Interim Results

RNS Number : 6532E

Delling Group PLC

30 September 2008

 



For immediate release

30 September 2008

DELLING GROUP PLC (DLG/L)

The AIM-listed marketing services group

INTERIM RESULTS

Delling Group PLC ('Delling' or the 'Company'), the only listed marketing support services group on AIM whose principal assets are in Scandinavia announces interim results for the six months ended 30 June 2008

Highlights

Financials

• Turnover was pleasingly maintained at £10.2m (2007: £10.5m), despite our significant cost cutting exercise and a sharp reduction in our sales force

• Profits before exceptional items was £0.7(2007:£0.3m)

• Board expects to see some softening in demand from potential international customers, but believes the Group's ability to reduce client costs across management, production and logistics will act defensively and enhance its market positioning

• Sales pipe line during autumn 2008 and prospects for 2009 look encouraging

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

'Delling has continued to make good progress, both in terms of integration and cost reduction, but also in terms of maintaining sales in a period where staff numbers have been significantly reduced. The Group has had a stable start to the third quarter and we expect this to continue into the Autumn with organic growth generated both by increased sales of single services as well as through new outsourcing contracts.

The board feels that the company is well positioned after substantive restructuring to meet a softer market and therefore, we look forward to the future with a fair degree of confidence

- 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 & Co Limited - Nominated Advisor
Hugh Oram	Tel: [phone]

CHAIRMAN'S STATEMENT

Financial results:

I am delighted to present the Company's interim results for the half year to 30 June 2008. Delling has continued to make good progress, both in terms of integration and cost reduction, but also in terms of maintaining sales in a period where staff numbers have been significantly reduced. Delling was profitable during the period before financial costs and adjustment for non-recurring restructuring costs. 

Financials

We are pleased that in spite of the significant reduction in the Group's cost base in the first half 2008, Delling has been able to maintain its sales volumes with a total of £10.2m in turnover. The company made an operating profit before exceptional items of £0.7m (2007: £0.3m). Exceptional items consist of non-recurring restructuring costs of £0.9m (2007: £0) and a write-down of nil paid shares of £0.3m (2007: £0).

The challenge for the company at the moment is to address high financing expenses of £0.6m (2007: £0.4m), which includes an expensive convertible loan. Management is currently focusing its efforts on reducing these costs, and it hopes to have them reduced to acceptable levels by the end of the year.

Trading Activity

The company has in the period seen good demand for its services, despite the changing macro economic environment. The Board does expect to see some softening in demand from potential international customers, but believes the Group's ability to reduce client costs across management, production and logistics will act defensively and will enhance its market positioning.

Delling's business model seeks to establish an outsourcing concept that reduces the costs of client marketing departments through the outsourcing of various marketing functions back to Delling Group. In a softer market, the Group will look to pass on the benefits of its economies of scale to those marketing departments, thereby lowering costs and in so doing, cementing further the relationship. 

Delling Group has more than 300 customers including a large number of international companies such as ABB, Bristol Meyer Squibb, Ericsson and Astra Zeneca amongst others. We believe that there is considerable potential for cross marketing our services to these organisations and growing our business organically. Therefore, we are focussing our efforts on our existing customer base. We do not believe that the company needs currently to take on any new customers so as to meet organic growth targets.  

The company has worked hard on integrating its sales department and it has appointed one director to focus on ensuring that the sales function targets the marketing of a suite of Delling's services to its customer base. This is vital if we are to be able to fully take advantage of the business concept that we have developed.  

Our sales efforts are pleasingly starting to generate results. The company is now involved in a wide range of contracts discussions with various customers and our sales pipeline for this autumn as well as our prospective pipeline for 2009 looks encouraging.  

Profit Improvement Program

Over the last half year our cost base has been reduced by more than £1.5m through reductions of staff, both planned as well as through natural wastage including staff that have left to set up their own business. In addition, the company has closed down one production unit, along with a warehouse, both in connection with the restructuring of the exhibition division. Furthermore, different companies in Sweden and Norway have been merged into one company in each country, and this has seen the winding up of the remaining non operating companies. The simplified corporate structure will lead to further costs reductions and improved efficiency. 

Non-recurring costs of £1.2m have impacted on the bottom line in the first half of 2008 and we look to feel the benefit of this restructuring as we go forward. 

During the first half of 2008, a completely new management information system was installed throughout the organisation and we are confident that this system will improve the efficiency of our finance department. 

The board believes that the major cost reduction processes are now complete.  

Financing

Our high financing costs are a direct consequence of acquisition financing, however the Group is working on addressing this shortly. We are also expecting in coming months to reduce our supplier debt. This then will increase the Group's purchasing power with suppliers, and will improve subsequently the Group's terms of trade, with positive effects on working capital and the gross profit margin going forward.

Future Strategy

The objectives and strategy of Delling Group are unchanged. Delling Group Plc is the only marketing support services company listed on AIM with the ambition of consolidating its particular part of the marketing arena within the Nordic area. The Company aims to continue its expansion, both through organic growth and subsequently through acquisitions when the present consolidation period is completed.

Delling Group's geographic focus is as before on the four Nordic countries. The Group has in Norway, operations in Oslo and Stavanger and in Sweden, operations in Stockholm, Linköping and Gothenburg. A gradual expansion into Finland and Denmark is anticipated on the back of increasing new business from existing and new customers in these countries. 

The size of Delling's marketplace across the Nordic countries is such that it can easily accommodate a profitable company with £100m in sales, giving Delling plenty of scope for further growth. Delling Group will continue to focus on business opportunities in its locality, where it is best able to take advantage of opportunities as they present themselves.

However, a number of our customers with businesses in London have increasingly enquired about the Group's ability to service them in the UK. A smaller acquisition in the London area that could take advantage of potential business volumes from Delling's various international and Scandinavian customers, is a possible geographic extension to our strategy when the board sees the time fit for such an acquisition.

Current Trading and Future Prospects

The Group has had a stable start to the third quarter and we expect this to continue into the Autumn with organic growth generated both by increased sales of single services as well as through new outsourcing contracts.

The board feels that the company is well positioned after substantive restructuring to meet a softer market and therefore, we look forward to the future with a fair degree of confidence.

Aksel Bratvedt

Executive Chairman

29 September 2008

  1. CONSOLIDATED INCOME STATEMENT

	6 months ended 30 June 2008 unaudited £'000				6 months ended 30 June 2007 unaudited (restated) £'000			Year ended 31 December 2007 audited £'000
Revenue
Continuing operations	10,241				10,526			17,484
Group revenue	10,241				10,526			17,484
Cost of sales	(4,845)				(5,485)			(8,659)
Gross profit	5,396				5,041			8,825
Administrative expenses	(5,908)				(4,783)			(11,130)
Operating profit/(loss) before exceptional items
Continuing operations	657				258			(2,305)
Exceptional items	(1,169)				-			(157)
Operating profit/(loss) after exceptional items	(512)				258			(2,462)
Finance income	11				-			9
Finance costs	(561)				(409)			(986)
Loss on Ordinary Activities before Taxation	(1,062)				(151)			(3,439)
Tax on loss on ordinary activities	-				-			(125)
Loss for period	(1,062)				(151)			(3,564)
Retained loss for period	(1,062)				(151)			(3,564)
Loss per share from Continuing Operations Attributable to the Equity Holders of the Company during the period	(0.62)p				(0.09)p			(2.08)p

  2. CONSOLIDATED BALANCE SHEET

	As at 30 June 2008  unaudited £'000		As at 30 June 2007  unaudited (restated) £'000		As at 31 December 2007 audited £'000
Called up share capital not yet paid	580		847		847
Non-current Assets
Intangible assets	9,586		9,124		9,598
Tangible assets	420		688		576
	10,006		9,812		10,174
Current Assets
Inventories	270		57		107
Trade receivables	2,484		3,627		2,665
Other current assets	1,525		2,005		883
Cash at bank	210		298		320
	4,488		5,987		3,975
Total Assets	15,074		16,646		14,996
Current Liabilities
Trade and other payables	4,333		3,608		3,752
Financial liabilities	2,136		2,754		2,515
Current corporation tax payable	125		-		125
Other taxation and social security	2,331		940		964
Other current liabilities	6,438		4,584		5,242
Accruals and deferred income	906		1,265		1,187
	16,269		13,151		13,785
Non-Current Liabilities
Financial liabilities	764		909		791
	764		909		791
Total Liabilities	17,033		14,060		14,576
Net Assets	(1,959)		2,586		420

	As at 30 June 2008  unaudited £'000		As at 30 June 2007  unaudited (restated) £'000		As at 31 December 2007 audited £'000
Capital and Reserves attributable to Equity holders of the Company
Called-up share capital	2,061		1,715		2,061
Shares to be issued under option	660		255		534
Share premium account	13,637		11,931		13,637
Retained earnings	(18,317)		(11,315)		(15,812)
Total Equity	(1,959)		2,586		420

  3. STATEMENT OF CHANGES IN EQUITY

	Share capital	Share premium account	Shares to be issued under option	Retained earnings	Total
	£'000	£'000	£'000	£'000	£'000
6 months ended 30 June 2008
As at 1 January 2008	2,061	13,637	534	(15,812)	420
Share based payments	-	-	126	-	126
Loss for the financial period attributable to the shareholders of the parent company	-	-	-	(1,062)	(1,062)
Currency translation differences on foreign currency net investments	-	-	-	(1,443)	(1,443)
As at 30 June 2008	2,061	13,637	660	(18,317)	(1,959)
6 months ended 30 June 2007
As at 1 January 2007	1,566	10,623	239	(11,158)	1,270
Issue of shares	149	1,362	-	-	1,511
Difference in respect of directors' share acquisitions scheme	-	-	-	(156)	(156)
Share issue costs	-	(54)	-	-	(54)
Share based payments	-		16	-	16
Loss for the financial period attributable to the shareholders of the parent company	-	-	-	(151)	(151)
Currency translation differences on foreign currency net investments	- -	- -	-	150	150
As at 30 June 2007	1,715	11,931	255	(11,315)	2,586
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	-	(70)	-	-	(70)
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	-	-	-	(1,090)	(1,090)
As at 31 December 2007	2,061	13,637	534	(15,812)	420

  4. CONSOLIDATED CASH FLOW STATEMENT

 

 

	6 months ended 30 June 2008 unaudited £’000	6 months ended 30 June 2007 unaudited £’000	Year ended 31 December 2007 unaudited £’000
Operating activities
Loss before taxation	(512)	258	(2,305)
Adjustments for:
Amortisation	12	21	21
Depreciation	158	169	320
Loss on disposal of fixed assets	2	0	13
Share based payments	126	8	268
Provision related to nil-paid shares	267	-	157
(Increase)/decrease in stocks	(148)	20	(23)
Decrease/(increase) in debtors	22	(1,699)	836
(Decrease)/increase in creditors	(730)	(87)	(820)
	--------------------------	--------------------------	--------------------------
Cash used in Operations	(803)	(1,310)	(1,847)

 

Interest element of finance leases	-	(1)	(1)
Interest received	12	-	9
Corporation tax paid	-	-	(79)
	--------------------------	--------------------------	--------------------------
Net Cash used in Operating activities	(791)	(1,311)	(1,918)
Cash Flows from Investing activities Interest paid	(339)	(215)	(441)
Purchase of intangible fixed assets	0	(819)	(1,419)
Purchase of tangible fixed assets	(2)	(91)	(125)
(Overdrafts)/cash acquired with subsidiaries	0	126	44
	--------------------------	--------------------------	--------------------------
Net Cash used in Investing activities	(341)	(999)	(1,941)
Cash outflow before Financing activities	(1,132)	(2,310)	(3,859)
Financing activities Issue of equity share capital	-	1,248	3,308
Capital element of finance leases	-	(3)	(7)
Repayment of loans	-	-	(0)
Increase in loans	839	295	834
	--------------------------	--------------------------	--------------------------
Net Cash flow from Financing activities	839	1,540	4,135
Increase/(decrease) in cash and cash equivalents	(293)	(770)	276
Effect of exchange rates on cash and cash equivalents	(170)	24	(184)
Cash and cash equivalents at the beginning of the year	(1,221)	(1,313)	(1,313)
	--------------------------	--------------------------	--------------------------
Cash and cash equivalents at the end of the year	(1,684)	(2,059)	(1,221)
	--------------------------	--------------------------	--------------------------

	At 31 December 2007	Cash Flows	Foreign exchange movement	At 30 June 2008
	£000	£000	£’000	£000

 

Net debt:

Cash in hand and at bank	320	(150)	40	210
Overdrafts	(1,541)	(143)	(210)	(1,894)
	_______________	_______________	_______________	_______________
	(1,221)	(293)	(170)	(1,684)
	_______________	_______________	_______________	_______________

5. NOTES TO THE INTERIM STATEMENT

5.1    Financial information and comparatives

The unaudited financial information comprises the consolidated interim balance sheets as at 30 June 2008 and 30 June 2007 and the related consolidated interim statements of income, changed in equity and cash flows and related notes for six months them ended (hereinafter referred to as the 'financial information'

The financial information, including the comparative figures for the year ended 31 December 2007, do not constitute statutory financial statements for the purposes of Section 240 of the Companies Act 1985. A copy of the statutory financial statements for the year ended 31 December 2007, prepared in accordance with the recognition and measurement criteria of the International Financial Reporting Standards (IFRS) as adopted by the European Union ,has been delivered to the Registrar of Companies and contained an unqualified auditors' report in accordance with Section 235 of the Companies Act 1985.

The interim financial information has been prepared in accordance with the recognition and measurement requirements of IFRS as endorsed by the European Union. The Directors do not consider that there are any changes to the group's accounting policies set out in the 2007 Annual Report. As permitted, the Group has chosen not to adopt IAS 34 'Interim Financial Statements' in preparing this interim financial information.

5.2    Tax on loss on ordinary activities

Operating loss is stated after charging:

	30 June 2008 £'000		30 June 2007 £'000		31 December 2007  £'000
Amortisation	12		12		21
Depreciation of tangible fixed assets
Owned assets	156		191		315
Leased assets	2		2		5
Loss on disposal of fixed assets	2		-		3

Exceptional item relates to:
Impairment of  debt due from  former directors	267		-		157
Non-recurring restructuring costs	902		-		-
	1,169		-		157

5.3    Tax on loss on ordinary activities

There is no tax charge on the result for the six month period due to available losses.

5.4    Dividends

No dividend is proposed.

5.5    Options granted in the six months to June

The company has granted 13,000,000 share options at an exercise price of 6p to directors and employees. The share options became exercisable after 26th March 2008 and will expire on 26th March 2018. The options were valued using the Black-Scholes option pricing model.

5.6    Loss per share

The calculation of loss per share is based on the loss attributable to ordinary shareholders divided by the weighted average number of shares in issue carrying the right to receive dividends. The weighted number of shares in issue is as follows:

	30 June 2008 Number '000		30 June 2007 Number '000		31 December 2007  Number '000
Weighted average number of shares	171,567		168,395		171,567

There is no dilution of earnings per share as a result of losses.

  Independent review report to the directors of Delling Group plc

We have been engaged by the Company to review the condensed set of Financial Statements in the half-yearly financial report for the six months ended 30 June 2008, which comprise the consolidated income statement, consolidated balance sheet, consolidated statement of changes in equity, consolidated cash flow statement and related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules for Companies.

The annual Financial Statements of the Group are prepared in accordance with the recognition and measurement criteria of IFRSs as adopted by the European Union. The condensed set of Financial Statements included in this half-yearly financial report has been prepared in accordance with the AIM Rules for Companies. 

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of Financial Statements in the half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the Company for the purpose of the AIM Rules for Companies. We do not, in producing this report, accept or assume responsibility for any other purpose to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of review

We conducted our review in accordance with the International Standard on Review Engagements 2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of Financial Statements in the half-yearly financial report for the six months ended 30 June 2008 is not prepared, in all material respects, in accordance with the AIM Rules for Companies.

Littlejohn

Chartered Accountants

1 Westferry Circus

Canary Wharf

London E14 4HD

 

29 September 2008

 

END

 

 

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