2017 final results presentation - cello health plc · •strategic marketing •brand and portfolio...

© CELLO GROUP PLC

2017FINAL RESULTS PRESENTATIONMARCH 2018

© CELLO GROUP PLC 2

We supply strategic advisory services to blue-chip clients primarily in the pharmaceutical and biotech sector

▪ Global infrastructure in UK and USA

▪ Long-term client relationships with good contracted profile and visibility

▪ Low client concentration

▪ Underlying technology capability and IP

▪ Strong balance sheet

▪ Strong and growing dividend

▪ Expansion programme ongoing

▪ Name change to Cello Health Group plc

CELLO GROUP PLC

INTRODUCTION


Lead ClientBrands

Significant Sub Brands

CELLO HEALTH ADVANTAGE

KUDOS RESEARCH

CELLO DEFINED HEALTH

THE VALUE ENGINEERS PULSAR

2CV

CELLO HEALTH GROUP PLC

CELLO SIGNAL HEALTH

GROUP PLC


CORE CAPABILITIES

Core Capability Specialism

• Qualitative data and analysis – all types, global coverage• Quantitative analysis – all types, global coverage• Social/consumer – digital/online patients, healthcare professionals

• Strategic marketing• Brand and portfolio strategy (pre, post brand launch to loss of patent)• Early product commercialisation (managed care, market access)• Business science (analytics, decision support software and tools, advisory)• Marketing excellence (process, organisation/people development)

• Strategic communication planning (medical, scientific, consumer)• Medical communication gap analysis and evidence assessment• Medical and health consumer marketing communications• Scientific data dissemination and education • Public affairs and influencer marketing

• Digital planning and activation• Campaign management• Market research• Social media analytics


CORE CAPABILITIES

Core Capability2017

Gross Profit Contribution

Key Hub Locations

23% London - UK, New York - USA

18% Farnham - UK, Pennsylvania - USA

19% Farnham - UK, Pennsylvania - USA

40% London, Edinburgh and Cheltenham - UK


CORECAPABILITIES PRE CLINICAL PHASE 1 PHASE 2 PHASE 3 APPROVAL LAUNCH IN MARKET

CELLO HEALTH ADVANTAGE

CELLO SIGNALHEALTH


SOURCES OF COMPETITIVE

ADVANTAGE

One brand, one team• Cello Health brand• BD culture• Marketing out-reach• Events• Uniform bonus scheme

Service innovation• Biotech• E-Village• IQ • Cello Health Logic• Pulsar Health• Signal digital capacity

Global presence• Hub offices in New York, Pennsylvania,

London and Farnham• USA 45% of Cello Health 2017 gross

profits• 24 out of 25 top pharma as clients

Collaborative culture• Within Cello Health• With Cello Signal• Cello Academy• Centres of excellence

GROUP PLC

A unique fusion of advisory and delivery capability under one global lead brand across pharmaceuticals, biotech, devices and OTC


KEY OPERATIONAL

DEVELOPMENTS

Increasing US focus

45% of Cello Health 2017 gross profit (US is c. 70% of overall health services market)

Balance between pre and post launch work

C. 50/50%

Increased weighting to biotech and early stage

Acquisition of Defined Health

Addition of digital market activation capability

14% of Signal 2017 gross profits now health related

Increasing and strengthening our range of servicesDefined Health, Cello Health Advantage, partnerships


GROWTH DRIVERS

• Our clients’ markets are healthy- Global R&D spend growing steadily at c. 2.4% and forecast to reach

$182bn* by 2022- Prescription drug sales are forecast to grow at an annual compound rate of

6.5%, eventually hitting $1.06trn worldwide in 2022*- Clinical trials registrations increasing by 13% 2015-2016 **- 46 new drug approvals in 2017, 24 in 2008 (FDA)***

• Ongoing growth of outsourcing trend by clients- Pricing pressure- Technology- Data- Regulation- Best practice- Specialist expertise vs. mission critical challenges

*Source: EvaluatePharma 2017

**Source: EvaluatePharma 2016

***Source: fda.gov 2017 New Drug Therapy approvals


GROWTH DRIVERS

Strong product pipeline: 20k+ additional pipeline opportunities sourced from repurposing existing assets, data mining existing discovery asset banks, further fueled by innovation and new discoveries

Better diagnosis combined with a large level of clinical unmet need and poor compliance drives accelerated short term demand

Ageing population and growing population drives long-term demand

Market revolution from Rx to Cx (consumer health)


KEY CLIENTS Firm Projected R&D Spend by 2022* $BN Cello Health client

P

P

P

P

P

P

P

P

P

P

P

P

P

P

P

P

P

P

P

P

*Source: EvaluatePharma 2016


COMPETITIONMajor Quoted Companies Market Cap 2017

($m)

Quintile IMS Holdings 17,600

Inc Research Holdings/Inventiv 7,400

ICON Plc 5,349

Medidata Solutions, Inc 4,473

PAREXEL International Corporation (now acquired) 4,467

Catalent, Inc 4,223

UDG Healthcare Plc 2,105

Medical Innovations Holdings, Inc 1,868

Huntsworth Plc 300

• Increased complexity and market growth are driving activity by larger players

• Highly fragmented growth market for service supply• Rapid consolidation amongst larger players• Entry barriers increasing• Private equity financing roll-ups of smaller providers


CELLO HEALTH GROUP

GROWTH IN 2018/19

• Continued addition of professionals, particularly in the US

• Continued expansion in core hubs – New York, Yardley, Farnham and London

• Push in quantitative research – IQ

• Launch of Pulsar Health product by Cello Health Logic

• Collaboration with Signal Health to deliver digital communication solutions in US and UK

• Ongoing acquisition programme, with US focus


SUPPORTING CELLO HEALTH

IN DIGITAL

• Pharmaceutical and biotech clients increasingly using digital engagement processes, both to gather data and disseminate data

• A range of specialist digital competitors emerging (Huntsworth plc)

• Too expensive for Cello Health to acquire businesses of scale in this space

• Cello Signal already has active healthcare clients in addition to deep technical capability

• Major strategic initiative to leverage these skills into Cello Health


SIGNAL’SPRIMARY

CLIENT FRANCHISES

Healthcare Technology and Entertainment

Utilities and Financial Serviceshttps

NFP and Charities

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© CELLO GROUP PLC

FINANCIAL REVIEW


FINANCIAL HIGHLIGHTS

• Gross profit up 10.6% to £102.5m (2016: £92.7m)

• Like-for-like gross profit up 2.5% (constant currency: 1.6%)

• Headline profit before tax up 11.9% to £11.4m (2016: £10.2m)

• Headline operating margin 11.7% (2016: 11.5%)

• Headline earnings per share down 8.4% at 7.93p (2016: 8.66p)

• Successful fund raise in January 2017 raising £14.2m (net)

• Two successful acquisitions in the US

• Good underlying cash generation

• Net cash £1.6m (2016: debt £5.1m)

• Headline tax rate drops in 2018 by c. 3 percentage points

• Full year dividend per share up 2.9% to 3.50p (2016: 3.40p)


SEGMENTAL ANALYSIS

2017 2016Headline

Gross Profit

£m

Headline Operating

Profit£m

Margin %

Headline Gross Profit

£m

Headline Operating

Profit£m

Margin %

Cello Health 60.2 10.6 17.7% 47.6 8.6 18.1%

Cello Signal 41.0 3.9 9.5% 43.6 4.5 10.3%

Sub total 101.2 14.5 14.3% 91.2 13.1 14.4%

Central cost - (2.7) - - (2.6) -

Group 101.2 11.8 11.7% 91.2 10.5 11.5%

• Like-for-like constant currency gross profit growth in Cello Health at 9.2%• Like-for-like constant currency gross profit decline in Cello Signal at 6.8%• 29.5% of group gross profit earnt in the US (2016: 23.3%)


CELLO HEALTH

• Like-for-like gross profit up 10.7%• Constant currency like-for-like gross profit up 9.2%• Operating margin remains competitive at 17.7% • Overall client base growing, especially in USA• US gross profit rises to 45.1% of total (2016: 35.1%)• Collaborative wins grow strongly behind the Cello Health brand• Defined Health acquisition in January 2017• Cello Health Advantage acquisition in July 2017• Both acquisitions performing well

2017£’000

2016 £’000

% change

Headline gross profit 60,150 47,605 26.4%

Headline operating profit 10,639 8,635 23.2%

Margins 17.7% 18.1% -


CELLO SIGNAL

• Like-for-like gross profit decline of 6.5% (2016: growth of 5.5%)• Constant currency like-for-like gross profit decline of 6.8%• Operating margin 9.5% (2016: 10.3%)• Tough comparator with large one-off projects in 2016• Trading issues within US research operations now resolved• Pulsar growth to 346 clients (2016: 257), £0.5m MRR• Rapid growth from Signal Health

2017£’000

2016 £’000

% change

Headline gross profit 40,961 43,615 (6.1%)

Headline operating profit 3,872 4,490 (13.8%)

Margins 9.5% 10.3% -


INCOME STATEMENT

2017£m

2016£m

Headline operating profit 11.8 10.5

Interest (0.4) (0.3)

Headline profit before tax 11.4 10.2

Restructuring costs (1.9) (1.2)

Credit/(charge) for VAT received/(payable) 0.2 (1.8)

Start-up investment/biotech team (1.4) (2.1)

Acquisition costs (0.2) -

Amortisation of intangibles (0.5) (0.3)

Acquisition related remuneration (1.4) (1.2)

Share options (0.4) (0.4)

Goodwill impairment - (4.9)

Statutory profit/(loss) before tax 5.8 (1.7)


KEY NON-HEADLINE

INCOME STATEMENT

ITEMS

ITEM £m COMMENT

Restructuring costs 1.9 US Consumer research; Signal property moves

VAT received 0.3 Issue now closed

Start-up investment 1.4Pulsar US; Cello Health Consulting in US (now in headline)

Amortisation 0.5 Slightly higher due to acquisitions

Acquisition related remuneration 1.7 Slightly higher due to acquisitions


CASH FLOW AND NET DEBT

2017£m

2016£m

COMMENT

Operating net inflow pre VAT settlement 4.8 11.7

VAT settlement - (5.2)

Net cash inflow from operating activities 4.8 6.5 See overleaf

Interest (0.4) (0.2)Unwinding of prior year working capital surplus, slightly higher LIBOR

Tax (2.1) (1.7) Tax rate dropping in 2018

Capex (1.8) (2.2) Office moves in prior year, £0.4m on Pulsar

Acquisitions (5.3) - 2 acquisitions and deferred settlement

Fund raise 14.2 - Cash raise in January 2017

Share option proceeds 0.2 0.3

Dividends (3.6) (2.6) Full year cash impact of new dividend policy

Net debt movement 6.0 0.1

Opening net debt (5.1) (4.2)

Foreign exchange differences 0.7 (1.0)

Closing net cash 1.6 (5.1) Facilities of £20m; renewed until March 2022


OPERATING CASH

CONVERSION

2017£m

2016£m

COMMENT

Headline operating profit 11.8 10.5

Depreciation 1.3 1.3

Amortisation 0.4 0.4

Headline EBITDA 13.5 12.2

Cash flow from operations 4.8 6.5

Cash impact of non-headline items 3.6 3.3 Start-ups restructuring

VAT settlement/receipts (0.3) 4.9 2016 VAT settlement

Deferred remuneration 2.3 0.2 iS Health settlement

Headline operating cash flow 10.4 14.9

% conversion of headline EBITDA 77% 123% 2017 shows reversal of underlying 2016 surplus

• Good underlying operating cash characteristics


BALANCE SHEET 31 December 2017£m

31 December 2016£m

Goodwill 73.0 69.9

Intangible assets 1.2 0.7

Fixed assets 2.8 2.7

Deferred tax assets 1.1 0.7

Non-current assets 78.1 74.0

Current non cash assets 54.5 46.8

Cash 13.0 7.4

Creditors <1 year (49.9) (49.2)

Net current assets 17.6 5.1

Creditors >1 year (12.8) (12.5)

Net assets 82.9 66.6

• Total maximum commitment of $6.3m payable over 3 years from 2019-2021, payable largely in cash


DIVIDEND

TAXATION

• Full year dividend increased 2.9% to 3.50p (2016: 3.40p)

• 11 year unbroken full year dividend growth record

• Headline tax rate in 2017 of 28.2% (2016: 25.7%)

• Dropping in 2018 by c. 3 percentage points (US changes)


GROUP SUMMARY AND

OUTLOOK FOR 2018

• Strong growth in fee income in Cello Health

• Rapidly increasing exposure to US market, organically and via acquisitions

• Leverage of Cello Signal digital capabilities into healthcare

• Strong balance sheet

• Dividend continues to grow

• Good 2018 outlook based on current pipeline

• Change of name to Cello Health Group plc

© CELLO GROUP PLC www.cellogroup.com

CONTACT US:

Cello Group plc

11-13 Charterhouse Buildings

London

EC1M 7AP

www.cellogroup.com

MARK SCOTT, Chief [email protected]

+44 (0)20 7812 8462

MARK BENTLEY, Group Finance [email protected]

+44 (0)20 7812 8463

https://www.cellogroup.com/

2017 final results presentation - cello health plc · •strategic marketing •brand and portfolio...

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