SUCCESSFUL CONNECTING - Cello Health plc · launch in April 2013 of Pulsar TRAC has been very successful, with several clients purchasing the software on a retained licence fee basis

SUCCESSFUL CONNECTING

ANNUAL REPORT 2013

Cello Annual Report 2013 | 1

Highlights 2Chairman’s Statement 4Cello Health 12Cello Signal 16Cello People 20Case Studies 24Strategic Report 26Directors’ Report 27Corporate Governance 30Report of the Remuneration Committee 32Consolidated Financial Statements

Independent Auditors’ Report 34Financial Statements 35Accounting Policies 40Notes 45

Company Financial StatementsIndependent Auditors’ Report 75Company Balance Sheet 76Accounting Policies 77

Notice of the Annual General Meeting 82Directors 86Group Directory 88Advisors 90

CONTENTS

Highlights2 | Cello Annual Report 2013

SUCCESS SPEAKS FOR ITSELF

The businesses started up in 2012 contributed £3.3m of gross profit to the Group in 2013.

Gross profit

£74,7oo,ooo

ArgentinaAustraliaAustriaBelgiumBrazilCanadaChileChina

ColombiaCzech RepublicDenmarkDubaiEgyptFranceGermanyGreece

HollandIndiaIndonesiaIrelandItalyJapanKoreaMalaysia

Countries worked in

HeadcountFull year dividend

2.25pNumber of offices

20800

HighlightsCello Annual Report 2013 | 3

Offices in UK, USA, Hong Kong and Singapore.

Headline profit before tax

£8,521,ooo

MexicoNetherlandsNew ZealandNorwayPeruPhilippinesPolandRomania

RussiaSaudi ArabiaSingaporeSlovakiaSouth AfricaSouth KoreaSpainSweden

SwitzerlandTaiwanThailandTurkeyUAEUgandaUKUSA

Number of partners and associatesUS staff numbers

771o5Overseas turnover as a % of total

34%

4 | Cello Annual Report 2013

Chairman’s Statement

Overview

2013 saw a strong financial and operational performance. The Group reports a 14.8% increase in gross profit to £74.7m (2012: £65.1m) and headline profit before tax up 21.1% to £8.5m (2012: £7.0m).

The success of the year has been underpinned by robust like-for-like1 gross profit growth of 11.4%. This growth has been achieved across the whole business and notably in Cello Signal, where growing digital gross profit and gross profit from technically related services was supplemented by the impact of a significant incremental project.

The l ike-for-l ike gross prof it grow th was en ha nced by the success of the start-up activity implemented in 2012. We have opened new off ices, launched new products and started new businesses. Gross profit from such activities started in 2012, rose from £1.0m in 2012 to £3.3m in 2013.

STRONGER CONNECTIONS,STRONGER RESULTS

Fina l ly, our grow th has been supplemented by the acquisition of Mash Health Limited (“Mash”) in January 2013. Mash provides consultancy and communication ser vices to a wide portfolio of pharmaceutica l, nutraceutica l a n d c o n s u m e r h e a l t h c a r e cl ients. We a re pleased w ith the performance of the business in the first year of ownership.

The investment made in 2013 in preparation for the launch of t h e C e l l o He a l t h b r a n d ( w w w. c e l l o h e a l t h . c o m ) h a s ensured a smooth transition to the new proposition with clients. T he l a u nc h of C el lo S i g n a l (w w w.cellosignal.com) has also been successfully completed. For the Group’s wide range of blue chip clients, the distinct service benefits offered by the two businesses are now clearer.

The Group started the new year w ith continued good book ing momentum, and a solid new business pipeline, providing good visibility for the first half of the year.

“”

The Group reports a 14.8% increase in gross profit to £74.7m.

Great success, in a year of change.

1 Like-for-like measures exclude the results from companies acquired in the year and results from new start-ups in 2013.

Mark ScottChief Executive

Chairman’s StatementCello Annual Report 2013 | 5



Financial Review

Total Group gross profit was £74.7m (2012: £65.1m) on revenues of £159.7m (2012: £135.1m). Headline2 profit before tax was £8.5m (2012: £7.0m). The Group’s results reflect a strong performance by both Cello Health and by Cello Signal.

Statutory profit before tax was £5.5m (2012: £1.4m) after the impact of restructuring costs of £0.5m (2012: £1.3m); amortisation of £1.2m (2012: £0.9m); and start-up losses of £0.4m (2012: £0.8m).

The Group’s headline operating margin3 was 12.4% (2012: 12.1%) with a headline operating margin of 21.2% in Cello Health (2012: 20.8%), and 10.2% in Cello Signal (2012: 9.1%).

Headline finance costs were £0.6m (2012: £0.7m). The Group’s tax charge was £1.8m (2012: £1.2m) ref lecting a normalised tax rate on taxable profits of 30.4% (2012: 31.5%). Headline basic earnings per share4 was 7.25p (2012: 6.37p).

I n Ja nu a r y 2 013 , t he G r o u p acquired the entire share capital of Mash Health Limited. Total amounts payable with regards to this acquisition are £2.1m with net current assets acquired of £0.6m.

FROMCOLLABORATION,WE ALLPROFIT

£0.7m of this amount has been accounted for as acquisition related employee remuneration which is a charge accounted for below headline operating profit. £1.6m was settled in the year, of which £1.4m was paid in cash with the balance paid in new ordinary shares.

Total Group deferred commitments with regards to acquisitions now stand at £0.6m, all payable in 2014 with a maximum of £0.1m payable in shares.

Cello Health produced headline operating profit growth of 16.2% on an increase in gross profit of 13.8%, reflecting continued robust demand from global clients for its highly specialist range of technical ser vices. It enjoyed a full year contribution from Mash which was acquired in January 2013. Cello Health’s continued expansion was helped by the start-up investments made in 2012, the majority of which achieved break-even in 2013, delivering a combined gross profit of £1.6m. Like-for-like gross profit in Cello Health grew by 6.4%.

Cello Signal had a very strong year, delivering headline operating profit of £3.9m (2012: £3.0m) on gross profit of £37.9m (2012: £32.7m). Cello Signal achieved headline

operating margins of 10.2% (2012: 9.1%). Like-for-like gross profit in Cello Signal grew by 16.2%.

O n e n o t a b l e f a c t o r i n t h i s impressive like-for-like growth rate was the delivery of a large, non-recurring rebranding project. It is not expected that a project of this size will occur in 2014, however there has been a notable increase in rebranding activity as the UK economy comes out of recession. Cello Signal has benefited from an improvement in the consumer research market, as well as an increase in work of a retained or continuous nature. The business has a lso developed a growing expertise in technical platform development. For example, the C om monwea lt h G a mes 201 4 ticketing website was developed by Blonde, a business w ith in Cello Signal.

Social media analysis is a lso a grow ing revenue stream. The launch in April 2013 of Pulsar TRAC has been very successful, with several clients purchasing the software on a retained licence fee basis. Cel lo Signa l’s rapid transition into a predominantly digital proposition supported by a range of web-centric services has enabled it to continue to develop its

Headline profit before tax up 21%.

Mark BentleyGroup Finance Director

Chairman’s StatementCello Annual Report 2013 | 7

“”

Results reflect a strong performance by both Cello Health and Cello Signal.

wide range of blue chip global client relationships.

In 2012, the Group incurred £0.8m of start-up costs in association with new offices, new products, or the commencement of new businesses. We are pleased that the gross profit in 2013 from these activities totalled £3.3m, and headline operating profit of £0.2m was delivered.

We have continued this strategy in 2013, by opening up offices in Hong Kong and Chicago, as well as investing in the continued development of Cello Business Sciences, a web-based analytic offering for pharmaceutical clients. In addition, we launched a US office for Cello Health Consulting, specia l isi ng i n ea rly product commercia l isation. The tota l losses from these activities in 2013 were £0.4m.

As indicated in the Interim Results, the consolidation of Cello Health and Cello Signal into separately branded entities has given rise to an opportunity to pursue further efficiency gains. As a consequence,

there was a restructuring charge of £0.5m in 2013 to achieve these ongoing future gains (2012: £1.3m).

Operating cash f low before tax of £11.1m (2012: £6.1m) during t he yea r represented a 122% conversion of headline operating profit (2012: 79%). The Group’s net debt5 position at 31 December 2013 was £3.6m (2012: £8.7m). The net debt:ebitda6 ratio has dropped to 0.3 (2012: 1.0). In order to reduce future non utilisation fees, the Board has elected to reduce the existing revolving credit facilities of £25.0m to £20.0m. This facility is in place until March 2016.

The Board is proposing a f inal dividend of 1.61p per share (2012: 1.42p), giving a total dividend per share of 2.25p (2012: 2.00p), an increase of 12.5%. The dividend has now grown every year since 2006 and has grown by 10% or more for the last three years. Subject to shareholder approval, the final dividend will be paid, on 4 July 2014 to all shareholders on the register at 6 June 2014 and will be recognised in the year ending 31 December 2014.

2013 2012 £’000 £’000

Headline operating profit 9,089 7,720 Net interest payable (568) (686)

Headline profit before tax 8,521 7,034

Restructuring costs (514) (1,328)Start-up losses (373) (787)Acquisition costs (66) – Amortisation of intangibles* (1,190) (876)Acquisition related employee remuneration expenses (745) (82)Share option charges* (179) (134)Impairment of goodwill* – (2,497)Fair value gain on financial instruments* 5 50

Statutory profit before tax 5,459 1,380

*no cash flow impact

2 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.

3 Operating margin is calculated by expressing operating profit as a percentage of gross profit.4 Headline earnings per share is defined in note 12.5 Net debt is defined in note 29.6 ebitda is defined as headline earnings before tax, interest, depreciation and amortisation.

The Group incurs a number of charges in the income statement below headline operating profit, which are detailed in the table below.

T h e G r o u p m o n i t o r s m a n y financial measures on a regular basis but our key performance indicators are headline prof it before tax, headline operating profit, headline operating margin, like-for-like gross profit, headline operating cash flow conversion and headline basic earnings per share.


Operational Review

Cello Health (www.cellohealth.com) 2013 2012 £’000 £’000

Gross profit 35,632 31,322

Headline operating profit 7,560 6,506

Headline operating margin 21.2% 20.8%

GLOBAL AND GROWING

Cello Health had another strong year, delivering headline operating profit of £7.6m (2012: £6.5m) from gross profit of £35.6m (2012: £31.3m). The business continues to service the majority of the largest 50 pharmaceutical clients globally as well as a growing number of biotech clients. The professional employee base increased to 316 during the year (2012: 296) reflecting the addition of senior resource, particularly in the USA, to enable continued growth. Despite this ongoing senior headcount increase, operating margins increased slightly to 21.2% (2012: 20.8%).

The Board of Cello Health has continued to execute aga inst its global strategy of establishing Cello Health as one of a handful of high quality, technically led advisers to the pharmaceutical and healthcare sector. During the course of 2013, the Board of Cello Health went through the detailed organisational planning required to transition its core operating brands into a single brand format reflecting the Cel lo Health positioning. This has already begun to deliver clear benefits in the form of better sharing of professional resource, and successful joint pitching for larger client opportunities. During 2014, it is expected that the recent

launch of the Cello Health brand as the core client facing brand of the business will materially help to raise Cello Health’s market profile, with associated commercial benefits.

In line with the stated strategy, the international profile of Cello Health continues to progress rapidly. In July 2013, Cello Health opened an office in Chicago. The consulting division of Cello Health also opened a specialist market access and early product commercialisation business in New York wh ich is being expanded in 2014. 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 core capabilities of Cello Health (Cello Health Consulting, Cello Health Insight and Cello Health Communications) are organised globally, enabling rapid deployment o f r e s o u r c e a g a i n s t g l o b a l opportunity.

The business continues to invest in organic expansion. In 2013 i nvestment wa s m ade i n t he development of a focused consumer health offering. The acquisition of Mash in January 2013 has been a significant addition to the effort to build a major global offering in the consumer health space.

Cello Health and Cello Signal. International names, building international reputations.



Innovation is at the core of Cello He a lt h’s pr o p o s it ion . C el lo Hea lth’s digita l and soft ware based capabilities have continued to gain market traction. Cello Business Sciences, a bespoke web-based analytical tool for Marketing Directors in the pharmaceutical industry, has joined forces with Cello Health’s consulting capability to secure wider sales reach. Sales of software licences have continued to grow at a strong rate.

New business momentum was strong in Q4 2013 and this momentum has continued into 2014. Notable, disclosable cl ient wins in 2013 i n c l u d e d : A b bV i e , A b e l l i o , Ahlstrom, Ariad, Avia, Bauer Media, Biogen, Biogen Idec, Boehringer Ingleheim, Canon, Chamberlain, Colgate Pa lmol ive, Consumer Focus, CooperVision, Eisai, Epson, FCA, FedEx, GSK Oncology, HP, Janssen Cilag, Johnson and Johnson, Kimberly Clark, Legal and General, M&G, Marie Curie, MBA Mead Johnson, Medtronic, NHS Blood Tr a n sf u sion s , N H S Bu si ness Services Authority, Novartis, Novo Nordisk, NS&I, Otsuka, Pfizer, PruHealth, Saint Gobain, Sandoz, Sanofi Pasteur, Shionogi, Shire, Sony, Swiss Re, Terumo, UCB, Unilever, Vertex, Zentiva, Zoetis, Zurich.

“”

All of Cello Health’s core businesses are now represented in the US market.



Operational Review (continued)

Cello Signal (www.cellosignal.com) 2013 2012 £’000 £’000


Headline operating profit 3,877 2,995

Headline operating margin 10.2% 9.1%

Cello Signal had a very strong year, delivering headline operating profit of £3.9m (2012: £3.0m) on gross profit of £37.9m (2012: £32.7m). Operating margins were increased to 10.2% (2012: 9.1%), ref lecting the business’s increasing transition to higher va lue added, g loba l services which command a higher margin. Headcount increased to 478 (2012: 459), reflecting expansion of capability outside the UK, both in the US and Asia.

Cello Signal made material progress in its development as a leading global adviser to marketing clients, enabling them to better manage relationships with customers in an increasingly digital context. The business’s unique combination of data analytics, systems delivery and creativity lends it genuine competitive advantage, enabling it to both identify key customer challenges and deliver solutions of a highly technical nature. The launch of Cello Signal as the umbrella brand for the business is expected to contribute to a rapid increase in its market profile.

Cel lo Signal has continued to develop its strong digital footprint. Through its brand Face, the Group has established an industry leading capability in social media based advisory work, backed by software-en abled a n a l y t ica l 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. The Group has developed a number of proprietary software products to support its sales process, including Pulsar, a ground-breaking social media analytics tool (www.pulsarplatform.com). Cello Signal continues to grow its focus on delivering proprietary software as a service. Pulsar software sales continue to progress strongly and are now supported by a dedicated sales team.

Cello Signal has a high quality, blue chip client list that underpins its global business growth. The client base spans the full range of technology led sectors, including mobile telephony, electronic games, and personal computing, ensuring Cello Signal is at the cutting edge of digital marketing developments. This is complemented by deep client expertise in fmcg, charities, and retail. Core clients include EA, HP, Sony, Unilever, Tesco, LBG, L’Oreal, NHS, BASF, TfL, IFAW, Oxfam, and General Motors. 2013 saw an ongoing increase in the average size of client contracts and an ongoing increase in visibi l it y achieved through multi-year contracts.

Cel lo Sig na l ha s been rapid ly 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 now offer truly global coverage. International gross profits have grown from 16% in 2012 to 18% in 2013. Cello Signal is increasingly selling contracts on a multi-country basis.

Cello Signal’s strong new business momentum from the last quarter of 2013 has continued into 2014. Notable, disclosable client wins in 2013 included: Aegon, Age UK, A hlstrom, Air wave Solutions, Alliance Trust, Anheuser Busch, Apetito, Art Institute of Chicago, Audi (Asia), Baillie Gifford, Barnes & Noble, Border Biscuits, BRG, British Red Cross, Canon, Cash Generator, CBRE, Chamberlain, Cigna, CITB, City of London, Cofunds, Disney, DWP, E.ON, Economist, English Heritage, Ernst & Young, Family Investments, Fantasy Football Manager, FCA, Fi r st Group, G enera l M i l l s , Halo Foods, Hearst Magazines, Homebase, International Cancer Resea rch , IQ C hocol ate, J P Morgan, Keen’s Footwear, Kimpton Hotels, King.com, Learn Direct, M&G, Macmillan Cancer Support, Michelmores, Microsoft, NBC Syfy, Nest, Nestle, NHS Business Services Authority, NHS Supply



Chain, Nokia, The North Face, NS&I, Oliver Bonas, ONS, OpenX, OXFAM, Philips, Pizza Express, Prostate Cancer UK, Qua lit y Solicitors, Reckitt Benckiser, Royal British Legion, Royal Mail, Russell (Fruit of the Loom), Sainsbury’s Finance, Save the Children, Scottish Government, Singtel (Asia), Spar, SYPTE, The Ritz Carlton, Thomas Cook, US Anheuser Busch, Visit England, Walt Disney, WorldPay.

People

Cello prides itself on investing in developing its people, funding a ra n ge of i n it iat i ves wh ich encompass both Cello Health and Cello Signal. At the heart of this is the Cello Partnership which comprises 41 Associates, 25 Partners and 11 Managing Partners. The Partnership meets regularly and forms sub-groups to address areas critical to the future of the business, including innovation, international expansion and cross Group working. Many Partners and Associates are alumni of Cello Academy.

Cello Academy is the Group’s well respected and proprietary training programme through which over 170 people have graduated. In addition there is a Cello graduate forum for the substantial annual graduate intake of the Group. In 2013 26 new graduate trainees were recruited over the course of the year (2012: 33).

In order to properly incentivise the Partnership, the Group administers a robust and demanding annual bonus scheme that rewards based on performance, in addition to a share option scheme.

As part of making a difference, C el lo i nvests i n helpi n g its professionals engage in socially contributive activities with a health orientation. In particular, Cello has invested in launching Talking Taboos as a stand-alone charitable foundation. The Talking Taboos Foundation assists selected charities to further develop their positions and to raise their profile supported by market data.

Current Trading and Outlook

Cello begins 2014 with a good level of secured forward bookings and has also seen encouraging levels of new business wins so far this year. The strong balance sheet position of the Group means the Board is able to further invest in the growth strategy and continue to build the Cello brand in the global marketplace. This is an exciting time for the Group and the focus of the Board is set on driving profitable g r ow t h f r om t he h i g h le vel marketing advisory platform that has successfully been established. We have two well managed, well structured and highly competitive brands in Cello Health and Cello Signal. These are only now starting to show their true potential. At this early stage of the year, the Board is confident that expectations for 2014 will be met.

Allan Rich Non-Executive Chairman 19 March 2014



Cello Health

2013 represented a challenging year for many of our clients. The cost of bringing new pharmaceutical products to market continued to i ncrea se, w it h some repor ts estimating that this can be as great a s $5bn. Combi ned w ith the obstacles of finding blockbuster products to replace those facing patent expiry and less molecular entities overall being approved, the challenge of ‘getting it right first time’ remains probably the single most important consideration f o r m a n y P h a r m a c e u t i c a l organisations. Not only in terms of com m e r c i a l s u cce s s , b ut importantly to ensure we have a healthy R&D industry which in turn provides the medicines of the future that our society needs.

G i v e n t h e i m p e r a t i v e t o demonstrate not only cl inica l efficacy but also meet target ROI outcomes, the pressure on clients to deliver has probably never been greater. However, with over 10,000 products currently in development,

CONTINUING THE JOURNEY

combined with the drive towards preventive care, and the growing role of the consumer, our clients have a dynamic future as well as a core set of challenges to meet.

T h is h a s a l l resu lted i n t he Hea lthca re Industr y ma k i ng significant changes in how it goes about discovering, developing and commercialising new products, creating ample opportunity for Cello Health to add value to our clients on a global basis. Likewise Cello, specifically Cello Health has changed to ref lect the needs and requirements of the clients that we serve.

Cello Health’s Journey in 2013

Cello Health continued its growth jou r ney i n 2013 w ith f u r ther expansion in the US, opening a Chicago office, and continued to increase headcount of our existing office in New York. We now have offices in 3 important locations in the US, all are key to ensuring we can f lexibly respond to cl ient requirements. We also expanded our Consulting practise in the US w ith the launch of a new offering aimed at Early Product C om mer c i a l i s at ion , hel pi n g our clients ‘get it right first time’.

Importantly, we brought on board some significant new talent to strengthen the healthcare team in the UK and USA across all three of our core capabilities.

Our client base remains strong. In 2013, the Group worked for 22 of the top 25 Pharmaceutical org a n isat ion s a nd a l l of t he Pharmaceutical organisations in the Global Fortune 500. 2013 also represented a yea r of grow th investment, especially in product innovation and the use of digital p l a t f o r m s . We a r e s e e i n g continuing signs of success in this area, particularly with eVillage and our SMarT suite of planning tools. SMarT was used to deliver over 25 client projects last year and 10 major Pharmaceutical companies have signed up for licences to use the SMarT Suite of tools.

We were also delighted to add to our overall capability in the Health and Wellbeing arena, specifically in the areas of Consumer Health and Patient Engagement with the acquisition of Mash and the set-up of a Consumer Hea lth bra nd strategy consultancy, The Value Engineers Consumer Hea lth. Both performed strongly last year.

Helping our clients thrive in challenging times.

Stephen HighleyCello Health Chairman and Group Corporate Development Director

Cello HealthCello Annual Report 2013 | 13

Cello Health – the Future

2014 represents a significant year for Cello Health as we continue our journey towards becoming the leading Healthcare Marketing ser vice partner to our clients. Cello has now unif ied its core health companies under the Cello Health brand to make it easier for clients to use our services and easier for our people to collaborate. In addition, changes made structurally and in terms of working practice now allow our professionals to seamlessly offer multi-disciplined teams. This provides our customers the best of both worlds, best-in-class capabi l ities in research, consulting and evidence based communications; and blended t e a m s w i t h e x p e r t s f r o m appropriate capabilities for the challenge faced by our clients.

This fusion of expertise offers our clients a truly integrated solution. One that has been designed to help clients unlock and maximise the potential of their assets, brands and organisations.

The change has come about by us understanding the client’s needs, the challenging and more complex environment they face and the need for them to ‘get it right first time’.

Our aim is to make sure our clients success is our success. Commercial success is important for both of us. By achieving this aim we will have a st r on g h e a lt h c a r e i nd u st r y, with healthy product pipelines. Consequently patients and the p u b l i c w i l l h a v e i m p r o v e d medicines and ser vices. Lastly and importantly, Cello Health will continue to build a vibrant organisation with a diverse set of skills focused on doing what they do best; passionately meeting our client’s needs.

“

”

Cello has now unified its core health companies under the Cello Health brand to make it easier for clients to use our services and easier for our people to collaborate.


Cello Health

CellO HeAlTH INSIGHT

• Cello Health Insight worked with all of the Pharmaceutical c o m p a n i e s i n t h e G l o b a l Fortune 500.

• The IQ practice’s first full year in operation saw the quantitative research business grow by 35% to £4m.

• Strong growth in US, with a mid-year opening of an office in Chicago, in addition to expansion within the existing office in New York.

• Broadening of digital footprint with the continued success of eVillage®.

• Continued focus on successful col l aborat ion w it h i n C el lo Health.

KEY HIGHLIGHTSFROM 2013

CellO HeAlTH COMMUNICATIONS(Medergy and Mash)

• A strong year with maintenance of client base and addition of a major new client corporation.

• Long term medical communica-tion support for a top 5 pharma company resulted in successful launch of a product emanating from the largest clinical program in that company’s history.

• Strong year in the area of health outcomes and market access, del ivering circa $1m of new revenue.

• I n v ol v e d i n a n i nc r e a s i n g n u m b e r of c o l l a b o r a t i o n s within Cello Health, supporting the differentiation gained by integration of Cello’s capabilities.

• Signif icant additions to the talent base, including attracting experienced executives from other agencies to assist in the long-term growth of the agency.

• S u c c e s s f u l i n t e g r a t i o n o f Mash into the Cel lo Health team following acquisition in January 2013.

• Diversification of client base across key health sectors from Rx (prescription) and OTC (over the counter) to nutraceuticals.

• S u c c e s s f u l l a u n c h of n e w offerings in practitioner and patient engagement and grass roots healthcare interventions.

• Strong growth building from clear market differentiation and industry awards won at the back end of 2012.


Cello Health

CellO HeAlTH CONSUlTING

• Very strong growth year with collaboration across the Cello Health capabilities contributing to increasing success across a range of clients.

• G l o b a l s t r a t e g i c b u s i n e s s continues to increase with 10 major global healthcare accounts and over 40% of revenues now generated from the USA.

• C onti nued development of business within high growth areas such as speciality pharma a nd biotech nolog y, w ith a n emph a sis on g a i n i n g more strategic, longer term project engagements.

• Proprietary SMarT planning tools successfully launched and used to deliver over 25 projects in 2013. With 10 major pharmaceutical companies already licensed to use The SMarT Suite.

• Continued growth of the senior team, with significant senior hires from Pfizer, Bayer and AbbVie both in the UK and USA.

CellO HeAlTH CONSUMeR

The Value engineers

• Strong performance from both UK and US offices.

• Profitable first full year trading for newly established consumer healthcare practice.

• Significant new business wins for consumer electronic, food and drink, f inancial ser vices and travel and leisure clients.

• Successful autumn conference on the subject of recognising and dealing with ‘multiplicity’ in modern brand marketing.

RS Consulting

• Strong performances in the UK and internationally.

• Increase in transformational global B2B and B2C projects won, particularly across Latin America and APAC regions.

• Ground breaking research by the social research and public policy team has driven the provision of mental healthcare services in the UK forward.

• The consultancy arm of the business has grown, writing high profile thought leadership reports for the likes of EY, Swiss Re, Canon Europe, and DWP.

• All key focus sectors have added major new clients to their books, including Pru Health, NEST and E.ON.

Kudos

• C o nt i n u e d to co n s o l id a te reputation as the premium data-collection resource for high-level business research internationally.

• International research accounted for 95% of overall business with a continued focus on the emerging markets of China, Brazil, Russia, India and the Middle East.


Cello Signal

A SIGNAL OF INTENT

Our Year

The UK and Global economies brightened somewhat in 2013 and confidence was palpable in driving increased activity from our clients. But only now are many large organisations (commercial and public) properly recognising that their scale and use of enterprise scale technology platforms is increasing their distance from customers, and reducing their ability to shape their brands with genuine empathy and distinction.

2013 was the year Cello Consumer both rebranded and, far more importantly, repositioned itself to focus on this specific issue. Our collective purpose is to humanise brands and make them socially intelligent and highly responsive. Our insight and advisory businesses have an enormous depth of experience in understanding how technology impacts on people. This places us in a uniquely strong position to deploy technology centred marketing solutions that are both brand building and, more importantly, built around customers.

It was a year of growth and energy for Cello Consumer. We stopped looking behind us, for how life

Clear core connected capabilities.

John RowleyChief Executive, Cello Signal

used to be, and started looking forward with real excitement and confidence.

Our businesses are in good shape, we’ve expanded and exported internationally and our investments in innovation and technology are now bearing fruit.

Connectivity

Our agencies have an interlocking logic that allows them to work with high levels of connectivity where it benefits the client. But each agency also has to prosper independently of the Group and has to build its credibility against a relevant competitive set. This simple concept ensures the quality and health of our Group. We are a quality collective rather than an amorphous mass.

It is important for us, at the points of client-facing connectivity, to have a brand expression that properly represents us. With this objective Cello Consumer changed its name on 1 January 2014 to Signal. We focus on three core capabilities; Insight and Innovation, Creativity and Content, and Marketing Automation and Technology.


Cello Signal

Insight and Innovation

Our insight and innovation agencies have been Signal’s trail-blazer in terms of international development. With offices now in three US locations – San Francisco, Los Angeles and New York, and two Asian offices – Singapore and Hong Kong, they have successfully established themselves as ‘global boutique’ businesses, with an increasing percentage of their UK work predicated on a multi-national client base.

2CV, Face, Leithal Thinking, TMI

Creativity and Content

The breadth of our creative capability has been complemented in 2013 by a growing number of integrated client relationships where blended teams are providing integrated services, driven by a strong understanding of both their brand and customer agendas. Scottish Government, Barr’s, Royal Mail, Royal British Legion, Lloyds Banking Group, First Group, British Red Cross, Glasgow 2014 and the NHS have all worked with us on this basis, benefiting from our extensive

experience of ‘multi-stakeholder’ client issues.

Leith, Stripe, Tangible, Opticomm

Marketing Automation and Technology

2013 was a year of realisation for the investment we’ve made in our IP and technology teams. The growing sales success of our proprietary social monitoring platform – Pulsar TRAC, the enterprise scale build of the Glasgow 2014 Commonwealth Games website (which smoothly handled 2.3m ticket applications) and the award winning build of Lloyds Banking Group’s multi-channel, automated marketing system are all testimony to growing technical depth within our business.

Blonde, Brightsource, Pulsar TRAC

The Future

We have three themes that will shape our business going forward – the continued focus on best in class Technology solutions, the growth of our three offices in the USA – both in headcount and capability and the continuing expansion of our Asian offices to reinforce insight network in that region.

This is the strategy that we carry around in our heads and will be the focus of all investment for the foreseeable future.

We also expect to see an increased instance of integrated group working as clients increase their focus on web, social and technology within their marketing mix. Platforms that ‘talk to each other’ will be vital and we see our mix of complementary marketing services and deep technical capability being particularly attractive.


Cello Signal

CellO SIGNAl INSIGHT AND INNOVATION

2CV

• All operations delivered profit and growth.

• New offices in Los Angeles and Hong Kong, as well as growing the teams in existing hubs – London, New York, Singapore and San Francisco, have helped grow the international network.

• S o c i a l R e s e a r c h P r a c t ice , an integrated research offer specialising in behaviour change and social policy research, was launched.

• Thought leadership credentials were underpinned by two MRS awards for work with eBay and the Nike Foundation, including the prestigious President’s award.

Face

• Grew its business by a further £900k of gross income in 2013 meaning it has nearly doubled in size in just two years.

• Social consultancy offering in the UK, whereby it helps clients extract value and meaning from big social data sets, has grown by 65%.

• US office continued to grow while offices in Singapore and Hong Kong delivered a healthy first year with substantial wins from Unilever, Nestle and Nokia.

leithal Thinking

• A strong year of growth in the Wel l nes s , Te ch nolog y a nd Luxury markets.

• Four new senior hires made, adding to capabilities in design resea rch, foresig ht, ma rket analysis and innovation strategy.

• I n t e r n a t i o n a l w o r k g r e w signif ica ntly w ith GSK a nd Marriott Group.

• New client wins included Nokia/Microsoft and OpenX.

TMI

• Another strong year for TMI with significant business growth in the Health Sector working with the NHS, The London Clinic and Celesio.

• Other major busi ness w i ns included clients such as John Lewis, Aer Lingus, The Musgrave Group and Ofqual.

• Based on the NHS “Putting People First” project conducted and implemented by TMI, three HSJ ( Health Ser vice Journal i s a lead i n g jou r n a l i n t he healthcare arena) awards were put forward, of which two were shortlisted and one of them was highly commended. In total over 1,000 awards were submitted to the HSJ.

KEY HIGHLIGHTSFROM 2013


Cello Signal

CellO SIGNAl CReATIVITY AND CONTeNT

leith

• Secured its position as lead agency for The Scottish Government for a minimum of a further 3 years.

• Created work in support of t icketing for Glasgow 2014 Commonwealth Games that has helped to sell in excess of 94% of tickets for the Games.

• Won Marketing Star Agency of the Year in Scotland – awarded Agency of the Year 5 times in the last 5 years by a variety of awards juries.

• A c q u i r e d N e w h a v e n Communications and with it the account for Tennents Lager in the UK.

Stripe

• Strong year of growth, with 11 new people, taking the team total to 30.

• Strong new business momentum i nclud i ng – Scottish Power, VELUX and Burn Stewart.

• New Glasgow office opened with team of 3 and 2 new clients.

• Grew its nationa l portfol io of existing clients, including – Seafish, Stewart Milne, The Halo Trust, Pizza Express, and Oliver Bonas.

Tangible

• A strong year with continued g row t h i n t he Roya l Ma i l , Sainsbury’s Bank and Lloyds Banking Group accounts, with large scale projects such as the rebranding of Lloyds Banking Group literature as part of their rebrand activity and the Smilers (personalised stamps) campaign for Royal Mail’s Philatellic team.

• Further strengthened digital credentials in the planning arena with a number of large scale digital and e-CRM projects for clients such as Sainsbury’s Bank, Thomas Cook and Russell.

• Continued strength in team with a number of senior appointments.

Opticomm

• A strong year, with significant wins from British Red Cross, Learn Direct and CITB.

• T h e o n l i n e m e d i a t e a m w a s e x p a n d e d t o i n c l u d e implementation and the building of new reporting tools for clients accessed via non-traditional platforms such as IOS devices.

• C on su lta nc y ser v ices were strengthened with key clients such as NFUM and Matalan as well as undertaking new projects with clients such as Unicef, Cash Generators, Nokia and Waitrose Deliver.

CellO SIGNAl MARKeTING AUTOMATION AND TeCHNOlOGY

Blonde

• Strong growth year with 27% i ncrea se i n sta ff over both London and Edinburgh offices.

• Launched high ly successf u l Volunteering and Ticketing campaigns for Glasgow 2014 Commonwealth Games.

• Launched Nando’s latest UK website and mobile app which reached No.1 in the Food and Drink categor y in the Apple App Store.

• MyRoyalMail.com developed t o h e l p c o m m u n i c a t e t h e privatisation process to 120,000 frontline Royal Mail employees.

• Launched The Daylight Project socia l content platform for V ELU X a nd va rious on l ine initiatives for ScotRail including roll out of on-train WiFi portals.

• Multiple high profile awards won for Royal Mail and IRN-BRU.

Brightsource

• 12th consecutive year of double digit growth in gross margin.

• S t r e n g t h e n e d m a r k e t i n g technology capability to enable Brightsource to deliver scalable multichannel messaging across print, email, SMS and online.

• L a u nc h e d a n e w d i v i s ion , Instinctiv, the first agency offer in the UK helping clients apply behavioural science to improve the effectiveness of their direct marketing.

• Aw a rded ‘ B est I n nov at ion in Direct Marketing’ at the Marketing Week Data Strategy Awards for transforming the marcomms infrastructure at Lloyds Banking Group.

• Won a 5 year contract with Oxfam covering all print services.

Pulsar TRAC

• Revolutionised socia l media insight by pushing social media r e s e a r c h b e y o n d k e y w o r d tracking with the launch of Pulsar TR AC, a proprietar y s o c i a l m e d i a i n s i g h t a n d planning tool.

• Opened a software licensing revenue stream to complement its consultancy revenue stream.


Cello People

FANTASTIC MOTIVATED TALENT

It is our aim to cultivate and harness the passion that exists in our organisation. We are committed to investing in professional and orga n isation development to ensure that we can continue to deliver a best-in-class service to our clients. We know that personal development is key to the success of every individual, every client and to the overall success of our business.

Initiatives That Matter

Cello has invested over the years in 3 distinct people initiatives:

• Cello Partnership – The aim of the Partnership Group is to accelerate the development of Cello as a cohesive business. Partnership provides a vehicle to allow the different skills and expertise of senior personnel to come together, and contribute to the overall success of the business. Collaboration, networks, and joint initiatives result in greater cross fertilisation of ideas and IP which help strengthen our overall position in the market.

Cel lo’s com m itment to the cross- compa ny Pa r tnersh ip Scheme continues, with 11% of the Cello Group involved. Current membership includes 1 1 M a n a g i n g P a r t n e r s , 25 Partners and 41 Associates. As the Group continues to grow,

so too will membership of the Partnership Group.

• Cello Academy – The Cel lo Academy continues as our flagship training programme across the Group. 170 delegates have passed through the Academy and in 2014 we will be running more modules than ever before. We are now seeing ever more of our ‘Academists’ moving into senior positions within the Group.

Alongside the core Academy, the MasterClass initiative continues to go from strength to strength. Almost 100 delegates have now attended these sessions, which are focused on key commercial areas specif ic to our Group businesses.

• Peer G roup I n it i at i ves – Collaboration and connectivity a r e k e y o r g a n i s a t i o n a l imperatives across both our div isions, Cel lo Hea lth and Cello Signal. The Partnership Group provides a forum to aid connectivity and in 2013 was further supported by a number of peer group initiatives. These initiatives allow individuals in similar roles around the Group to meet and share ideas, with the purpose of delivering incremental benefits in operations, service delivery and client acquisition. This will be strengthened further during 2014 in both divisions.

C el l o a i m s to e n s u r e t he s e initiatives result in a culture of success and individual career advancement which we have seen across the Group; with Karen Trickett now CEO of Tangible, who joined as a Group Account D i r e c to r ; Jo n S i m o n s f r o m Research Executive to Director Cel lo Hea lth Insight and Jon Bircher who joined as a Senior Consultant is now CEO of Cello Health Consulting.

To date, our People initiatives have provided notable success:

Success in terms of cultivating an environment of collaboration, resulting in incremental sales. Success in positively influencing staff retention. Success for our people achieving their career aspirations. 2014 and beyond wil l provide f u r t h e r o p p o r t u n i t i e s f o r advancement to all our people as our organisation continues to grow.

2014 and Beyond

Cello across both its divisions has great depth and breadth of talent. Our teams have a reputation for delivering best-in-class services. Our initiatives aim to build on a solid foundation, channelling and harnessing this talent to develop differentiated ser vices, whilst

We continue to invest in and nurture our people, thereby further unlocking the potential that exists across our organisation.


Cello People

delivering to a higher level of satisfaction than our competitors.

Collaboration and connectivity will be a priority during 2014 building on our current success.

Talking Taboos

2 01 4 s ees t he l au nch of t he Ta l k i n g Taboos Fou nd ation, with an independent board of trustees.

This new status wil l establish Talking Taboos as a not for profit organisation, with the potential to raise its own funds and direct them in l ine with its mission: to improve health and wellbeing

through creating a dialogue around “taboo” health issues.

This year, Talking Taboos will also begin to operate as an agency, specialising in marketing insight and communications briefs which have a “taboo” issue at their heart.

The Foundation wil l continue to d r a w on t he d i ver s e a nd complementary talents of Cello Signal and Cello Health, as well as engage with a l l Cel lo staff in a common pur pose: to use their combined talents, skills and experience for good.

Distress Signals

The distress signals project was launched in 2013 to follow up on the successful campaign to raise the profile of self-harm amongst young people.

This new campaign focuses on the identification of the early signs of stress and low mood, through posts on Facebook, Twitter and other social media networks.

The insights from this will form the basis of a campaign to encourage ‘friends’ to look out for each other. It will also suggest ways they can help. 2014 will see this campaign launch and go viral.

Cello Academy

Academy Master Classes 2013

170Total people trained since June 2005

79Male Delegates

91%Satisfaction rate on Module I in 2013

11Delegates trained in Negotiation

91Female Delegates

95%Satisfaction rate on Module II in 2013

85From Signal Companies

85From Health Companies

23Delegates trained in Managing Profitable Projects 90%

Satisfactionrate

90%Satisfaction

rate

24Delegates trained in Client Relationship Management

93%Satisfaction

rate

10Academy Alumni now in senior positions

15US Delegates trained in Presentation skills

87%Satisfaction

rate


Cello People

“I am from Morocco, and have a Scientific background, having done an MSc in Biotechnology at Ecole polytechnique fédérale de L ausa n ne i n Sw itzerl a nd. Back then, I aspired to become a Research Scientist, and even engaged in a year of lab research at the University of Edinburgh. Little did I know I would become a Market Researcher a few years later.

After a gap year in Africa and work as a sales representative at Roche, I moved to London, in the search of a fresh start. I started working at Cello Health Insight when I joined as an Research Associate in the Graduate Programme 2011. Market Research was a completely uncharted territory, as I’d never even heard of it before I applied.

However, I quickly realised that this could be the right career path for me. Over my 2½ years here, I’ve had the chance to work for varied clients, in a multitude of therapy areas, and across a number of quantitative and qualitative methodologies.

I’ve been lucky to have found C el lo Hea lt h Insig ht. B ei ng surrounded by innovative thinkers and passionate people has been a stimulating experience and my skill set has improved drastically thanks to that.

From Resea rch A ssociate to Regional Account Manager, the learning cur ve has been steep. Alongside appropriate training (project management, moderation, proposal writing, client handling training, etc.) the opportunities to get exposure to new challenges are always available.

Hav i ng recent ly moved back to Switzerland to strengthen Cello Health Insight’s presence amongst our strong and growing Swiss client base, my focus now in the short and medium term is to further develop some already existing business relationships, as well as reaching out to potential new clients.”

Being surrounded by innovative thinkers and passionate people has been a stimulating experience and my skill set has improved drastically thanks to that.

“

”

ZINEB BEKKALISenior Research Executive Cello Health Insight


Cello People

“I didn’t always know I wanted a career in marketing.

W h e n I g r a d u a t e d f r o m Newcastle with a music degree, it was 2008 and the credit crunch wa s i n f u l l s w i n g. Gr adu ate prospects were supposedly bleak and my best option seemed to be to keep studying. I completed a law conversion a year later then started apply ing for graduate schemes far and wide.

In applying to Brightsource, I was struck by how well the company w a s p e r f o r m i n g i n a to u g h economic climate. The interview d i d n ’ t d i s a p p o i n t e i t h e r – welcoming and enthusiastic about t h e i r w o r k , I f e l t a t h o m e immediately.

I’ve been here three years now.

I s p e n t t h e f i r s t t w o a s a project manager running direct marketing campaigns for some big-name charity brands. It was challenging, but also rewarding and the responsibility and constant deadlines taught me a lot.

P r o j e c t m a n a g e m e n t g a v e me a great introduction to our business. However, it didn’t give me the chance to present to clients very often.

I first realised I liked presenting at the Brightsource inter view. Perhaps it’s all the years I spent playing the piano in front of an audience... I’m not sure. Whatever the reason, we had to deliver a mock pitch to the board of directors and I remember being surprised by how much I enjoyed it.

Similarly, during the graduate tra i n i ng per iod, a t h ree - d ay sa les and presentation course reaffirmed my eagerness. I knew I wanted to present our ideas to clients and help win new business.

The great thing about Brightsource is that when they see potential in someone, they act on it. I got the chance to move into a business development role almost a year ago and I’ve never looked back.

I attended my first new business event in October last year – three days on a boat with 41 scheduled m e e t i n g s a n d a 3 0 - m i n u t e presentation to deliver. It was an intense few days, and one of the best learning experiences I’ve ever had. Since then I’ve written half a dozen proposals and worked on several pitches (including two led by other Cello Group companies) and even won a couple of new

clients. I’ve also taken over the @BrightsourceUK Twitter account.

My time at Brightsource has been brilliant. It’s here that I found my career in marketing and, with so much room to grow in my new role, I can’t think of a better place to continue it.”

BARNEY KNIBBBusiness Development Manager Brightsource

The great thing about Brightsource is that when they see potential in someone, they act on it.

“”

W


Case Studies

Delving deep to stay on top

Cel lo Hea lth Consu lting was tasked by a top 10 pharmaceutical cl ient to help its g loba l team understand the changing future competitive landscape.

By getting ‘u nder the sk in’ of their competitors, Cello Health C o n s u l t i n g h e l p e d t h e m understand how they needed to do business so they could continue to generate the revenue required to invest in new and exciting licence extensions.

Cello Health Consulting navigated over 400 senior members of the c l ient or g a n i s at ion t h rou g h competitive simulation.

This allowed them to form a picture of their future competitors, their impact on the global treatment and healthcare landscape and, most important of all, what was critical in order to be successful in this future landscape.

OUR WORK

Success in the global eVillage

Our client was looking to develop evidence based health support services with a difference.

Cello Health Insight used a 5 week eVillage toolbox to talk to nurses and difficult-to-access patients in 5 markets, spanning Asia, The Americas and Europe.

The eVillage uncovered patients’ ‘real time’ treatment experiences and ‘in the moment’ emotional, p h y s i c a l a n d p s y c h o l o g i c a l unmet needs

Its f lex ibi l it y faci l itated r ich discourse, using both private activities for more sensitive topics, and group online forums for co-creation. All backed by ‘quali’ metrics gleaned from quick opinion polls and mini-surveys.

Adding the value

Wa l m a r k a r e t h e l e a d i n g independent ma nufacturer of v ita m i ns, m i nera ls a nd food supplements across Central and Eastern Europe.

To help drive f uture grow th, Wa l m a r k a s k e d T h e Va l u e Engineers Consumer Health team to develop a series of new umbrella brands, from their portfolio of brands and products.

By using a set of proprieta r y techniques to define the brands which could occupy the largest potential spaces in their respective markets, The Value Engineers’ work resu lted i n sig n i f ica nt successes for Walmark.

The Value Engineers’ Consumer Hea lt h tea m now work w it h Walmark across a broad range of brand and product areas.

How we’re delivering success around the globe.

W

Case StudiesCello Annual Report 2013 | 25

No.1 iTunes App

Proof of concept was developed via several rounds of prototyping, with the design and functionality a d a pted to work a c ros s iO S (including iOS 7 and iPad) and A ndroid platforms (including e x t r a h i g h d en s it y A nd r oid displays).

G o o g l e A n a l y t i c s w a s incorporated into the app build to allow us to derive maximum commercial insight from its usage.

The app went straight to No.1 in the iTunes Food and Drink c a t e g o r y a f t e r l a u n c h a n d reached No.33 overa l l in free downloads. At the time of writing there have been nearly 164,000 downloads (versus 20,000 for the previous app).

There have been circa 61,000 loyalty card registrations through the app at the time of writing, a 17% contribution to the overall total of around 350,000.

The app averages 4,500 active sessions per day.

Women’s participation in sport

Working with 2CV, this project built on existing research and drew on a range of insight tools to address the question of what’s stopping more women getting active and what cou ld cha nge th is. The output provided a clear, high-level overview of the women’s market, setting out how different types of women are participating in sport and physical activity and why, and defining for priority target groups, the influences of and triggers for physical activity.

The project applied advanced c u lt u ra l a n a l y sis tech n iq ues to identif y the most powerful narratives in the context of women’s participation in sport and fitness. It combined innovative online auto-ethnographic and qualitative face to face research approaches to understand the role that sport and activity plays in the wider lifestyle context, the level of competition for women’s leisure time and the opportunities for sports to engage with women.

Delivering the world

ASCO is a g loba l oi l a nd gas logistics company. It tasked Leith with the creation of a clear vision and a compelling set of values. An “ASCO World”.

This was no superficial makeover. It was a brand refresh, that would also drive sales, increase loyalty and help the business grow into new markets

Leith got to know the business inside out. Running workshops in Aberdeen and Houston and helping to capture the passion and entrepreneurship at the heart of the organisation.

The result? A very dynamic visual and verbal identit y for a ver y dynamic company.


Strategic Report

The Directors present their strategic report on the Group for the year to 31 December 2013.

General Information

Cello Group plc (“The Group”) is an AIM quoted group of companies domiciled and registered in the United Kingdom. The Group has offices in the United Kingdom, The United States of America, Singapore and Hong Kong.

Review of the Business and Future Developments

The results for the year ended 31 December 2013 are set out in the consolidated income statement on page 35. These show a profit for the year of £3.6m (2012: loss of £0.4m). An interim dividend of 0.64p per share was paid in January 2014 (2012: 0.58p) and a final dividend of 1.61p per share is proposed (2012: 1.42p).

The Directors are required by the Companies Act to present a business review, reporting 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 4 to 11 which are incorporated in this report by reference.

The Group’s KPIs are outlined in various sections of this review. Whilst there are many financial measures that the Group monitors on a regular basis our core financial objectives are:• Headline profit before tax• Headline operating profit• Headline operating margin• Like-for-like gross profit• Headline operating cash flow conversion• Headline basic earnings per share

Risks and Uncertainties

The Company regularly reviews the risks and uncer tainties facing the business through a regular series of board and operational meetings. The Directors believe the current largest risks are as follows:

1. Economic conditionsThe Group’s business is domiciled in the UK but 34% of the Group’s revenues are from clients based overseas. It is clear that income from clients is impacted by the prevailing economic conditions. However the broad spread of clients across sector and geography mitigates this risk.

2. Loss of the Group’s key clientsClient 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 staffThe Group’s Directors and staff are critical to the servicing of existing business and the winning of new accounts and the 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.

By order of the Board

Mark Bentley Company Secretary 19 March 2014

Directors’ ReportCello Annual Report 2013 | 27

The Directors present their report and audited financial statements for the year ended 31 December 2013.

Information covering the legal constitution of the Group; the location of its branches; and comments on future developments can be found within the strategic report on page 26.

Directors

The Directors of the Company who were in office during the year and up to the date of signing the financial statements were:

Mark ScottMark BentleyStephen Highley (appointed 13 May 2013)Paul HamiltonWill David Allan Rich

Biographical details of the Directors at the date of this report are set out on pages 86 to 87.

Directors’ Interests in Shares and Options

Directors’ interests in the shares of the Company were as follows:

Number of ordinary Number of ordinary shares of 10p each shares of 10p each At 31 December 2013 At 31 December 2012

Mark Scott 928,779 875,919

Mark Bentley 230,000 35,000

Stephen Highley 2,000,868 2,000,868

Paul Hamilton 50,000 50,000

Will David 15,000 15,000

Allan Rich 977,785 977,785

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:

At 1 January 2013

Granted during year

Exercised during the

year

At 31 December

2013 Exercise price

(pence)Earliest

exercise date Expiry date

Mark ScottEMI Scheme 100,000 – – 100,000 100.00 Nov 2004 Nov 2014

Unapproved Scheme 2004 200,000 – – 200,000 100.00 Nov 2004 Nov 2014

PSP 2010 430,000 – – 430,000 10.00 June 2013 June 2020

PSP 2010 170,000 – – 170,000 10.00 June 2014 June 2021

PSP 2010 170,000 – - 170,000 10.00 July 2015 July 2022

PSP 2010 – 210,000 – 210,000 10.00 July 2016 July 2023

Approved Plan 2009 72,000 – – 72,000 31.50 June 2013 June 2020

Total Mark Scott 1,142,000 210,000 – 1,352,000


Directors’ Report

Research and Development Activities

During the year the Group spent £312,000 (2012: £358,000) on the development of new software products which are expected to generate economic benefits in the future. These amounts were capitalised as intangible assets. £247,000 (2012: £167,000) of amortisation on research and development expenditure 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.

employees

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, efforts are made to provide appropriate re-training. The Company places enormous importance 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.

Treasury Shares

The total number of shares in treasury at 31 December 2013 was 453,000 (2012: 237,000), which represents 0.54% (2012: 0.29%) of the issued share capital. The purpose of the treasury shares is to satisfy future earn out payments and/or share option awards.

Substantial Shareholdings

Other than the Directors’ interests disclosed on page 27, the Company is aware of the following shareholdings of 3% or more in the issued share capital at 28 February 2014:

No. of shares %

Ennismore Fund Management 6,752,330 8.08

Henderson Volantis Capital 6,609,944 7.91

Octopus Asset Management 5,630,442 6.73

Hargreave Hale 5,350,000 6.40

Investec Wealth and Investment 4,916,256 5.88

Milton Asset Management 3,785,000 4.53

Vincent Nolan 3,341,545 4.00

At 1 January 2013

Granted during year

Exercised during the

year

At 31 December

2013 Exercise price

(pence)Earliest

exercise date Expiry date

Mark BentleyEMI Scheme 81,633 – – 81,633 122.50 May 2005 May 2015

Unapproved Scheme 2004 81,633 – – 81,633 122.50 May 2005 May 2015

PSP 2010 214,000 – (214,000) – 10.00 June 2013 June 2020

PSP 2010 130,000 – – 130,000 10.00 June 2014 June 2021

PSP 2010 130,000 – – 130,000 10.00 July 2015 July 2022

PSP 2010 – 165,000 – 165,000 10.00 July 2016 July 2023

Approved Plan 2009 72,000 – (72,000) – 31.50 June 2013 June 2020

Total Mark Bentley 709,266 165,000 (286,000) 588,266

Stephen Highley PSP 2010 36,000 – – 36,000 10.00 June 2013 June 2020

PSP 2010 16,000 – – 16,000 10.00 June 2014 June 2021

PSP 2010 20,000 – – 20,000 10.00 July 2015 July 2022

PSP 2010 – 100,000 – 100,000 10.00 July 2016 July 2023



Approved Plan 2009 30,000 – – 30,000 33.25 July 2015 July 2022

Total Stephen Highley 148,000 100,000 – 248,000

There were no changes in Directors interests between the year end and the date of signing the Groups accounts.

Directors’ ReportCello Annual Report 2013 | 29

Share Capital

Changes to the Company’s share capital during the year are given in note 26 to the consolidated financial statements.

Statement of Directors’ Responsibilities

The Directors are responsible for preparing the Annual Report, the Directors’ Remuneration Report and the financial 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, and the Parent Company financial statements in accordance with United Kingdom Generally 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 profit 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 European

Union and applicable UK Accounting Standards have been followed, subject to any material departures 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 Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements and the Directors’ Remuneration Report comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and the Group 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.

The Directors consider that the Annual Report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess a Company’s performance, business model and strategy.

Each of the Directors, whose names and functions are listed in the Directors’ report confirm that, to the best of their knowledge:• the Group financial statements, which have been

prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and

• the Directors’ report contained in the Annual Report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.

Statement as to Disclosure of Informationto the Auditors

The Directors who were in office on the date of approval of these financial 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.

Independent Auditors

A resolution to reappoint PricewaterhouseCoopers LLP, Chartered Accountants, as auditors will be proposed at the forthcoming Annual General Meeting.

Corporate Governance

The Company’s statement on corporate governance can be found in the corporate governance report on pages 30 to 31 of the financial statements. The corporate governance report forms part of this Directors’ report and is incorporated into it by cross reference.


Mark Bentley Company Secretary

19 March 2014


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 (September 2012) (the “Code”) as best applicable to the Company given its current size. The full requirements of the code have not been adopted.

Board Structure

The Board comprises three 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 86 to 87.

The Board is scheduled to meet at least six times a year and additionally when necessary. At each scheduled meeting of the Board, the Chief Executive and Finance Director report 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.

Audit Committee

The Audit Committee consists of two Non-Executive Directors; Will David as Chairman, and Paul Hamilton. Will David is considered to have relevant financial experience to chair this Committee. The Committee considers matters relating to the financial accounting controls, the reporting of results, and the effectiveness and cost of the external 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 Committee consists of two Independent Non-Executive Directors; 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 making proposals to the Board 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

The Remuneration Committee is formally 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 Hamilton, who chairs the Committee 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.

Further 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 32 to 33.

Shareholder Communications

The Group believes in maintaining 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 Group 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.

Going Concern

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.

Corporate GovernanceCello Annual Report 2013 | 31

Internal Control

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 financial 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.

Given the Group’s size and the nature of its 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 financial controls forms part 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 pertinent financial and other

information by the Board on a regular basis;• the prior approval of all significant strategic

decisions;• having a formal strategy for business activities.

The environment

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.

employees

The Group employs over 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.

On behalf of the Board

Mark Bentley Company Secretary

19 March 2014


Report of the Remuneration Committee

Directors’ Remuneration

2013 Salary Bonus BenefitsTotal

Emoluments Pension Total

Mark Scott 274 180 13 467 41 508

Mark Bentley 200 135 9 344 30 374

Stephen Highley* 120 97 6 223 17 240

Allan Rich 50 – – 50 – 50

Will David 30 – – 30 – 30

Paul Hamilton 30 – – 30 – 30

Total 704 412 28 1,144 88 1,232

*Appointed on 13 May 2013. Salary, pension and benefits is for period 13 May 2013 to 31 December 2013

2012 Salary Bonus BenefitsTotal

Emoluments Pension Total

Mark Scott 255 63 13 331 38 369

Mark Bentley 189 43 9 241 28 269

Allan Rich 50 – – 50 – 50

Will David 30 – – 30 – 30

Paul Hamilton 30 – – 30 – 30

Total 554 106 22 682 66 748

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 remuneration policy on Executive Directors’ remuneration, including pension rights and share option awards, and the terms of their service 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-Executive Directors; Paul Hamilton, who chairs the Committee, and 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; • benefit package – car allowance and healthcare

insurance;• share option incentives – details of share options

granted to the Executive Directors are shown on pages 27 to 28;

• contributions to Directors’ individual defined contribution pension schemes.

The Remuneration Committee reviews the components of each Executive Director’s remuneration package annually.

Report of the Remuneration CommitteeCello Annual Report 2013 | 33

Directors’ Titles and Service Arrangements

Name Title Date of appointment Notice period

Allan Rich Non-Executive Chairman 5 April 2005 6 months

Mark Scott Chief Executive 5 May 2004 12 months

Mark Bentley Group Finance Director 1 May 2005 12 months

Stephen Highley Group Corporate Development Director 13 May 2013 6 months

Paul Hamilton Senior Non-Executive Director 8 October 2004 6 months

Will David Non-Executive Director 8 October 2004 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 were subject to performance conditions which subsequently have been met.

On 17 November 2009 the Board adopted the Cello Group plc HM Revenue & Customs Approved Share Option Plan 2009 (the “Approved Plan 2009”) and on 15 March 2010 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 targets and the extent to which these are achieved or exceeded over the performance period will determine the proportion of each participant’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.

On 4 June 2010 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 Proportion of TSR performance award vesting

Below median nil

Median 25%

Upper quartile 100%

Between median interpolation between and upper quartile 25% and 100%

Market Value of Shares

The market value of the shares at 31 December 2013 was 70.5p and the high and low prices during the year were 74.5p and 37.5p respectively.

On behalf of the Board

Paul Hamilton Chairman – Remuneration Committee

19 March 2014


Consolidated Financial Statements – Independent Auditors’ Report

Independent auditors’ report to the membersof Cello Group plc

Report on the Group financial statements

Our opinionIn our opinion the financial statements, defined below:• give a true and fair view of the state of the Group’s

affairs as at 31 December 2013 and of its profit and cash flows for the year then ended;

• have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union; and

• have been prepared in accordance with the requirements of the Companies Act 2006.

This opinion is to be read in the context of what we say in the remainder of this report.

What we have auditedThe Group financial statements (the “financial statements”), which are prepared by Cello Group plc, comprise:• Consolidated balance sheet as at 31 December

2013;• Consolidated income statement and consolidated

statement of comprehensive income for the year then ended;

• Consolidated cash flow statement for the year then ended;

• Consolidated statement of changes in equity for the year then ended;

• the accounting policies; and• the notes to the financial statements, which

include other explanatory information.

The financial reporting framework that has been applied in their preparation is applicable law and IFRSs as adopted by the European Union.

In applying the financial reporting framework, the Directors have made a number of subjective judgements, for example in respect of significant accounting estimates. In making such estimates, they have made assumptions and considered future events.

What an audit of financial statements involvesWe conducted our audit in accordance with International Standards on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”). An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material 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;

• the reasonableness of significant 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 and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on matter prescribed by the Companies Act 2006In our opinion the information given in the Strategic Report and Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

Other matters on which we are required to report by exceptionAdequacy of information and explanations received

Under the Companies Act 2006 we are required to report to you if, in our opinion, we have not received all the information and explanations we require for our audit. We have no exceptions to report arising from this responsibility.

Directors’ remunerationUnder the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of Directors’ remuneration specified by law are not made. We have no exceptions to report arising from this responsibility.

Responsibilities for the financial statements and the auditOur responsibilities and those of the DirectorsAs explained more fully in the Directors’ Responsibilities Statement, 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 ISAs (UK & Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

This report, 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.

Other matterWe have reported separately on the Parent Company financial statements of Cello Group plc for the year ended 31 December 2013.

David A Snell (Senior Statutory Auditor) for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors London

19 March 2014

Consolidated Income Statementfor the year ended 31 December 2013


Notes

Year ended 31 December 2013

£’000


£’000

Continuing operationsRevenue 2 159,671 135,141

Cost of sales (84,971) (70,046)

Gross profit 2 74,700 65,095

Administration expenses 4 (68,678) (63,079)

Operating profit 2 6,022 2,016

Finance income 3 16 76

Finance costs 3 (579) (712)

Profit on continuing operations before taxation 5,459 1,380

Taxation 9 (1,828) (1,224)

Profit on continuing operations before taxation 3,631 156

Loss from discontinued operations 10 – (516)

Profit/(loss) for the year 3,631 (360)

Attributable to:Owners of the parent 3,634 (386)

Non-controlling interests (3) 26

3,631 (360)

NotesYear ended

31 December 2013Year ended

31 December 2012

Basic earnings/(loss) per shareFrom continuing operations 12 4.41p 0.16 p

From discontinued operations 12 – (0.65)p

Total basic earnings/(loss) per share 12 4.41p (0.49)p

Diluted earnings/(loss) per shareFrom continuing operations 12 4.28p 0.16 p

From discontinued operations 12 – (0.65)p

Total diluted earnings/(loss) per share 12 4.28p (0.49)p

The notes on pages 40 to 74 are an integral part of these consolidated financial statements.


Consolidated Statement of Comprehensive Income for the year ended 31 December 2013


£’000


£’000

Profit/(loss) for the year 3,631 (360)

Other comprehensive income/(loss):Items that may be subsequently reclassified to profit or lossExchange differences on translation of foreign operations (34) (287)

Total comprehensive income/(loss) for the year 3,597 (647)

Total comprehensive income/(loss) attributable to:Owners of the parent 3,600 (673)

Non-controlling interest (3) 26

Total comprehensive income/(loss) for the year 3,597 (647)

Total comprehensive income/(loss) attributable to owners of the parent arises: From continuing operations 3,600 (164)

From discontinued operations – (509)

Total comprehensive income/(loss) attributable to owners of the parent 3,600 (673)

The notes on pages 40 to 74 are an integral part of these financial statements.

Consolidated Balance Sheet31 December 2013


Notes31 December 2013

£’00031 December 2012

£’000

Goodwill 13 71,192 71,028

Intangible assets 15 1,275 1,790

Property, plant and equipment 16 2,212 2,289

Deferred tax assets 25 792 463

Non-current assets 75,471 75,570

Trade and other receivables 18 36,320 29,935

Cash and cash equivalents 19 5,984 4,148

Current assets 42,304 34,083

Trade and other payables 20 (38,403) (29,717)

Current tax liabilities (1,271) (582)

Borrowings 21 (373) (498)

Provisions 22 – (108)

Obligations under finance leases 23 (13) (23)

Derivative financial instruments 24 – (5)

Current liabilities (40,060) (30,933)

Net current assets 2,244 3,150

Total assets less current liabilities 77,715 78,720

Borrowings 21 (9,146) (12,320)

Provisions 22 – (280)

Obligations under finance leases 23 (13) (26)

Deferred tax liabilities 25 (292) (498)

Non-current liabilities (9,451) (13,124)

Net assets 68,264 65,596

EquityShare capital 26 8,348 8,226

Share premium 18,368 18,188

Merger reserve 28,345 28,228

Capital redemption reserve 50 50

Retained earnings 12,810 10,636

Share-based payment reserve 455 343

Foreign currency reserve (158) (124)

Equity attributable to owners of the parent 68,218 65,547

Non-controlling interests 46 49

Total equity 68,264 65,596


The financial statements on pages 35 to 74 were approved by the Board of Directors on 19 March 2014 and signed on its behalf by:

Mark Scott Director

Mark Bentley Director


Consolidated Cash Flow Statementfor the year ended 31 December 2013

Notes


£’000


£’000

Net cash generated from operating activities before taxation 28 11,074 6,125

Tax paid (1,738) (1,874)

Net cash generated from operating activities after taxation 9,336 4,251

Investing activitiesInterest received 11 26

Purchase of property, plant and equipment (1,047) (1,432)

Sale of property, plant and equipment 27 75

Purchase of intangible assets 15 (312) (358)

Purchase of subsidiary undertakings (777) (1,327)

Net cash used in investing activities (2,098) (3,016)

Financing activitiesProceeds from issuance of shares 112 –

Dividends paid to equity holders of the parent 11 (1,643) (1,386)

Repayment of borrowings (7,500) (3,800)

Repayment of loan notes (125) (461)

Drawdown of borrowings 4,524 5,500

Capital element of finance lease payments (23) (50)

Interest paid (498) (911)

Purchase of own shares (117) –

Net cash used in financing activities (5,270) (1,108)

Net increase in cash and cash equivalents 1,968 127

Exchange losses on cash and cash equivalents (132) (149)

Cash and cash equivalents at the beginning of the year 4,148 4,170

Cash and cash equivalents at end of the year 19 5,984 4,148

Cash flows in the year ended 31 December 2013 have been classified. Further details are provided in note 28.


Consolidated Statement of Changes in Equityfor the year ended 31 December 2013


Share capital

£’000

Share premium

£’000

Merger reserve

£’000

Capital redemption

reserve £’000

Retained earnings

£’000

Share-based

payment reserve

£’000

Foreign currency

exchange reserve

£’000

Total attributable

to the owners of

the parent £’000

Non- controlling

interest £’000

Total equity £’000

At 1 January 2012 7,853 18,104 28,742 50 10,389 209 163 65,510 613 66,123

Comprehensive income:Loss for the year – – – – (386) – – (386) 26 (360)Other comprehensive income:Currency translation – – – – – – (287) (287) – (287)

Total comprehensive income for the year – – – – (386) – (287) (673) 26 (647)

Transactions with owners:Shares issued (note 26) 373 84 898 – – – – 1,355 – 1,355Credit for share-based incentives – – – – – 134 – 134 – 134Tax on share-based payments recognised directly in equity – – – – 17 – – 17 – 17Changes in non-controlling interests in shareholdings – – – – 590 – – 590 (590) – Transfer between reserves in respect of impairment – – (1,412) – 1,412 – – – – – Dividends (note 11) – – – – (1,386) – – (1,386) – (1,386)

Total transactions with owners 373 84 (514) – 633 134 – 710 (590) 120

As at 31 December 2012 8,226 18,188 28,228 50 10,636 343 (124) 65,547 49 65,596

Comprehensive income:Profit for the year – – – – 3,634 – – 3,634 (3) 3,631Other comprehensive income:Currency translation – – – – – – (34) (34) – (34)

Total comprehensive income for the year – – – – 3,634 – (34) 3,600 (3) 3,597

Transactions with owners:Shares issued (note 26) 122 180 117 – – – – 419 – 419Purchase of treasury shares – – – – (117) – – (117) – (117)Credit for share-based incentives – – – – – 179 – 179 – 179Tax on share-based payments recognised directly in equity – – – – 233 – – 233 – 233Transfer between reserves in respect of share options – – – – 67 (67) – – – – Dividends (note 11) – – – – (1,643) – – (1,643) – (1,643)

Total transactions with owners 122 180 117 – (1,460) 112 – (929) – (929)

As at 31 December 2013 8,348 18,368 28,345 50 12,810 455 (158) 68,218 46 68,264



Accounting Policiesfor the year ended 31 December 2013

Significant Accounting Policies

(1) Basis of PreparationThe consolidated financial statements of Cello Group plc have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (“IFRSs”), IFRIC interpretations and the Companies Act 2006 applicable to companies reporting 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 principle accounting policies have been applied consistently throughout the year.

The Group’s business activities, performance and position are set out in the Chairman’s Statement on pages 4 to 11 and an assessment of the risks and uncertainties is set out in the Strategic Report on page 26.

During the year the Group generated a profit before tax on continuing activities of £5.5m and excluding non-recurring restructuring costs and other non-headline charges the Group generated a profit before tax of £8.5m.

The Group meets its day-to-day working capital requirements through its bank facilities. At 31 December 2013 the Group’s bank facilities consisted of a £4.0m overdraft facility and a £25.0m revolving credit facility (“RCF”). The RCF is committed to March 2016. On 3 February 2014 the Directors elected to reduce the RCF to £20.0m. £10.9m of the RCF, at its reduced level, is undrawn at 31 December 2013 and the Groups forecasts and projections show that the Group is able to operate within the level of its current facilities.

After reviewing the Group’s performance 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 ConsolidationThe Group’s financial statements consolidate the financial statements of the Company and all of its subsidiary undertakings. 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 convertible are considered when assessing whether the Group controls another entity. 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 CurrenciesSterling 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 are recognised in the income statement.

The financial statements of subsidiaries whose functional currency is different to the presentation currency of the Group are translated into the presentation currency 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 comprises the fair value of the consideration received or receivable from services, provided by the Group in the ordinary course of the Group’s activities. Services 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. The stage of completion is assessed based on the proportion of costs incurred or milestone completed, as appropriate to the contract. 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.

(5) Pension ContributionsThe Group operates defined contribution pension schemes and contributes to the personal pension schemes of certain 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 profits represents the contributions payable to the schemes in respect of the accounting period.

(6) Share-based PaymentsThe 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, certain 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 MeasuresThe 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 operating profit, finance income, finance costs, profit before taxation and earnings per share 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. 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 reported and headline profit before taxation is presented in note 1. In addition to this, a reconciliation between reported and headline operating profit 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 ReportingOperating segments are reported in a manner consistent with the internal reporting 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.



(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 identifiable net assets acquired 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.

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.

The carrying value of goodwill for each cash-generating 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.

(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 part 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.

Intangible assets acquired as part of a business combination are reviewed for impairment annually or 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 part 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.

(12) Internally Generated Intangible Assets – Research and Development Expenditure

Expenditure on research activities is recognised as an expense in the period in which it is incurred.

An internally generated intangible asset arising from the Group’s development expenditure is recognised only when the following conditions are met:

i. an asset is created that can be identified (such as software or a new process);

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 amortisation. Amortisation 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 annually or 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. Internally generated intangible assets which have suffered an impairment are reviewed for possible reversal of impairment at each reporting date.

(13) Property, Plant and EquipmentProperty, plant and equipment is 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:

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



Property, plant and equipment are reviewed for impairment annually or 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 TaxationTax 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 appropriate 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) LeasesWhen 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. The asset is recorded at fair value (or present value of minimum lease payments if lower) in the balance sheet as property, plant and equipment and is depreciated over the estimated useful life or the term of the lease, whichever is shorter. Future instalments under such leases, net of finance charges, are included as a liability. Rentals payable are apportioned 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 rentals payable are charged to the income statement on a straight line basis over the lease term.

(16) ProvisionsProvisions 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 January 2008). 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 InstrumentsFinancial 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 cost 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 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 classified 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 overdrafts are recorded initially at their fair value, net of direct transaction costs. Such instruments are subsequently carried at their amortised 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 financial 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 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 re-measured at their fair value. Changes in the fair value are recorded in the income statement. The Group does not use derivative financial instruments for speculative purposes.

(18) Share Capital Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new ordinary shares are shown in equity as a deduction, net of tax, from the proceeds.

Where any Group company purchases the 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 estimates and judgements concerning the application of 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 financial 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 reporting 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 employee remuneration.

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 performance. 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.

As part 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 performance 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 and intangible assets acquired as part of a business combination.

The Group tests goodwill and intangible assets acquired as part of a business combination annually for impairment, in accordance with the Group’s accounting policies. 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.


Notes to the Consolidated Financial Statementsfor the year ended 31 December 2013

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 2006 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 2013 but do not have a material impact on the Group:

• IFRS 13 Fair value measurement• IFRS 1 (amendment) First time adoption – government loans• IAS 19 (amendments) Employee benefits – elimination of the corridor approach and calculate finance costs

on a net funding basis• IAS 1 (amendment) Financial statement presentation – presentation of other comprehensive income

A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2013, and have not been applied in preparing these consolidated financial statements. None of these are expected to have a significant effect on the consolidated financial statements of the Group, although the full impact is being assessed by management.

1 Reconciliation of Profit on Continuing Operations Before Taxation to Headline Profit Before Tax

Notes

31 December 2013

£’00031 December 2012

£’000

Profit on continuing operations before taxation 5,459 1,380

Restructuring costs 6 514 1,328

Start-up losses 7 373 787

Acquisition costs 4 66 –

Amortisation of intangible assets 15 1,190 876

Acquisition related employee remuneration expense 4 745 82

Share option charges 4 179 134

Impairment of goodwill 13 – 2,497

Fair value gain on derivative financial instruments 3 (5) (50)

Headline profit before taxation 8,521 7,034

Headline profit before taxation is made up as follows:Headline operating profit 2 9,089 7,720

Headline finance income 3 11 26

Headline finance costs 3 (579) (712)

8,521 7,034


Notes to the Consolidated Financial Statements for the year ended 31 December 2013

2 Segmental Information

For management purposes, the Group is organised into two operating groups; Cello Health and Cello Signal. 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.

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 Signal

The Cello Signal 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.

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.



2 Segmental Information (continued)

for the year ended 31 December 2013Cello Health

£’000Cello Signal

£’000

Consolidation and

Unallocated £’000

Group £’000

RevenueExternal sales 52,330 105,694 – 158,024

Intersegment revenue 18 40 (58) –

Total segmental revenue 52,348 105,734 (58) 158,024

Start-up revenue 1,647

Total revenue 159,671

Gross profitSegmental gross profit 35,632 37,873 – 73,505

Start-up gross profit 1,195

Total gross profit 74,700

Operating profit Headline operating profit (segment result) 7,560 3,877 (2,348) 9,089

Restructuring costs (514)

Start-up losses (373)

Acquisition costs (66)

Amortisation of intangible assets (1,190)

Acquisition related employee remuneration expense (745)

Share option charges (179)

Operating profit 6,022

Financing income 16

Finance costs (579)

Profit before tax on continuing operations 5,459

Other information Capital expenditure 205 839 3 1,047

Capitalisation of intangible assets 131 181 – 312

Depreciation of property, plant and equipment 438 683 3 1,124



2 Segmental Information (continued)

for the year ended 31 December 2012Cello Health

£’000Cello Signal

£’000

Consolidation and

Unallocated £’000

Group £’000

RevenueExternal sales 46,247 87,457 – 133,704

Intersegment revenue 100 88 (188) –

Total segmental revenue 46,347 87,545 (188) 133,704

Start-up revenue 1,437

Total revenue 135,141Gross profitSegmental gross profit 31,322 32,735 – 64,057

Start-up gross profit 1,038

Total gross profit 65,095

Operating profit Headline operating profit (segment result) 6,506 2,995 (1,781) 7,720

Restructuring costs (1,328)

Start-up losses (787)

Amortisation of intangible assets (876)

Acquisition related employee remuneration expense (82)

Share option charges (134)

Impairment of goodwill (2,497)

Operating profit 2,016

Financing income 76

Finance costs (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

The Group’s operations are materially 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


£’000


£’000

UK 105,684 85,159

Rest of Europe 16,487 17,053

USA 32,349 26,172

Rest of the World 5,151 6,757

159,671 135,141



3 Finance Income and Costs


£’000


£’000

Finance income:Interest received on bank deposits 11 26

Headline finance income 11 26

Fair value gains on derivative financial instruments 5 50

Total finance income 16 76

Finance costs:Interest payable on bank loans and overdrafts 569 649

Interest payable in respect of finance leases 5 6Finance costs paid on derivative financial instruments 5 57

Total and headline finance costs 579 712

4 Administration Expenses

Profit/(loss) for the year is stated after charging:

Continuing operations Discontinued operations Total

Notes

Year Ended 31 December

2013 £’000


2012 £’000


2013 £’000


2012 £’000


2013 £’000


2012 £’000

Headline administration costs:Staff costs 8 48,154 41,816 – 645 48,154 42,461

Operating lease rentals 2,267 2,156 – – 2,267 2,156

Depreciation of property, plant and equipment 16 1,124 1,033 – 94 1,124 1,127

(Profit)/loss on disposal of property, plant and equipment (16) 38 – 82 (16) 120

Amortisation of intangibles 15 247 – – – 247 –

Auditors remuneration 5 347 335 – 8 347 343

Net foreign exchange losses 41 83 – 5 41 88

Other property costs 1,755 1,825 – 96 1,755 1,921

Other administration costs 10,497 9,051 – 349 10,497 9,400

Non-headline administration costs: Restructuring costs 6 514 1,328 – – 514 1,328

Start-up costs 7 1,568 1,825 – – 1,568 1,825

Acquisition costs 66 – – – 66 –

Amortisation of intangibles 15 1,190 876 – – 1,190 876Acquisition related employee remuneration 8 745 82 – – 745 82

Impairment of goodwill 13 – 2,497 – – – 2,497

Share option costs 8 179 134 – – 179 134

68,678 63,079 – 1,279 68,678 64,358



5 Auditors’ Remuneration


£’000


£’000

Fees payable to PricewaterhouseCoopers LLP for:

Audit of Group’s Annual Report and accounts 48 47

Audit of subsidiaries 202 198

Total audit fees 250 245

Non-audit fees:

Taxation 70 67

Interim review 13 10

Other services 14 21

Total non-audit fees 97 98

Total auditors’ remuneration 347 343

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: Year ended

31 December 2013 £’000


£’000

Staff redundancies 514 730

Property costs – 598

Total restructuring costs 514 1,328



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 2013 £’000


£’000

Revenue 1,647 1,437

Cost of sales (452) (399)


Administration costs (1,568) (1,825)

Start-up losses (373) (787)

8 Staff Costs

The average monthly number of persons (including Directors) employed by the Group during the year was as follows:



Cello Health 316 296

Cello Signal 478 459

Central 6 7

800 762

The aggregate staff costs of these persons were as follows:Year ended

31 December 2013 £’000


£’000

Wages and salaries 42,243 37,166

Social security costs 4,584 4,135

Other pension costs 1,327 1,160

Employee costs before non-headline charges 48,154 42,461

Acquisition related employee remuneration expense 745 82

Share-based payments – share options 179 134

49,078 42,677

Included in the aggregate staff costs are the following amounts paid to the Directors:

Directors’ emoluments 1,144 682

Money purchase pension contributions 88 66

1,232 748

Included in the above is £467,000 (2012: £331,000) of emoluments and £41,000 (2012: £38,000) 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 3 (2012: 2).



9 Taxation


£’000


£’000

Current tax:Current tax on profits for the year 2,312 1,499

Prior year current tax adjustment (33) (132)

2,279 1,367

Deferred tax:Origination and reversal of temporary differences (323) (98)

Effect of decrease in tax rate on deferred tax assets 35 21

Prior year deferred tax adjustment (163) (66)

(451) (143)

Tax charge 1,828 1,224

The standard rate of corporation tax in the UK changed from 24% to 23% with effect from 1 April 2013. Accordingly the Group’s profits from the UK are taxed at an effective rate of 23.25% (2012: 24.50%). A further rate reduction to 21% from 1 April 2014 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.Year ended

31 December 2013 £’000


£’000

Profit before taxation 5,459 1,380

Tax at the UK corporation tax rate of 23.25% (2012: 24.50%) 1,269 338

Tax effect of expenses not deductible for tax purposes 447 870

Effect of decrease in tax rate on deferred tax assets 35 21

Effect of different tax rates of subsidiaries in foreign jurisdiction 273 193

Prior year current tax adjustment (33) (132)

Prior year deferred tax adjustment (163) (66)

1,828 1,224



10 Discontinued Operations

The loss from discontinued operations in the year ended 31 December 2012 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 ended 31 December 2012.

An analysis of the result of discontinued operations is as follows: Year ended

31 December 2013 £’000


£’000

Revenue – 2,703

Cost of sales – (2,041)

Gross profit – 662

Administration expenses – (1,279)

Pre-tax (loss) of discontinued operations – (617)

Taxation – 101

Post-tax loss for the year from discontinued operations – (516)

Loss for the year from discontinued operations attributable to:

Equity holders of the parent – (516)

– (516)

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:


£’000


£’000

Operating cash flows – 147

Investing cash flows – (30)

Total cash flows – 117



11 equity Dividends

The dividends paid in the year were:

Date paid


£’000


£’000

Interim dividend 2011 – 0.55p per share 6 January 2012 – 429

Final dividend 2011 – 1.17p per share 6 July 2012 – 957

Interim dividend 2012 – 0.58p per share 6 January 2013 476 –

Final dividend 2012 – 1.42p per share 5 July 2013 1,167 –

1,643 1,386

A 2013 interim dividend of 0.64p per ordinary share was paid on 6 January 2014 and a 2013 final dividend of 1.61p has been proposed for approval at the Annual General Meeting in 2014. In accordance with IAS 10 Events after the reporting date these dividends have not been recognised in the consolidated financial statements at 31 December 2013.

12 earnings/(loss) per Share


£’000


£’000

Profit/(loss) attributable to owners of the parent 3,634 (386)

Loss from discontinued operations – 516

Earnings attributable to owners of the parent from continuing operations 3,634 130

Non-controlling interests (3) 22

Earnings from continuing operations 3,631 152

Adjustments to earnings:Restructuring costs 514 1,328

Start-up losses 373 787

Acquisition costs 66 –

Amortisation of intangible assets 1,190 876

Acquisition related employee remuneration expenses 745 82

Share-based payments charge 179 134

Impairment of goodwill – 2,497

Fair value gain on derivative financial instruments (5) (50)

Tax thereon (712) (766)

Headline earnings for the year 5,981 5,040



12 earnings/(loss) per Share (continued)

2013 Number of shares

2012 Number of shares

Weighted average number of ordinary shares used in basic earnings/(loss) per share calculation 82,444,872 79,116,209

Dilutive effect of securities:

Share options 2,231,510 –

Deferred consideration shares 198,540 1,540,918

Weighted average number of ordinary shares in diluted earnings/(loss) per share 84,874,922 80,657,127



Basic earnings/(loss) per shareFrom continuing operations 4.41p 0.16 p

From discontinued operations – (0.65)p

Total basic earnings/(loss) per share 4.41p (0.49)p

Diluted earnings/(loss) per shareFrom continuing operations 4.28p 0.16 p

From discontinued operations – (0.65)p

Total diluted earnings/(loss) per share 4.28p (0.49)p

In addition to basic and diluted earnings/(loss) per share, headline earnings per share, which is a non-GAAP measure, has also been presented.

Headline earnings per shareHeadline basic earnings per share 7.25p 6.37 p

Headline diluted earnings per share 7.05p 6.25 p

Basic earnings/(loss) per share is calculated by dividing the earnings/(loss) attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year, excluding treasury shares and shares in employee benefit 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 outstanding during the year adjusted for the potentially dilutive ordinary shares.

The Group’s potentially dilutive shares are shares expected to be issued as deferred consideration on acquisitions and share options issued.

Headline earnings per share is calculated using headline post-tax 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

£’000

CostAt 1 January 2012 83,705

Adjustment to fair value of deferred consideration (8)

Exchange differences (290)

At 31 December 2012 83,407

Additions 248

Exchange differences (84)

At 31 December 2013 83,571

Amortisation At 1 January 2012 9,882

Impairment charge in the year 2,497

At 31 December 2012 and 31 December 2013 12,379

Net book valueAt 31 December 2013 71,192

At 31 December 2012 71,028

At 1 January 2012 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 2013 relates to the Group’s acquisition of Mash Health Limited (“Mash”).

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).

Goodwill acquired through business combinations is allocated to cash-generating units (“CGUs”) for impairment testing. The goodwill balance was allocated to the following CGUs:

2013 £’000

2012 £’000

Insight Research Group 10,224 10,224

The Value Engineers 9,526 9,526

RS Consulting 4,305 4,305

MSI 7,666 7,666

2CV 8,276 8,276

Tangible UK 22,889 22,889

Face 3,442 3,442

Opticomm 48 48

MedErgy 4,568 4,652

Mash 248 –

Total 71,192 71,028



13 Goodwill (continued)

The recoverable amount for each CGU is determined using a value-in-use calculation. This calculation uses pre-tax cash flow projections derived from 2014 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 9.7% for 2013 (2012: 10.5%). This rate was calculated using the Capital Asset Pricing Model with an estimated cost of debt and equity, with appropriate small company risk factors.

Sensitivity to changes in assumptions

The value-in-use exceeds the total goodwill value across the Group by £55.9m.

The impairment review of the Group is sensitive to changes in the key assumptions, most notably the pre-tax discount rate, the terminal growth rate and projected operating cash flows. Reasonable changes to these assumptions are considered to be:

• 1% increase in the pre-tax discount rate.• 1% decrease in the terminal growth rate.• 10% decrease in projected operating cash flows.

Reasonable changes to the assumptions used, considered in isolation, would not result in an impairment to goodwill for any of the Groups CGU’s.

14 Acquisitions

Mash

On 25 January 2013, the Group acquired the entire share capital of Mash Health Limited (“Mash”), a healthcare communications consulting company based in the UK.

Mash has contributed £2.5m to revenue and £0.5m to profit before tax for the period between the date of acquisition and the balance sheet date. Had Mash been consolidated from 1 January 2013, the consolidated income statement for the period ended 31 December 2013 would show revenue of £159.9m and profit before tax of £5.4m.

The fair value of the net assets at the acquisition date is as follows:Fair value

£’000

Client relationships 531

Property, plant and equipment 15

Trade and other receivables 717

Cash and cash equivalents 694

Trade and other payables (686)

Deferred tax liability (124)

Net assets acquired 1,147

Goodwill arising on acquisition 248

1,395

The fair value of trade and other receivables include trade receivables with a fair value of £567,000. The gross contractual amount of trade receivables is equal to the fair value.

Goodwill comprises the value of expected synergies and other opportunities arising from the acquisition, management know how, the skilled work force employed by Mash and other intangible assets that do not qualify for separate recognition. None of the goodwill recognised is expected to be deductible for tax purposes.



14 Acquisitions (continued)

The fair value of the consideration paid is as follows:

£’000

Cash consideration 500

Issue of ordinary shares 127

Deferred consideration 593

Deferred contingent consideration 175

1,395

As part of the consideration for the acquisition of Mash deferred contingent consideration is payable. The amount to be paid is dependent on the profits earned by Mash in the year to 31 December 2013. The fair value of this consideration at the acquisition date was £175,000 and at 31 December 2013 is £175,000. The maximum amount of deferred contingent consideration payable is £175,000. Any changes to the fair value of deferred contingent consideration in the future will be recognised in the income statement.

In addition to the deferred consideration, acquisition related employee remuneration of up to £700,000 was also payable to the vendors of Mash. This remuneration was also dependent on the profits earned by Mash in the year to 31 December 2013 and is recognised in the income statement over that period. At 31 December 2013 £350,000 of deferred remuneration has been paid and £350,000 is expected to be paid in the year ended 31 December 2014.

Newhaven

On 14 June 2013, the Group acquired the trade and certain assets of Newhaven Communications Limited. The net assets acquired and consideration paid were immaterial.

15 Intangible Assets

Software development costs

£’000Client contracts

£’000Licences

£’000Total

£’000

CostAt 1 January 2012 692 3,700 3,209 7,601

Expenditure on development 358 – – 358

Exchange differences – (65) – (65)

At 31 December 2012 1,050 3,635 3,209 7,894

Expenditure on development 312 – – 312

On acquisition of subsidiaries – 601 – 601

Exchange differences – 9 – 9

At 31 December 2013 1,362 4,245 3,209 8,816

Accumulated amortisation At 1 January 2012 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

Charge for the year 247 961 229 1,437

At 31 December 2013 785 3,547 3,209 7,541

Net book value At 31 December 2013 577 698 – 1,275

At 31 December 2012 512 1,049 229 1,790

At 1 January 2012 321 1,595 457 2,373



16 Property, Plant and equipment

Leasehold improvements

£’000

Computer equipment

£’000

Fixtures, fittings

and office equipment

£’000

Motor vehicles

£’000Total

£’000

CostAt 1 January 2012 1,974 3,585 920 210 6,689

Additions 391 521 427 110 1,449

Disposals (394) (272) (486) (45) (1,197)

Exchange differences – – (3) – (3)

At 31 December 2012 1,971 3,834 858 275 6,938

Additions 214 587 245 1 1,047

On acquisition of subsidiaries – 15 – – 15

Disposals – (19) – (72) (91)

Exchange differences 1 5 2 – 8

At 31 December 2013 2,186 4,422 1,105 204 7,917

Accumulated depreciationAt 1 January 2012 1,129 2,762 503 119 4,513

Charge for the year 288 541 231 67 1,127

Disposals (309) (258) (392) (43) (1,002)

Exchange differences 1 7 3 – 11

At 31 December 2012 1,109 3,052 345 143 4,649

Charge for the year 311 549 215 49 1,124

Disposals – (18) – (62) (80)

Exchange differences 5 7 – – 12

At 31 December 2013 1,425 3,590 560 130 5,705

Net book valueAt 31 December 2013 761 832 545 74 2,212

At 31 December 2012 862 782 513 132 2,289

At 1 January 2012 845 823 417 91 2,176

The net book value of property, plant and equipment of the Group includes £20,000 (2012: £53,000) of motor vehicles and £22,000 (2012: £32,000) of fixtures, fittings and office equipment in respect of assets held under finance leases.



17 Subsidiaries

Details of the Company’s principal subsidiary undertakings as at 31 December 2013 are as follows:

Company name

Country of

incorporation/ principal

operation Class of share

Proportion of shares held

2013

Held directly:2CV Limited England Ordinary 100%

Cello Group Inc USA Ordinary 100%

Cello Business Sciences Limited England Ordinary 100%

Chiaros Holdings Limited England Ordinary 100%

Fenix Media Limited England Ordinary 97%

Insight Medical Research Limited England Ordinary 100%

Mash Health Limited England Ordinary 100%

MedErgy Europe Limited England Ordinary 100%

Opticomm Media Limited England Ordinary 51%

RS Consulting Group Limited England Ordinary 100%

Tangible Group Limited England Ordinary 100%

The MSI Consultancy Limited England Ordinary 100%

The Value Engineers Limited England Ordinary 100%

Held indirectly:2CV Inc USA Ordinary 100%

Blonde Digital Limited Scotland Ordinary 100%

Brightsource Limited England Ordinary 100%

Insight Research Group USA Inc USA Ordinary 100%

Labinah Management Training Limited England Ordinary 100%

MedErgy Communications Inc USA Ordinary 100%

MedErgy Healthcare Group USA Ordinary 100%

MedErgy Marketing Inc USA Ordinary 100%

RS Consulting Limited England Ordinary 100%

Scifluent Communications Inc USA Ordinary 100%

Stripe PR and Communications Limited Scotland Ordinary 100%

Tangible UK Limited Scotland Ordinary 100%

During the year the Group acquired 100% of the share capital of Mash Health Limited. There were no other changes in the proportion of shares held in other subsidiaries of the Group.



18 Trade and Other Receivables

2013 £’000

2012 £’000

Trade receivables 28,468 23,840

Other receivables 789 1,174

Prepayments and accrued income 7,063 4,921

36,320 29,935

The average credit period taken on the provision of services was 52 days (2012: 53 days).

The Directors consider that the carrying value of trade and other receivables approximates to fair value.

19 Cash and Cash equivalents

2013 £’000

2012 £’000

Cash at bank and in hand 5,984 4,148

Cash of £nil (2012: £278,000) 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.

20 Trade and Other Payables

2013 £’000

2012 £’000

Trade payables 12,700 14,744

Other taxation and social security costs 1,344 1,546

Accruals and deferred income 23,098 12,416

Deferred consideration for acquisitions 201 343

Acquisition related employee remuneration liability 350 75

Other payables 710 593

38,403 29,717

The Directors consider that the carrying value of trade and other payables approximates to fair value.



21 Borrowings

2013 £’000

2012 £’000

Bank loans 9,146 12,320

Loan notes 373 498

9,519 12,818

The borrowings are repayable as follows:

– on demand or within one year 373 498

– within two to five years 9,146 12,320

9,519 12,818

Bank loans

The Group has a multi-currency debt facility with the Royal Bank of Scotland plc (“RBS”). At 31 December 2013 this facility consisted of a £25.0m revolving credit facility (“RCF”). The RCF bears interest at a variable rate of 1.75% to 2.80% over LIBOR and is committed to March 2016. The average interest rate on the Group’s bank loans in the year was 2.8% (2012: 3.4%). The debt facility is secured by a debenture held by RBS over the assets of the Group. On 3 February 2014 the Directors elected to reduce the RCF to £20.0m.

At 31 December 2013, the Group has drawn £9.1m (2012: £12.3m) under the revolving credit facility.

Loan notes

Loan notes have been issued as part of the consideration for certain acquisitions. Loan notes are initially secured by way of cash deposits and by guarantee. This security expires after a period of between 2 and 5 years in accordance with the terms of the relevant acquisition agreement. After this period the loan notes are unsecured. Cash deposits provided as security are included within cash and cash equivalents and amount to £nil (2012: £278,000). Loan notes bear interest at the following rates:

2013 £’000

2012 £’000

SecuredLIBOR less 2% – 278

UnsecuredLIBOR less 2% 322 169

LIBOR 51 51

373 498



22 Provisions

2013 £’000

2012 £’000

Restructuring provision – 388

– 388

Current – 108

Non-current – 280

– 388

Contingent deferred consideration for acquisitions

£’000

Restructuring provision

£’000Total

£’000

At 1 January 2012 2,268 – 2,268

Recognised in the year – 388 388

Finance costs on deferred consideration (8) – (8)

Utilisation of provisions (2,260) – (2,260)

At 31 December 2012 – 388 388

Utilisation of provisions – (388) (388)

At 31 December 2013 – – –

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 related to redundancy costs and onerous lease costs as a result of restructuring of operations within the Cello Signal Division.



23 Obligations under Finance leases

A maturity analysis of obligations under finance leases is shown below:2013

£’0002012

£’000

Finance leases which expire:

– within one year 13 23

– in more than one year but not more than five years 13 26

26 49

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 13.5% (2012: 10.5%). 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.

24 Derivative Financial Instruments

2013 £’000

2012 £’000

Interest rate swap at fair value – 5

During the year ended 31 December 2013 the Group had an interest rate swap over £1.0m (2012: £3.3m) of borrowings. This interest rate swap expired on 31 March 2013. The interest rate swap is included within level 2 as defined in IFRS 13 Fair value measurement.



25 Deferred Taxation

An analysis of deferred tax assets and deferred tax liabilities is set out below:2013

£’0002012

£’000

Deferred tax assets Decelerated capital allowances 260 202

Unrelieved share-based payment expense 298 85

Unrelieved acquisition related employee remuneration expense 234 175

Unrelieved loss on derivative financial instruments – 1

792 463

Deferred tax liabilitiesAccelerated capital allowances (23) (1)

Temporary difference between the net book value and the tax value of intangible assets (269) (497)

(292) (498)

500 (35)

The movement for the year is analysed as follows:2013

£’0002012

£’000

At 1 January (35) (222)

Income statement 451 143

Recognised in equity 213 17

Acquired deferred tax balances (124) –

Foreign exchange differences (5) 27

At 31 December 500 (35)



26 Share Capital

Authorised number of 10p shares

Allotted, issued and fully paid number of

10p sharesShare capital

£’000

At 1 January 2012 100,000,000 78,526,706 7,853

Movements in the year – 3,734,799 373

At 31 December 2012 100,000,000 82,261,505 8,226

Movements in the year – 1,221,547 122

At 31 December 2013 100,000,000 83,483,052 8,348

The Company has one class of ordinary shares which carry no right to fixed income.

On 30 April 2012, 486,219 new ordinary shares of 10.0p 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 10.0p 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.

On 28 January 2013, 333,332 new ordinary shares of 10.0p each were issued at 38.2p to vendors of Mash Health Limited pursuant to the terms of the share purchase agreement of that company.

On 10 May 2013, 89,122 new ordinary shares of 10.0p each were issued at 50.0p to certain employees of the Group. These shares were issued pursuant to the share purchase agreements in relation to Red Kite Consulting Group Limited.

On 13 September 2013, 196,188 new ordinary shares of 10.0p each were issued at 68.5p to the vendors of Mash Health Limited pursuant to the terms of the share purchase agreement of that company.

During the year, 602,905 shares (2012: nil) were issued to staff in relation to share option schemes exercise prices between 10.0p and 31.5p per share. Further details of share options are provided in note 27.

The Group owns 453,000 (2012: 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. The purchase of treasury shares is recorded in equity as a deduction in retained earnings.



27 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 50.0p. 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 2013 and 31 December 2012:

31 December 2013 31 December 2012

Number of share options

Weighted average

exercise price (pence)

Number of share options

Weighted average

exercise price (pence)

Outstanding at the beginning of the year 5,583,928 32 4,560,842 35

Granted during the year 1,698,772 30 1,526,866 25

Exercised during the year (602,905) 19 – –

Lapsed during the year (583,375) 33 (503,780) 35

Outstanding at the end of the year 6,096,420 33 5,583,928 32

Exercisable at the end of the year 1,934,294 43 463,266 108

The options outstanding at the end of the year under the EMI Scheme and Unapproved Scheme 2004 have a weighted average remaining life of 1.1 years (2012: 2.1 years) and options issued under the PSP, Approved Plan 2009 and the Unapproved Plan 2010 have a weighted average remaining life of 8.1 years (2012: 8.3 years).



27 Share Options (continued)

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:

2013 2012

Weighted average share price 50.0p 34.0p

Weighted average exercise price 30.0p 25.0p

Expected volatility 31.5% 31.3%

Expected life 10 years 10 years

Risk free rate 2.38% 1.57%

Dividend yield 4.00% 5.26%

Expected volatility has been determined by calculating the historical volatility of the Group’s share price over the previous 9 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.

The following options have vested and are unexercised at 31 December 2013 and 31 December 2012:

2013 2012

EMI Scheme 181,633 181,633

Unapproved scheme 281,633 281,633

PSP 646,000 –

Approved plan 2010 785,028 –

Unapproved plan 2011 40,000 –

1,934,294 463,266

The fair value of all options granted in the year was £313,000 (2012: £121,000).

28 Cash Generated from Operations


£’000


£’000

Profit on continuing activities before taxation 5,459 1,380

Loss from discontinued operations – (617)

Financing income (16) (76)

Finance costs 579 712

Depreciation of property, plant and equipment 1,124 1,127

Amortisation of intangible assets 1,437 876

Impairment of goodwill – 2,497

Share-based payment expense 179 134

(Profit)/loss on disposal of property, plant and equipment (16) 120

Increase in trade and other receivables (5,747) (879)

Increase/(decrease) in acquisition related employee remuneration payable 433 (628)

Increase in trade and other payables 7,642 1,479

Net cash inflow from operating activities 11,074 6,125

Cash flows in relation to acquisition related employee remuneration payments in the year ended 31 December 2012 have been reclassified. The effect of this is to reduce in cash generated from operating activities in the year ended 31 December 2012 by £710,000. There is a corresponding decrease in cash used in investing activities in the year ended 31 December 2012, which is presented in the consolidated cash flow statement.



29 Net Debt

At 1 January 2013

£’000Cash flow

£’000

Foreign exchange

£’000

At 31 December 2013

£’000

Cash and cash equivalents 4,148 1,968 (132) 5,984Loan notes (498) 125 – (373)Bank loans (12,320) 2,976 198 (9,146)Finance leases (49) 23 – (26)

Net debt (8,719) 5,092 66 (3,561)

30 Commitments under Operating leases

The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

Land and buildings

2013 £’000

Land and buildings

2012 £’000

Other 2013

£’000

Other 2012

£’000

No later than one year 1,970 2,116 143 151

Later than one year and no later than five years 4,721 5,355 103 154

Later than five years 1,062 925 – –

7,753 8,396 246 305

31 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 Non-Executive). The remuneration paid to the key management personnel is shown below:


£’000


£’000

Salaries and other short-term benefits 1,296 770

Post-employment benefits 88 66

Share-based payments – share options 62 63

1,446 899

Further information about the remuneration of the Directors is provided in the Remuneration Report on pages 32 to 33, and in note 8 to the consolidated financial statements.



32 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 22 to the consolidated financial statements).

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 2013 and 31 December 2012:

2013 £’000

2012 £’000

Financial assets:Cash and cash equivalents 5,984 4,148


Other receivables 789 1,174

Accrued income 5,303 3,251

Total financial assets 40,544 32,413

Financial liabilities:Bank loans 9,146 12,320

Loan notes 373 498

Finance leases 26 49

Consideration payable in respect of acquisitions 551 418

Trade payables 12,700 14,744

Accruals 14,573 7,623

Other payables 710 593

Total financial liabilities 38,079 36,245

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 24. 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.

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.



33 Financial Instruments (continued)

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.

£6.4m (2012: £3.6m) 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 21 and details of the Groups obligations under finance leases are set out in note 23.

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:

2013 £’000

2012 £’000

Increase in rates of 100 basis pointsEffect on headline profit before tax (124) (98)

Effect on profit before tax and equity (124) (95)

Decrease in rates of 50 basis pointsEffect on headline profit before tax 62 49

Effect on profit before tax and equity 62 48

The difference in the effects on headline profit before tax and reported profit before tax in the year ended 31 December 2012 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.

At 31 December 2013 the Group has an agreed committed revolving credit facility (“RCF”) of £25.0m with the Royal Bank of Scotland plc (“RBS”), which is committed to March 2016. On 3 February 2014 the Directors elected to reduce the RCF to £20.0m.

In addition to the RCF the Group has an overdraft facility of £4.0m with RBS, which is reviewed on an annual basis.

At 31 December 2013 the Group had an undrawn facility of £15.9m (2012: £12.7m) on the RCF and cash and cash equivalents of £6.0m (2012: £4.1m).




The table below summarises the maturity profile of the Group’s non-derivative financial liabilities at 31 December 2013 and 31 December 2012 based on contractual undiscounted payments, including estimated interest payments where applicable:

2013

Less than 6 months

£’000

Between 6 months and

1 year £’000

Between 1 and 5 years

£’000Total

£’000

Bank loans 76 55 9,610 9,741

Loan notes 373 – – 373

Finance leases 9 8 13 30

Consideration payable in respect of acquisitions 551 – – 551

Trade payables 12,700 – – 12,700

Accruals 14,573 – – 14,573

Other payables 710 – – 710

Total 28,992 63 9,623 38,678

2012

Less than 6 months

£’000

Between 6 months and

1 year £’000

Between 1 and 5 years

£’000Total

£’000

Bank loans 88 57 12,691 12,836

Loan notes 498 – – 498

Finance leases 14 14 26 54

Consideration payable in respect of acquisitions 418 – – 418

Trade payables 14,744 – – 14,744

Accruals 7,623 – – 7,623

Other payables 593 – – 593

Total 23,978 71 12,717 36,766

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.




The Group considers the maximum exposure to credit risk is as follows:2013

£’0002012

£’000


Accrued income 5,303 3,251

33,771 27,091

The following table provides an analysis of trade and other receivables that were past due, but not impaired, at 31 December 2013 and 31 December 2012. 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 2013 or 31 December 2012.

2013 £’000

2012 £’000

Up to three months 3,125 2,209

Up to six months 217 199

3,342 2,408

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 2013 the net foreign assets were £2.1m (2012: £6.5m). 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.

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 profit 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 Euro

2013 2012 2013 2012

Strengthening of sterling by 10%On profit for the year 109 65 (38) (24)

On equity (392) (390) (38) (24)

Weakening of sterling by 10%On profit for the year (133) (79) 46 29

On equity 480 476 46 29




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 2013 and 31 December 2012 is as follows:2013

£’0002012

£’000

Total debt 9,545 12,867

Less cash and cash equivalents (5,984) (4,148)

Net debt 3,561 8,719

Total equity 68,264 65,596

Debt to capital ratio 5.2% 13.3%

The Group has various financial covenants in connection with its current bank loans. During the year ended 31 December 2013 the Group was compliant with its covenants.

Company Financial Statements – Independent Auditors’ Report for the year ended 31 December 2013


Independent auditors’ report to the members of Cello Group plc

Report on the Parent Company financial statements

Our opinionIn our opinion the financial statements, defined below:

• give a true and fair view of the state of the Parent Company’s affairs as at 31 December 2013;

• 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.

This opinion is to be read in the context of what we say in the remainder of this report.

What we have auditedThe Parent Company financial statements (the “financial statements”), which are prepared by Cello Group plc, comprise:

• Company balance sheet as at 31 December 2013;• the accounting policies; and• the notes to the financial statements, which

include other explanatory information.

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).

In applying the financial reporting framework, the Directors have made a number of subjective judgements, for example in respect of significant accounting estimates. In making such estimates, they have made assumptions and considered future events.

What an audit of financial statements involvesWe conducted our audit in accordance with International Standards on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”). An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material 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 significant 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 and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on matter prescribed by the Companies Act 2006In our opinion the information given in the Strategic Report and Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

Other matters on which we are required to report by exceptionAdequacy of accounting records and information and explanations receivedUnder the Companies Act 2006 we are required to report to you if, in our opinion:

• we have not received all the information and explanations we require for our audit; or

• 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 financial statements are not in agreement with the accounting records and returns.

We have no exceptions to report arising from this responsibility.

Directors’ remunerationUnder the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of Directors’ remuneration specified by law are not made. We have no exceptions to report arising from this responsibility.

Responsibilities for the financial statements and the auditOur responsibilities and those of the DirectorsAs explained more fully in the Directors’ Responsibilities Statement, 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 ISAs (UK & Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

This report, 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.

Other matterWe have reported separately on the Group financial statements of Cello Group plc for the year ended 31 December 2013.

David A Snell (Senior Statutory Auditor) for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors London

19 March 2014


Company Balance Sheetat 31 December 2013

Notes31 December 2013

£’00031 December 2012

£’000

Fixed assetsTangible assets 1 2 3

Investments 2 82,840 81,324

82,842 81,327

Current assetsDebtors 3 9,482 10,924

Cash at bank and in hand 531 754

10,013 11,678

Creditors: Amounts falling due within one year 4 (17,307) (22,163)

Net current liabilities (7,294) (10,485)

Total assets less current liabilities 75,548 70,842

Creditors: Amounts falling due after more than one year 5 (9,146) (12,320)

Net assets 66,402 58,522

Capital and reservesCalled up share capital 8 8,348 8,226

Share premium account 10 18,368 18,188

Merger reserve 10 28,345 28,228

Capital redemption reserve 10 50 50

Share-based payment reserve 10 455 343

Profit and loss account 10 10,836 3,487

Total shareholders’ funds 11 66,402 58,522

The financial statements on pages 76 to 81 were approved by the Board of Directors on 19 March 2014 and signed on its behalf by:

Mark Scott Director

Mark Bentley Director

Company Financial Statements – Accounting Policiesfor the year ended 31 December 2013


(1) Basis of AccountingThe 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.

(2) Profit and Loss AccountAs permitted by section 408 The Companies Act 2006, the Company’s profit and loss account has not been presented. The Company reported a profit in the financial year of £9,073,000 (2012: loss £5,077,000).

The auditor’s remuneration for the audit of the Company’s financial statements was £10,000 (2012: £9,000). The auditor’s remuneration for audit and other services is disclosed in note 5 to the consolidated financial statements.

(3) TurnoverTurnover is derived from management charges to subsidiary companies. Turnover is recognised on an accruals basis, net of VAT.

(4) PensionsThe 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 AssetsTangible 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

(6) InvestmentsFixed asset investments are stated at cost less provision for any impairment in value.

(7) Deferred TaxationDeferred 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 CurrencyTransactions 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.

(9) Share-based PaymentsThe Company has applied the requirements of FRS 20 Share-based payment to both cash-settled and equity-settled share-based employee compensation schemes.

Certain 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 reserves.

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 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 reserves.

The grant of share options to the employees of subsidiary undertakings 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 reserves.


Notes to the Company Financial Statementsfor the year ended 31 December 2013

1 Tangible Fixed Assets

Computer equipment £’000

Fixtures, fittings and

office equipment £’000

Total £’000

CostAt 1 January 2013 40 45 85

Additions 2 – 2

At 31 December 2013 42 45 87

Accumulated depreciationAt 1 January 2013 39 43 82

Charged for the year 2 1 3

At 31 December 2012 41 44 85

Net book valueAt 31 December 2013 1 1 2

At 31 December 2012 1 2 3

2 Fixed Asset Investments

Subsidiaries

£’000

CostAt 1 January 2013 95,002

Additions in the year 1,450

Capital contribution in relations to share-based payments 66

At 31 December 2013 96,518

Amortisation At 1 January 2013 and 31 December 2013 13,678

Net book valueAt 31 December 2013 82,840

At 1 January 2013 81,324

The Company’s principal trading subsidiaries are listed in note 17 to the consolidated financial statements.

During the year the company acquired 100% of the share capital of Mash Health Limited. Further details of the acquisition are included in note 14 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

2013

£’0002012

£’000

Amounts falling due within one year:Amounts owed by subsidiary companies 8,853 10,273

Other debtors 51 45

Deferred tax asset 7 41 34

Corporation tax 327 295

Prepayments 210 277

9,482 10,924

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% (2012: 1.5%).

4 Creditors: Amounts falling due within one year

Notes

2013

£’0002012

£’000

Bank overdraft 7,886 8,305

Loan notes 373 498

Trade creditors 115 134

Amounts owed to Group companies 7,475 12,548

Other taxation and social security costs 227 274

Consideration payable in respect of acquisitions 6 141 –

Other creditors 69 82

Accruals 1,021 322

17,307 22,163

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% (2012: 1.5%).

Bank overdraftThe 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 notesLoan notes have been issued as part of the consideration for certain acquisitions. Loan notes are initially secured by way of cash deposits and by guarantee. This security expires after a period of between 2 and 5 years in accordance with the terms of the relevant acquisition agreement. After this period the loan notes are unsecured. Cash deposits provided as security are included within cash and cash equivalents and amount to £nil (2012: £278,000). Loan notes bear interest at the following rates:

2013 £’000

2012 £’000

SecuredLIBOR less 2% – 278

UnsecuredLIBOR less 2% 322 169

LIBOR 51 51

373 498



5 Creditors: Amounts falling due after more than one year

2013 £’000

2012 £’000

Bank loans 9,146 12,320

The Company has a debt facility with the Royal Bank of Scotland plc. At 31 December 2013 the debt facility consists of a £25.0m revolving credit facility (“RCF”). The RCF bears interest at a variable rate of 1.75% to 2.80% over LIBOR and is committed to March 2016. The security over the RCF is the same as for the bank overdraft (note 4). On 3 February 2014 the Directors elected to reduce this facility to £20.0m.

6 Consideration Payable for Acquisitions

£’000

At 1 January 2013 –

Additions in the year 768

Settled in the year (627)

At 31 December 2013 141

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

2013 £’000

2012 £’000

Deferred tax assets:Other timing differences 41 34

The deferred tax credit in the year of £7,000 (2012: £16,000) is included in the tax charge in the profit and loss account.

8 Called Up Share Capital

2013 £’000

2012 £’000

Allotted, issued and fully paid:

83,483,052 ordinary shares of 10p each 8,348 8,226

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 26 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 27 to the consolidated financial statements.

For the year ended 31 December 2013, the Company recognised an expense of £82,000 in the profit and loss account (2012: £68,000) in relation to equity settled share-based payment transactions.

10 Reserves

Share premium

account £’000

Merger reserve

£’000

Capital redemption

reserve £’000

Share-based payment

reserve £’000

Profit and loss account

£’000

CompanyAt 1 January 2013 18,188 28,228 50 343 3,487

Profit for the year – – – – 9,073

Shared-based payments – – – 82 –

Dividends paid – – – – (1,643)

Transfer between reserves in respect of share option exercised – – – (36) 36

Share-based payment in subsidiaries – – – 66 –

Allotment of shares during the year 180 117 – – –

Purchase of own shares – – – – (117)

31 December 2013 18,368 28,345 50 455 10,836

11 equity Shareholders’ Funds

2013 £’000

2012 £’000

Profit/(loss) for the year 9,073 (5,077)

New share capital subscribed 122 373

Premium on shares issued in the year (net of expenses) 180 84

Merger reserve on shares issued in the year 117 898

Dividends paid (1,643) (1,386)

Expense for share-based incentive schemes 82 68

Share-based payments in subsidiaries 66 66

Purchase of own shares (117) –

Net addition to equity shareholders’ funds 7,880 (4,974)

Opening equity shareholders’ funds 58,522 63,496

Closing equity shareholders’ funds 66,402 58,522

12 Related Party Transactions

Transactions with the Company’s Directors are disclosed in note 31 to the consolidated financial statements. Further information about the remuneration of the Directors is provided in the Remuneration report on pages 32 to 33 and in note 8 to the consolidated financial statements.

During the year ended 31 December 2013 the Company earned £61,000 (2012: £41,000) 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.


Notice of Annual General Meeting

Notice is hereby given that the Tenth Annual General Meeting of the Company will be held at Buchanan, 107 Cheapside, London EC2V 6DN on Tuesday 13 May 2014 at 12.30pm, for the transaction of the following business:

Ordinary Business

1. To receive and adopt the Directors’ Report and Financial Statements for the year ended 31 December 2013, together with the auditors’ report thereon.

2. To declare a final dividend of 1.61p per ordinary share for the year ended 31 December 2013.

3. To receive and approve the Directors’ Remuneration Report for the year ended 31 December 2013.

4. To re-elect Mark Bentley as a Director, who resigns in accordance with the Company’s Articles of Association.

5. To elect Stephen Highley as a Director, 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 up to an aggregate nominal amount of £1,633,285 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 2015 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.

Notice of Annual General MeetingCello Annual Report 2013 | 83

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) the allotment of equity securities in 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 proportion (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 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 £836,017

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 2015 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 first 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:

(a) the maximum number of shares authorised to be purchased is 4,180,088 ordinary shares of 10p each, being 5% of the shares in issue as at 28 February 2014.

(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 2015 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.


Mark Bentley Company Secretary 14 April 2014

Registered Office 11-13 Charterhouse Buildings London EC1M 7AP


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 appoint more than one proxy 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. As permitted by Regulation 41 of the Uncertificated Securities Regulations 2001, Shareholders who hold their shares in uncertificated form must be entered on the Company’s share register by 12.30pm on 9 May 2014 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 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 registrars, Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol, BS99 6ZY by 12.30pm on 9 May 2014, 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 corporate representatives 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 accordance with 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 corporate 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 normal business hours from the date of this notice until the date of the Annual General Meeting:

– a copy of the service agreements for the Executive Directors;

– a copy of the letters of appointment for the Non Executive Directors;

– the Articles of Association of the Company; and

– the register of interests of the directors (and their families) in the share capital of the Company.

These documents will also be available for inspection during the Annual General Meeting and for at least 15 minutes before it begins.

Notice of Annual General MeetingCello Annual Report 2013 | 85

Explanation of Special Business at the AnnualGeneral Meeting

Explanation of Resolution 7 (Authority to allot securities)

Resolution 6, which will be proposed as an ordinary resolution, would give the directors authority to allot shares up to a maximum nominal amount of £1,633,285 being approximately 20% of the Company’s issued share capital as at 28 February 2014. The existing authority would be revoked and this new authority would expire on the date of the 2015 Annual General Meeting or 13 August 2015, 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-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 £836,017 being approximately 10%, of the issued share capital of the Company as at 28 February 2014 (to give the directors some flexibility in financing business opportunities as they arise).

This power would expire on the date of the 2015 Annual General Meeting or 13 August 2015, whichever is the earlier.

Explanation of Resolution 9 (Authority to purchase own shares)

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 2015 Annual General Meeting or 13 August 2015, 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 specifies the maximum number of shares which may be acquired (being 4,180,088 ordinary shares, which is approximately 5% of the Company’s issued share capital as at 28 February 2014 of 83,601,762 ordinary shares) and the maximum and minimum prices at which they may be bought.


Directors

Allan RichNon-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 four years MediaCom became the largest media company in the UK and remains so to this day.

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 fifteen 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.

DirectorsCello Annual Report 2013 | 87

Stephen Highley Group Corporate Development Director and Cello Health Chairman

Stephen started his career in the Retail and FMCG sector before moving into healthcare. His extensive healthcare career includes working for Baxter Healthcare and a London based consultancy company where he was Director of the Healthcare Division. In 1994 Stephen was a founding Director of MSI and subsequently spent seventeen years as Managing Director. Since early 2011 Stephen has performed in a number of wider Cello roles, specifically Chairman of Cello Health and Group Corporate Development Director, responsibilities he currently retains. As Chairman of Cello Health, Stephen’s key role is to harness the considerable talent within the Cello Health capabilities to build on the success to date in the healthcare sector.

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. Paul has also been Chairman of the FSA Listing Rules Committee and a member of the FSA Listing Authority Advisory 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 previously Non-Executive Chairman of Polaron plc, Orca Interactive Limited and Advanced power Components plc and is currently a Non-Executive Director of Winlogic plc. He has more than twenty years experience working in corporate advisory and broking roles for small and mid cap companies and has 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 fund-raisings and provision of advice on corporate governance matters. Will chairs the Audit Committee and is a member of both the Nomination and Remuneration Committees.


Group Directory

Head Office

11-13 Charterhouse Buildings, London EC1M 7APtel: +44 (0)20 7812 8460 www.cellogroup.comContact: Mark Scott

Cello Health

11-13 Charterhouse Buildings, London EC1M 7APtel: +44 (0)20 7812 8460 www.cellohealth.comContact: Stephen Highley

Cello Health Insight11-13 Charterhouse Buildings, London EC1M 7APtel: +44 (0)20 7608 9300 www.cellohealthinsight.comContact: Jane Shirley, Nicola Cowland

Cello Health Insight – New York256 West 38th Street, 15th Floor, New York, NY 10018 USAtel: +1 646 837 8151 www.cellohealthinsight.comContact: Kathryn Gallant

Cello Health Insight – Chicago5250 Old Orchard Rd, Suite 300, Skokie, IL 60077 USAtel: +1 847 983 3686 www.cellohealthinsight.comContact: Angela Wheeler

Cello Health Communications (MedErgy)790 Township Line Road, Suite 200, Yardley, PA 19067 USAtel: +1 215 504 2082 www.medergygroup.comContact: Julia Ralston

Cello Health Communications (Mash)Harlequin House, 7 High Street, Teddington, Middlesex TW11 8EEtel: +44 (0)20 8977 5358 www.mashhealth.comContact: Jane Ayton

Cello Health Consulting Weaver’s Yard, West Street, Farnham, Surrey GU9 7DNtel: +44 (0)1252 748 600 www.cellohealthconsulting.comContact: Jon Bircher

RS Consulting LtdPriory House, 8 Battersea Park Road, London SW8 4BGtel: +44 (0)20 7627 7700 www.rsconsulting.comContact: Chris Stead, Kate Anderson

The Value EngineersWendover House, 24 London End, Beaconsfield,Buckinghamshire HP9 2JHtel: +44 (0)1494 680999 www.thevalueengineers.comContact: Owen Williams

The Value Engineers – North America256 W 38th Street, 15th Floor, New York, NY 10018 USAtel: +1 646 837 8161 www.thevalueengineers.comContact: Alex Waters

MRUKPriory House 8 Battersea Park Road, London SW8 4BGtel: +44 (0)845 130 4576 www.mruk.co.ukContact: Rachel Cope

Cello Signal

86/3 Commercial Quay, Commercial Street, Edinburgh EH6 6LXtel: +44 (0)131 526 3030 www.cellosignal.comContact: John Rowley 2CV 12 Flitcroft Street, London WC2H 8DJtel: +44 (0)20 7655 9900 www.2cv.comContact: Vincent Nolan

2CV – San Francisco460 Bush Street, Floor 1, San Francisco, CA 94108 USAtel: +1 415 956 1004 www.2cv.comContact: Doug Edmonds

2CV – Los Angeles13441 Beach Avenue, Marina Del Rey, Los Angeles, CA 90292 USAtel: +1 310 874 9414 www.2cv.comContact: Doug Edmonds

2CV – New York256 W 38th Street, 15th Floor, New York, NY 10018 USAtel: +1 415 956 1004 www. 2cv.com Contact: Doug Edmonds

2CV – Singapore78 Tras Street, Singapore, 079010tel: +65 6574 5015 www.2cv.comContact: James Redden

2CV – Hong KongAIA Tower, Level 43, 183 Electric Road,North Point, Hong Kongtel: +852 3975 1354 www.2cv.comContact: Josie Yau

Blonde 86/3 Commercial Quay, Commercial Street, Edinburgh EH6 6LXtel: +44 (0)131 526 3030 www.blonde.netContact: Pete Burns

Group DirectoryCello Annual Report 2013 | 89

BrightsourceSt James’s House, St James Square, Cheltenham, Gloucestershire GL50 3PRtel: +44 (0)1242 534200 www.brightsource.co.ukContact: Peter Frings

Face7 Midford Place, London W1T 5BGtel: +44 (0)20 7874 6599 www.facegroup.comContact: Andrew Needham

Face – New York256 W 38th Street, 15th Floor, New York, NY 10018 USAtel: +1 646 837 8152 www.facegroup.com Contact: Philip McNaughton

Face – Hong Kong8B Trust Tower, 68 Johnstone Road, Wan Chai, Hong Kongtel: + 1 852 5808 3676 www.facegroup.com Contact: Andrew Ho

Face – Singapore71 Tras Street, Singapore 079010tel: + 1 65 6226 2042 www.facegroup.com Contact: Andrew Ho

LeapfrogPriory House, 8 Battersea Park Road, London SW8 4BGtel: +44 (0) 20 7627 7810 www.leapfrogresearch.co.ukContact: Kate Anderson

Leith 37 The Shore, Edinburgh EH6 6QUtel: +44 (0)131 561 8600 www.leith.co.ukContact: Richard Marsham

Leithal Thinking – Edinburgh37 The Shore, Edinburgh EH6 6QUtel: +44 (0)131 561 8600 www.leithalthinking.comContact: David Amers

Leithal Thinking – London7 Midford Place, London W1T 5BGtel: +44 (0)207 881 3260 www.leithalthinking.comContact: Lee Powney

Opticomm Media7 Midford Place, London W1T 5BGtel: +44 (0)20 7874 6567 www.opticomm.co.ukContact: Spencer Stratford, Paul Cox

Stripe Communications – Edinburgh86/3 Commercial Quay, Commercial Street, Edinburgh EH6 6LXtel: +44 (0)131 561 8628 www.stripecom.co.ukContact: Juliet Simpson

Stripe Communications – Glasgow2 West Regent Street, Glasgow G2 1RWtel: +44 (0) 141 206 3710 www.stripecom.co.ukContact: Juliet Simpson

Tangible Group37 The Shore, Edinburgh EH6 6QUtel: +44 (0)131 556 8002 www.tangible.uk.comContact: Karen Trickett

Tangible – Edinburgh37 The Shore, Edinburgh EH6 6QUtel: +44 (0)131 556 8002 www.tangible.uk.comContact: Karen Trickett

Tangible – CheltenhamSt James’s House, St James Square,Cheltenham GL50 3PRtel: +44 (0)1242 258700 www.tangible.uk.comContact: Karen Trickett

Tangible – London7 Midford Place, London W1T 5BGtel: +44 (0)20 7881 3200 www.tangible.uk.comContact: Karen Trickett

TMI7 Clarendon Place, Royal Leamington Spa, Warwickshire CV32 5QLtel: +44 (0)1926 462998 www.tmi.co.ukContact: Gillian James


Advisors

Company Secretary

Mark Bentley

Registered Office

11-13 Charterhouse BuildingsLondonEC1M 7AP

Independent Auditor

PricewaterhouseCoopers LLPChartered Accountants and Statutory Auditors1 Embankment PlaceLondonWC2N 6RH

Nominated Adviser and Broker

Cenkos Securities plc6.7.8 Tokenhouse YardLondon EC2R 7AS

Solicitors

Marriott Harrison LLP11 Staple Inn LondonWC1V 7QH

Principal Banker

The Royal Bank of Scotland plc280 BishopsgateLondon EC2M 4RB

Registrars

Computershare Investor Services plcPO Box 82The PavilionsBridgwater RoadBristol BS99 7NH

Cello Group plc11-13 Charterhouse Buildings

London EC1M 7APTel: +44 (0)20 7812 8460

www.cellogroup.com

Company Registration no. 05120150

Documents

SUCCESSFUL CONNECTING - Cello Health plc · launch in April 2013 of Pulsar TRAC has been very successful, with several clients purchasing the software on a retained licence fee basis