Grouping items by category

I am in the process of designing and interface where a internal user creates a programme of items. Each item can be grouped with other items in a "category".

If two or items in the same category are displayed together in the list I would like duplicate information (e.g. the category name) to be removed "Category 1"

Items not in a category should be easily identifiable that they are not part of a category (second item under "Category 2").

A category does not need to be contiguous and a category may be split up by uncategorized items and other categorized items "category 3" - It should be clear that both items with the "Category 3" heading are together.

My current concept assigns a background colour to each category - this seems to work well but I am concerned that I have a finite usable palette and it gets very busy quickly, Some other points, the category labels are unique - and user supplied, and the soloution should scale to potentially 10-20 categories over 50-60+ items.