ANALYSTS will be watching for any signs of weakening trading at Cello Group, the advertising and marketing business behind the Leith Agency, when it reports full-year figures this week.
While media owners are enduring difficult conditions, with fears they will worsen during the year, Cello’s niche businesses are thought to be holding up well.
Although results for 2007 are expected to be towards the top end of expectations, market nervousness means the outlook for the remainder of 2008 will be critical.
“Indicators to look for include clients being difficult over price or projects being delayed by clients, but as far as we’re hearing across the sector there aren’t signs of that happening,” said Simon Lapthorne of Corporate Synergy.
Chime, though focused more on PR, is another quoted marketing services group, and its figures last week were positive. Chairman Tim Bell said he was “fantastically optimistic”.
An update from Cello in January said its trading continued to be strong. Full-year results are expected to see pre-tax profits of around 7.6m on turnover of 86.2m, with net debt at the year end expected to fall to 6m.
Roddy Davidson of Altium Securities in Edinburgh believes the company would be better placed than others in the media sector to weather worsening conditions during 2008.
“A number of media companies are starting to feel the pinch, but in the case of Cello it has positioned itself in value-added areas of advertising spend.
“This year we’ll see whether it does what it says on the tin and proves to be a bit more defensive or whether it suffers from a more general cyclical downturn in marketing spend.”
Lapthorne also believes this year will be an important one as it will be the first since the end of the earn-out deals – including one with the owners of Leith – struck when Chime came to market in 2004.
“The key is keeping the momentum going after the vendors have crystallised their money from the deal,” he said.
Last month Cello announced a restructuring which will see its marketing businesses brought under the umbrella of a new division, Tangible, with a major base in Edinburgh.
John Rowley, chairman of the Leith Agency, which is behind campaigns for clients including Irn-Bru, will head Tangible as chief executive. Andy Carolan, chairman of Edinburgh-based direct marketing firm Navigator, is taking on the role of chairman of the group.
Rowley said the move would allow all of Cello’s marketing companies, which range from the Leith Agency and its London sister firm Farm to Blonde Digital and PR company Stripe, to work more closely together.
Tangible will have a turnover of 60m and employ 330 people across four UK offices.
Shares in Cello have performed poorly over the last year. They are down by almost a third on levels seen last summer and are only slightly above the 1 placing figure at which they joined Aim in November 2004.