Final Results

RNS Number : 7953X

Delling Group PLC

30 June 2008

 

For Release

7:00 am

30 June 2008

DELLING GROUP PLC (DLG)

The AIM-listed marketing services group

FINAL RESULTS

for the year ended 31 December 2007

Delling Group Plc ('Delling' or the 'Company'), the only listed marketing support services group on AIM whose principal assets are in Scandinavia, announces its results 

for the year ended 31 December, 2007.

Financials

• Turnover for the period was £17.5m (2006: £10.5m) with a pre-tax loss of £3,4m (2006: £5.2m). The growth in turnover was an increase of 67% when compared to the prior period. 

• The loss before interest, depreciation and amortisation of £1.96m was significantly reduced compared to a loss of £4.4m in 2006.

• The pre-tax profit performance was disappointing and reflects a difficult 3rd quarter due to subdued business activity and problems with a loss making subsidiary that negatively impacted the results. Despite considerable progress (announced on 23 October 2007) in turning around this subsidiary and although Delling saw strong trading return in the 4th quarter, together these factors were insufficient to neutralise the impact on the results
  

• High financial expenses of £0.9m impacted on performance
  

• The results include contributions from companies acquired during the period: Sandberg Expo (12 months' contribution), Hennix (1 month) and Dekorateljen (3 months)

• Although the Company is announcing a disappointing pre-tax loss for 2007, since then it has experienced a modest recovery and a profit at EBITDA level was generated in the 1st quarter of 2007.  

Operations

• Since last autumn the expo businesses Dekorateljen and Hennix have been integrated, and the group has implemented a complete integration of all the businesses in Sweden and Norway into one Marketing Support Services unit in each country.  Actions were taken to improve the management in the Exhibition business area to improve the integration process. In connection with this process, we have closed down one office and one production facility, which has further made it possible to reduce costs with limited impact on turnover.  
  

• As announced previously, the effect of this integration process and cost reduction activity, which started last autumn, has reduced Delling's head count by around 40 to approximately 110 employees. The beneficial effect of these activities has started to come through and the Group is pleased to announce trading in the 1st quarter of 2008 was profitable.  

  Aksel Bratvedt, Executive Chairman of Delling Group Plc, said:

'Although substantial improvements have been made in 2007 compared to 2006, the results for 2007 were still disappointing. However, good progress has been made in integrating all our recent acquisitions, which has led to a substantial reduction in head count. The reduction in headcount has had a limited negative effect on the expected growth in turnover, but it has been necessary to create profitability.'

'Going forward the company now has the appropriate critical mass and a good strategic position and platform upon which to grow profitability and the results from our 1st quarter this year have been encouraging'  

ENDS

For further information please contact:

Contact:

Delling Group Plc
Aksel Bratvedt, Chairman	Tel: [phone]
Geir Lolleng, CEO	Tel: [phone]
www.dellinggroup.com
Adventis Financial PR
Tarquin Edwards	Tel: [phone]
Nabarro Wells - Nominated Advisor
Hugh Oram	Tel: [phone]

Chairman's statement

Over the past year, Delling Group saw revenue increase by 67 per cent from £10.5m in 2006 to £17.5m in 2007. £3.2m of this growth came from acquisitions with organic growth delivering around £3.8m or a 36 per cent increase. 

The group completed some smaller acquisitions in the autumn last year of Dekorateljen and Hennix, both in the exhibition area. These companies will add, on an annualised basis, around £2m to Delling's revenue. On a pro forma basis therefore, including these two acquisitions, the revenue for 2007 would come to approximately £19.5m. 

The board decided last year that no more acquisitions will be contemplated until sustainable profitability has been reached. The company has reached sufficient size in its industry and is now also a leading company in design and exhibitions in Scandinavia. Therefore all focus going forward is on organic growth.  

Regarding the results, the loss at EBITDA level was reduced from £4.4m to £1.96m. Although this performance is not satisfactory, the board feels that it represents a considerable step forward in the right direction. Management's focus since last autumn has been on integrating the acquisitions and taking cost out of the business. Since then, the head count has been reduced by 40 employees generating approximately £1.9m in cost savings. 

The finance function has been centralised and a more suitable management system for the group has been implemented. The group has also merged the operating companies in Sweden and Norway into one legal entity in each country. 

On the sales side, the organisation is working on developing one sales department to take advantage of the significant cross selling opportunities posed by Delling's customer base of more than 300 medium-sized to large and international Scandinavian customers. All the above actions continue to have further positive effects on the costs and revenue going forward and can already be seen following the profitable 1st quarter this year on EBITDA level.

Our financing costs remain a continuing challenge to the company, of which around £1m relates to financing costs in 2007. These costs are partly related to an expensive convertible loan along with the fact that during the period, the Group has been financing its growth from the late payment of suppliers who charge interest. The Group continues to energetically work on ways of refinancing the convertible loan, as well as reducing the supplier overhang. With increased profitability the possibility of finding cheaper financing will increase.

Although the macro-economic picture is subdued at the moment in a number of geographical markets, the board is reasonably optimistic about the Scandinavian markets. The Scandinavian economies are robust and are at a different stage in the business cycle than the Anglo-Saxon economies. 

The market sector that Delling Group serves is dependent on marketing budgets. A downturn in the marketing budgets will affect negatively certain parts of our business but on the other hand, the board believes it is likely that it will positively impact on the company's outsourcing business. Therefore, the board believes, that even in a downturn in the economy, there exist substantial growth opportunities for the Group. We have seen outsourcing contracts as large as £5-10m in revenue per year in our market place and we believe that Delling Group now has the size and capacity to take on these types of contracts.

The board will focus all resources going forward on driving organic growth, whilst taking advantage of the significant potential inherent within our customer base. We will continue to focus on reducing costs throughout the business. Regarding the investor market the board will focus on raising Delling's profile by improving the analyst coverage of the group as well as engaging in more investor meetings.

The board strongly considers that a parallel listing in Scandinavia due to the geographic location of the business should be sought. This is backed up by the fact that some major investors in the company are Scandinavian. We believe that this could improve the trading volume of the shares in the company as well as its shareholder base.

I would finally like to thank our staff for all their hard work over the last year. The Group has a very competent pool of staff that has the capacity to take on more work through organic growth. I look forward to the future with considerable confidence and enthusiasm.

Aksel Bratvedt

Chairman

27th of June 2008

Introduction

Delling Group offers marketing departments in large and medium sized companies a unique opportunity to reduce costs, increase speed to market and increase the quality of production and handling of marketing and information material. Our offering includes graphical material as well as the digital distribution of content on to screens or the Web as well as mobile phones. Our wide ranging, but closely linked service-offering makes it possible for customers to take advantage of the opportunity to outsource their back office marketing department requirements and to thereby significantly reduce associated costs, which further drives our organic growth. 

Business and operating review

Our work to develop Delling Group into a leading integrated marketing support services group in the Nordic area has continued apace. The result in financial terms has disappointed, however we have taken a number of strategic steps forward to establish an excellent base for profitability as well as further growth.

We have now 4 business units: the outsourcing businesses (the graphical business area), the exhibition business, the digital business area (screens, mobile phones and the Web) and the unit for annual and financial reports trading under the name of n3prenör. The Group have offices in Oslo and Stavanger in Norway and Stockholm, Linköping, Gothenburg in Sweden. We have closed down our offices in Gävle and Norrtälje (during first half 2008). 

The market

The market for our services is still benefitting from the relatively benign economic conditions in Scandinavia. As long as growth in the world economy is not entering into a deep recession, management does not see any major threats in our markets at this point in time though we do expect a possible reduced rate of growth. 

Human resources

We focus on getting more and more out of our staff through investments in on-the-job training and competence development. This is vital so that Delling is able to benefit from potential synergies between the business units. We have an extraordinarily loyal and able staff that should be able to exploit the significant potential we see in the business in the short as well as the long term. 

Outlook

In 2008 we are putting every effort into achieving sustainable profitability. We have taken all necessary steps to reduce staff and have today approximately 110 employees. The integration work has also resulted in a number of staff leaving us by their own choice, however this has helped to accelerate the integration process. 

With a prestigious customer base and an excellent and skilled workforce, Delling Group is well-placed to continue to grow organically and be solidly profitable within the short term.

Geir Lolleng

Chief Executive

The Directors present their report and the audited financial statements of the Group for the year ended 31 December 2007.

Principal activities and review of the business

The principal activity of the Company during the year was that of a holding company. The principal activities of the Group are the provision of marketing support services.

A review of the Group's activities and performance for the year ended 31 December 2007 and its prospects for 2008 are contained in the statements of the Chairman and Chief Executive.

Results and dividends

The trading results for the year and the Group's financial position at the end of the year are shown in the attached financial statements.

The Directors have not recommended the payment of a dividend.    

Future developments

A review of the business and future prospects is set out in the statements of the Chairman and Chief Executive on pages 2 to 4.

Financial risk management

The Group's operations expose it to a variety of financial risks that include the effect of changes in debt market prices, credit risk, liquidity risk and interest rate risk. The Group has in place a risk management programme that seeks to limit the adverse effects on the financial performance of the Group by monitoring levels of debt finance and the related finance costs. The Group does not use derivative financial instruments to manage interest rate costs and, as such, no hedge accounting is applied. 

Given the size of the Group, the Directors have not delegated the responsibility of monitoring financial risk management to a sub-committee of the Board. The policies set by the Board of Directors are implemented by the Group's finance department. The department has a policy that sets out specific guidelines to manage interest rate risk, credit risk and circumstances where it would be appropriate to use financial institutions to manage these.

Price risk

The Group is exposed to commodity price risk as a result of its operations. However, given the size of the Group's operations, the costs of managing exposure to commodity price risk exceed any potential benefits. The Directors will revisit the appropriateness of this policy should the Group's operations change in size or nature. The Group has no exposure to equity securities price risk as it has no listed or other equity investments.

Credit risk

The Group has implemented policies that require appropriate credit checks on potential customers before sales are made. Where debt finance is utilised, this is subject to pre-approval by the Board of Directors and such approval is limited to reputable and good standing financial institutions. The amount of exposure to any individual counter party is subject to a limit, which is reassessed annually by the Board.

Liquidity risk

The Group actively maintains a mixture of long-term and short-term debt finance that is designed to ensure the Group has sufficient available funds for operations and planned expansions.

Interest Rate Cash Flow Risk

The Group has both interest bearing assets and liabilities. Interest bearing assets include only cash balances, all of which earn interest at a variable rate. The Group has a policy of maintaining debt at a fixed rate to ensure certainty of future interest cash flows. The Directors will revisit the appropriateness of this policy should the Group's operations change in size or nature.

Financial Key Performance Indicators (KPI's)

Revenue growth

Revenue growth fell from a rate of 97% in 2006 to 67% in 2007. However this rate still leaves the Group in line with its long term objective.

Net losses

Net loss margin bettered from (51.0%) in 2006 to (20.4%) in 2007.

The Directors and their interests

The Directors who served the Company during the year together with their beneficial interests in the shares of the Company were as follows:

	Date of Appointment	At  31 December 2007	At 31 December 2006
David Krucik	23 March 2004	149,746	149,746
	Resigned 18 August 2007
Aksel Bratvedt	23 March 2004	6,320,268	6,320,268
Geir Lolleng	8 July 2004	17,903,125	17,903,125
James Robinson	15 July 2005	1,435,559	1,435,559
	Resigned 16 January 2008
Robert Lowe	8 July 2004	150,000	150,000
Mikael von Schedvin	23 August 2005	-	-
Christopher Stone	1 August 2004 Resigned 4 April 2007	-	-

  Substantial shareholdings

As at 25th June 2008, the Directors were aware of the following shareholdings in excess of 3% of the Company's issued share capital.

	Number of ordinary shares	Percent of issued  ordinary share capital
Vidacos Nominees Limited	36,523,777	17.60%
Credit Suisse Client Nominees(UK) Limited	21,105,952	10.17%
MP Pensjon	18,833,333	9.08%
Bjart Dysthe	16,666,667	8.03%
Geir Lolleng	11,764,369	5.67%
Plastisk Kirurgisk Klinikk AS	11,610,925	5.60%
HSBC Global Custody Nominee (UK) Limited	10,762,021	5.19%
Aksel Bratvedt	6,320,268	3.05%

Directors

The Board comprises

Aksel Bratvedt M.Sc (Siv.ing), MBA (UCLA) (Executive Director) aged 51, worked in the Scandinavian Department of Hambros Bank before becoming a founding partner at investment bank Elcon Partners and Elcon Securities. He then acted as strategy consultant at Nordic Management, the French consulting company Siar-Bossard, Ericsson Radio Systems, and Telecoms Consultancy. He was from 1994 to 1996 adviser to the CEO of the Swedish state-owned bank Retriva that handled debt after the Swedish bank crisis.

Geir Lolleng Cand.jur. (Chief Operating Officer), aged 54, and also chairman of Kelvin AS. He gained a Law degree at Oslo University and was for three years a partner at Oslo law firm Steenstrup Stordrange. He was for 10 years Chairman of Technical Software Consultants AS, for four years Chairman of Saga Plakatreklame AS, and a director of Muva Greetings SA, LRC Norge AS and Nutricia AS.

Robert Gardiner Lowe (Non-Executive Director), aged 64, brings 33 years of varied business experience, with 20 years directly involved in the IT industry. In the early 1990s, Robert was Deputy CEO of Superscape Plc and involved in the successful flotation of that company's shares on the London Stock Exchange. He opened the US office of Superscape in Palo Alto, California, and served as President of the North American operation. Prior to Superscape, Robert was International Vice-President at Micro Focus. Robert has considerable experience in the US, where he lived for over 12 years. He is Non-Executive Chairman of AIM-listed company Infonics Plc.

Mikael von Schedvin (Non-Executive Director), aged 46 is partner in the Swedish law firm MAQS, and a board member in a number of Swedish companies. He has particular experience of doing business throughout the Nordic area and Eastern Europe.

  Management share options and share acquisition scheme

The following options were granted to the Board

Director	Number of options	Exercise price, p	Period of exercise
D Krucik	1,170,054 755,863	14 12	21 June 2006 - 21 June 2016 18 Sep 2006 - 18 Sep 2011
RG Lowe	585,027 755,863	14 12	21 June 2006 - 21 June 2016 18 Sep 2006 - 18 Sep 2011
CMR Stone	585,027	14	1 August 2006 - 1 August 2016
M von Schedvin	585,027 755,863	21 12	15 June 2007 - 15 June 2017 18 Sep 2006 - 18 Sep 2011
A Bratvedt	1,511,725	12	18 Sep 2006 - 18 Sep 2011
G Lolleng	1,511,725	12	18 Sep 2006 - 18 Sep 2011
J Robinson	1,511,725	12	18 Sep 2006 - 18 Sep 2011

The executive directors also hold shares under the share acquisition scheme, further details of which can be found in note 11.

Charitable and political donations

The Company made no charitable donations during the year. There were no political donations.

Corporate governance

The Company shares are traded on the Alternative Investment Market of the London Stock Exchange and the Company is not therefore required to report on compliance with the Combined Code appended to the listing rules. However, the Board of Directors supports the principles of good governance and the further guidance included in the Turnbull report. It is the Board's policy to comply as far as is reasonable for a business the size of Delling Group Plc.

Internal control

The Directors acknowledge their responsibilities for the Group's system of internal control. The Board considers major business and financial risks. All strategic decisions are decided by the Board and the making of individual investment and loan decisions is designated to members of the Board. Accepting that no systems of control can provide absolute assurance against material misstatement or loss, the Directors believe that the established systems for internal control within the Group are appropriate to the business. 

International Financial Reporting Standards

The Directors have implemented International Financial Reporting Standards for the first time this year, as required by the Alternative Investment Market. The 2006 accounts have been restated to comply with these new standards.

The impact of the transition on the group's results is set out in note 25.

Disclosure of information to the auditors

The Directors who held office at the date of approval of this report of the directors confirm that, so far as they are individually aware;

• there is no relevant audit information of which the Company's auditors are unaware; and 

• the directors have taken all the steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information.

Audit Committee

The Audit Committee of the Company comprises Mr R G Lowe and Mr M von Schedvin and meets at least twice each year. The audit committee is responsible for ensuring that the Group's financial performance is properly monitored, controlled and reported. It also meets the auditors and reviews reports from the auditors relating to accounts and internal control systems. The Audit Committee meets once a year with the auditors, without executive board members present.

Going concern

After making enquiries, the Directors have formed a judgement at the time of approving the accounts that there is a reasonable expectation that the Company and Group have adequate resources to continue its operations for the foreseeable future. For this reason, the Directors continue to adopt the going concern basis in preparing the accounts.

Supplier payment policy

The Group seeks to maintain good relations with all of its trading partners. In particular, it is the Group's policy to abide by the terms of payment agreed with each of its suppliers. As at 31 December 2007 the number of creditors days in respect of trade creditors was 117 (2006: 181 days) days.

Directors' responsibilities

Company law requires the Directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and of the Group at the end of the year and of the Group's profit or loss for the year then ended. Under that law, and in accordance with the AIM rules, the Directors have prepared the Company and Group financial statements in accordance with International Financial Reporting Standards (IFRS).

In preparing those financial statements, the Directors are required to select suitable accounting policies, as described on pages 24 to 28 and then apply them on a consistent basis, making judgements and estimates that are prudent and reasonable. The Directors must state whether applicable accounting standards have been followed, subject to any material departures. The Directors must also prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company and Group will continue in business, in which case there should be supporting assumptions or qualifications as necessary.

The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and Group and to enable them to ensure that the financial statements comply with the Companies Act 1985 and as regards the Group Financial Statements, Article 4 of the IAS Regulation. The Directors are also responsible for safeguarding the assets of them Company and 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 corporate and financial information included on the Company's website.

Auditors

The auditors, CLB Littlejohn Frazer, have changed their name to Littlejohn. A resolution to reappoint Littlejohn as auditors for the ensuing year will be proposed at the annual general meeting in accordance with section 385 of the Companies Act 1985.

Registered office:                                              Signed by order of the Directors

Golden Cross House
8 Duncannon Street

London WC2N 4JF

                                                                            Robert Lowe

                                                                            Company Secretary

Approved by the Directors on 27 June 2008

INDEPENDENT AUDITOR'S REPORT TO THE SHAREHOLDERS OF DELLING GROUP PLC

We have audited the Group and Parent Company Financial Statements (the 'Financial Statements') of Delling Group plc for the year ended 31st December 2007 which comprise the Group Income Statement, the Group and Company Balance Sheets, the Group and Company Cash Flow Statements, the Group and Company Statements of Changes in Equity, and the related notes 1 to 26. These Financial Statements have been prepared under the accounting policies set out therein.

This report is made solely to the Company's shareholders, as a body, in accordance with Section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the Company's shareholders those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's shareholders as a body, for our audit work, for this report, or for the opinions we have formed.

Respective Responsibilities of Directors and Auditors

The Directors' responsibilities for preparing the Annual Report and the Financial Statements in accordance with applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union are set out in the Statement of Directors' Responsibilities.

Our responsibility is to audit the Financial Statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). We report to you our opinion as to whether the Financial Statements give a true and fair view and whether the Financial Statements have been properly prepared in accordance with the Companies Act 1985 and, as regards the Group Financial Statements, Article 4 of the IAS Regulation. We also report to you whether, in our opinion, the information given in the Directors' Report is consistent with the Financial Statements. In addition we report to you if, in our opinion, the Company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors' remuneration and other transactions is not disclosed.

We read other information contained in the Annual Report and consider whether it is consistent with the audited Financial Statements. The other information comprises only Directors' Report, the Chairman's Statement and the Chief Executive's Statement. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the Financial Statements. Our responsibilities do not extend to any other information.

Basis of Audit Opinion

We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the Financial Statements. It also includes an assessment of the significant estimates and judgments made by the Directors in the preparation of the Financial Statements, and of whether the accounting policies are appropriate to the Group's and Company's circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the Financial Statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the Financial Statements.    

Opinion

In our opinion:

• the Financial Statements give a true and fair view, in accordance with IFRSs as adopted by the European Union, of the state of the Group's and the Parent Company's affairs as at 31 December 2007 and of the Group's loss for the year then ended;

• the Financial Statements have been properly prepared in accordance with the Companies Act 1985 and Article 4 of the IAS Regulation; and

• the information given in the Directors' Report is consistent with the Financial Statements.

Littlejohn

Chartered Accountants    and Registered Auditors 

1 Westferry Circus 

Canary Wharf

London E14 4HD

27th June 2008

Group Income Statement

Year ended 31st December 2007

	2007	2006
Note	£000	£000
		Restated

Revenue
Continuing operations		17,484	10,462
		--------------	-----------------
Group Revenue	2	17,484	10,462

Cost of sales		(8,659)	(6,037)
		--------------	----------------
Gross Profit		8,825	4,425

Administrative expenses		(11,130)	(9,168)
		-----------------	-------------------
Operating Loss before Exceptional items
Continuing operations		(2,305)	(4,743)
Exceptional items		(157)	-
Operating Loss after Exceptional items		(2,462)	(4,743)
		-----------------	------------------
Group Operating Loss	3	(2,462)	(4,743)

Finance income		9	4
Finance costs	6	(986)	(472)
		-----------------	------------------
Loss on Ordinary Activities before Taxation		(3,439)	(5,211)

Tax on loss on ordinary activities

7

(125)

(129)

		-----------------	------------------
Loss for the Financial year	9	(3,564)	(5,340)
		==========	============

Loss per Share for loss from Continuing Operations Attributable to the Equity Holders of the Company during the Year  8	(2.08)p	(4.80)p
	==========	===========

    All of the activities of the Group are classed as continuing.

    The Company has taken advantage of section 230 of the Companies Act 1985 not to publish

    its own Income Statement.

Delling Group Plc

 

Group Balance Sheet

 

31st December 2007

 

 

	2007	2006
Note	£000	£000
		Restated

Called up Share Capital not yet paid

11

847

1,148

Non-current Assets

Intangible assets	12	9,598	7,781
Tangible assets	13	576	599
		-----------------------	-----------------------
		10,174	8,380
		-----------------------	--------------------

Current Assets

Inventories	15	107	55
Trade receivables	16	2,665	2,114
Other current assets		883	1,268
Cash at bank		320	290
		-------------------	----------------
		3,975	3,727
		--------------------	----------------
Total Assets		14,996	13,255
		=============	===========
Current Liabilities Trade and other payables		3,752	3,711
Financial liabilities	17	2,515	2,016
Current corporation tax payable		125	129
Other taxation and social security		964	372
Other current liabilities		5,242	4,178
Accruals and deferred income		1,187	953
		-------------------	---------------
		13,785	11,360
		------------------	---------------

Non-Current Liabilities

Financial liabilities	18	791	622
Long term provisions		-	3
		-----------------	---------------
		791	625
		-----------------	---------------
Total Liabilities		14,576	11,985
		=========	==========
Net Assets		420	1,270
		=========	==========

Delling Group Plc

 

Group Balance Sheet

 

31st December 2007

 

 

	2007	2006
Note	£000	£000
		Restated

  Capital and Reserves attributable to Equity 

holders of the Company
Called-up share capital	21	2,061	1,566
Shares to be issued under option	22	534	239
Share premium account		13,637	10,623
Retained earnings		(15,812)	(11,158)

		----------------	-------------------
Total Equity		420	1,270
		==========	===========

These financial statements were approved and authorised for issue by the directors on 27 June 2008 and signed on their behalf by:

Aksel Bratvedt    Robert Lowe

Company Balance Sheet

31st December 2007

	2007	2006
Note	£000	£000
		Restated

Called up Share Capital not yet paid

11

847

1,148

Non-Current Assets

Tangible assets	12	3	8
Investments	14	2,362	2,269
Financial assets	16	11,815	7,866
		---------------------	---------------
		14,180	10,143

Current Assets

Trade receivables		-	7,866
Tax receivable		17	-
Other receivables		5	601
		-----------------	---------------
		22	601
		-----------------	---------------
Total Assets		15,049	11,892
		==========	=========
Current Liabilities Trade and other payables		158	162
Financial liabilities	17	60	33
Other taxation and social security		-	24
Other current liabilities		2,436	1,545
Accruals and deferred income		16	16
		-------------------	---------------
		2,670	1,780
		-------------------	---------------
Non-Current Liabilities Long term provisions	18	-	3
		------------------	---------------
		-	3
		--------------------	---------------
Total Liabilities		2,670	1,783
		============	=========
Net Assets		12,379	10,109
		============	=========

 

Delling Group Plc

 

Company Balance Sheet

 

31st December 2007

 

 

	2007	2006
Note	£000	£000
		Restated

Capital and Reserves

Called-up share capital	21	2,061	1,566
Shares to be issued under option	22	534	239
Share premium account		13,637	10,623
Profit and loss account		(3,853)	(2,320)
		--------------------	--------------------
Total Equity		12,379	10,109
		============`	============

These financial statements were approved and authorised for issue by the directors on 27 June 2008 and signed on their behalf by:

Aksel Bratvedt                                                                                                                   Robert Lowe

 Delling Group Plc

Group Statement of Changes in Equity

Year ended 31st December 2007

	Share capital	Share premium account	Shares to be issued under option	Retained earnings	Total
	£'000	£'000	£'000	£'000	£'000
Year ending 31 December 2007
As at 1 January 2007	1,566	10,623	239	(11,158)	1,270
Issue of shares	495	3,102	-	-	3,597
Share issue costs	-	(71)	-	-	(71)
Share based payments	-	(18)	295	-	277
Loss for the financial period attributable to the shareholders of the parent company	-	-	-	(3,564)	(3,564)
Currency translation differences on foreign currency net investments	-	-	-	(1,088)	(1,088)
As at 31 December 2007	2,061	13,637	534	(15,812)	420
Year ending 31 December 2006
As at 1 January 2006	742	4,928	18	(5,580)	108
Issue of shares	824	6,015	-	-	6,839
Share issue costs	-	(320)	-	-	(320)
Share based payments	-	-	221	-	221
Loss for the period	-	-	-	(5,340)	(5,340)
Currency translation differences on foreign currency net investments	-	-	-	(238)	(238)
As at 31 December 2006	1,566	10,623	239	(11,158)	1,270

Delling Group Plc

 

Company Statement of Changes in Equity

 

Year ended 31st December 2007

	Share capital	Share premium account	Shares to be issued under option	Retained earnings	Total
	£'000	£'000	£'000	£'000	£'000
Year ending 31 December 2007
As at 1 January 2007	1,566	10,623	239	(2,320)	10,108
Issue of shares	495	3,102	-	-	3,597
Share issue costs	-	(70)	-	-	(70)
Share based payments	-	(18)	295	-	277
Loss for the financial period attributable to the shareholders of the parent company	-	-	-	(1,533)	(1,533)
As at 31 December 2007	2,061	13,637	534	(3,853)	12,379
Year ending 31 December 2006
As at 1 January 2006	742	4,928	18	(811)	4,877
Issue of shares	824	6,015	-	-	6,839
Share issue costs	-	(320)	-	-	(320)
Share based payments	-	-	221	-	221
Loss for the period	-	-	-	(1,509)	(1,509)
As at 31 December 2006	1,566	10,623	239	(2,320)	10,108

Delling Group Plc

 

Group Cash Flow Statement

 

Year ended 31st December 2007

	2007	2006
	£000	£000  Restated
Operating activities
Loss before taxation	(2,305)	(4,743)
Adjustments for:
Amortisation	21	21
Depreciation	320	203
Loss on disposal of fixed assets	13	121
Share based payments	268	398
(Increase)/decrease in stocks	(23)	19
(Increase)/decrease in debtors	836	(749)
Increase/(decrease) in creditors	(725)	1,494
	------------------	------------------
Cash used in Operations	(1,847)	(3,236)

Interest element of finance leases	(1)	(1)
Interest received	9	4
Corporation tax paid	(79)	-
	-----------------	-----------------
Net Cash used in Operating activities	(1,918)	(3,233)

Cash Flows from Investing activities

Interest paid	(441)	(271)
Purchase of intangible fixed assets	(1,419)	(2,143)
Purchase of tangible fixed assets	(125)	(311)
(Overdrafts)/cash acquired with subsidiaries	44	(311)
	-                        ------------------------	--------------------
Net cash flow from financing activities	(1,941)	(3,431)
Cash outflow before Financing activities	(3,859)	(6,664)

Financing activities

Issue of equity share capital	3,308	4,670
Capital element of finance leases	(7)	(6)
Repayment of loans	(0)	(405)
Increase in loans	834	1,000
	--------------------	-----------------
Net cash flow from financing activities	4,135	5,259

	-----------------------	-------------------
Increase in cash and cash equivalents	276	(1,405)
Effect of exchange rates on cash and cash equivalents	(184)	89
Cash and cash equivalents at the beginning of the year	(1,313)	3
	-------------------------	---------------
Cash and cash equivalents at the end of the year	(1,221)	(1,313)
	===============	===============

Delling Group Plc

 

Group Cash Flow Statement

 

Year ended 31st December 2007

	At 31 December 2006	Cash Flows	Foreign exchange movement	At 31 December 2007
	£000	£000	£'000	£000

Net debt:

Cash in hand and at bank	290	(8)	38	320
Overdrafts	(1,603)	284	(222)	(1,541)
	_______________	_______________	_______________	_______________
	(1,313)	276	(184)	(1,221)

Major non-cash transactions

During the period ended 31 December 2007 the Company issued 343,633 ordinary shares of 1p at a price of 10.85p in partial consideration of an acquisition.

Delling Group Plc

 

Company Cash Flow Statement

 

Year ended 31st December 2007

	2007		2006
	£000		£000
Operating activities
Loss before taxation	(943)		(1,272)
Adjustments for:
Depreciation	5		5
Share based payments	268		398
(Increase)/decrease in debtors	583		(468)
Increase/(decrease) in creditors	(192)		654
	--------------------------		--------------------------
Cash used in Operating activities	279		(683)
Interest element of finance leases	(1)		(1)
	--------------------------		--------------------------
Net Cash used in Operating Activities	278		(684)
Cash Flows from Investing activities Interest paid	(441)		(36)
Payments to acquire investments	(0)		(449)
Loans to subsidiaries	(3,299)		(4,036)
		--------------------		---------------
Net cash used in Investing activities	(3,740)		(4,521)
Cash outflow before Financing activities		(4,020)		(5,205)

Financing activities

Issue of equity share capital	3,308	4,670
Capital element of finance leases	(7)	(6)
Increase in loans	750	595
	-------------------------	---------------
Net cash inflow from financing activities	4,051	5,259

	-----------------------	---------------
Decrease in cash and cash equivalents	(31)	54
Cash and cash equivalents at the beginning of the year	(28)	(85)
	-------------------------	---------------
Cash and cash equivalents at the end of the year	(59)	(31)
	======================	===============

Delling Group Plc

 

Company Cash Flow Statement

 

Year ended 31st December 2007

	At 31 December 2006	Cash Flows	Foreign exchange movement	At 31 December 2007
	£000	£000	£'000	£000

Net debt:

Overdrafts	(28)	(31)	-	(59)
	_______________	_______________	_______________	_______________
	(28)	(31)	-	(59)

Major non-cash transactions

During the period ended 31 December 2007 the Company issued 343,633 ordinary shares of 1p at a price of 10.85p in partial consideration of an acquisition.

• Summary of Significant Accounting policies

    Basis of accounting

        The Financial Statements have been prepared in accordance with EU-endorsed International Financial Reporting Standards (IFRS), IFRIC interpretations and the parts of the Companies Act 1985 applicable to companies reporting under IFRS. The Financial Statements have also been prepared under the historical cost convention.

    The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's Accounting Policies.

    First-Time Adoption of International Financial Reporting Standards (IFRS)

    The Company and Group have adopted IFRS for the first time in their respective Financial Statements.

The Company and Group have applied IFRS 1 'First-time Adoption of International Financial Reporting Standards' to provide a starting point for reporting under IFRS. The date of transition to IFRS was 1 January 2006, and all comparative information in these Financial Statements has been restated to reflect the Company's and Group's adoption of IFRS.

The transition to IFRS reporting has resulted in a number of changes to the Financial Statements, the Notes thereto and the Accounting Policies, compared with previous annual reports. These changes are set out in Note 25. The Accounting Policies that have been applied in the opening Balance Sheet have also been applied throughout all periods presented in these Financial Statements.

    Standards and Interpretations in Issue but not yet Effective or not yet Relevant

    IFRS 8 'Operating Segments' requires companies to adopt a management approach to reporting on their operating segments. This standard is effective for the period ended 31 December 2009 and is not expected to have an impact on the Group's financial statement.

    A revised version of IAS 1 'Presentation of Financial Statements' will require information in financial statements to be aggregated on the basis of shared characteristics, and introduce a statement of comprehensive income. This standard is effective for the period ended 31 December 2009 and is not expected to have a major impact on the Group's financial statement.

    A revised version of IAS 23 'Borrowing Costs' removes the option of immediately recognising as an expense borrowing costs that relate to assets that take a substantial period of time to get ready for use or sale. This standard is effective for the period ended 31 December 2009 and is not expected to have an impact on the Group's financial statement. 

    An amendment to IFRS 2 'Share-based Payment' clarifies that vesting conditions are service conditions and performance conditions only, and specifies that all cancellations, whether by the entity or by other parties, should receive the same accounting treatment. This standard is effective for the period ended 31 December 2009 and is not expected to have a major impact on the Group's financial statement.

    IFRIC 11 'IFRS 2 - Group and Treasury Share Transactions' considers how certain grants of equity instruments should be treated under IFRS 2 'Share-based Payment'. This standard is effective for the period ended 31 December 2008 and is not expected to have a major impact on the Group's financial statement.

IFRIC 12 'Service Concession Arrangements' addresses how service concession operators should apply existing IFRSs to account for the obligations they undertake and rights they receive in service concession arrangements. This standard is effective for the period ended 31 December 2009 and is not expected to have an impact on the Group's financial statement.

IFRIC 13 'Customer Loyalty Programmes' addresses accounting by entities that grant loyalty award credits to customers who buy goods or services. This standard is effective for the period ended 31 December 2009 and is not expected to have an impact on the Group's financial statement.

IFRIC 14 'IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction' provides guidance on how to assess the limit in IAS 19 'Employee Benefits' on the amount of the surplus that can be recognised as an asset. This standard is effective for the period ended 31 December 2008 and is not expected to have an impact on the Group's financial statement.

    Basis of consolidation

    The Group Financial Statements consolidate the Financial Statements of Delling Group plc and all its subsidiary undertakings made up to 31st December 2007.

    Subsidiaries are entities over which the Group has control. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities. The Group obtains and exercises control through voting rights.

    The acquisition of subsidiaries has been accounted for using the purchase method of accounting. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed are measured initially at their fair values at the acquisition date. 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. Goodwill arising on purchases prior to the date of transition to IFRS was set off directly against reserves.

    Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated, unless the transaction provides evidence of an impairment of the asset transferred. Amounts reported in the Financial Statements of subsidiaries have been adjusted where necessary to ensure consistency with the Accounting Policies adopted by the Group.

    Revenue

    Revenue comprises the value of goods and services supplied by the Group, excluding value added tax and trade discounts. 

    Amortisation

    Amortisation is calculated so as to write off the cost of an asset, less its estimated residual value, over the useful economic life of that asset as follows:

    Brands, licences and patents - 10% straight line

    Tangible assets

    All fixed assets are initially recorded at cost.

      Depreciation

    Depreciation is calculated so as to write off the cost of an asset, less its estimated residual value, over the useful economic life of that asset as follows:

    Plant & Machinery - 3-5 years straight line

    Impairment of non-current assets

    Internal and external sources of information are reviewed at each balance sheet date to identify indications that assets may be impaired or, except in the case of goodwill, that an impairment loss previously recognised no longer exists or may have decreased.

    If any such indication exists, the asset's recoverable amount is estimated. In addition, for goodwill, the recoverable amount is estimated annually whether or not there is any indication of impairment.

    Calculation of recoverable amount

    The recoverable amount of an asset is the greater of its net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where an asset does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the smallest group of assets that generates cash flows independently (i.e., a cash-generating unit).

    Recognition of impairment losses

    An impairment loss is recognised in the income statement whenever the carrying amount of an asset, or the cash-generating unit to which it belongs, exceeds its recoverable amount. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (or group of units), and then to reduce the carrying amount of the other assets in the unit (or group of units) on a pro-rata basis, except that the carrying amount of an asset will not be reduced below its individual fair value less costs to sell, or value in use, if determinable.

    Reversals of impairment losses

    In respect of assets other than goodwill, an impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount. An impairment loss in respect of goodwill is not reversed.

    A reversal of an impairment loss is limited to the asset's carrying amount that would have been shown had no impairment loss been recognised in prior years. Reversals of impairment losses are credited to the income statement in the year in which the reversals are recognised.

    Inventories

    Inventories are valued at the lower of cost and net realisable value, after making due allowance for obsolete and slow moving items.    

Foreign Currencies

The Company and Group financial statements are presented in Pounds Sterling, which is the functional and presentation currency of the parent company. The assets and liabilities of foreign operations, including goodwill and fair value adjustments, are translated into Pounds sterling at the foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are translated to Pounds sterling at the average exchange rate ruling during the period. All exchange differences are taken to reserves.

Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of the transaction. Exchange differences are taken into account in arriving at the operating profit.

Investments

Investments in subsidiaries are stated at cost less any necessary provision for impairment. 

Financial instruments

Trade and other receivables

Trade and other receivables are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts at the year end. A provision for doubtful trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables.

Share capital

Ordinary shares are classified as equity.

Share premium is shown as an addition to shareholders' equity, and represents the premium paid on the issue of new shares.

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

Borrowings

Borrowings, including transaction costs, are initially recognised at the net proceeds received. In subsequent periods, borrowings are stated at amortised cost using the effective interest method.

Interest costs are expensed as incurred.

Trade and other payables

Trade and other payables are initially recognised at fair value and thereafter at amortised cost, unless the effect of discounting would be immaterial, in which case they are stated at cost.

Operating lease agreements

    Rentals applicable to operating leases where substantially all of the benefits and risks of ownership remain with the lessor are charged against profits on a straight line basis over the period of the lease.

Hire purchase agreements

Assets held under hire purchase agreements are capitalised and disclosed under tangible assets at their fair value. The capital element of the future payments is treated as a liability and the interest is charged to the profit and loss account on a straight line basis.

Share based payments

The Group operates a share option scheme to encourage participation by Directors and employees in the Group's performance. The fair value of the services received in exchange for the grant of options is recognised as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of any options granted, excluding non-market vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. At each balance sheet date, the Company revises its estimate of options that are expected to vest.

All other share based payments are reflected at fair value within the financial statements.

Pension costs

The Group operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Group. The annual contributions payable are charged to the income statement.

    Deferred taxation

    Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events have occurred at that date that will result in an obligation to pay more, or a right to pay less or to receive more tax, with the exception that deferred tax assets are recognised only to the extent that the Directors consider that it is more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted.

    Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date.

    Cash and cash equivalents

    Cash and short term deposits in the balance sheet comprise cash at banks and in hand and short-term deposits with and original maturity of three months or less.

    For the purpose of the consolidated cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.

    Going concern

    United Kingdom company law requires the Company's Directors to consider whether it is appropriate to prepare the financial statements on the basis that the Group is a going concern. In considering this matter the Directors have reviewed the Group's budget for 2008 and its plan for 2009. This included consideration of the cash flow implications of the budget and plan and the receipt of an unconditional guarantee provided by a major shareholder. The Directors see no reason why the Group and the Company should not continue in operational existence for the foreseeable future. For this reason the Directors have adopted the going concern basis in preparing the Group's financial statements.

    Capital Risk 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 and benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital.

    In order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

2.        Revenue

    The revenue and loss before tax are attributable to the one principal activity of the Group.

    A geographical analysis of revenue is given below:

	2007	2006
	£000	£000
Europe	17,484	10,462
	===============	===============

3.       Operating loss

    Operating loss is stated after charging:

	2007	2006
	£000	£000
Amortisation	21	21
Depreciation of tangible fixed assets:
Owned assets	315	198
Leased assets	5	5
Loss on disposal of fixed assets	3	121

    Auditors' remuneration

- as auditors	16	16
- non-audit services - taxation	8	3
Remuneration of foreign auditors	84	37
	===========	===============
Exceptional item relates to an impairment of a loan due from  Mike Hudgell	157	-

4.         Particulars of employees

    The average number of staff employed by the Group during the financial year amounted to:

	2007	2006
	No	No

Management	12	10
Sales	42	32
Production and development	86	78
Administrative	12	10
	------------------	------------------
	152	130
	=================	===============

    The aggregate payroll costs of the above were:

	2007	2006
	£000	£000
Wages and salaries	5,589	3,624
Social security costs	1,658	860
Other pension costs, life cover & medical costs	339	197
	--------------------------	--------------------------
	7,586	4,681
	==========================	==========================

5.  Directors' emoluments

    The Directors' aggregate emoluments in respect of qualifying services were:

	2007	2006
	£000	£000

Emoluments receivable - from the Company	160	215
- from group companies	273	309
Benefits receivable	32	44
Value of company pension contributions to money purchase schemes	12	12
	------------------	---------------
	477	580
	==================	===============

    During the year one director participated in a money purchase pension scheme (2006: one)

    Emoluments of highest paid director:

Total emoluments	200	200
	==================	===============

6.   Finance costs

	2007	2006
	£000	£000
Interest payable on bank borrowing	985	471
Interest element of finance leases	1	1
	--------------	---------------
	986	472
	===============	===============

7.   Taxation on ordinary activities

    (a)    Analysis of charge in the year

		2007	2006
		£000	£000
UK Corporation tax based on the results for the year at 30% (2006: 30%)		-	-
Overseas taxation		125	129
		------------------	---------------
Total tax		125	129
		===========	===========

(b)    Factors affecting current tax charge

    The tax assessed on the loss on ordinary activities for the year is higher than the standard rate of corporation tax in the UK. 

	2007	2006
	£000	£000

Loss on ordinary activities before taxation	(3,439)	(5,211)
	================	===============

Loss on ordinary activities by rate of tax at 30% (2006: 30%)	(1,032)	(1,701)
Disallowed expenditure	89	13
Overseas taxation	125	129
Losses carried forward	417	450
Overseas losses	401	1,238
	--------------	---------------
Total current tax - debit (note 7(a))	125	129
	==============	===============

Deferred tax assets have not been recognised in the financial statements as the Directors are uncertain as to when they will be utilised.

8.   Loss per share

	2007	2006
	Pence	Pence
Loss per ordinary share	(2.08)	(4.80)
	===============	===============

The basic loss per share is calculated by dividing the loss on ordinary activities after tax of £ 3,564,000 (2006: £5,341,000) and the weighted average number shares in issue and carrying the right to receive dividend during year ended 31 December 2007 being 171,566,735 (2006: 111,216,685), which excludes shares issued to the Directors and not fully paid.

The diluted earnings per ordinary share calculation are the same as the basic earnings per share calculation. This is because no dilution arises as there is a loss.

9.   Loss attributable to members of the parent company

    The loss dealt with in the accounts of the parent company was £1,533,000 (2006: £1,509,000). 

10.  Dividends

    No dividends have been paid in respect of the year.

11.  Called up share capital not yet paid

Subsequent to the AGM that took place on 15 July 2005 the following directors were allotted ordinary shares at the then market price of 21p, under the Directors' Share Acquisition Scheme, the Directors that held these shares at 31 December 2007 were:

Director	Shares allotted
Geir Lolleng	1,298,839
Aksel Bratvedt	1,298,839
James Robinson	1,435,559

These shares were issued and remain unpaid and no application will be made for the shares to be admitted to trading on AIM whilst they remain unpaid. All shares can be paid up and the directors have until the 15 July 2015 to pay up the shares. Whilst the shares remain unpaid they will have no voting or dividend rights.

12.  Intangible fixed assets

31 December 2007

31 December 2006

Group	Brands, licences     & patents	Goodwill	Total	Brands, licences & patents	Goodwill	Total
	£000	£000	£000	£000	£000	£000

    Cost

At 1 January	215	8,106	8,321	215	3,372	3,587
Additions	-	1,838	1,838	-	4,734	4,734
	---------------	---------------	---------------	---------------	---------------	---------------
At 31 December	215	9,944	10,159	215	8,106	8,321
	=========	=========	=========	=========	=========	=========

    Amortisation

	At 1 January	50	490	540	29	490	519
	Charge for the year	21	0	21	21	0	21
		---------------	---------------	---------------	---------------	---------------	---------------
	At 31 December	71	490	561	50	490	540
		===============	===============	===============	===============	===============	===============

Net book value At 31 December		144	9,454	9,598	165	7,616	7,781
		===============	===============	===============	===============	===============	===============

      Impairment Tests for Goodwill

Goodwill is allocated to the Group's cash-generating units (CGUs), identified accordingly as the subsidiaries.

The following table shows a segment-level summary of the goodwill allocation:

		31 December 2007		31 December 2006
Delling Group AS			828		828
Delling Group AB			2,410		2,151
Delling Expo AB			4,546		2,967
N3prenör AB			1,670		1,670
			---------------		---------------
Total			9,454		7,616

The recoverable amount of a CGU is determined based on value-in-use calculations. These use pre-tax cash flow projections, based on financial budgets approved by management, covering a three-year period. Cash flows beyond this period are extrapolated using the estimated growth rates between 3 and 6 % based on industry and managements view of the observable markets. Management determined budgeted gross margin based on past performance and its expectations of market development.  Projected cash flows pre tax, were discounted at 7,5 % per annum to calculate the net present value, the discount rate reflecting the time value of money and risks specific to the CGUs. As a result of these tests, no impairment provisions are considered necessary. 

13.   Tangible fixed assets

		31 December 2007			31 December 2006
Group		Plant & machinery	Total		Plant & machinery	Total
		£000	£000		£000	£000

    Cost

At 1 January		1,006	1,006		840	840
Acquired in year		311	311		311	311
Disposed in year		(92)	(92)		(145)	(145)
		---------------	---------------		---------------	---------------
At 31 December		1,225	1,225		1,006	1,006
		===============	===============		===============	===============

    Depreciation

At 1 January			407	407		228	228
Charge for the year			320	320		203	203
On disposals			(78)	(78)		(24)	(24)
			---------------	---------------		---------------	---------------
At 31 December			649	649		407	407
			===============	===============		===============	===============

    Net book value

At 31 December		576	576		599	599
		===============	===============		===============	===============

		31 December 2007			31 December 2006
Company		Plant & machinery	Total		Plant & machinery	Total
		£000	£000		£000	£000

    Cost

At 1 January		16	16		16	16
Acquired in year		-	-		-	-
		---------------	---------------		---------------	---------------
At 31 December		16	16		16	16
		===============	===============		===============	===============

    Depreciation

At 1 January			8	8		3	3
Charge for the year			5	5		5	5
			---------------	---------------		---------------	---------------
At 31 December			13	13		8	8
			===============	===============		===============	===============

    Net book value

At 31 December		3	3		8	8
		===============	===============		===============	===============

All of the assets held by the Company are held under hire purchase agreements.

14.  Investments in Subsidiary Undertakings

Company	Total
	£000

    Cost

At 1 January 2007	2,269
Additions	93
	--------------------------
At 31 December 2007	2,362
	==========================

    Net book value

At 31 December 2007	2,362
	==========================
At 31 December 2006	2,269
	==========================

  Subsidiary undertaking

Name of company

Holding

Country of incorporation

Proportion of voting rights held

Nature of business

Directly Held Azzets Limited	Ordinary Shares	UK	100%	Dormant
Butler Systems Limited	Ordinary Shares	UK	100%	Dormant
Depicta Limited	Ordinary Shares	UK	100%	Dormant
Dellinger Group Holding AB	Ordinary Shares	Sweden	100%	Holding company
Dellinger Group Holding II AB	Ordinary Shares	Sweden	100%	Holding company
Indirectly Held
Dellinger Group AB	Ordinary Shares	Sweden	100%	Outsourced marketing services
Delling Group AS (previously called Depicta Fame AS)	Ordinary Shares	Norway	100%	Outsourced marketing services
Dellinger Expo AB (previously called Sandberg Expo AB)	Ordinary Shares	Sweden	100%	Provision of expo services
n3prenör AB	Ordinary Shares	Sweden	100%	Preparation of annual reports and other corporate documents
Full Bredde AS	Ordinary Shares	Norway	100%	Dormant
Domain of Graphics AB (previously called Azzets AB)	Ordinary shares	Sweden	100%	Dormant

Business Combinations

In 2007 the Group acquired 100% of the shares in Domain of Graphics AB for £260,000 giving rise to the goodwill with the same amount. The trade of Domain of Graphics was transferred into Delling Group and subsequent to this transfer Domain of Graphics was wound up. Since the trade was transferred to Delling Group it is not possible to separate the revenue and profit for 2007.

In late 2007 the trades of Hennix Expo and Dekorateljén were purchased for £380,000 giving rise to the same amount in goodwill. 

In 2007 the Group acquired a 100% shareholding in Sandberg Expo AB. The consideration comprised: shares to the value of £372,000 and cash of £819,000, giving rise to goodwill of £1,199,000.

Net assets/liabilities acquired are considered to be at fair value and comprise:

				£000
Intangible assets				28
Tangible assets				165
Stock				24
Trade debtors				374
Other debtors				182
Cash				135
Overdraft				(100)
Trade creditors				(143)
Other creditors				(679)
Net liabilities acquired				(16)
Cost:     -shares issued     -cash				370 813
				________
Goodwill arising				1,199
				========================

From the date of acquisition to 31 December 2007, Sandberg Expo AB contributed with £3,253 in revenue and £(151) to the net loss of the Group. Since the combination took place at the beginning of 2007, this reflects the full loss for 2007 for Sandberg Expo AB.

On 1 January 2007 the Group transferred the trades of Eckerud Scandinavian Group AB into Sandberg Expo AB and changed the business name to Dellinger Expo AB, resulting in Eckerud Scandinavian Group AB becoming dormant. Eckerud Scandinavian Group AB was wound up during 2007.

15.  Inventories

	Group		Company
	2007	2006	2007	2006
	£000	£000	£000	£000

Finished goods	107	55	-	-
	=====================	===============	============	===============

  16.  Trade receivables

	Group		Company
	2007	2006	2007	2006
	£000	£000	£000	£000

Trade receivables	2,665	2,114	-	-
Amounts owed by group undertakings	-	-	11,815	7,866
	-------------------------	------------------	-------------------------	---------------
	2,665	2,114	11,815	7,866
	=========================	===============	========================	===============

    Trade receivables of £1,114,000 (2006: £408,000) have been factored.

At 31 December 2007, trade receivables of £157,000 were impaired. The individually impaired receivables relate mainly to customers, which are in unexpectedly difficult economic situations. It is expected that a portion of the receivables will be recovered. The aging of these receivables is:

	2007
	£000

3 to 6 months	87
Over 6 months	70
	-------------------------
Total	157
	=========================

At 31 December 2007, trade receivables of £249,000 were past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default. The aging for these receivables is:

	2007
	£000

3 to 6 months	233
Over 6 months	16
	-------------------------
	249
	=========================

17.  Financial liabilities: Amounts falling due within one year

	Group		Company
	2007	2006	2007	2006
	£000	£000	£000	£000

Amounts due to debt factors	1,114	408	-	-
Bank loans & overdrafts	1,400	1,603	59	28
Finance leases	1	5	1	5
	-------------------------	--------------------------	-------------------------	---------------
	2,515	2,016	60	33
	========================	==========================	=========================	===============

The bank loans and overdrafts of the subsidiaries are secured by a fixed and floating change over the assets of those subsidiaries.

  18.  Financial liabilities: Amounts falling due after more than one year

	Group		Company
	2007	2006	2007	2006
	£000	£000	£000	£000

Other creditors	791	622	-	-
Finance leases	0	3	-	3
	---------------	---------------	-----------------	---------------
	791	625	-	3
	=================	===============	===================	===============

19.  Commitments under operating leases 

    At 31 December 2007 the Group had annual commitments under non-cancellable operating leases as set out below.

Group
	2007		2006
	Land and Buildings	Other items	Land and Buildings	Other items
	£000	£000	£000	£000

    Operating leases which expire:

Within 1 year	350	-	12	-
Within 2 to 5 years	911	0	858	5
	---------------	---------------	---------------	---------------
	1,261	0	870	5
	===============	===============	===============	===============

Company
	2007		2006
	Land and Buildings	Other items	Land and Buildings	Other items
	£000	£000	£000	£000

    Operating leases which expire:

Within 1 year	12	-	12	-
Within 2 to 5 years	-	-	-	5
	---------------	---------------	---------------	---------------
	12	-	12	5
	===============	===============	===============	===============

  20.  Related party transactions

    During the year Delling Group AS invoiced Delling Group AB £280,000 and Delling Group AB invoiced Delling Group AS £267,000 for various services. Delling Expo AB has invoiced Delling Group AB for £127,000. There was no outstanding balance at the year end. 

    During the year there were transactions between Delling Group Plc and the subsidiaries to pay off the group liabilities as they fall due. At the balance sheet date the balance due from the subsidiaries to Delling Group Plc:

	2007	2006
	£000	£000
Dellinger Holding I AB	821	821
Dellinger Holding II AB	1,579	259
Dellinger Group AB	3,773	3,667
Delling Group AS	5,586	3,118
Dellinger Expo AB	56	-
	---------------	---------------
	11,815	7,865

    During the year the Group transferred the trade of Eckerud Scandinavian Group AB into Sandberg Expo AB and changed the business name to Dellinger Expo AB, resulting in Eckerud Scandinavian Group AB becoming dormant. Eckerud Scandinavian Group AB was wound up during 2007.

    During the year the trade of Domain of Graphics AB was transferred into Dellinger Group AB, resulting in Domain of Graphics becoming dormant. All group transactions were eliminated on consolidation.

    During the year group companies were invoiced £273,000 (2006: £117,000) by Nordic Investment Management Ltd a company under the control of A Bratvedt and G Lolleng for directors' services. 

    During the year group companies were invoiced £0 (2006: £192,000) by Nordic Investment Management AS, a company under the control of G Lolleng for directors' services. There was no outstanding balance at the year end.

    The Group increased its loan with RAB Capital plc, a significant shareholder in the Company with £750,000. The amounts owed is £1,750,000 (2006: £1,000,000) and £613,000 has been accrued in interest costs.

    The Group owes £73,000 (2006 was owed £605,000) to Mr Bjart Dysthe, a significant shareholder in the company. The loans are interest free and unsecured with no fixed repayment date.

  21.  Share capital

    Authorised share capital

	2007	2007	2006	2006
	No	£000	No	£000

Ordinary shares of £0.01 each	400,000,000	4,000	200,000,000	2,000
	==================	=================	==================	===============

	2007	2007	2006	2006
	No	£000	No	£000

Allotted, called up and fully paid:
Ordinary shares of £0.01 each	202,104,606	2,021	151,172,514	1,511
Allotted, called up and unpaid
Ordinary shares of £0.01 each	4,033,237	40	5,468,796	55
	====================	=================	==================	_____
	206,137,843	2,061	156,641,310	1,566
	=====================	==================	===================	=============

    The following shares were issued in the year

	£000	No	Reason
February 2007	1,035	11,500,000	Placing
February 2007	329	3,343,633	Acquisition
December 2007	1,683	33,652,900	Placing
December 2007	55	1,000,000	Placing
	------------------------	---------------------------------------------------
	3,102	49,496,533
	======================	===================================================
Warrants

The Company has two warrants in existence as follows:

(1)    1% of the issued share capital at admission to AIM at the admission price exercisable at any time over 5 years from the admission, and

(2)    3% of the issued share capital at admission to AIM at the admission price exercisable at any time over 3 years from the admission.

22.  Shares to be issued under option

Options were valued using the Black-Scholes option pricing model. The assumptions used to value the options are set out below:

Option granted on:	15 June 2005	18 September 2006	20 November 2007
Shares under option	5,265,243	6,802,764	5,000,000
Exercise price	14p - 21p	12p	6.56p
Exercisable from (years)	2	0	0
Option life (years)	3-10	5	5
Risk free rate	4.34	4.34	4.52
Expected volatility	28.42%	28.42%	36.89%
Expected dividend yield	0%	0%	0%
Forfeiture rate	0%	0%	0%
Bid price discount	0%	0%	0%
Total fair value of options granted (£000)	194	188	119
Recognised in the current year	149	0	119

In addition the Company has 585,000 options granted on 14 October 2004, exercisable at 14p.

The expected volatility is based on historical volatility since listing on AIM on 14th October 2004.

The total fair value has been spread over the relevant vesting periods and has resulted in a charge to the income statement for the year ended 31 December 2007 of £268,000 (2006: £203,000).

23.  Contingent liabilities

Depict Guarantee

    In 2002, Kanonladdaren AB sold software rights to a related party Cultmag AS. Kanonladdaren agreed to guarantee Cultmag's bank borrowings for that purchase. Subsequently, as part of Kanonladdaren's sale of its assets to members of the Group, Depicta took over 2.5 million Swedish kronor of that guarantee in favour of Sparebanken Spreetogo which it can be called on to pay and contains no recourse.

    Azzets Undertaking

    In 2002, Kanonladdaren AB sold software rights to a related party, Cultmag AD. Kanonladdaren agreed to guarantee Cultmag's bank borrowings for that purchase.  Subsequently, as part of Kanonladdaren's sale of its assets to members of the Group Azzets agreed to take over 14.3 million Swedish kronor of that guarantee in favour of DNBOR which it can be called on to pay and contains no recourse.

24.  Controlling party

    There is no controlling party

  25.  Reconciliation of previous GAAP to IFRS

Reconciliation of Balance sheet

		Year ended 31 December 2006			Year ended 31 December 2007
£'000		Previous GAAP	Effect of transition to IFRS	IFRS	Previous GAAP	Effect of transition to IFRS	IFRS
Called up share capital not yet paid		1,148		1,148	847		847
Non-current assets
Intangible assets	a)	7,321	460	7,781	8,775	823	9,598
Tangible Assets		599		599	576		576
Current assets
Inventories		55		55	107		107
Trade receivables		2,114		2,114	2,665		2,665
Other current assets		1,268		1,268	883		883
Cash at bank		290		290	320		320
Total assets		12,795	460	13,255	14,173	823	14,996
Current liabilities
Trade and other payables		3,711		3,711	3,752		3,752
Financial liabilities		2,016		2,016	2,515		2,515
Current corporation tax payable	b)	129		129	125		125
Other taxation and social security		372		372	964		964
Other current liabilities		4,178		4,178	5,242		5,242
Accruals and deferred income		954		954	1,187		1,187
Non-current liabilities
Financial liabilities		622		622	791		791
Long-term provisions		3		3	-		-
Total liabilities		11,985		11,985	14,576		14,576
Net assets		810	460	1,270	(403)	823	420
Capital and reserves attributable to Equity holders of the Company
Called up share capital		1,566		1,566	2,061		2,061
Shares to be issued under option		239		239	534		534
Share premium account		10,623		10,623	13,637		13,637
Retained earnings		(11,618)	460	(11,158)	(16,636)	823	(15,813)
Total equity		810	460	1,270	(403)	823	420

  Reconciliation of Income statement

				Year ended 31 December 2006
£'000				Previous GAAP	Effect of transition to IFRS	IFRS
Continuing Operations
Revenue				10,462		10,462
Cost of sales				(6,037)		(6,037)
Gross profit				4,425		4,425
Administrative expenses				(9,628)	460	(9,168)
Operating loss				(5,203)	460	(4,743)
Finance income				4		4
Finance costs				(472)		(472)
Loss before tax				(5,671)	460	(5,211)
Tax on loss on ordinary activities				(129)		(129)
Loss for the period				(5,800)	460	(5,340)

    Notes

a)      Under UK GAAP the Group amortised goodwill over its estimated useful economic life, of 10 years, IFRS 3 requires that goodwill is not amortised but is subject to an annual impairment review instead. As required by IFRS 1 an impairment test was carried out at the date of transition to IFRSs. No impairment was identified. The remeasurement adjustment to the Group balance sheet at 31 December 2006 of £460,000 reverses the amortisation of goodwill charged in that year under UK GAAP.

b)      Current corporation tax balances previously held within creditors are now disclosed separately on the face of the balance sheet.

c)      Under IFRS, the Group Cash Flow Statement reconciles the movements in cash and cash equivalents, whereas in the last audited UK GAAP Financial Statements, it reconciled the movements in cash only. There are no material differences between the IFRS and UK GAAP cash flow statements. There have been a number of minor reclassifications: for example, interest paid is now included in net cash from investing activities, whereas under UK GAAP it was reported in returns on investments and servicing of finance.

  26.  Post balance sheet events

After the year end Delling Group Plc has granted 13,000,000 share options at an exercise price of 6p to directors and employees. The share options will become exercisable after 26th March 2008 and will expire on 26th March 2018. The grants to directors included 4,000,000 share options each to Mr. Bratvedt and Mr. Lolleng who will after this grant have 5,511,725 share options in total each; 2,000,000 share options to Mr Lowe who will have after this grant 3,340,890 share options in total and 1,000,000 share options to Mr. Von Schedvin who will have after this grant 2,340,890 share options in total.

Under the rules of the scheme, the options may be exercised immediately after the date of grant and may not in any event be exercised later than the tenth anniversary of the date of grant.

As of 16th 2008 January James Robinson, Finance Director resigned his directorship of the Company. The Group has employed Svante Godén as Group CFO.

In April 2008 the trades of Delling Expo AB and Delling Group AB, as a part of the ongoing integration, were transferred to a new company Delling Marketing Support Services AB, resulting in Delling Expo AB and Delling Group AB becoming dormant.

 

END

 

 

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