;
Going Concern
• having a formal strategy for business activities.
The directors have satisfied themselves that the
Company and Group have adequate resources to
continue in operational existence for the foreseeable
future, and for this reason the financial statements
continue to be prepared on a going concern basis.
The Environment
Internal Control
Employees
The Board is responsible for ensuring that the
Group maintains a system of internal controls and
risk management, including suitable monitoring
procedures. The objective of the system is to
safeguard Group assets, ensure proper accounting
records are maintained and that the f inancial
information used within the business and for
publication is reliable. Any such system can only
provide reasonable, but not absolute, assurance
against material misstatement or loss.
The Group employs nearly 800 employees and
places a great deal of emphasis on their training and
retention. The central programme for rising talent,
“Cello Academy”, is now a well established feature
of the Group’s staff development initiatives.
Given the Group’s size and the nature of its
12 March 2013
The activities of the Group do not have a high
impact on the environment. However, the Group
aims to ensure that where waste can be reduced,
this is done efficiently, by recycling where viable.
On behalf of the Board
Mark Bentley
Company Secretary
23
REPORT OF REMUNERATION COMMIT TEE
The directors have applied the principles of good
governance relating to directors’ remuneration as
described below:
Remuneration Committee
The Remuneration Committee is authorised on
behalf of the Board to determine the Company’s
remuner ation policy on Executive Direc tor s’
remuneration, including pension rights and share
option awards, and the terms of their ser vice
contracts. The Committee aims to meet at least
twice a year and supervises the operation of share
schemes and other employee incentive schemes.
The remuneration and terms and conditions of
appointment of the Non-Executive Directors will
be set by the Board. No director shall participate
in discussions relating to his own remuneration.
The Remuneration Committee consists of two
Independent Non- E xecu tive Direc tor s ; Paul
H a mil ton , w ho chair s t he C om mi t te e , a nd
Will David.
Remuneration Policy
The policy of the Board is to provide executive
remuneration packages designed to attract, motivate
and retain directors of the calibre necessary to
maintain the Group’s position as a market leader
and to reward them for enhancing shareholder
value and return on investment. The remuneration
should also reflect the directors responsibilities and
contain incentives to deliver the Group’s objectives.
The main elements of the Executive Directors’
remuneration packages are as follows:
• basic salary;
• performance-related bonus;
• benefi t package – car allowance and health care
insurance;
• share option incentives – details of share options
granted to the Executive Directors are shown on
page 19;
• contributions to directors’ individual def ined
contribution pension schemes.
T he Remuner ation Commi t tee r eviews the
co m p o n e n t s of e a c h E xe cu t i ve D i r e c t o r ’s
remuneration package annually.
24
REPORT OF REMUNERATION COMMIT TEE
Directors’ Remuneration
Total
Benefi ts Emoluments
£’000
£’000
Salary/Fees
£’000
Bonus
£’000
Mark Scott
Mark Bentley
Allan Rich
Paul Hamilton
Will David
Paul Walton*
255
189
50
30
30
–
63
43
–
–
–
–
13
9
–
–
–
–
Total
554
106
22
Pension
£’000
Total 2012
£’000
Total 2011
£’000
331
241
50
30
30
–
38
28
–
–
–
–
369
269
50
30
30
–
370
278
50
30
30
200
682
66
748
958
*Resigned on 31 December 2011
Directors’ Titles and Service Arrangements
Name
Title
Date of appointment
Notice period
Allan Rich
Mark Scott
Mark Bentley
Paul Hamilton
Will David
Non-Executive Chairman
Chief Executive
Group Finance Director
Senior Non-Executive Director
Non-Executive Director
5 April 2005
5 May 2004
1 May 2005
8 October 2004
8 October 2004
3 months
12 months
12 months
6 months
6 months
Long Term Incentive Arrangements
In 2004 the Company established an EMI Share
Option Scheme and an Unapproved Share Option
Scheme. Vesting of the share options awarded
to Mark Scott in November 2004 under the EMI
scheme and the Unapproved Share Option Scheme
2004 are not subject to performance conditions,
but the vesting of the share options granted to Mark
Bentley in June 2005 under these plans was subject
to performance conditions which subsequently have
been met.
On 4 June 2006 the Board adopted the Cello Group
plc Performance Share Plan 2010 (the “PSP 2010”),
as the principal long term incentive plan for the
Group’s most senior executives. The performance
measure for the PSP 2010 is Total Shareholder
Return (“TSR”) relative to a comparator group of
the Company’s peers over the three years following
the date of the award. The proportion of PSP 2010
awards which vest will be calculated as follows:
Cello relative TSR performance
Below median
Median
Upper quartile
Between median and
upper quartile
Proportion
of award vesting
nil
25%
100%
interpolation between
25% and 100%
On 17 November 20 09 the B oard adopted
the Cello Group plc HM Revenue & Customs
Approved Share Option Plan 2009 (the “Approved
Plan 2009”) and on 15 March 2011 adopted the
Cello Group plc Unapproved Option Plan 2010 (the
“Unapproved Plan 2010”). Under the Approved
Plan 2009 and the Unapproved Plan 2010 (the
“Option Plans”) performance conditions will be
tailored to each participant according to his or her
seniority and responsibilities and will be based on
performance as measured against an appropriate
combination of Company, Division and Group
25
REPORT OF REMUNERATION COMMIT TEE
Long Term Incentive Arrangements continued
targets and the extent to which these are achieved
or exceeded over the per formance period will
determine the propor tion of each par ticipant’s
options which vest. Awards under the Option
Plans to main Board directors will be subject to
the performance conditions which apply to awards
under the PSP 2010. The Committee will review
the Option Plans on a regular basis and may amend
the performance conditions from time to time.
Market Value of Shares
The market value of the shares at 31 December
2012 was 37.5p and the high and low prices during
the year were 45.0p and 32.5p respectively.
On behalf of the Board
Paul Hamilton
Chairman – Remuneration Committee
12 March 2013
26
INDEPENDENT AUDITOR’S REPORT – GROUP
We have audited the Group financial statements of
Cello Group plc for the year ended 31 December
2012 which comprise the Consolidated Income
St a te m e n t a n d C o ns olid a te d St a te m e n t of
Comprehensive Income, Consolidated Balance
Sheet, the Consolidated Cash Flow Statement, the
Consolidated Statement of Changes in Equity and
the Notes to the Consolidated Financial Statements.
The financial reporting framework that has been
applied in their preparation is applicable law and
International Financial Reporting Standards (IFRSs)
as adopted by the European Union.
Respective responsibilities of directors and auditors
As explained more fully in the Statement of
Directors’ Responsibilities set out on page 28, the
directors are responsible for the preparation of the
financial statements and for being satisfied that they
give a true and fair view. Our responsibility is to audit
and express an opinion on the financial statements
in accordance with applicable law and International
Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing
Practices Board’s Ethical Standards for Auditors.
This repor t, including the opinions, has been
prepared for and only for the company’s members
as a body in accordance with Chapter 3 of Par t
16 of the Companies Act 2006 and for no other
purpose. We do not, in giving these opinions, accept
or assume responsibility for any other purpose or to
any other person to whom this report is shown or
into whose hands it may come save where expressly
agreed by our prior consent in writing.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the
amounts and disclosures in the financial statements
suff icient to give reasonable assurance that the
f ina ncial s t ate me nt s a r e fr ee fr om mate r ial
misstatement, whether caused by fraud or error. This
includes an assessment of: whether the accounting
policies are appropriate to the Group’s circumstances
and have been consistently applied and adequately
disclosed ; t he r ea sona ble ness of signif ic a nt
accounting estimates made by the directors; and the
overall presentation of the financial statements. In
addition, we read all the financial and non-financial
information in the annual report to identify material
inconsistencies with the audited financial statements.
If we become aware of any apparent material
misstatements or inconsistencies we consider the
implications for our report.
Opinion on financial statements
In our opinion the Group financial statements:
• give a true and fair view of the state of the
Group’s affairs as at 31 December 2012 and of its
loss and cash flows for the year then ended;
• have been properly prepared in accordance with
IFRSs as adopted by the European Union; and
• have been prepared in accordance with the
requirements of the Companies Act 2006.
Opinion on other matter prescribed by the
Companies Act 2006
In our opinion the information given in the Directors’
Report for the financial year for which the group
financial statements are prepared is consistent with
the Group financial statements.
Matters on which we are required to report by
exception
We have nothing to repor t in respect of the
following matters where the Companies Act 2006
requires us to report to you if, in our opinion:
• cer tain disclosures of directors’ remuneration
specified by law are not made; or
• we have not received all the information and
explanations we require for our audit.
Other matter
We have repor ted separ ately on the parent
company financial statements of Cello Group plc for
the year ended 31 December 2012.
David Snell (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
12 March 2013
27
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2012
Notes
Year ended
31 December 2012
£’000
Year ended
31 December 2011
£’000
Continuing operations
Revenue
Cost of sales
2
135,141
(70,046)
127,714
(65,910)
Gross profit
2
65,095
61,804
Administration expenses
4
(63,079)
(59,775)
Operating profit
2
2,016
2,029
Finance income
Finance costs
3
3
Profit on continuing operations before taxation
Taxation
9
Profit/(loss) on continuing operations after taxation
76
(712)
86
(885)
1,380
1,230
(1,224)
(1,564)
156
(334)
(516)
64
Loss for the year
(360)
(270)
Attributable to:
Owners of the parent
Non-controlling interests
(386)
26
(587)
317
(360)
(270)
(Loss)/profit from discontinued operations
10
Notes
Year ended
31 December 2012
Year ended
31 December 2011
From continuing operations
12
0.16 p
(0.90)p
From discontinued operations
12
(0.65)p
0.09 p
Total basic loss per share
12
(0.49)p
(0.81)p
From continuing operations
12
0.16 p
(0.90)p
From discontinued operations
12
(0.65)p
0.08 p
Total diluted loss per share
12
(0.49)p
(0.81)p
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
28
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2012
Year ended
31 December 2012
£’000
Year ended
31 December 2011
£’000
Loss for the year
(360)
(270)
Other comprehensive income:
Exchange differences on translation of foreign operations
(287)
208
Total comprehensive income for the year
(647)
(62)
Total comprehensive income attributable to:
Owners of the parent
Non-controlling interest
(673)
26
(379)
317
Total comprehensive income for the year
(647)
(62)
Total comprehensive income attributable to owners of the parent arises:
From continuing operations
From discontinued operations
(164)
(509)
(437)
58
Total comprehensive income attributable to owners of the parent
(673)
(379)
29
CONSOLIDATED BAL ANCE SHEET
31 DECEMBER 2012
Notes
31 December 2012
£’000
31 December 2011
£’000
13
14
15
24
71,028
1,790
2,289
463
73,823
2,373
2,176
577
75,570
78,949
29,935
4,148
29,131
4,170
34,083
33,301
(29,717)
(582)
(498)
(108)
(23)
(5)
(29,968)
(1,190)
(959)
(2,268)
(39)
(55)
(30,933)
(34,479)
3,150
(1,178)
78,720
77,771
(12,320)
(280)
(26)
(498)
(10,806)
–
(43)
(799)
(13,124)
(11,648)
65,596
66,123
8,226
18,188
28,228
50
10,636
343
(124)
7,853
18,104
28,742
50
10,389
209
163
Equity attributable to owners of the parent
Non-controlling interests
65,547
49
65,510
613
Total equity
65,596
66,123
Goodwill
Intangible assets
Property, plant and equipment
Deferred tax assets
Non-current assets
Trade and other receivables
Cash and cash equivalents
17
18
Current assets
Trade and other payables
Current tax liabilities
Borrowings
Provisions
Obligations under finance leases
Derivative financial instruments
19
20
21
22
23
Current liabilities
Net current assets/(liabilities)
Total assets less current liabilities
Borrowings
Provisions
Obligations under finance leases
Deferred tax liabilities
20
21
22
24
Non-current liabilities
Net assets
Equity
Share capital
Share premium
Merger reserve
Capital redemption reserve
Retained earnings
Share-based payment reserve
Foreign currency reserve
25
The financial statements on pages 28 to 70 were approved by the Board of Directors on 12 March 2013 and
signed on its behalf by:
Mark Scott
Director
Mark Bentley Director
30
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2012
Notes
Year ended
31 December 2012
£’000
Year ended
31 December 2011
£’000
Net cash generated from operating activities before taxation 27
6,835
7,024
(1,874)
(1,266)
4,961
5,758
26
(1,432)
75
(358)
(2,037)
22
(975)
25
(38)
(2,767)
(3,726)
(3,733)
–
(1,386)
(3,800)
(461)
5,500
(50)
(911)
2,541
(709)
(9,494)
(1,430)
11,300
(61)
(704)
(1,108)
1,443
Tax paid
Net cash generated from operating activities after taxation
Investing activities
Interest received
Purchase of property, plant and equipment
Sale of property, plant and equipment
Expenditure on intangible assets
Purchase of subsidiary undertakings
14
Net cash used in investing activities
Financing activities
Proceeds from issuance of shares
Dividends paid to equity holders of the parent
Repayment of borrowings
Repayment of loan notes
Drawdown of borrowings
Capital element of finance lease payments
Interest paid
11
Net cash (used)/generated in financing activities
Net increase in cash and cash equivalents
127
Exchange losses on cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at end of the year
(149)
4,170
18
4,148
3,468
(95)
797
4,170
31
CONSOLIDATED STATEMENT OF CHANGES IN EQUIT Y
FOR THE YEAR ENDED 31 DECEMBER 2012
Capital
Merger redemption
reserve
reserve
£’000
£’000
Share
capital
£’000
Share
premium
£’000
6,164
15,738
26,741
50
–
–
–
–
Currency translation
–
–
–
–
Total comprehensive income
for the year
–
–
–
–
At 1 January 2011
Retained
earnings
£’000
Share-based
payment
reserve
£’000
9,187
112
Total
Foreign attributable
currency
to the
exchange
owners of
reserve the parent
£’000
£’000
(45)
57,947
Noncontrolling
interest
£’000
Total
equity
£’000
296 58,243
Comprehensive income:
Loss for the year
(587)
–
–
(587)
–
208
208
–
208
(379)
317
(270)
Other comprehensive income:
–
(587)
–
317
208
(62)
Transactions with owners:
Shares issued (note 25)
1,689
2,366
4,500
–
–
–
–
8,555
–
8,555
Credit for share-based incentives
–
–
–
–
–
97
–
97
–
97
Deferred tax on share-based payments
recognised directly in equity
–
–
–
–
(1)
–
–
(1)
–
(1)
Transfer between reserves in respect
of impairment
–
–
–
–
–
–
–
Dividends (note 11)
–
–
–
–
–
–
Total transactions with owners
1,689
2,366
2,001
–
1,789
97
–
7,942
As at 31 December 2011
7,853
18,104
28,742
50
10,389
209
163
65,510
–
–
–
–
–
–
Currency translation
–
–
–
–
Total comprehensive income
for the year
–
–
–
–
(2,499)
–
2,499
(709)
(709)
–
–
(709)
7,942
613 66,123
Comprehensive income:
Loss for the year
(386)
(386)
26
(360)
Other comprehensive income:
–
(386)
–
(287)
(287)
–
(287)
–
(287)
(673)
26
(647)
Transactions with owners:
Shares issued (note 25)
373
84
898
–
–
–
–
1,355
–
1,355
Credit for share-based incentives
–
–
–
–
–
134
–
134
–
134
Deferred tax on share-based payments
recognised directly in equity
–
–
–
–
17
–
–
17
–
17
Changes in non-controlling interests
in shareholdings
–
–
–
–
590
–
–
590
Transfer between reserves in respect
of impairment
–
–
–
1,412
–
–
–
Dividends (note 11)
–
–
–
(1,386)
–
–
373
84
–
8,226
18,188
Total transactions with owners
As at 31 December 2012
32
(1,412)
–
(514)
28,228
–
633
134
50
10,636
343
(124)
(1,386)
710
65,547
(590)
–
–
(590)
–
–
(1,386)
120
49 65,596
CONSOLIDATED FINANCIAL STATEMENTS
ACCOUNTING POLICIES
General Information
Cello Group plc and its subsidiaries (the “Group”)
provides market research, consulting and direct
marketing services.
Cello Group plc is incorporated in England and
Wales under the Companies Act 1985 and is
domiciled in the United Kingdom. The company
is a public limited company, which is listed on
the Alternative Investment Market (“AIM”) of
the London Stock Exchange. The address of the
Company’s registered office is 11-13 Charterhouse
Buildings, London, EC1M 7AP.
The consolidated financial statements are presented
in UK sterling, which is also the functional currency
of the parent company.
The following new and revised standards and
interpretations have been adopted for the financial
year beginning 1 January 2012 but do not have a
material impact on the Group:
• IFRS 1 (amendment) First-time adoption – fixed
dates and hyperinflation
• IFRS 7 (amendments) Financial instruments :
disclosures – disclosures on transfers of assets
• IAS 12 (amendment) Income taxes – deferred tax
on investment property
A number of new standards and amendments to
standards and interpretations are effective for annual
periods beginning after 1 January 2012, and have
not been applied in preparing these consolidated
financial statements. None of these is expected to
have a significant effect on the consolidated financial
statements of the Group, although the full impact is
being assessed by management.
Significant Accounting Policies
(1) Basis of Preparation
The consolidated f inancial statements of Cello
Group plc have been prepared in accordance
with International Financial Repor ting Standards
as adopted by the European Union ( “IFRSs” ),
IFRIC interpretations and the Companies Act 2006
applicable to companies repor ting under IFRSs.
The consolidated financial statements have been
prepared under the historical cost convention, as
modified by the revaluation of financial assets and
financial liabilities (including derivative instruments)
at fair value through profit or loss.
The Group’s business activities, performance and
position are set out in the Chairman’s Statement
on pages 2 to 7 and an assessment of the risks and
uncertainties is set out in the Directors’ Report on
page 18.
During the year the Group generated a prof it
before tax on continuing activities of £1.4m and
excluding non-recurring restructuring costs and
other non-headline charges the Group generated a
profit before tax of £7.0m.
The Group meets its day-to-day working capital
requirements through its bank facilities. The Group’s
bank facilities consist of a £4.0m overdraft facility and
a £25.0m revolving credit facility which is committed
to March 2016. £12.7m of the revolving credit facility
is undrawn at 31 December 2012 and the Groups
forecasts and projections show that the Group is able
to operate within the level of its current facilities.
Af ter reviewing the Group’s per formance and
forecast future cash flows, the directors consider
the Group has adequate resources to continue in
operational existence for the foreseeable future.
The Group therefore continues to adopt the going
concern basis in preparing the Group’s financial
statements.
(2) Basis of Consolidation
The Group’s financial statements consolidate the
financial statements of the Company and all of its
subsidiary under takings. Subsidiaries are entities
controlled by the Group. Control is achieved
when the Group has the power to govern the
financial and operating policies of an entity which
generally accompany a shareholding of more than
one half of the voting rights. The existence and
effect of potential voting rights that are currently
exercisable or conver tible are considered when
assessing whether the Group controls another entity.
33
CONSOLIDATED FINANCIAL STATEMENTS
ACCOUNTING POLICIES
Subsidiaries are fully consolidated from the date on
which control is transferred to the Group and are
de-consolidated from the date that control ceases.
The Group uses the purchase method of accounting
to account for the acquisition of subsidiaries.
Consideration is measured as the fair value of
the assets given, equity instruments issued and
liabilities incurred or assumed at the date of
exchange. Identifiable assets and liabilities acquired
and contingent liabilities assumed in a business
combination are measured initially at their fair
values at the acquisition date, irrespective of the
extent of any non-controlling interest. The excess
of the cost of acquisition over the fair value of the
Group’s share of the identifiable net assets acquired
is recorded as goodwill. Acquisition related costs
are expensed as incurred.
Inter-company transactions, balances and unrealised
gains are eliminated on consolidation. Accounting
policies of subsidiaries have been changed where
necessary to ensure consistency with the policies
adopted by the Group.
The Group treats transactions with non-controlling
interests as transactions with equity owners. For
purchases of non-controlling interests, the difference
between any consideration paid and the relevant
share acquired of the carrying value of net assets of
the subsidiary is recorded in equity. Gains and losses
of disposal to non-controlling interests are also
recorded in equity.
(3) Foreign Currencies
Sterling is the functional currency of the Company
and the presentation currency of the Group. The
functional currency of subsidiaries is the local
currency of the primary economic environment in
which the entity operates.
Foreign currency transactions are translated into
the functional currency using the exchange rate
prevailing at the date of the transaction. Foreign
exchange gains or losses on monetary assets and
liabilities denominated in foreign currencies resulting
from the settlement of such transactions and from
the translation to the rate prevailing at the year end
34
are recognised in the income statement.
The f inancial statements of subsidiaries whose
functional currency is different to the presentation
currency of the Group are translated into the
present ation cur rency of the Group on
consolidation. Assets and liabilities are translated
at the exchange rate prevailing at the balance sheet
date. Income and expenses are translated at the
average exchange rate for the year, unless exchange
rates fluctuate significantly during the year, in which
case the exchange rates at the transaction date are
used. Exchange differences arising on consolidation
are recognised in other comprehensive income
and the cumulative effect of these as a separate
component in equity.
(4) Revenue, Cost of Sales and Revenue Recognition
Revenue compr ises the fair value of the
consideration received or receivable from services,
provided by the Group in the ordinar y course
of the Group’s activities. Ser vices include fees,
commissions, rechargeable expenses and sales of
materials provided by the Group. Revenue is shown
net of Value Added Tax and discounts.
Revenue derived from fees is recognised as contract
activity progresses, in accordance with the terms
of the contractual agreement and the stage of
completion of the work. Where recorded revenue
exceeds amounts invoiced to clients, the excess is
classified as accrued income and where recorded
revenue is less than amounts invoiced to clients, the
difference is classified as deferred income.
Revenue derived from retainers is recognised evenly
over the contract period.
Revenue derived from commissions, rechargeable
expenses and sale of materials is recognised when
the risk and rewards have been transferred to the
client in line with the individual contract.
Cost of sales include amounts payable to external
suppliers where they are retained at the Group’s
discretion to perform part of a specific client project
or service where the Group has full exposure to
the benefits and risks of the contract with the client.
Cost of sales does not include direct labour costs.
CONSOLIDATED FINANCIAL STATEMENTS
ACCOUNTING POLICIES
(5) Pension Contributions
T h e G r o u p o p e r a te s d ef i n e d co n t r i b u t io n
pension schemes and contributes to the personal
pension schemes of cer tain employees or to a
Group personal pension plan. The assets of the
schemes are held separately from those of the
Group in independently administered funds. The
amount charged against prof its represents the
contributions payable to the schemes in respect of
the accounting period.
(6) Share-based Payments
The Group has applied the requirements of IFRS
2 Share-based payment to both cash-settled and
equity-settled share-based employee compensation
schemes.
This standard has been applied to various types
of share-based payments as follows:
i. Share options
Certain employees receive remuneration in the
form of share options. The fair value of the share
options granted is measured at the date of grant
and expensed to the income statement over the
appropriate vesting period, with a corresponding
adjustment to equity.
The fair value of the share options takes
into account market vesting conditions and
non-vesting conditions. Non-market vesting
conditions are included in assumptions of the
number of options expected to vest. At the
end of each reporting period the Group revises
its estimate of the number of share options
expected to vest and recognises the impact of
the revisions to previous estimates in the income
statement, with a corresponding adjustment
to equity.
ii. Acquisition related employee remuneration
expenses
In accordance with IFRS 3 (revised) Business
combinations and IFRS 2 Share-based payment,
cer tain payments to employees in respect
of acquisition arrangements are treated as
remuneration within the income statement.
These payments are typically payable in cash or
shares at the option of the Group so are treated
as cash-settled share-based payments. The
amount expected to be payable is expensed
in the income statement over the appropriate
period, with a corresponding adjustment made
to amounts payable in respect of acquisitions.
(7) Headline Measures
The Group believes that reporting non-GAAP or
headline measures provides a useful comparison
of business performance and this reflects the way
the business is reported internally and controlled.
Accordingly headline measures of oper ating
profi t, finance income, finance costs, profi t before
taxation and earnings per share exclude, where
applicable, restructuring costs, amor tisation of
intangible assets, impairment charges, acquisition
accounting adjustments, star t-up losses, share
option charges and fair value gains and losses on
derivative financial instruments. These are items
that, in the opinion of the directors, are required
to be disclosed separately, by virtue of their size
or incidence, to enable a full understanding of the
Group’s financial performance.
A reconciliation between repor ted and headline
prof it before taxation is presented in note 1.
In addition to this, a reconciliation between reported
and headline operating profi t is presented in note
2, a reconciliation between reported and headline
finance income and costs is presented in note 3
and a reconciliation between reported and headline
earnings per share is presented in note 12. Headline
measures in this report are not defined terms under
IFRSs and may not be comparable with similarly
titled measures reported by other companies.
(8) Segment Reporting
Operating segments are repor ted in a manner
consistent with the internal repor ting provided
to the chief operating decision maker. The chief
operating decision maker, which is responsible for
allocating resources and assessing performance of
the operating segments, has been identified as the
Board of directors.
35
CONSOLIDATED FINANCIAL STATEMENTS
ACCOUNTING POLICIES
(9) Discontinued Operations
A discontinued operation is a component of the
Group that has been disposed of or closed. These
operations represent a separate line of business
or geographical area of operations and can be
clearly distinguished operationally and for financial
reporting purposes from the rest of the Group.
(10) Goodwill
Goodwill represents the excess of consideration
over the fair value of the Group’s share of the
identif iable net a sset s acquir ed at the date
of acquisition. Goodwill is carried at cost less
accumulated impairment losses. Impairment losses
are recognised in the income statement and cannot
subsequently be reversed.
(12) Internally Generated Intangible Assets –
Research and Development Expenditure
Goodwill is allocated to cash-generating units for
the purposes of impairment testing. The allocation
is made to those cash-generating units that are
expected to benefit from the business combination
in which the goodwill arose.
Expenditure on research activities is recognised
as an expense in the period in which it is incurred.
The carr ying value of goodwill for each cashgenerating unit is reviewed annually for impairment,
or more frequently if the events or changes in
circumstances indicate a potential impairment.
An impairment loss is recognised for the amount
by which the assets carrying amount exceeds its
recoverable amount. The recoverable amount is the
higher of an assets fair value less costs to sell and its
value-in-use.
i. an asset is created that can be identified (such as
software or a new process);
(11) Intangible Assets Acquired as Part of a Business
Combination
In accordance with IFRS 3 (revised) Business
combinations, intangible assets acquired in a
business combination are recognised at fair value
at the acquisition date. Identified intangible assets
acquired as par t of a business combination are
client contracts and licences. These intangible assets
have a finite useful economic life and are carried at
cost less accumulated amortisation. Amortisation
is calculated using the straight line method over
the expected life of the asset, which vary from
3 months to 8 years.
36
Intangible assets acquired as par t of a business
combination are reviewed for impairment whenever
events or changes in circumstances indicate that
the carrying value may not be fully recoverable.
An impairment loss is recognised for the amount
by which the assets carrying amount exceeds its
recoverable amount. The recoverable amount
is the higher of an assets fair value less costs to
sell and its value-in-use. Intangible assets acquired
as par t of a business combination which have
suffered an impairment are reviewed for possible
reversal of the impairment at each reporting date.
Impairment losses and reversal of impairment losses
are recognised in the income statement.
An internally generated intangible asset arising from
the Group’s development expenditure is recognised
only when the following conditions are met:
ii. it is probable that the asset created will generate
future economic benefit;
iii. the development cost of the asset can be
measured reliably;
iv. there is the availability of adequate technical,
financial or other resources and an intention to
complete the development and to use or sell the
development.
Internally generated assets are carried at cost
less accumulated amor tisation. Amor tisation is
calculated using the straight line method over the
expected life of the asset. The expected life of
internally generated intangible assets are between
3 and 5 years. Where no internally generated
intangible asset can be recognised, the development
expenditure is recognised as an expense in the
period in which it is incurred.
Internally generated intangible assets are reviewed
for impairment whenever events or changes in
circumstances indicate that the carrying value may
CONSOLIDATED FINANCIAL STATEMENTS
ACCOUNTING POLICIES
not be fully recoverable. An impairment loss is
recognised for the amount by which the assets
carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an assets
fair value less costs to sell and its value-in-use.
Internally generated intangible assets which have
suffered an impairment are reviewed for possible
reversal of impairment at each reporting date.
(13) Property, Plant and Equipment
Property, plant and equipment is stated at historical
cost less accumulated depreciation. Cost includes
the original purchase price of the asset and the
costs at tributable to bringing the asset to its
working condition for its intended use. Depreciation
is provided at rates calculated to write off the cost,
less estimated residual value, of each asset, over
their estimated useful economic lives as follows:
Leasehold
improvements
Over the remaining term
of the lease
Motor vehicles
25% pa. straight line
Computer equipment
33% pa. straight line
Fixtures, fittings and
office equipment
25% pa. straight line
Proper ty, plant and equipment are reviewed
for impairment whenever events or changes in
circumstances indicate that the carrying amount
may not be recoverable. Any property, plant and
equipment that has suffered an impairment, is
reviewed for possible reversal of the impairment
at each reporting date.
(14) Current and Deferred Taxation
Tax on the profit or loss for the year comprises
current and deferred tax. Tax is recognised in the
income statement, except to the extent that it
relates to items recognised in other comprehensive
income or directly in equity.
Current tax is calculated on the basis of the tax laws
enacted or substantively enacted at the balance
sheet date. Management periodically evaluates
positions taken in tax returns with respect to
situations in which the applicable tax regulation is
subject to interpretation. It establishes provisions
where appropr iate on the basis of amounts
expected to be paid to the tax authorities.
Deferred tax is income tax recognised, using the
liability method, on temporary differences arising
between the tax bases of assets and liabilities and
their carrying value in the consolidated financial
statements. However, deferred tax liabilities are not
recognised if they arise from the initial recognition
of goodwill nor from the initial recognition of an
asset or liability, other than resulting from a business
combination that does not affect the accounting
profit or loss or the taxable profit or loss.
Deferred tax assets are only recognised to the
extent that it is probable that they can be utilised
against future taxable profits.
Deferred tax is calculated at the tax rates that are
enacted or substantially enacted and expected
to apply in the period when the liability is settled or
the asset is realised.
Deferred tax assets and liabilities are offset when
there is a legally enforceable right to offset current
tax assets and liabilities and when the deferred tax
assets and liabilities relate to income taxes levied
by the same tax authority on either the taxable
entity or different taxable entities where there is an
intention to settle the balances on a net basis.
(15) Leasing and Hire Purchase Commitments
When the Group enters into a lease which entails
taking substantially all the risks and rewards of
ownership of an asset, the lease is treated as a
finance lease or similar hire purchase contract.
The asset is recorded at fair value (or present
value of minimum lease payments if lower) in the
balance sheet as proper ty, plant and equipment
and is depreciated over the estimated useful life
or the term of the lease, whichever is shor ter.
Future instalments under such leases, net of finance
charges, are included as a liability. Rentals payable
are appor tioned between the finance element,
which is charged to the income statement, and
the capital element which reduces the outstanding
obligation for future instalments.
All other leases are treated as operating leases and
37
CONSOLIDATED FINANCIAL STATEMENTS
ACCOUNTING POLICIES
rentals payable are charged to the income statement
on a straight line basis over the lease term.
(16) Provisions
Provisions are recognised when the Group has a
present obligation (legal or constructive) as a result
of a past event, it is probable that an outflow of
resources will be required to settle this obligation
and a reliable estimate can be made of the amount
of the obligation. Expected future cash flows to
settle provisions are discounted to present value.
Provisions for contingent deferred consideration
represent the directors best estimate of amounts
expected to be payable on acquisitions before 1 July
2009 and accounted for under IFRS 3 Business
combinations (as revised Januar y 20 08) . The
provision is discounted to present value at the risk
free rate at the acquisition date.
Provisions for restructuring costs relate to onerous
lease costs and redundancy costs resulting from the
restructuring of operations.
(17) Financial Instruments
Financial assets and financial liabilities are recognised
on the Group’s balance sheet when the Group has
become a party to the contractual provisions of the
instrument.
i. Trade receivables
Trade receivables are classified as loans and
receivables and are initially recognised at fair
value and subsequently measured at amortised
cos t in accordance with IAS 39 Financial
instruments: Recognition and measurement.
A provision for impairment is made where there
is objective evidence (including customers with
financial difficulties or in default on payments)
that amounts will not be recovered in accordance
with original terms of the agreement. A provision
for impairment is established when the carrying
value of the receivable exceeds the present
value of the future cash flow discounted using
the original effective interest rate. The carrying
value of the receivable is reduced through the
use of an allowance account and any impairment
38
loss is recognised in the income statement.
ii. Cash and cash equivalents
Cash and cash equivalents comprise cash in
hand and at bank and other short-term deposits
held by the Group with original maturities of less
than three months.
iii. Financial liabilities and equity
A financial liability is a contractual obligation
to deliver cash or another financial instrument.
Financial liabilities and equity instruments are
classif ied according to the substance of the
contractual arrangements entered into. An
equity instrument is any contract that evidences
a residual interest in the assets of the Group
after deducting all of its liabilities.
iv. Bank borrowings
Interest bearing bank loans and overdraf ts
are recorded initially at their fair value, net of
direct transaction costs. Such instruments are
subsequently carried at their amor tised cost
and finance charges, including premiums payable
on settlement or redemption, are recognised
in the income statement over the term of the
instrument using an effective rate of interest.
v. Trade payables
Trade payables are initially recognised at fair
value and subsequently measured at amortised
cost.
vi. Derivative f inancial instruments and hedge
accounting
The Group’s activities expose the entity primarily
to foreign currency and interest rate risk. The
Group uses interest rate swap contracts to
hedge interest rate exposures. The Group
does not use derivative financial instruments for
speculative purposes.
The interest rate swap contracts do not meet the
requirements for hedge accounting so the contracts
are initially recognised at fair value on the date
the contract is entered into and subsequently remeasured at their fair value. Changes in the fair
value are recorded in the income statement.
CONSOLIDATED FINANCIAL STATEMENTS
ACCOUNTING POLICIES
(18) Share Capital
employee remuneration.
Ordinary Shares are classified as equity.
The Group has estimated the value of future
amounts payable in respect of acquisitions. The
estimate is based on management’s estimates
of the relevant entities future per formance.
If these estimates change in the future as
the earn out progresses, the amount of the
provision will vary. Any changes to the carrying
value of the provision are recognised in the
income statement.
Incremental costs directly attributable to the issue
of new ordinary shares are shown in equity as a
deduction, net of tax, from the proceeds.
W h e r e a ny G r o u p co m p a ny p u r cha s e s t h e
company’s equity share capital (treasury shares), the
consideration paid, including any directly attributable
incremental costs, net of tax, is deducted from equity
until the shares are cancelled or revised. Where such
shares are reissued, any consideration received, net
of any direct attributable incremental costs and
related income tax effects, are included in equity.
(19) Accounting Estimates and Judgements
The Group makes es timates and judgements
concerning the application the Group’s accounting
policies and concerning the future. The resulting
estimates may, by definition, vary from the actual
results. Estimates are based on historical experience
and various other assumptions that management
and the Board of directors believe are reasonable.
The directors consider the critical accounting
estimates and judgements used in the f inancial
statements and concluded that the main areas of
judgements are:
i. Revenue recognition policies in respect of
contracts which straddle the year end.
The Group is required to make an estimate
of the project completion levels in respect of
contracts which straddle the year end for income
recognition purposes. Estimates are based on
expected total costs and revenues from each
contract. This involves a level of judgement and
therefore differences may arise between the
actual and estimated result. Where immaterial
differences arise they are recognised in the
income statement for the following repor ting
period. Any material changes to these estimates
would affect revenue recognised in the financial
statements and the level of deferred or accrued
income on the balance sheet.
ii. Contingent deferred consideration payments in
respect of acquisitions and acquisition related
As par t of a typical acquisition an amount is
also payable to the employees of the acquired
company. These acquisition related employee
remuneration costs are calculated using the
same estimates of the relevant entities future
per formance as the deferred consideration
payable. If these estimates change in the future,
as the earn out progresses, the amount of the
employee liability, which is recognised over the
earn out period, will vary. Any changes to the
carrying value of these liabilities are recognised
in the income statement.
iii. Valuation and amortisation period of separately
identifiable intangible assets on acquisitions.
The Group is required to value the separately
identifiable intangible assets acquired as part of
a business combination. In order to value some
of these intangible assets, the Group must make
assumptions as to future cash flows derived
from these costs and estimate the expected
lives of these assets. Changes to these estimates
would affect the resulting valuation of goodwill
and the amortisation charge recognised in the
financial statements.
iv. Impairment of goodwill.
T h e G r o u p t e s t s g o o d w i l l a n n u a l l y fo r
impairment, in accordance with the Group’s
accounting policy. The recoverable amount
is based on value-in-use calculations, which
requires estimates of future cash flows and the
discount rate to apply in order to calculate the
present values of these cash flows. The estimates
used and sensitivity of these assumptions is
disclosed in note 13.
39
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
1. Reconciliation of Profit on Continuing Operations Before Taxation to Headline
Profit Before Taxation
Notes
Profit on continuing operations before taxation
Restructuring costs
Start-up losses
Acquisition costs
Amortisation of intangible assets
Acquisition related employee remuneration expense
Share option charges
Impairment of goodwill
Finance cost of deferred consideration
Fair value gain on derivative financial instruments
Facility fees written off
4
7
4
14
4
4
13
3
3
3
Headline profit before taxation
Headline profit before taxation is made up as follows:
Headline operating profit
Headline finance income
Headline finance costs
2
3
3
Year ended
31 December 2012
£’000
Year ended
31 December 2011
£’000
1,380
1,328
787
–
876
82
134
2,497
–
(50)
–
1,230
928
163
211
1,198
631
97
2,499
58
(64)
111
7,034
7,062
7,720
26
(712)
7,756
22
(716)
7,034
7,062
2. Segmental Information
For management purposes, the Group is organised into two operating groups; Cello Health and Cello
Consumer. These groups are the basis on which the Group reports internally to the plc’s board of directors,
who have been identified as the chief operating decision makers.
During the year the Group has changed its operating segments, in line with the way the Group is managed
and reported to the chief operating decision maker. Prior period segmental information has been represented
in line with these new operating segments.
The principal activities of the operating segments are as follows:
Cello Health
The Cello Health Division provides market research, consulting and communications services principally
to the Group’s pharmaceutical and healthcare clients.
Cello Consumer
The Cello Health Division provides market research and direct communications services principally to the
Group’s consumer facing clients.
Revenues derived from the Group’s largest client are less than 10% of the Group’s total revenue. Revenue
derived from the largest client in each operating segment also represents less than 10% of external revenue
in each segment.
40
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
2. Segmental Information
continued
Sales between segments are carried out at arms-length. The revenue from external parties reported to the
chief operating decision maker is measured in a manner consistent with that in the income statement.
Consolidation and
Unallocated
£’000
Cello Health
£’000
Cello Consumer
£’000
Revenue
External sales
Intersegment revenue
46,247
100
87,457
88
–
(188)
133,704
–
Total segmental revenue
46,347
87,545
(188)
133,704
for the year ended 31 December 2012
Start-up revenue
1,437
Total revenue
Gross profit
Segmental gross profit
Group
£’000
135,141
31,322
32,735
–
Start-up gross profit
1,038
Total gross profit
Operating profit
Headline operating profit (segment result)
64,057
65,095
6,506
2,995
(1,781)
Restructuring costs
Start-up losses
Amortisation of intangible assets
Acquisition related employee remuneration expense
Share option charges
Impairment of goodwill
7,720
(1,328)
(787)
(876)
(82)
(134)
(2,497)
Operating profit
2,016
Financing income
Finance costs
76
(712)
Profit before tax on continuing operations
1,380
Other information
Capital expenditure
605
843
1
1,449
Capitalisation of intangible assets
102
256
–
358
Depreciation of property, plant and equipment
391
728
8
1,127
41
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
2. Segmental Information
continued
Consolidation and
Unallocated
£’000
Cello Health
£’000
Cello Consumer
£’000
Revenue
External sales
Intersegment revenue
45,104
260
82,550
63
–
(323)
127,654
–
Total segmental revenue
45,364
82,613
(323)
127,654
for the year ended 31 December 2011
Start-up revenue
60
Total revenue
Gross profit
Segmental gross profit
127,714
29,225
32,553
–
Start-up gross profit
Operating profit
Headline operating profit (segment result)
61,778
26
Total gross profit
61,804
6,100
3,378
(1,722)
7,756
Restructuring costs
Start-up losses
Acquisition costs
Amortisation of intangible assets
Acquisition related employee remuneration expense
Share option charges
Impairment of goodwill
(928)
(163)
(211)
(1,198)
(631)
(97)
(2,499)
Operating profit
2,029
Financing income
Finance costs
86
(885)
Profit before tax on continuing operations
Other information
Capital expenditure
Capitalisation of intangible assets
Depreciation of property, plant and equipment
42
Group
£’000
1,230
273
733
1
1,007
–
38
–
38
374
651
10
1,035
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
2. Segmental Information
continued
The Group’s operations are located in the United Kingdom and the USA.
The following table provides an analysis of the Group’s revenue by geographical market, based on the
location of the client:
Geographical
UK
Rest of Europe
USA
Rest of the World
Year ended
31 December 2012
£’000
Year ended
31 December 2011
£’000
85,159
17,053
26,172
6,757
84,427
21,808
18,822
2,657
135,141
127,714
Year ended
31 December 2012
£’000
Year ended
31 December 2011
£’000
3. Finance Income and Costs
Finance income:
Interest received on bank deposits
26
22
Headline finance income
26
22
Fair value gains on derivative financial instruments
50
64
Total finance income
76
86
Finance costs:
Interest payable on bank loans and overdrafts
Interest payable in respect of finance leases
Finance costs paid on derivative financial instruments
649
6
57
617
9
90
Headline finance costs
712
716
–
–
58
111
712
885
Finance costs on deferred consideration
Facility fee written off
Total finance costs
43
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
4. Loss for the Year
Loss for the year is stated after charging:
Continuing operations
Discontinued operations
Total
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
31 December 31 December 31 December 31 December 31 December 31 December
2012
2011
2012
2011
2012
2011
£’000
£’000
£’000
£’000
£’000
£’00 0
Notes
Headline administration costs:
Staff costs
Operating lease rentals
Depreciation of property,
plant and equipment
Loss on disposal of property,
plant and equipment
Auditors remuneration
Net foreign exchange losses/(gains)
Other property costs
Other administration costs
8
41,816
2,156
40,366
2,120
645
–
1,662
–
42,461
2,156
42,028
2,120
15
1,033
1,017
94
18
1,127
1,035
38
335
83
1,825
9,051
64
289
(15)
1,243
8,938
82
8
5
96
349
–
13
5
86
549
120
343
88
1,921
9,400
64
302
(10)
1,329
9,487
1,328
1,825
–
82
876
2,497
134
928
189
211
631
1,198
2,499
97
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,328
1,825
–
82
876
2,497
134
928
189
211
631
1,198
2,499
97
63,079
59,775
1,279
2,333
64,358
62,108
5
Non-headline administration costs:
Restructuring costs
6
Start-up costs
7
Acquisition costs
Acquisition related employee remuneration 8
Amortisation of intangible assets
14
Impairment of goodwill
13
Share option costs
8
5. Auditors’ Remuneration
Year ended
31 December 2012
£’000
Year ended
31 December 2011
£’000
Fees payable to PricewaterhouseCoopers LLP for:
Audit of Group’s annual report and accounts
Audit of subsidiaries
47
198
38
189
Total audit fees
245
227
Non-audit fees:
Taxation
Interim review
Other services
67
10
21
66
9
–
Total non-audit fees
98
75
343
302
Total auditors’ remuneration
44
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
6. Restructuring Costs
Restructuring costs comprise of cost saving initiatives including severance payments, property and other
contract termination costs. They are included within administration costs and have been separately identified
as a non-headline item because of their size or their nature or because they are non-recurring. In the opinion
of the directors, these costs are required to be separately identified, to enable a full understanding of the
Group’s financial performance.
An analysis of restructuring costs incurred is as follows:
Staff redundancies
Property costs
Other
Total restructuring costs
Year ended
31 December 2012
£’000
Year ended
31 December 2011
£’000
730
598
855
–
–
73
1,328
928
7. Start-up Losses
Start-up losses have been separately identified as a non-headline item because, in the opinion of the
directors, separate disclosure is required to enable a full understanding of the Group’s financial performance.
Start-up losses are defined as the net operating result in the period of the trading activities that relate to new
offices, new products, or new organically started businesses. Activities so defined will cease being separately
identified where, in the opinion of the directors, the activities show evidence of becoming sustainably
profitable or are closed, whichever is earlier. In any event start-up losses will cease being separately identified
after two years from the commencement of the activity.
An analysis of start-up losses incurred is as follows:
Year ended
31 December 2012
£’000
Year ended
31 December 2011
£’000
Revenue
Cost of sales
1,437
(399)
60
(34)
Gross profit
1,038
26
(1,825)
(189)
(787)
(163)
Administration costs
Start-up losses
45
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
8. Staff Costs
The average monthly number of persons (including directors) employed by the Group during the year was
as follows:
Year ended
31 December 2012
Year ended
31 December 2011
296
459
7
273
457
7
762
737
Year ended
31 December 2012
£’000
Year ended
31 December 2011
£’000
Wages and salaries
Social security costs
Other pension costs
37,166
4,135
1,160
36,796
4,140
1,092
Employee costs before non-headline charges
42,461
42,028
82
134
631
97
42,677
42,756
Cello Health
Cello Consumer
Head Office
The aggregate staff costs of these persons were as follows:
Acquisition related employee remuneration expense
Share-based payments – share options
Included in the aggregate staff costs are the following amounts paid to the directors:
Directors’ emoluments
Money purchase pension contributions
682
66
881
77
748
958
Included in the above is £331,000 (2011: £333,000) of emoluments and £38,000 (2011: £37,000) of pension
contributions paid or payable to the highest paid director.
The number of directors to whom retirement benefits accrued under money purchase pension schemes in the
year was 2 (2011: 3).
In addition to the directors’ emoluments above, £77,000 was paid to a former director, who resigned on
31 December 2011, in respect of his notice period. This cost is included within restructuring costs.
46
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
9. Taxation
Year ended
31 December 2012
£’000
Current tax:
Current tax on profits for the year
Adjustment in respect of prior year
1,499
(132)
1,892
(294)
1,367
1,598
Deferred tax:
Origination and reversal of temporary differences
Effect of decrease in tax rate on deferred tax assets
Adjustment in respect of prior year
Tax charge
Year ended
31 December 2011
£’000
(98)
21
(66)
(256)
19
203
(143)
(34)
1,224
1,564
The standard rate of corporation tax in the UK changed from 26% to 24% with effect from 1 April 2012.
Accordingly the Group’s profits from the UK are taxed at an effective rate of 24.5% (2011: 26.5%). A further
rate reduction to 23% from 1 April 2013 has also been substantially enacted and this rate has been applied in
valuing UK deferred tax assets and liabilities. Taxation for other jurisdictions is calculated at the rates prevailing
in the respective jurisdiction.
The charge for the year can be reconciled to the profit per the income statement.
Profit before taxation
Tax at the UK corporation tax rate of 24.5% (2011: 26.5%)
Tax effect of expenses not deductible for tax purposes
Effect of decrease in tax rate on deferred tax assets
Effect of different tax rates of subsidiaries in foreign jurisdiction
Prior year corporation tax adjustment
Prior year deferred tax adjustment
Year ended
31 December 2012
£’000
Year ended
31 December 2011
£’000
1,380
1,230
338
870
21
193
(132)
(66)
1,224
326
996
19
314
(294)
203
1,564
On 5 December 2012, legislation to reduce the main rate of corporation tax in the UK from 23% to 21%,
from 1 April 2014, was announced. This change had not been substantially enacted at the balance sheet date
and is therefore not included in these financial statements.
If applied to the deferred tax balances at 31 December 2012, the 2% reduction in the main rate of corporation
tax would increase the net deferred tax liability provided at the balance sheet date by £40,000.
47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
10. Discontinued Operations
The (loss)/profit from discontinued operations relates to Farm, Magnetic and Leapfrog in America Inc. Farm
was a division of Tangible UK Limited, a wholly owned subsidiary of the Group. Magnetic was a division of
Brightsource limited, a wholly owned subsidiary of the Group. Leapfrog in America Inc is a wholly owned
subsidiary of the Group. The operations of Farm, Magnetic and Leapfrog in America Inc are included as
discontinued operations because their activities ceased during the year.
In accordance with IFRS 5 Non-current assets held for sale and discontinued operations the income
statement for the year ended 31 December 2011 has been re-presented to include income and expenses
of the discontinued operations within (loss)/profit from discontinued operations.
An analysis of the result of discontinued operations is as follows:
Year ended
31 December 2012
£’000
Revenue
Cost of sales
2,703
(2,041)
Gross profit
662
Administration expenses
(1,279)
Pre-tax (loss)/profit of discontinued operations
Year ended
31 December 2011
£’000
5,819
(3,352)
2,467
(2,333)
(617)
134
101
(70)
Post-tax (loss)/profit for the year from discontinued operations
(516)
64
(Loss)/profit for the year from discontinued operations attributable to:
Equity holders of the parent
Non-controlling interest
(516)
–
64
–
(516)
64
Taxation
In accordance with IFRS 5 Non-current assets held for sale and discontinued operations, cash flows from
discontinued operations have been included in the cash flow statement together with cash flows from
continuing operations. Cash flows from discontinued operations are as follows:
Year ended
31 December 2012
£’000
48
Year ended
31 December 2011
£’000
Operating cash flows
Investing cash flows
147
(30)
125
(177)
Total cash flows
117
(52)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
11. Equity Dividends
Date paid
Year ended
31 December 2012
£’000
Year ended
31 December 2011
£’000
8 July 2011
6 January 2012
6 July 2012
–
429
957
709
–
–
1,386
709
The dividends paid in the year were:
Final dividend 2010 – 0.905p per share
Interim dividend 2011 – 0.55p per share
Final dividend 2011 – 1.17p per share
A 2012 interim dividend of 0.58p per ordinary share was paid on 6 January 2013 and a 2012 final dividend
of 1.42p has been proposed for approval at the Annual General Meeting in 2013. In accordance with IAS
10 Events after the reporting date these dividends have not been recognised in the consolidated financial
statements at 31 December 2012.
12. Earnings/(Loss) per Share
Loss attributable to ordinary shareholders
Loss/(profit) from discontinued operations
Year ended
31 December 2012
£’000
Year ended
31 December 2011
£’000
(386)
516
(587)
(64)
Earnings/(loss) attributable to ordinary shareholders
from continuing operations
Non-controlling interests
130
22
(651)
311
Earnings/(loss) from continuing operations
152
(340)
Adjustments to earnings/(loss):
Restructuring costs
Start-up losses
Acquisition costs
Amortisation of intangible assets
Acquisition related employee remuneration expenses
Share-based payments charge
Impairment of goodwill
Finance costs on deferred consideration
Fair value gain on derivative financial instruments
Facility fees written off
Tax thereon
1,328
787
–
876
82
134
2,497
–
(50)
–
(766)
928
163
211
1,198
631
97
2,499
58
(64)
111
(570)
Headline earnings for the year
5,040
4,922
49
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
12. Earnings/(Loss) per Share
continued
2012
Number of shares
2011
Number of shares
Weighted average number of ordinary shares in issue
Less:
Weighted average number of treasury shares
Weighted average number of shares held in employee benefit trusts
80,720,587
74,111,359
(237,000)
(1,367,378)
(237,000)
(1,739,754)
Weighted average number of ordinary shares
79,116,209
72,134,605
1,540,918
5,629,378
80,657,127
77,763,983
3,713,181
89,127
4,097,576
143,885
84,459,435
82,005,444
Dilutive effect of securities:
Deferred consideration shares
Diluted weighted average number of ordinary shares
Further dilutive effect of securities:
Share options
Contingent consideration shares to be issued
Fully diluted weighted average number of ordinary shares
Year ended
31 December 2012
Year ended
31 December 2011
Basic earnings/(loss) per share
From continuing operations
From discontinued operations
Total basic loss per share
0.16 p
(0.65)p
(0.49)p
(0.90)p
0.09 p
(0.81)p
Diluted earnings/(loss) per share
From continuing operations
From discontinued operations
Total diluted loss per share
0.16 p
(0.65)p
(0.49)p
(0.90)p
0.08 p
(0.81)p
In addition to basic and diluted earnings/(loss) per share, headline earnings per share and fully diluted earnings/
(loss) per share, which are non-GAAP measured, have also been presented.
50
Fully diluted earnings/(loss) per share
From continuing operations
From discontinued operations
Total fully diluted loss per share
0.15 p
(0.65)p
(0.49)p
(0.90)p
0.08 p
(0.81)p
Headline earnings per share
Headline basic earnings per share
Headline diluted earnings per share
Headline fully diluted earnings per share
6.37 p
6.25 p
5.97 p
6.82 p
6.33 p
6.00 p
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
12. Earnings/(Loss) per Share
continued
Basic earnings/(loss) per share is calculated by dividing the earnings/(loss) attributable to ordinary
shareholders by the weighted average number of ordinary shares in issue during the year, excluding treasury
shares and shares in employee benefi t trusts, determined in accordance with the provisions of IAS 33
Earnings per share.
Diluted earnings/(loss) per share is calculated by dividing earnings/(loss) attributable to ordinary shareholders
by the weighted average number of ordinary shares in issue during the year adjusted for the potentially
dilutive ordinary shares for which the conditions of issue have substantially been met but not issued at the
end of the year.
The Group’s potentially dilutive shares are shares expected to be issued as deferred consideration on
acquisitions and share options issued but not exercised.
Fully diluted earnings/(loss) per share is calculated by dividing earnings/(loss) attributable to ordinary
shareholders by the weighted average number of shares in issue during the year adjusted for all of the
potentially dilutive ordinary shares expected to be issued in future period whether or not the conditions of
the issue have substantially been met. This measure is presented to show the dilutive effect on earnings per
share of all shares expected to be issued in the future.
Headline earnings per share is calculated using headline earnings for the year, which excludes the effect of
restructuring costs, start-up losses, amortisation of intangibles, impairments charges, acquisition accounting
adjustments, share option charges, fair value gains and losses on derivative financial instruments and other
exceptional costs. The calculation also excludes non-controlling interests over which the Group has exclusive
options to acquire in the future.
13. Goodwill
2012
£’000
2011
£’000
At 1 January
Goodwill arising on acquisitions in the year
Adjustment to fair value of deferred consideration
Impairment of goodwill
Exchange differences
73,823
–
(8)
(2,497)
(290)
71,155
4,687
225
(2,499)
255
At 31 December
71,028
73,823
Goodwill represents the excess of consideration over the fair value of the Group’s share of the net
identifiable assets of the acquired subsidiary at the date of acquisition.
Goodwill arising on acquisition in the year ended 31 December 2011 relates to the Group’s acquisition of
MedErgy HealthGroup Inc. (“MedErgy”).
The adjustment to fair value of deferred consideration relates to the changes in estimate to deferred
consideration payable under earn out arrangements in accordance with the terms of the relevant acquisition
agreements for acquisitions before 1 July 2009 and therefore not accounted for in accordance with the
provisions of IFRS 3 Business combinations (as revised January 2008).
51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
13. Goodwill
continued
Goodwill acquired through business combinations is allocated to cash-generating units (“CGUs”) for
impairment testing. The goodwill balance was allocated to the following CGUs:
2012
£’000
2011
£’000
Insight Research Group
Leapfrog
The Value Engineers
RS Consulting
MSI
2CV
Tangible UK
Face
Opticomm
MedErgy
10,224
–
9,526
4,305
7,666
8,276
22,889
3,442
48
4,652
10,224
3,908
9,526
3,364
7,666
8,276
22,419
3,450
48
4,942
Total
71,028
73,823
During the year ended 31 December 2012, as a result of restructuring initiatives which rationalised the
Group’s management structure, the goodwill allocations changed.
The recoverable amount for each CGU is determined using a value-in-use calculation. This calculation uses
pre-tax cash flow projections derived from 2013 budgets, as approved by management, with an underlying
growth rate of 3.5% per annum in years two to five, representing economic growth and inflation. After year
five a terminal value has been applied using an underlying long term inflation rate of 2.5%. No additional
Cello specific growth has been assumed beyond year one. The pre-tax cash flows are discounted to present
value using the Group’s pre-tax weighted average cost of capital (“WACC”), which was 10.5% for 2012
(2011: 10.8%). This rate was calculated using the Capital Asset Pricing Model with an estimated cost of debt
and equity, with appropriate small company risk factors.
The review performed at 31 December 2012 did not result in an impairment of goodwill for any CGU.
In addition to this review, a review of the Leapfrog CGU was performed prior to the restructuring of
operations. This review resulted in an impairment of goodwill of £2,497,000. The remaining goodwill of
the Leapfrog CGU has been allocated to the Tangible UK CGU and the RS Consulting CGU, in line with
the restructuring.
Sensitivity to changes in assumptions
The value-in-use exceeds the total goodwill value across the Group by £52.3m.
The impairment review of the Group is sensitive to changes in the key assumptions, most notably the pretax discount rate, the terminal growth rate and projected operating cash flows. Reasonable changes to these
assumptions would not result in an impairment to goodwill for any of the Groups CGU’s, with the exception
of the Tangible CGU, where an impairment was recognised in the year ended 31 December 2011.
52
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
13. Goodwill
continued
Variations required to each of the key assumptions, in isolation, for the value-in-use of the Tangible CGU to
equal the carrying value are:
Increase in pre-tax discount rate
Decrease in projected operating cash flows
Decrease in terminal growth rate
0.5%
5.7%
0.5%
The table below shows the impairment charge that would be recognised against the carrying value of
goodwill in the Tangible CGU, with reasonable variations, in isolation, of the key assumptions used in the
value-in-use calculation:
Impairment charge
£’000
1% increase in pre-tax discount rate
10% decrease in projected operating cash flows
1% decrease in terminal growth rate
2,582
1,178
1,275
14. Intangible Assets
Software
development costs
£’000
Client contracts
£’000
Licences
£’000
Total
£’000
Cost
At 1 January 2011
Expenditure on development
On acquisition of subsidiaries
Exchange differences
654
38
–
–
1,280
–
2,348
72
3,209
–
–
–
5,143
38
2,348
72
At 31 December 2011
692
3,700
3,209
7,601
Expenditure on development
Exchange differences
358
–
–
–
358
(65)
At 31 December 2012
–
(65)
1,050
3,635
3,209
7,894
Accumulated amortisation
At 1 January 2011
Charge for the year
226
145
1,280
825
2,524
228
4,030
1,198
At 31 December 2011
371
2,105
2,752
5,228
Charge for the year
167
481
228
876
At 31 December 2012
538
2,586
2,980
6,104
Net book value
At 31 December 2012
512
1,049
229
1,790
At 31 December 2011
321
1,595
457
2,373
At 1 January 2011
428
–
685
1,113
53
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
15. Property, Plant and Equipment
Leasehold
improvements
£’000
Computer
equipment
£’000
Fixtures, fi ttings
and office
equipment
£’000
Motor
vehicles
£’000
Total
£’000
Cost
At 1 January 2011
Additions
On acquisition of subsidiaries
Disposals
Exchange differences
1,824
258
15
(124)
1
3,149
560
85
(214)
5
1,208
153
60
(504)
3
274
36
–
(100)
–
6,455
1,007
160
(942)
9
At 31 December 2011
1,974
3,585
920
210
6,689
Additions
Disposals
Exchange differences
391
(394)
–
427
(486)
(3)
110
(45)
–
1,449
(1,197)
(3)
At 31 December 2012
1,971
3,834
858
275
6,938
2,437
534
(209)
–
762
238
(498)
1
149
60
(90)
–
4,331
1,035
(853)
–
Accumulated depreciation
At 1 January 2011
Charge for the year
Disposals
Exchange differences
983
203
(56)
(1)
521
(272)
–
At 31 December 2011
1,129
2,762
503
119
4,513
Charge for the year
Disposals
Exchange differences
288
(309)
1
541
(258)
7
231
(392)
3
67
(43)
–
1,127
(1,002)
11
At 31 December 2012
1,109
3,052
345
143
4,649
Net book value
At 31 December 2012
862
782
513
132
2,289
At 31 December 2011
845
823
417
91
2,176
At 1 January 2011
841
712
446
125
2,124
The net book value of property, plant and equipment of the Group includes £53,000 (2011: £85,000) of
motor vehicles and £32,000 (2011: £15,000) of fixtures, fittings and office equipment in respect of assets
held under finance leases.
54
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
16. Subsidiaries
Details of the Company’s principal subsidiary undertakings as at 31 December 2012 are as follows:
Country of
incorporation/
principal
operation
Class of share
Proportion
of shares held
2012
Held directly:
2CV Limited
Cello Group Inc
Cello Business Sciences Limited
Chiaros Holdings Limited
Fenix Media Limited
Insight Medical Research Limited
Leapfrog Research and Planning Limited
MedErgy Europe Limited
Opticomm Media Limited
RS Group Limited
Tangible Group Limited
The MSI Consultancy Limited
The Value Engineers Limited
England
USA
England
England
England
England
England
England
England
England
England
England
England
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100%
100%
100%
100%
97%
100%
100%
100%
51%
100%
100%
100%
100%
100%
100%
100%
100%
51%
100%
100%
100%
20%
100%
100%
100%
100%
Held indirectly:
2CV Inc
Blonde Digital Limited
Brightsource Limited
Insight Research Group USA Inc
Labinah Management Training Limited
MedErgy Communications Inc
MedErgy Healthcare Group
MedErgy Marketing Inc
RS Consulting Limited
Scifluent Communications Inc
Stripe PR and Communications Limited
Tangible UK Limited
USA
Scotland
England
USA
England
USA
USA
USA
England
USA
Scotland
Scotland
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
84%
100%
100%
100%
100%
100%
100%
100%
100%
76%
100%
Company name
Proportion
of shares held
2011
During the year ended 31 December 2012 the Group increased its proportion in shares held in Fenix Media
Limited, Opticomm Media Limited, Blonde Digital Limited and Stripe PR and Communications Limited.
These increases were as a result of transactions pursuant to the terms of share purchase agreements in
relation to these companies.
55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
17. Trade and Other Receivables
Trade receivables
Other receivables
Prepayments and accrued income
2012
£’000
2011
£’000
23,840
1,174
4,921
21,566
1,456
6,109
29,935
29,131
The average credit period taken on the provision of services was 53 days (2011: 53 days).
The directors consider that the carrying value of trade and other receivables approximates to fair value.
18. Cash and Cash Equivalents
Cash at bank and in hand
2012
£’000
2011
£’000
4,148
4,170
Cash of £278,000 (2011: £830,000) is maintained in a designated account with The Royal Bank of Scotland
plc as security for the loan notes issued on acquisitions and is therefore not freely available to the Group.
19. Trade and Other Payables
Trade payables
Other taxation and social security costs
Accruals and deferred income
Deferred consideration for acquisitions
Acquisition related employee remuneration liability
Other payables
2012
£’000
2011
£’000
14,744
1,546
12,416
343
75
593
11,728
1,454
14,710
559
927
590
29,717
29,968
The directors consider that the carrying value of trade and other payables approximates to fair value.
56
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
20. Borrowings
Bank loans
Loan notes
The borrowings are repayable as follows:
– on demand or within one year
– within two to five years
2012
£’000
2011
£’000
12,320
498
10,806
959
12,818
11,765
498
12,320
959
10,806
12,818
11,765
Bank loans
The Group has a multi-currency debt facility with the Royal Bank of Scotland plc. This facility consists of a
£25.0m revolving credit facility which is committed to March 2016. The revolving credit facility bears interest
at a variable rate of 1.75% to 2.80% over LIBOR. The average interest rate on the Group’s bank loans in the
year was 3.0% (2011: 3.4%). The debt facility is secured by a debenture held by the Royal Bank of Scotland
plc over the assets of the Group.
At 31 December 2012, the Group has drawn £12.3m (2011: £10.8m) under the revolving credit facility.
Loan notes
Loan notes have been issued as part of the consideration for certain acquisitions. Secured loan notes are
secured on cash deposits and by way of guarantee. Cash deposits provided as security are included within
cash and cash equivalents and amount to £278,000 (2011: £830,000). Loan notes bear interest at the
following rates:
Secured
LIBOR less 2%
LIBOR
2012
£’000
2011
£’000
447
51
880
79
498
959
57
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
21. Provisions
Contingent deferred consideration for acquisitions
Restructuring provision
Current
Non-current
2012
£’000
2011
£’000
–
388
2,268
–
388
2,268
108
280
2,268
–
388
2,268
Contingent deferred
consideration for acquisitions
£’000
Restructuring
provision
£’000
6,415
456
6,871
Adjustments to provisions for additions in prior years
Finance costs on deferred consideration
Utilisation of provisions
225
58
(4,430)
–
–
(456)
225
58
(4,886)
At 31 December 2011
2,268
At 1 January 2011
Additions for the year
Adjustments to provisions in prior years
Utilisation of provisions
At 31 December 2012
–
(8)
(2,260)
–
–
388
–
–
388
Total
£’000
2,268
388
(8)
(2,260)
388
The provision for contingent deferred consideration for acquisitions represents the directors’ best estimate
of the amount expected to be payable in cash (or loan notes) and shares to be issued on acquisitions before
1 July 2009 and accounted for under IFRS 3 Business combinations (as revised January 2008). The provision
is discounted to present value at the risk free rate at the acquisition date.
The restructuring provision relates to redundancy costs and onerous lease costs as a result of restructuring
of operations within the Cello Consumer Division.
58
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
22. Obligations under Finance Leases
A maturity analysis of obligations under finance leases is shown below:
Finance leases which expire:
– within one year
– in more than one year but not more than five years
2012
£’000
2011
£’000
23
26
39
43
49
82
The Group’s policy is to lease certain of its property, plant and equipment under finance leases. The average
lease term is 3 years. The average effective borrowing rate is 10.5% (2011: 9.1%). Interest rates are fixed at
the contract date and all leases are on a fixed repayment basis.
All lease obligations are denominated in sterling.
The fair value of the Group’s obligations approximates to their carrying value.
The Group’s obligations under finance leases are secured by the lessors’ rights over the leased assets.
23. Derivative Financial Instruments
Interest rate swap at fair value
2012
£’000
2011
£’000
5
55
During the year ended 31 December 2012 the Group had an interest rate swap over £3.3m (2011: £5.3m)
of borrowings. This reduced to £1.0m on 31 December 2012 and reduces to £nil on 31 March 2013. The
interest rate swap fixes the LIBOR rate at 2.35%. At 31 December 2012 the fair value of this interest rate
swap is a liability of £5,000 (2011: £55,000). The interest rate swap is included within Tier 2 as defined in
IFRS 7 (Revised) Financial instruments: Disclosures.
59
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
24. Deferred Taxation
An analysis of deferred tax assets and deferred tax liabilities is set out below:
Deferred tax assets
Decelerated capital allowances
Unrelieved share-based payment expense
Unrelieved acquisition related employee remuneration expense
Unrelieved loss on derivative financial instruments
Deferred tax liabilities
Accelerated capital allowances
Temporary difference between the net book value
and the tax value of intangible assets
2012
£’000
2011
£’000
202
85
175
1
203
40
320
14
463
577
(1)
(10)
(497)
(789)
(498)
(799)
(35)
(222)
The movement for the year is analysed as follows:
At 1 January
Income statement
Recognised in equity
Acquired deferred tax balances
Foreign exchange differences
At 31 December
60
2012
£’000
2011
£’000
(222)
143
17
–
27
768
34
(1)
(992)
(31)
(35)
(222)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
25. Share Capital
Authorised number of
10p shares
Allotted, issued and
fully paid number of
10p shares
Share capital
£’000
At 1 January 2011
Movements in the year
84,600,000
15,400,000
61,644,654
16,882,052
6,164
1,689
At 31 December 2011
Movements in the year
100,000,000
–
78,526,706
3,734,799
7,853
373
At 31 December 2012
100,000,000
82,261,505
8,226
The Company has one class of ordinary shares which carry no right to fixed income.
Authorised share capital in the table above represents the number of shares the Company has been given
authority to issue by shareholders, including shares already issued, by way of resolution at the Company’s last
Annual General Meeting.
On 15 March 2011, 5,333,333 ordinary shares of 10p each were issued at a placing price of 52.5p to new and
existing shareholders. The proceeds were used to fund the acquisition of MedErgy.
On 22 March 2011, 5,804,049 ordinary shares of 10p each were issued at the value of 54.4p to the vendors
of MedErgy HealthGroup Inc. pursuant to the terms of the share purchase agreement of that company.
On 11 May 2011, 5,744,670 ordinary shares of 10p each were issued at a value of 49.6p to the vendors of
2CV Limited and The MSI Consultancy Limited pursuant to the terms of the share purchase agreements
of these companies.
On 30 April 2012, 486,219 new ordinary shares of 10p each were issued at a value of 39.7p to vendors
of businesses previously acquired by the Group and certain employees of the Group. These shares were
issued pursuant to the terms of minority share purchases under the share purchase agreements in relation
to Blonde Digital Limited, Stripe PR and Communications Limited and Opticomm Media Limited.
On 23 May 2012, 3,248,580 new ordinary shares of 10p each were issued at 35.8p to vendors of businesses
previously acquired by the Group and certain employees of the Group. These shares were issued pursuant
to the share purchase agreements in relation to Fenix Media Limited (which trades as Face Group) and Red
Kite Consulting Group Limited.
The Group owns 237,000 (2011: 237,000) of its own shares and these shares are held as treasury shares.
The company has the right to re-issue these shares at a later date.
61
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
26. Share Options
The Group has the following share options schemes.
EMI Share Option Scheme and Unapproved Share Option Scheme 2004
In 2004, the Company established an EMI Share Option Scheme (the “EMI Scheme”) and an Unapproved
Share Option Scheme (the “Unapproved Scheme 2004”). 463,266 share options awarded under these
schemes remain outstanding and have vested in full. 300,000 of these share options expire on 1 November
2014 and 163,266 share options expire on 1 June 2015. On 13 March 2006, the Remuneration Committee
agreed that no further awards would be made under these plans. The range of exercise prices of options
outstanding under these schemes is 100.0p to 122.5p being the market value of the shares at the date
of grant of the options.
HM Revenue & Customs Approved Share Option Plan 2009 and the Unapproved Option Plan 2010
On 17 November 2009 the Company established the HM Revenue & Customs Approved Share Option
Plan 2009 (the “Approved Plan 2009”) and on 15 March 2010 established the Unapproved Option Plan 2010
(the “Unapproved Plan 2010”). Under these plans participants are awarded options over fully paid shares
with an exercise price equal to the market value of the shares at the date the awards are granted. The range
of exercise prices of options granted under these schemes is 31.5p to 42.0p. Options are exercisable three
years, but not later than ten years, after the date of grant subject to performance conditions. Performance
conditions are based on Company, Division or Group targets, as appropriate to the participant.
PSP Option Scheme 2010
On 4 June 2010 the Company established a new Performance Share Plan (“PSP”). Under this plan
participants are awarded options over fully paid shares with an exercise price equal to the nominal value
of shares, currently 10p per share. Options are exercisable three years, but not more than ten years, after
grant, subject to performance conditions based on the total shareholder return (“TSR”) of the Group. The
number of awards that ultimately vest depends on where Cello ranks when compared to the TSR of a list
of comparator companies.
The following share options were outstanding under these share option schemes at 31 December 2012 and
31 December 2011
31 December 2012
Weighted
average
Number of share exercise price
(pence)
options
Outstanding at the beginning of the year
Granted during the year
Lapsed during the year
4,560,842
1,526,866
(503,780)
35
25
35
3,649,266
1,494,576
(583,000)
41
31
65
Outstanding at the end of the year
5,583,928
32
4,560,842
35
463,266
108
463,266
108
Exercisable at the end of the year
62
31 December 2011
Weighted
average
Number of exercise price
(pence)
share options
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
26. Share Options continued
The options outstanding at the end of the year under the EMI Scheme and Unapproved Scheme 2004 have
a weighted average remaining life of 2.1 years (2011: 3.0 years) and options issued under the PSP, Approved
Plan 2009 and the Unapproved Plan 2010 have a weighted average remaining life of 8.3 years (2011:
8.4 years).
The Group uses a Black Scholes model to calculate the fair value of options. The key inputs for share options
granted in the year are as follows:
Weighted average share price
Weighted average exercise price
Expected volatility
Expected life
Risk free rate
Dividend yield
2012
2011
34.0p
25.0p
31.3%
10 years
1.57%
5.26%
42.0p
31.0p
27.6%
10 years
3.3%
3.4%
Expected volatility has been determined by calculating the historical volatility of the Group’s share price over
the previous 8 years. The expected life used in the model has been adjusted, based on management’s best
estimates, for the effects of the non-transferability, exercise restrictions and behavioural considerations.
At 31 December 2012, 181,633 options under the EMI Scheme (2011: 181,633) and 281,633 options under
the Unapproved Scheme 2004 (2011: 281,633) had vested. None of the options under the PSP, or Approved
Plan 2010 or the Unapproved Plan 2011 have vested at 31 December 2012 (2011: nil).
The fair value of all options granted in the year was £121,000 (2011: £213,000).
27. Cash Generated from Operations
Year ended
31 December 2012
£’000
Year ended
31 December 2011
£’000
Profit on continuing activities before taxation
1,380
1,230
(Loss)/profit on discontinued operations
Financing income
Finance costs
Depreciation of the property, plant and equipment
Amortisation of intangible assets
Impairment of goodwill
Share-based payment expense
Acquisition related employee remuneration expense
Loss on disposal of property, plant and equipment
Increase in trade and other receivables
Increase/(decrease) in trade and other payables
(617)
(76)
712
1,127
876
2,497
134
82
120
(879)
1,479
134
(86)
885
1,035
1,198
2,499
97
631
64
(324)
(339)
Net cash inflow from operating activities
6,835
7,024
63
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
28. Net Debt
At 1 January
2012
£’000
Cash and cash equivalents
Loan notes
Bank loans
Finance leases
Cash flow
£’000
Foreign
exchange
£’000
Other
changes
£’000
At
31 December
2012
£’000
4,170
(959)
(10,806)
(82)
127
461
(1,700)
50
(149)
–
186
–
–
–
–
(17)
4,148
(498)
(12,320)
(49)
(7,677)
(1,062)
37
(17)
(8,719)
29. Commitments under Operating Leases
The future aggregate minimum lease payments under non-cancellable operating leases are as follows:
No later than one year
Later than one year and no later than five years
Later than five years
64
Land and
buildings
2012
£’000
Land and
buildings
2011
£’000
Other
2012
£’000
Other
2011
£’000
2,116
5,355
925
1,962
5,491
1,247
151
154
–
215
203
–
8,396
8,700
305
418
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
30. Related Party Transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on
consolidation and are not disclosed in this note.
Remuneration of key management personnel
The key management personnel of the Group are considered to be the directors (Executive and NonExecutive). The remuneration paid to the key management personnel is shown below:
Salaries and other short-term benefits
Post-employment benefits
Share-based payments – share options
Year ended
31 December 2012
£’000
Year ended
31 December 2011
£’000
770
66
63
995
77
44
899
1,116
Further information about the remuneration of the directors is provided in the Remuneration Report on
pages 24 to 26, and in note 8 to the consolidated financial statements.
31. Contingent Liabilities
Under the terms of certain acquisition agreements, additional consideration is payable by the Company
contingent on the future financial performance of the acquired entities. The estimated amount of such
contingent consideration is included in Provisions (note 21 to the consolidated financial statements).
32. Post Balance Sheet Events
On 25 January 2013, the Group acquired the entire share capital of Mash Health Limited for an initial
consideration of £0.5m of cash and the issue of 333,332 new ordinary shares of 10p each. Additional
payments of up to £0.9m may be payable to the vendors, subject to performance conditions.
65
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
33. Financial Instruments
The Group’s principal financial instruments comprise bank loans, bank overdrafts, loan notes, finance leases,
deferred consideration for acquisition under IFRS 3 (revised), trade receivables, trade payables and cash.
The main purpose of these financial instruments is to provide finance for the Group operations. The Group
has other financial assets and liabilities which arise directly from operations.
The following table provides an analysis of the Group’s non-derivative financial assets and liabilities
at 31 December 2012 and 31 December 2011:
2012
£’000
2011
£’000
Financial assets:
Cash and cash equivalents
Trade receivables
Other receivables
Accrued income
4,148
23,840
1,174
3,251
4,170
21,566
1,456
2,815
Total financial assets
32,413
30,007
Financial liabilities:
Bank loans
Loan notes
Finance leases
Consideration payable in respect of acquisitions
Trade payables
Accruals
Other payables
12,320
498
49
418
14,744
7,623
593
10,806
959
82
3,754
11,728
8,232
590
Total financial liabilities
36,245
36,151
All non-derivative financial assets are categorised as loans and receivables and all non-derivative financial
liabilities are categorised as other financial liabilities at amortised cost.
The Group enters into derivative financial instruments in the form of interest rate swaps which are disclosed
in note 23. The purpose of these derivative financial instruments is to manage the interest rate risk arising
from its sources of finance. The Group does not hold derivative financial instruments for trading purposes.
Derivative financial instruments are recognised in the balance sheet at fair value. All other financial assets and
liabilities are recognised in the balance sheet at amortised cost.
66
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
33. Financial Instruments
continued
Risk management objectives and policies
The main risks arising from the Group’s financial instruments are interest rate risk, liquidity risk, credit risk
and foreign exchange risk.
Interest rate risk
The Group’s exposure to interest rate risk arises from the Group’s long term debt obligations with floating
and fixed interest rates. Floating rate financial instruments comprise of the Group’s cash and cash equivalents
and borrowings. Fixed rate financial instruments comprise of obligations under finance leases.
£3.6m (2011: £3.8m) of the Group’s borrowings are denominated in US dollars. All of the Group’s other
borrowings and obligations under finance leases are denominated in sterling. Details of the Group’s
borrowings are set out in note 20 and details of the Groups obligations under finance leases are set out in
note 22.
The Group manages interest rate risk with the use of interest rate swaps. Details of the Group’s interest
rate swap arrangement is set out in note 23. At 31 December 2012 approximately 8.2% (2011: 26.0%) of the
Group’s total borrowings are at a fixed rate of interest as a result of this arrangement.
The following table demonstrates the sensitivity to reasonably possible changes in interest rates, with all
other variables held constant, on the Group’s profit before tax and equity:
2012
£’000
2011
£’000
Increase in rates of 100 basis points
Effect on headline profit before tax
Effect on profit before tax and equity
(98)
(95)
(91)
(55)
Decrease in rates of 50 basis points
Effect on headline profit before tax
Effect on profit before tax and equity
49
48
45
28
The difference in the effects on headline profit before tax and reported profit before tax is due to estimated
differences in the fair value of derivative financial instruments.
Liquidity risk
The Group manages liquidity risk by maintaining adequate reserves on its available bank facilities and by
continuously monitoring forecast and actual cash flows.
The Group currently has an agreed committed revolving credit facility (“RCF”) of £25.0m with the Royal
Bank of Scotland plc, which matures on 31 March 2016, as set out in note 20. In addition to the RCF, the
Group has an overdraft facility of £4.0m with the Royal Bank of Scotland plc, which is reviewed on an
annual basis. Both the RCF and the overdraft are available on demand. At 31 December 2012 the Group
had an undrawn facility of £12.7m (2011: £14.2m) on the RCF and had cash and cash equivalents of £4.1m
(2011: £4.2m).
67
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
33. Financial Instruments
continued
The table below summarises the maturity profile of the Group’s non-derivative financial liabilities at
31 December 2012 and 31 December 2011 based on contractual undiscounted payments, including
estimated interest payments where applicable:
Less than 6
months
£’000
Between
6 months and
1 year
£’000
Between
1 and 5 years
£’000
Total
£’000
Bank loans
Loan notes
Finance leases
Consideration payable in respect of acquisitions
Trade payables
Accruals
Other payables
88
498
14
418
14,744
7,623
593
57
–
14
–
–
–
–
12,691
–
26
–
–
–
–
12,836
498
54
418
14,744
7,623
593
Total
23,978
71
12,717
36,766
2011
Less than 6
months
£’000
Between
6 months and
1 year
£’000
Between
1 and 5 years
£’000
Total
£’000
Bank loans
Loan notes
Finance leases
Consideration payable in respect of acquisitions
Trade payables
Accruals
Other payables
91
959
25
3,749
11,728
8,232
590
64
–
24
–
–
–
–
11,221
–
42
–
–
–
–
11,376
959
91
3,749
11,728
8,232
590
Total
25,374
88
11,263
36,725
2012
Credit risk
Credit risk predominately arises from trade receivables.
The Group only trades with recognised creditworthy third parties. Customers who wish to trade on credit
terms are generally subject to credit verification procedures. In addition, trade receivable balances are
monitored on a continuous basis with the result that the Group’s exposure to bad debt is considered limited.
68
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
33. Financial Instruments
continued
The Group considers the maximum exposure to credit risk is as follows:
Trade receivables
Accrued income
2012
£’000
2011
£’000
23,840
3,251
21,566
2,815
27,091
24,381
The following table provides an analysis of trade and other receivables that were past due, but not impaired,
at 31 December 2012 and 31 December 2011. The Group believes that the balances are ultimately
recoverable based on a review of past payment history and the current financial status of customers. There
are no material bad debt provisions at either 31 December 2012 or 31 December 2011.
Up to three months
Up to six months
2012
£’000
2011
£’000
2,209
199
2,081
166
2,408
2,247
The credit risk from other financial instruments arises from default of the counterparty, with a maximum
exposure equal to the carrying value of the asset.
Foreign exchange risk
The Group operates in a number of markets across the world and is exposed to foreign exchange risk
arising from various currency exposures in respect of trade receivables and trade payables, in particular with
respect to the US dollar and the Euro. The Group mitigates its foreign exchange risk with bank loans and
overdrafts denominated in foreign currency under its debt facilities.
The Group also has foreign subsidiaries located in the USA. At 31 December 2012 the net foreign assets
were £6,478,000 (2011: £8,109,000). Differences that arise from the translation of these assets from US
dollar to sterling are recognised in other comprehensive income in the year and the cumulative effect as a
separate component in equity. The Group does not hedge this translation exposure to its equity.
69
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
33. Financial Instruments
continued
The following table demonstrates the Group’s sensitivity to a 10% increase and decrease in sterling against
the US dollar and euro, on the Group’s profi t for the year and on the Group’s equity. This sensitivity
represents management’s assessment of the reasonably possible change in foreign exchange rates.
US Dollar
Strengthening of sterling by 10%
On profit for the year
On equity
Weakening of sterling by 10%
On profit for the year
On equity
Euro
2012
2011
2012
2011
65
(390)
(40)
(515)
(24)
(24)
(111)
(111)
(79)
476
48
630
29
29
135
135
Capital management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going
concern in order to provide returns for shareholders through the optimisation of the debt and equity
balance.
The Group considers its capital to be total equity and net debt. Equity attributable to the owners of the
parent comprises of issued share capital, reserves and retained earnings and is disclosed in the balance sheet
and in the consolidated statement of changes in equity. Net debt comprises short and long term borrowings
(including overdrafts and obligations under finance leases) net of cash and cash equivalents.
The ratio of debt to capital ratio at 31 December 2012 and 31 December 2011 is as follows:
Total debt
Less cash and cash equivalents
Net debt
Total equity
Debt to capital ratio
2012
£’000
2011
£’000
12,867
(4,148)
11,847
(4,170)
8,719
7,677
65,596
66,123
13.3%
11.6%
The Group has various financial covenants in connection with its current bank loans. During the year ended
31 December 2012 the Group was compliant with its covenants.
70
INDEPENDENT AUDITOR’S REPORT – COMPANY
We have audited the parent company financial
statements of Cello Group plc for the year ended
31 December 2012 which comprise the Balance
Sheet, the Accounting Policies and the Notes to
the Company Financial Statements. The financial
reporting framework that has been applied in their
preparation is applicable law and United Kingdom
Accounting Standards (United Kingdom Generally
Accepted Accounting Practice).
Respective responsibilities of directors and auditors
As explained more fully in the Statement of
Directors’ Responsibilities set out page 20 the
directors are responsible for the preparation of the
parent company financial statements and for being
satisfied that they give a true and fair view. Our
responsibility is to audit and express an opinion
on the parent company f inancial statements in
accordance with applicable law and International
Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing
Practices Board’s Ethical Standards for Auditors.
This repor t, including the opinions, has been
prepared for and only for the company’s members
as a body in accordance with Chapter 3 of Part 16 of
the Companies Act 2006 and for no other purpose.
We do not, in giving these opinions, accept or
assume responsibility for any other purpose or to
any other person to whom this report is shown or
into whose hands it may come save where expressly
agreed by our prior consent in writing.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the
amounts and disclosures in the financial statements
suff icient to give reasonable assurance that the
f ina ncial s t ate me nt s a r e fr ee fr om mate r ial
misstatement, whether caused by fraud or error. This
includes an assessment of: whether the accounting
policies are appropriate to the parent company’s
circumstances and have been consistently applied
and adequately disclosed ; the reasonableness
of signif icant accounting estimates made by the
directors; and the overall presentation of the financial
statements. In addition, we read all the financial and
non-financial information in the annual repor t to
identify material inconsistencies with the audited
financial statements. If we become aware of any
apparent material misstatements or inconsistencies
we consider the implications for our report.
Opinion on financial statements
In our opinion the parent company f inancial
statements:
• give a true and fair view of the state of the
company’s affairs as at 31 December 2012;
• have been properly prepared in accordance with
United Kingdom Generally Accepted Accounting
Practice; and
• have been prepared in accordance with the
requirements of the Companies Act 2006.
Opinion on other matter prescribed by the
Companies Act 2006
In our opinion the infor mation given in the
Directors’ Report for the financial year for which
the parent company f inancial statements are
prepared is consistent with the parent company
financial statements.
Matters on which we are required to report by
exception
We have nothing to repor t in respect of the
following matters where the Companies Act 2006
requires us to report to you if, in our opinion:
• adequate accounting records have not been kept
by the parent company, or returns adequate for
our audit have not been received from branches
not visited by us; or
• the parent company financial statements are not
in agreement with the accounting records and
returns; or
• cer tain disclosures of directors’ remuneration
specified by law are not made; or
• we have not received all the information and
explanations we require for our audit.
Other matter
We have reported separately on the Group financial
statements of Cello Group plc for the year ended
31 December 2012.
David Snell (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
12 March 2013
71
COMPANY BAL ANCE SHEET
AT 31 DECEMBER 2012
Fixed assets
Tangible assets
Investments
Current assets
Debtors
Cash at bank and in hand
Creditors: Amounts falling due within one year
Notes
31 December 2012
£’000
31 December 2011
£’000
1
2
3
81,324
10
83,763
81,327
83,773
10,924
754
10,069
830
11,678
10,899
(22,163)
(20,370)
(10,485)
(9,471)
70,842
74,302
(12,320)
(10,806)
58,522
63,496
3
4
Net current liabilities
Total assets less current liabilities
Creditors: Amounts falling due after more than one year
5
Net assets
Capital and reserves
Called up share capital
Share premium account
Capital redemption reserve
Merger reserve
Share-based payment reserve
Profit and loss account
8
10
10
10
10
10
8,226
18,188
50
28,228
343
3,487
7,853
18,104
50
28,742
209
8,538
Total shareholders’ funds
11
58,522
63,496
The financial statements on pages 72 to 79 were approved by the Board of Directors on 12 March 2013 and
signed on its behalf by:
72
Mark Scott
Director
Mark Bentley
Director
COMPANY FINANCIAL STATEMENTS
ACCOUNTING POLICIES
(1) Basis of Accounting
(6) Investments
The Company financial statements are prepared
on a going concern basis, under the historical cost
convention and in accordance with the Companies
Act 2006 and applicable to accounting standards
in the United Kingdom. The principle accounting
policies, which have been applied consistently
throughout the year, are set out below.
Fixed asset investments are stated at cost less
provision for any impairment in value.
(2) Profit and Loss Account
As permitted by section 408 The Companies Act
2006, the company’s profit and loss account has not
been presented. The Company reported a loss in
the financial year of £5,077,000 (2011: £2,926,000).
The auditor’s remuneration for audit and other
services is disclosed in note 5 to the consolidated
financial statements.
(3) Turnover
Turnover is derived from management charges to
subsidiary companies. Turnover is recognised on an
accruals basis, net of VAT.
(4) Pensions
The Company operates a defined contribution
scheme. The amount charged to the profit and loss
account in respect of pensions is the contributions
payable in the year. Differences between
contributions payable in the year and contributions
paid are shown as either other debtors or other
creditors.
(5) Tangible Fixed Assets
Tangible fixed assets are stated at historical cost less
accumulated depreciation. Cost includes the original
purchase price of the asset and the costs attributable
to bringing the asset to its working condition for
its intended use. Depreciation is provided at rates
calculated to write off the cost, less estimated
residual value, of each asset, over their estimated
useful economic lives as follows:
Computer equipment
33% pa. straight line
Fixtures, fittings and
office equipment
25% pa. straight line
(7) Deferred Taxation
Deferred tax is recognised in respect of all timing
differences that have originated but not reversed
at the balance sheet date where transactions or
events that result in an obligation to pay more tax
in the future or a right to pay less tax in the future
have occurred at the balance sheet date. Timing
differences are differences between the Company’s
taxable profits and its results as stated in the
financial statements that arise from the inclusion
of gains and losses in tax assessments in periods
different from those in which they are recognised
in the financial statements.
Deferred tax assets are recognised to the extent
that it is regarded as more likely than not that they
will be recoverable against suitable taxable profits in
the future.
Deferred tax is measured at the average tax rates
that are expected to apply in the periods in which
timing differences are expected to reverse, based
on tax rates and laws that have been enacted or
substantially enacted by the balance sheet date.
Deferred tax is measured on a non-discounted basis.
(8) Foreign Currency
Transactions denominated in foreign currencies are
initially translated at the exchange rate ruling at
the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies are
retranslated at the rate of exchange ruling at the
balance sheet date and the resulting gains and losses
are recorded in the profit and loss account.
73
COMPANY FINANCIAL STATEMENTS
ACCOUNTING POLICIES
(9) Share-based Payments
(10) Provisions
The Company has applied the requirements of FRS
20 Share-based payment to both cash-settled and
equity-settled share-based employee compensation
schemes.
Provisions are recognised when the Company has a
present obligation (legal or constructive) as a result
of a past event, it is probable that an outflow of
resources will be required to settle this obligation
and a reliable estimate can be made of the amount
of the obligation. Expected future cash flows to
settle provisions are discounted to present value.
Cer tain employees of the Company receive
remuneration in the form of share options. The fair
value of the share options granted is measured at
the date of grant and expensed to the profit and loss
account over the appropriate vesting period, with
a corresponding adjustment to equity.
The fair value of the share options takes into
account market vesting conditions and non-vesting
conditions. Non-market vesting conditions are
included in assumptions of the number of options
expected to vest. At the end of each repor ting
period the Company revises its estimate of the
number of share options expected to vest and
recognises the impact of the revisions to previous
estimates in the profit and loss account, with a
corresponding adjustment to equity.
The grant of share options to the employees of
subsidiar y under takings is treated as a capital
contribution. The fair value of the share options
granted is measured at the date of grant and
recognised as an increase of cost of investment over
the appropriate vesting period, with a corresponding
adjustment to equity.
74
(11) Cash Flow Statement
The Company has applied the exemption available
under FRS 1 (revised) Cash flow statements and has
not presented a cash flow statement. A consolidated
cash flow statement has been presented in the
Group financial statements.
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
1. Tangible Fixed Assets
Computer equipment
£’000
Fixtures, fi ttings and
office equipment
£’000
Total
£’000
Cost
At 1 January 2012
Additions
40
–
44
1
84
1
At 31 December 2012
40
45
85
Accumulated depreciation
At 1 January 2012
Charged for the year
37
2
37
6
74
8
At 31 December 2012
39
43
82
Net book value
At 31 December 2012
1
2
3
At 31 December 2011
3
7
10
2. Fixed Asset Investments
Subsidiaries
£’000
At 1 January 2012
Adjustment to deferred consideration
Impaired in the year
Capital contribution in relation to share-based payments
83,763
(8)
(2,497)
66
At 31 December 2012
81,324
Subsidiaries:
The Company’s principal trading subsidiaries are listed in note 16 to the consolidated financial statements.
The directors believe that the carrying value of the investments is supported by their underlying net assets.
3. Debtors
Notes
Amounts falling due within one year:
Amounts owed by subsidiary companies
Other debtors
Deferred tax asset
Corporation tax
Prepayments
7
2012
£’000
2011
£’000
10,273
45
34
295
277
9,621
346
18
–
84
10,924
10,069
Amounts owed by subsidiaries are unsecured and repayable on demand. Balances with subsidiaries outside
of normal trading terms bear an interest rate of 1.5% (2011: 1.5%).
75
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
4. Creditors:
Amounts falling due within one year
Notes
Bank overdraft
Loan notes
Trade creditors
Amounts owed to Group companies
Corporation tax
Other taxation and social security costs
Consideration payable in respect of acquisitions
Other creditors
Accruals
6
2012
£’000
2011
£’000
8,305
498
134
12,548
–
274
–
82
322
12,128
1,263
92
3,434
66
145
2,467
102
673
22,163
20,370
Amounts owed to subsidiaries are unsecured and repayable on demand. Balances with subsidiaries outside
of normal trading terms bear an interest rate of 1.5% (2011: 1.5%).
Bank overdraft
The bank overdraft is part of the Group wide overdraft facility with the Royal Bank of Scotland plc, which
holds a debenture over the assets of the Company and its subsidiaries. There is a cross-guarantee between
the Company and its subsidiaries. The bank overdraft bears interest at a variable rate of 1.75% to 2.80%
over LIBOR and is repayable on demand.
Loan notes
Loan notes have been issued as part of the consideration for certain acquisitions. Secured loan notes are
secured on cash deposits and by way of guarantee. Cash deposits provided as security are included within
cash at bank and in hand and amount to £278,000 (2011: £830,000). Loan notes are repayable on demand
and bear interest at the following rates:
Secured
LIBOR less 2%
LIBOR
76
2012
£’000
2011
£’000
447
51
1,184
79
498
1,263
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
5 . Creditors:
Amounts falling due after more than one year
Bank loans
2012
£’000
2011
£’000
12,320
10,806
The Company has a debt facility with the Royal Bank of Scotland plc. The debt facility consists of a £25.0m
revolving credit facility which is committed to March 2016. The revolving credit facility bears interest at a
variable rate of 1.75% to 2.80% over LIBOR. The security over the revolving credit facility is the same as for
the bank overdraft (note 4).
6. Consideration Payable for Acquisitions
£’000
At 1 January 2012
Settled in the year
Adjustment to provision for additions in prior years
2,467
(2,392)
(75)
At 31 December 2012
–
Acquisitions made by the Company typically involve an earn out agreement whereby the consideration
payable includes a deferred element that is contingent on the future financial performance of the acquired
entity.
The provision for contingent consideration for acquisitions represents the directors’ best estimate of the
amount expected to be payable in cash or loan notes and shares to be issued. The provision is discounted to
present value at the risk free rate at the acquisition date.
7. Deferred Taxation
Deferred tax assets:
Other timing differences
2012
£’000
2011
£’000
34
18
The deferred tax credit in the year of £16,000 (2011: £10,000) is included in the tax charge in the profit and
loss account.
77
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
8. Called Up Share Capital
Allotted, issued and fully paid:
82,261,505 ordinary shares of 10p each
2012
£’000
2011
£’000
8,226
7,853
The Company has one class of ordinary shares which carry no right to fixed income.
Details of shares issued in the year are given in note 25 to the consolidated financial statements.
9. Share-based Payments
Details of share option awards and key inputs into the Black Scholes model to calculate the fair value of
options are given in note 26 to the consolidated financial statements.
For the year ended 31 December 2012, the Company recognised an expense of £68,000 in the profit and
loss account (2011: £47,000) in relation to equity settled share-based payment transactions.
10. Reserves
Capital
Share
premium redemption
reserve
account
£’000
£’000
Company
At 1 January 2012
Loss for the year
Shared-based payments
Dividends paid
Transfer between reserves in
respect of impairment
Share-based payment in subsidiaries
Allotment of shares during the year
31 December 2012
78
18,104
–
–
–
50
–
–
–
–
–
84
–
–
–
18,188
50
Merger
reserve
£’000
28,742
–
–
–
(1,412)
–
898
28,228
Share-based
payment
Profi t and
reserve loss account
£’000
£’000
Total
£’000
209
–
68
–
8,538
(5,077)
–
(1,386)
55,643
(5,077)
68
(1,386)
–
66
–
1,412
–
–
–
66
982
343
3,487
50,296
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
11. Equity Shareholders’ Funds
2012
£’000
2011
£’000
Loss for the year
New share capital subscribed
Premium on shares issued in the year (net of expenses)
Merger reserve on shares issued in the year
Dividends paid
Expense for share-based incentive schemes
Share-based payments in subsidiaries
(5,077)
373
84
898
(1,386)
68
66
(2,926)
1,689
2,366
4,500
(709)
47
50
Net addition to equity shareholders’ funds
(4,974)
5,017
Opening equity shareholders’ funds
63,496
58,479
Closing equity shareholders’ funds
58,522
63,496
12. Related Party Transactions
Transactions with the Company’s directors are disclosed in note 30 to the consolidated financial statements.
Further information about the remuneration of the directors is provided in the Remuneration report on
pages 24 to 26 and in note 8 to the consolidated financial statements.
During the year ended 31 December 2012 the Company earned £41,000 (2011: nil) of turnover from Fenix
Media Limited, a subsidiary which is not 100% owned.
The Company has applied the exemption available under FRS 8 Related party disclosures not to disclose
transactions with its wholly owned subsidiaries.
79
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the Ninth Annual
General Meeting of the Company will be held at
Buchanan, 107 Cheapside, London EC2V 6DN on
Tuesday 14 May 2013 at 12.30pm, for the transaction
of the following business:
Ordinary Business
1. To receive and adopt the Directors’ Repor t
and Financial Statements for the year ended
31 December 2012, together with the auditors’
report thereon.
2. To declare a final dividend of 1.42p per ordinary
share for the year ended 31 December 2012.
3. To r e ce i ve a n d a p p r ove t h e D i r e c t o r s’
Remuner ation Repor t for the year ended
31 December 2012.
4. To re-elect Mark Scott as a Director, who resigns
in accordance with the Company’s Articles of
Association.
5. To re-elect Allan Rich as a Director, who resigns
in accordance with the Company’s Articles of
Association.
6. To re-appoint PricewaterhouseCoopers as
auditors of the Company to hold office until
the next General Meeting at which accounts are
laid and to authorise the Directors to fix their
remuneration.
Special Business
To consider and, if thought fit, pass the following
resolutions of which resolution 7 is an ordinary
resolution and resolutions 8 and 9 are special
resolutions.
7. That, in substitution for existing authorities to
the extent unutilised, the directors be and are
hereby generally and unconditionally authorised
pursuant to section 551 of the Companies Act
2006 (the “Act” ) to exercise all powers of
the Company to allot shares or grant rights to
subscribe for or convert any security into shares
80
up to an aggregate nominal amount of £1,740,517
to such persons, at such times and on such
terms and conditions as the directors determine,
during the period expiring (unless previously
renewed, varied or revoked by the Company in
General Meeting) on whichever is the earlier of
the conclusion of the Annual General Meeting of
the Company held in 2014 and the date falling
15 months after the date of the passing of this
resolution, but the Company may make an offer
or agreement before the expiry of this authority
which would or might require shares to be
allotted or rights to subscribe for or convert any
security into shares to be granted after expiry of
this authority and the directors may allot shares
or grant rights to subscribe for or convert any
security into shares in pursuance of that offer
or agreement.
Special Resolutions
8. That, subject to the passing of resolution 7 set
out in the notice convening this meeting, the
directors be empowered pursuant to section
570 of the Companies Act 2006 (the “Act”), to
allot equity securities (within the meaning of the
Act) of the Company for cash pursuant to the
general authority conferred on them by the said
resolution 7 as if section 561(1) of the Act did
not apply to any such allotment provided that
this power shall be limited to:
(a) t h e a llot m e n t of e q u i t y s e cu r i t i e s i n
connection with an offer of equity securities
(whether by way of a rights issue, open offer
or otherwise), open for acceptance for a
period fixed by the directors, to holders
of ordinary shares on the register on any
fixed record date in propor tion (as nearly
as practicable) to their holdings of ordinary
shares, subject to such exclusions or other
such arrangements as the directors may
deem necessary or expedient in relation to
fractional entitlements or legal or practical
problems arising under the laws of, or the
NOTICE OF ANNUAL GENERAL MEETING
requirements of, any regulatory body or any
stock exchange in, any territory; and/or
(b) the allotment (otherwise than pursuant to
paragraph (a) above) of equity securities up
to an aggregate nominal amount of £825,948
and the power hereby conferred shall operate
in substitution for and to the exclusion of any
previous power given to the directors pursuant
to section 570 of the Act and shall expire on
whichever is the earlier of the conclusion of the
Annual General Meeting of the Company held
in 2014 and the date falling 15 months after the
date of the passing of this resolution, unless such
power is renewed or extended prior to such
expiry, except that the Company may before the
expiry of any power conferred by this resolution
make an offer or agreement which would or
might require equity securities to be allotted
after such expiry and the directors may allot
equity securities in pursuance of such offer or
agreement as if the power conferred hereby had
not expired.
This power applies in relation to a sale of shares
which is an allotment of equity securities by
virtue of Section 560(2) of the Act as if in the
f irst paragraph of this resolution the words
“pursuant to the general authority conferred on
them by the said resolution 7” were omitted.
9. That the Company be and is hereby granted
general and unconditional authority (pursuant
to section 701 of the Companies Act 2006 (the
“Act”)) to make market purchases (as defined
in section 693 of the Act) of any of its own
ordinary shares of 10p each on such terms and
in such manner as the board of directors of the
Company may from time to time determine
provided that:
(b) the maximum price which may be paid for a
share is an amount equal to not more than
105% of the average of the middle market
quotations for the shares taken from the
London Stock Exchange Daily Official List
for the five business days before the day on
which the purchase is made;
(c) the minimum price which may be paid for
a share is 10p exclusive of any attributable
expenses payable by the Company; and
(d) the authority conferred by this resolution
shall expire on whichever is the earlier of the
conclusion of the Annual General Meeting
of the Company held in 2014 and the date
falling 15 months after the date of the passing
of this resolution, unless such authority is
renewed or extended prior to such expiry,
whichever is the earlier, except that the
Company may, before such expiry, enter into
a contract for the purchase of its own shares
which may be completed by or executed
wholly or partly after the expiration of this
authority.
By order of the Board
Mark Bentley
Company Secretary
11 April 2013
Registered Office
11-13 Charterhouse Buildings
London
EC1M 7AP
(a) the maximum number of shares authorised
to be purchased is 4,129,742 ordinary shares
of 10p each, being 5% of the shares in issue
as at 11 April 2013;
81
NOTICE OF ANNUAL GENERAL MEETING
Notes To The Notice Of Annual
General Meeting
1. As a member of the Company, you are entitled
to appoint a proxy to exercise all or any of your
rights to attend, speak and vote at the Annual
General Meeting and you should have received a
proxy form with this notice of meeting. You can
only appoint a proxy using the procedures set out
in these notes and the notes to the proxy form.
2. A proxy does not need to be a member of the
Company but must attend the Annual General
Meeting to represent you. Details of how to
appoint the Chairman of the Annual General
Meeting or another person as your proxy using
the proxy form are set out in the notes to the
proxy form. If you wish your proxy to speak on
your behalf at the Annual General Meeting you
will need to appoint your own choice of proxy
(not the Chairman) and give your instructions
directly to him/her.
3. You may a p poin t m or e t ha n o ne p r ox y
provided each proxy is appointed to exercise
rights attached to different shares. You may not
appoint more than one proxy to exercise rights
attached to any one share.
4. A s p e r m i t t e d b y R e g u l a t i o n 41 o f t h e
Uncer tif icated Securities Regulations 2001,
Shareholder s who hold their shares in
uncer tificated form must be entered on the
Company’s share register by 12.30pm on 10
May 2013 in order to be entitled to attend
and vote at the Annual General Meeting. Such
Shareholders may only cast votes in respect of
shares held at such time. Changes to entries on
the register of members after such time on such
date will be disregarded in determining the rights
of any person to attend and vote at the Annual
General Meeting.
5. To be effective, a proxy form must be duly
completed, executed and returned, together
with the power of attorney or other authority,
if any, under which it is signed, or a notarially
82
certified copy or a copy certified in accordance
with the Powers of Attorney Act 1971 of such
power of attorney or authority, so as to reach
the Company’s registr ar s, Computer share
Investor Services PLC, The Pavilions, Bridgwater
Road, Bristol, BS99 6ZY by 12.30pm on 10
May 2013, being 48 hours (excluding any part
of a day that is not a working day) prior to the
time fixed for the meeting or, in the case of an
adjournment, as at 48 hours (excluding any part
of a day that is not a working day) prior to the
time of the adjourned meeting.
6. In the case of joint holders, where more than
one of the joint holders purports to appoint a
proxy, only the appointment submitted by the
most senior holder will be accepted. Seniority
is determined by the order in which the names
of the joint holders appear in the Company’s
register of members in respect of the joint
holding (the first-named being the most senior).
7. If multiple cor por ate represent atives are
appointed, in order to facilitate voting by
corporate representatives at the Annual General
Meeting, arrangements will be put in place at the
Annual General Meeting so that:
(i) if a corporate member has appointed the
Chairman of the Annual General Meeting as
its corporate representative with instructions
to vote on a poll in accor dance wi t h
the directions of all the other corporate
representatives for that member at the
Annual General Meeting, then, on a poll,
those corporate representatives will give
voting directions to the Chairman and the
Chairman will vote (or withhold a vote) as
corporate representative in accordance with
those directions; and
(ii) if more than one corporate representative
for the same corporate member attends the
Annual General Meeting but the corporate
member has not appointed the Chairman of
the Annual General Meeting as its corporate
representative, a designated cor por ate
NOTICE OF ANNUAL GENERAL MEETING
representative will be nominated, from those
corporate representatives who attend, who
will vote on a poll and the other corporate
representatives will give voting directions to
that designated corporate representative.
8. The following documents will be available at
the registered office of the Company on any
weekday (except Saturday) during nor mal
business hours from the date of this notice until
the date of the Annual General Meeting:
– a copy of the ser vice agreements for the
Executive Directors;
– a copy of the letters of appointment for the
Non Executive Directors;
emption conferred by section 561(1) of the Act did
not apply:
(a) in connection with an offer to existing shareholders
in proportion to their existing holdings save that
the directors are allowed to offer shares to existing
shareholders otherwise than strictly in proportion
to their holdings where, for example, overseas
regulations make it difficult to offer shares pro rata
to existing overseas shareholders or when dealing
with fractions of shares, and/or
(b) up to a nominal amount of £825,948 being 10% ,
of the issued share capital of the Company as at
11 April 2013 (to give the directors some flexibility
in financing business opportunities as they arise).
– the Articles of Association of the Company;
and
This power would expire on the date of the 2014
Annual General Meeting or 14 August 2014, whichever
is the earlier.
– the register of interests of the directors
(and their families) in the share capital of the
Company.
Explanation of Resolution 9 (Authority to purchase
own shares)
These documents will also be available for
inspection during the Annual General Meeting
and for at least 15 minutes before it begins.
Explanation of Special Business at the
Annual General Meeting
Explanation of Resolution 7 (Authority to allot
securities)
Resolution 7, which will be proposed as an ordinary
resolution, would give the directors authority to
allot shares up to a maximum nominal amount of
£1,740,517 being approximately 21% of the Company’s
issued share capital as at 11 April 2013. The existing
authority would be revoked and this new authority
would expire on the date of the 2014 Annual General
Meeting or 14 August 2014, whichever is the earlier.
Explanation of Resolution 8 (Disapplication of
pre-emption rights)
Resolution 8, which will be proposed as a special
resolution, would renew the power of the directors
to allot shares for cash as though the rights of pre-
In certain circumstances it may be advantageous for
the Company to purchase its own shares. Resolution
9, which will be proposed as a special resolution, seeks
authority from shareholders to do so, such authority
to expire on the date of the 2014 Annual General
Meeting or 14 August 2014, whichever is the earlier.
The directors intend to exercise this power only if and
when, in the light of market conditions prevailing at the
time, they believe that the effect of such purchases will
be to increase earnings per share and is in the best
interests of shareholders generally. Other investment
opportunities, appropriate gearing levels and the
overall position of the Company will be taken into
account before deciding upon this course of action. Any
shares purchased in this way will be cancelled and the
number of shares in issue will be accordingly reduced.
This resolution specif ies the maximum number of
shares which may be acquired (being 4,129,742
ordinary shares, which is 5% of the Company’s issued
share capital as at 11 April 2013 of 82,594,837
ordinary shares) and the maximum and minimum
prices at which they may be bought.
83
DIRECTORS
Allan Rich – Non-Executive Chairman
Allan Rich has spent all his working life in the advertising business. He co-founded Davidson
Pearce Berry and Spottiswood which became one of the most successful agencies in the UK
during the late 60’s and early 70’s. In 1975 he founded the first independent media planning
and buying company in the UK which he called The Media Business. In 1995 he took the
company to the London Stock Market and in 1998 sold his group to Grey Advertising New
York in order to create a truly global media organisation, MediaCom. Over the following
4 years MediaCom became the largest media company in the UK and number 5 in the world. Allan is
a member of the Audit Committee.
Mark Scott – Chief Executive
From 1994 to 1998 Mark Scott was a senior executive at WPP Group plc, latterly being
appointed Operations Director for the Group with responsibility for the Group’s European
and Asian acquisition programme. Post WPP he became Executive Vice President of
Lighthouse Global Network LLC where he helped acquire and consolidate more than
15 marketing services companies. From 2000 to 2002 he was appointed a senior executive
of Lake Capital Management, a private equity firm, where he was responsible for a range
of investments in marketing service firms. He has been a member of the Boards of a number of public
companies in the sector including Watermark Group plc, Chime Communications Group plc, Chemistry
Communications Group plc and Fitch plc. He obtained his MBA from Harvard Business School and a first
class honours degree in English Literature from Oxford University.
Mark Bentley – Group Finance Director
Mark Bentley joined Cello Group as Group Finance Director in May 2005. He is also
Company Secretary. Mark previously worked for Citigate Dewe Rogerson which he joined
in 2000 as Financial Controller and spent the next five years in various senior finance roles
within Incepta Group plc, including Finance Director of Citigate Dewe Rogerson from
February 2001. Whilst maintaining the Finance Director role, he took on wider operational
responsibilities when he was appointed Chief Operating Officer in November 2003. From
June 2002 he also had the parallel role of Finance Director of the Citigate SMARTS regional network
of offices. Prior to Citigate he was Financial Projects Manager at Hodder Headline plc. Mark qualified as
a chartered accountant with Coopers & Lybrand in 1996.
84
DIRECTORS
Paul Hamilton – Non-Executive Director and Senior Independent
Director
Paul Hamilton was Senior Independent Director of Wellington Underwriting plc until
31 December 2006. Prior to this Paul worked in both corporate finance at UBS Warburg
where he was a Managing Director, and in corporate broking at Rowe & Pitman where
he was a Partner. In recent years Paul has also been Chairman of the FSA Listing Rules
Committee and a member of the FSA Listing Authority Advisor y Committee and
London Stock Exchange Primary Markets Committee. Paul chairs both the Nomination and Remuneration
Committee and is a member of the Audit Committee.
Will David – Independent Non-Executive Director
Will David was Non-Executive Chairman of Polaron plc until March 2007 and Chairman of
its Audit and Remuneration Committees, and of Orca Interactive Limited until it was taken
over in May 2008. He has more than 20 years experience working in corporate advisory
and broking roles for small and mid cap companies. Will has also worked at Investec
Henderson Crosthwaite, PricewaterhouseCoopers, Hoare Govett & Co and The London
Stock Exchange. During his professional career Will has worked on over twenty flotations
for clients across a range of sectors. His experience also includes acquisitions and disposals, public takeovers
and secondary fundraisings and provision of advice on corporate governance matters. Will chairs the Audit
Committee and is a member of both the Nomination and Remuneration Committees.
85
GROUP DIRECTORY
Head Office
The Value Engineers – North America
11-13 Charterhouse Buildings, London EC1M 7AP
tel: +44 (0)20 7812 8460 www.cellogroup.com
Contact: Mark Scott
256 W 38th Street, 15th Floor, New York,
NY 10018 USA tel: +1 646 837 8161
www.thevalueengineers.com
Contact: Alex Waters
Cello Health
Insight Research Group
11-13 Charterhouse Buildings, London EC1M 7AP
tel: +44 (0)20 7608 9300 www.insightrg.com
Contact: Jane Shirley, Nicola Cowland
Insight Health US
256 W 38th Street, 15th Floor, New York,
NY 10018 USA tel: +1 646 837 8151
www.insightrg.com/insight-health-us
Contact: Jessica Cunningham, Kathryn Gallant
MedErgy HealthGroup
790 Township Line Road, Suite 200,
Yardley, PA 19067 tel: +1 215 504 2082
www. medergygroup.com
Contact: Julia Ralston
MedErgy Europe
Priory House, 8 Battersea Park Road, London
SW8 4BG tel: +44 (0)845 130 4576
www.mruk.co.uk
Contact: Rachel Cope
Mash Health
3 Beverley Court, 26 Elmtree Road, Teddington
TW11 8ST tel: +44 (0)20 8977 5358
www.mashhealth.com
Contact: Jane Ayton
Cello Consumer
2CV Research
35 King Street, Covent Garden, London WC2E 8JG
tel: +44 (0)20 7655 9900 www.2CV.com
Contact: Vincent Nolan
11-13 Charterhouse Buildings, London EC1M 7AP
tel: +44 (0)20 7608 3396
www. medergygroup.com
Contact: Mark Vince
2CV US
The MSI Consultancy
2CV Asia Pacific
Weaver’s Yard, West Street, Farnham, Surrey
GU9 7DN tel: +44 (0)1252 748 600
www.msi.co.uk
Contact: Jon Bircher
104a Tanjong Pagar Road, Singapore 0088524
tel: +65 6574 5015 www.2CV.com
Contact: James Redden
RS Consulting Ltd
86/3 Commercial Quay, Commercial Street,
Edinburgh EH6 6LX tel: +44 (0)131 526 3030
www.blonde.net
Contact: Pete Burns
Priory House, 8 Battersea Park Road, London
SW8 4BG tel: +44 (0)20 7627 7700
www.rsconsulting.com
Contact: Phil Stubington, Chris Stead
The Value Engineers
Wendover House, 24 London End, Beaconsfield,
Buckinghamshire HP9 2JH
tel: +44 (0)1494 680999
www.thevalueengineers.com
Contact: Owen Williams
86
MRUK
460 Bush Street, Floor 1, San Francisco, CA 94108
tel: +1 415 956 1004 www.2CV.com
Contact: Doug Edmonds
Blonde
GROUP DIRECTORY
Brightsource
Leithal Thinking (Edinburgh)
St James’s House, St James Square, Cheltenham,
Gloucestershire GL50 3PR
tel: +44 (0)1242 534200 www.brightsource.co.uk
Contact: Peter Frings
37 The Shore, Edinburgh EH6 6QU
tel: +44 (0)131 561 8600 www.leithalthinking.com
Contact: David Amers
Cello Business Sciences
7 Midford Place, London W1T 5BG
tel: +44 (0)207 881 3260 www.leithalthinking.com
Contact: Richard Marsham
Weaver’s Yard, West Street, Farnham,
Surrey GU9 7DN tel: +44 (0)845 838 6376
www.businesssciences.com
Contact: Alex Blyth
Face
7 Midford Place, London W1T 5BG
tel: +44 (0)20 7874 6599 www.facegroup.com
Contact: Andrew Needham
Face USA
256 W 38th Street, 15th Floor, New York,
NY 10018 USA tel: +1 646 837 8152
www.facegroup.com
Contact: Philip McNaughton
Face Asia
19th Floor, The Phoenix Building,
No.23 Luard Road, Wan Chai, Hong Kong
tel: + (852) 64666 749 www.facegroup.com
Contact: Andrew Ho, Daniel Tompsett
Leapfrog
Priory House, 8 Battersea Park Road, London
SW8 4BG tel: +44 (0)20 7627 7810
www.leapfrogresearch.co.uk
Contact: Kate Anderson
Leith
37 The Shore, Edinburgh EH6 6QU
tel: +44 (0)131 561 8600 www.leith.co.uk
Contact: Richard Marsham
Leithal Thinking (London)
Opticomm Media
7 Midford Place, London W1T 5BG
tel: +44 (0)20 7874 6567 www.opticomm.co.uk
Contact: Spencer Stratford, Paul Cox
Stripe Communications
86/3 Commercial Quay, Commercial Street,
Edinburgh EH6 6LX tel: +44 (0)131 561 8628
www.stripecom.co.uk
Contact: Juliet Simpson
Tangible Group
37 The Shore, Edinburgh EH6 6QU
tel: +44 (0)131 556 8002 www.tangible.uk.com
Contact: John Rowley
Tangible (Edinburgh)
37 The Shore, Edinburgh EH6 6QU
tel: +44 (0)131 556 8002 www.tangible.uk.com
Contact: Karen Trickett
Tangible (Cheltenham)
St James’s House, St James Square,
Cheltenham GL50 3PR tel: +44 (0)1242 258700
www.tangible.uk.com
Contact: Karen Trickett
Tangible (London)
7 Midford Place, London W1T 5BG
tel: +44 (0)20 7881 3200 www.tangible.uk.com
Contact: Karen Trickett
TMI
7 Clarendon Place, Royal Leamington Spa,
Warwickshire CV32 5QL tel: +44 (0)1926 462998
www.tmi.co.uk
Contact: Gillian James
87
ADVISORS
Company Secretary
Solicitors
Mark Bentley
Marriott Harrison
Staple Court
11 Staple Inn Buildings
London
WC1V 7QH
Registered Office
11-13 Charterhouse Buildings
London
EC1M 7AP
Principal Banker
Independent Auditor
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
1 Embankment Place
London
WC2N 6RH
Nominated Advisor and Broker
Cenkos Securities
6.7.8 Tokenhouse Yard
London
EC2R 7AS
88
Royal Bank of Scotland plc
280 Bishopsgate
London
EC2M 4RB
Registrars
Computershare Investor Services plc
PO Box 82
The Pavilions
Bridgwater Road
Bristol
BS99 7NH
Cello Group plc
11-13 Charterhouse Buildings
London EC1M 7AP
tel: +44 (0)20 7812 8460
www.cellogroup.com
Company Registration No. 05120150