Interim Results

Delling Group PLC 10 September 2007 Press Release 7.00am 10 September 2007 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 2007 Highlights •Turnover up 110 per cent. to £10.5m (2006 interims: £5.0m) reflecting the full effect of recent acquisitions in addition to new contracts and good organic growth •Maiden operating profit of £214,000 (2006 interims: Loss £1.3m) with the Company benefiting from significantly improved economies of scale and critical mass allied to an increasingly strong footprint within its markets •Consolidation of the business and cost cutting continue the ongoing process of realising the profit potential within the business •Successful completion of the acquisitions of Domain of Graphics AB and Sandbergs Exhibition Group AB took place during the period. Combining Sandbergs with our existing exhibition businesses makes Delling Group the largest provider of such services in Scandinavia, a strategically important position, upon which the Group is well placed to build. Commenting, Aksel Bratvedt, Executive Chairman, said: 'Delling is now turning over sufficient volumes to give it critical mass, allowing the Company to extract those economies of scale that have long existed and enabling it to generate operating profits for the first time in its history'. 'The Group has had a stable start to the 3rd quarter and expects this to continue into the Autumn with organic growth generated both by increased sales of single services as well as through new outsourcing contracts.' 'With the present demand for our services and the increasing profitability of the Group, the Board is looking forward to the future with considerable confidence.' Contact: Delling Group Plc Aksel Bratvedt, Chairman Tel: 020 7484 5663 James Robinson, Finance Director Tel: 020 7484 5664 www.dellinggroup.com ---------------------- Adventis Financial PR Tel: 020 7034 4758 Tarquin Edwards 07879 458 364 Seymour Pierce Nicola Marrin Tel: 020 7107 8000 Notes to Editors Delling Group is a leading supplier of marketing support services for marketing and communication departments throughout The Nordic countries. Delling manages all fields of graphic support in many different forms and formats including trade fairs, exhibitions and interactive digital solutions for the web, mobile telephone marketing solutions, motion media for flat screens, plasma or LCD. It also supplies IT solutions which support and increase the efficiency of both marketing and information departments. However, its major strength is that the Group can deliver complete turnkey solutions, tailor-made for its customers' every need. Delling also offers outsourcing solutions that can substantially save costs and improve efficiency. The Group's major activities are today concentrated in the Norwegian and Swedish markets, however, it is quickly expanding into other Nordic areas, as well as having customers and production facilities in Eastern Europe. It also has well respected suppliers as far afield as China and Thailand. Delling Group has today 140 employees. It is rapidly developing its organisation by focusing on supplying its customers with the quality they demand, delivered on time at the right price. Central to its philosophy lies the fact that its customers will obtain greater effects and efficiency for every pound they invest in marketing and information. The Group has strong growth, both through further development of existing clients and establishment of many new relationships, together with acquiring companies that enhance and further develop our business concept. Delling's goal is within the course of the next two years, through both satisfied customers and recommendations, to be the largest and most profitable company in the field of marketing support services within the Nordic countries, and a significant player within Eastern Europe. In October 2004, Delling was the first Scandinavian business to be listed on the Alternative Investment Market ('AIM'), the London Stock Exchange's international market for smaller growing companies. This has given Delling access to capital funds for the further development of the Group. CHAIRMAN'S STATEMENT Financial results: I am delighted to present the Company's interim results for the half year to 30 June 2007. Delling has continued to make good progress, both organically and by acquisition and the Company is pleased to announce a substantial increase in turnover and a move from significant losses into operating profitability. Financials Our performance for the first half of 2007 represents a doubling of turnover to £10.5m compared to the comparative period last year (2006: £5.0m) and it equals the turnover for the full year 2006 (£10.5m). This sales growth was generated both from the full effect of last year's acquisitions and also the acquisitions of Sandberg Expo and D.O.G in January 2007 as well as the expansion of our outsourcing contracts and good organic growth. Most importantly however, the Group has for the first time moved into operating profit. Delling has benefited from significantly improved economies of scale and critical mass, allied to an increasingly strong footprint within its markets. Consolidation of the business and synergistic cost cutting continue the ongoing process of realising the profit potential within the business. Trading Activity The Group is seeing increasing demand for its services, most especially with regard to its outsourcing concept. Delling has a customer base of more than 300 customers with international brand names such as Bristol-Myers Squibb, Ericsson, ABB, Coca Cola, McDonalds and others. These customers are increasingly seeing the benefits of converting to the outsourcing model, whereby Delling can reduce costs and increase quality and efficiency for their respective marketing departments. We are very excited by the significant potential for cross selling to these international customers more of our services and also the potential for introducing our outsourcing concepts to the customer bases of those companies we have acquired. Processes for integrating our sales staff are ongoing within the Group and we are very optimistic that the result of these processes will lead to improved sales. Profit Improvement Program As previously announced, our focus continues to be on improving the profitability of the Group. We have come a long way in bringing that process to fruition since the beginning of the year. Out of our 4 subsidiaries, only one subsidiary was still in loss during the period. While this subsidiary accounted for 15% of Group turnover, it accounted for all of the loss, thereby reducing the impact of the profitable performance of other companies in the Group. The Board believes that the process of cost cutting and actions to increase efficiency will turn this subsidiary around in the short term. We are focussing on both integrating our sales efforts and improving organic growth in turnover along with enhanced efficiency and cost cutting activities throughout the organisation. The Board and management have decided that our acquisition programme will temporarily cease, apart from small infill acquisitions that will have a short term identifiable impact on margins, and further substantial acquisitions will not be considered until the Company can see the final results of the profit improvement programme. Financing Financing costs are a consequence of expensive short term acquisition financing, which the Group is currently working on refinancing. In addition, the Group has experienced cash flow constraints during the period, causing financial expenses owing to late payment of suppliers. In connection with the loan refinancing of the subsidiaries, the Board believes that in the coming months, these expenses will cease and that the Group's purchasing power with suppliers will improve substantially, improving the Group terms of trade with positive effects on working capital and the gross profit margin. Acquisitions The Group acquired Sandberg Expo in January 2007 and fused with our existing businesses in this sector, has created the leading exhibition design and production company in Scandinavia. The Board can confirm already that this has been a successful acquisition, which has generated a strong strategic position for further growth in this arena. An example of this is our contract with Ericsson, announced on 5th June 2007 to deliver their exhibition material over the next 2 years. Although our focus is on profits rather than growth at the moment, the Group has a large pipeline of potentially interesting acquisition candidates. The Group will start pursuing these acquisitions as soon as the Board feels confident that the Group's financial position has stabilised and that Group cash flow is strong enough to support leveraged acquisition financing. 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 this sector within the Nordic area. The Company aims to continue its expansion, both through organic growth and subsequently through acquisitions. Delling Group's geographic focus is presently the four Nordic countries with a focus on Norway and Sweden where scope for cost efficiencies are largest at the moment. The Group has in Norway, operations in Oslo and Stavanger and in Sweden, operations in Stockholm, Linkoping, Gavle 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. Current Trading and Future Prospects The Group has had a stable start to the 3rd quarter and expects this to continue into the Autumn with organic growth generated both by increased sales of single services as well as through new outsourcing contracts. With the present demand for our services and the increasing profitability of the Group, the Board is looking forward to the future with considerable confidence. Aksel Bratvedt Executive Chairman 7 September 2007 1. CONSOLIDATED INCOME STATEMENT 6 months ended 6 months ended Year ended 30 June 2007 30 June 2006 31 December 2006 unaudited unaudited audited £'000 £'000 £'000 Turnover Continuing operations 8,382 4,995 7,053 Acquisitions 2,144 - 3,409 ------------ ------------ ------------ Group turnover 10,526 4,995 10,462 Cost of sales (5,485) (2,525) (6,037) ------------ ------------ ------------ Gross profit 5,041 2,470 4,425 Administrative expenses (4,827) (3,734) (9,628) ------------ ------------ ------------ Operating profit/(loss) Continuing operations (423) (1,264) (5,135) Acquisitions 637 - (68) ------------ ------------ ------------ Group operating profit/(loss) 214 (1,264) (5,203) Interest receivable - 8 4 Interest payable (409) (142) (472) ------------ ------------ ------------ Loss on ordinary activities before taxation (195) (1,398) (5,671) Tax on loss on ordinary activities - - (129) ------------ ------------ ------------ Loss for period (195) (1,398) (5,800) ------------ ------------ ------------ Retained loss for period (195) (1,398) (5,800) ============ ============ ============ Loss per share (pence) (0.12)p (2.02)p (5.22)p 2. CONSOLIDATED BALANCE SHEET As at As at As at 30 June 2007 30 June 2006 31 December 2006 unaudited unaudited audited (restated) £'000 £'000 £'000 Called up share capital not yet paid 847 1,148 1,148 Fixed assets Intangible assets 8,620 4,366 7,321 Tangible assets 688 611 599 ------------ ---------- ------------ 9,308 4,977 7,920 ------------ ---------- ------------ Current assets Stocks 57 65 55 Debtors 5,632 3,648 3,382 Cash at bank 298 381 290 ------------ ---------- ------------ 5,987 4,094 3,727 Creditors: amounts falling due (13,151) (8,743) (11,360) within one year ------------ ---------- ------------ Net current liabilities (7,164) (4,649) (7,633) ------------ ---------- ------------ Total assets less current liabilities 2,991 1,476 1,435 Creditors: amounts falling due after (909) (2,105) (625) more than one year ------------ ---------- ------------ Net assets/(liabilities) 2,082 (629) 810 ============ ========== ============ Capital reserves Called up share capital 1,715 844 1,566 Shares to be issued under option 255 18 239 Share premium account 11,931 5,643 10,623 Profit and loss account (11,819) (7,134) (11,618) ------------ ---------- ------------ Shareholders' funds 2,082 (629) 810 ============ ========== ============ 3. STATEMENT OF CHANGES IN EQUITY Share capital Share premium Shares to be Retained Total account issued under earnings option £'000 £'000 £'000 £'000 £'000 6 months ended 30 June 2007 As at 1 January 2007 1,566 10,623 239 (11,618) 810 Issue of shares 149 1,362 - - 1,511 Difference in respect of directors' share acquisition 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 - - - (195) (195) Currency translation differences on foreign currency net investments - - - 150 150 ------- ------- --------- -------- ------ As at 30 June 2007 1,715 11,931 255 (11,819) 2,082 ======= ======= ========= ======== ====== 6 months ended 30 June 2006 As at 1 January 2006 742 4,928 18 (5,580) 108 Issue of shares 102 715 - - 817 Loss for the financial period attributable to the shareholders of the parent company - - - (1,398) (1,398) Currency translation differences on foreign currency net investments - - - (156) (156) ------- ------- --------- -------- ------ As at 30 June 2006 844 5,643 18 (7,134) (629) ======= ======= ========= ======== ====== 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 - - - (5,800) (5,800) Currency translation differences on foreign currency net investments - - - (238) (238) ------- ------- --------- -------- ------ As at 31 December 2006 1,566 10,623 239 (11,618) 810 ======= ======= ========= ======== ====== 4. CONSOLIDATED CASH FLOW STATEMENT 6 months ended 6 months ended Year ended 31 30 June 2007 30 June 2006 December 2006 unaudited unaudited audited £'000 £'000 £'000 Net cash flows from operating activities (1,310) 765 (3,236) (Note 5.1) Cash flows from investing activities Payments to acquire intangible fixed assets - (78) (2,143) Payments to acquire tangible fixed assets (91) (92) (311) Purchase of subsidiary undertakings (819) (1,385) - Cash/(overdraft) acquired with subsidiaries 126 14 (706) ----------- ----------- ----------- Net cash flows from investing activities (784) (1,541) (3,160) Cash flows from financing activities Net issue of equity share capital 1,103 - 4,670 Proceeds from directors' share acquisition scheme 145 - - Interest element of finance leases (1) (1) (1) Interest received - 8 4 Interest paid (215) (141) (271) Capital element of finance leases (3) (4) (6) Repayment of loans - - (405) Increase in loans 295 960 1,000 ----------- ----------- ----------- Net cash flows from financing activities 1,324 822 4,991 ----------- ----------- ----------- Net change in cash and cash equivalents (770) 46 (1,405) Cash and cash equivalents at the beginning of the period (1,313) 89 89 Foreign exchange movement 24 (4) 3 ----------- ----------- ----------- Cash and cash equivalents at the end of the period (2,059) 131 (1,313) =========== =========== =========== Consisting of: Cash and cash equivalents 298 381 290 Bank overdrafts (2,357) (250) (1,603) ----------- ----------- ----------- Net cash and cash equivalents (2,059) 131 (1,313) =========== =========== =========== Non-cash transactions In the year ended 31 December 2006 the Company converted short term non-institutional loans totalling £1.4m into equity. The Company also issued shares to the value of £271,000 as part payment for the acquisitions of n3prenor AB and Eckerud Scandinavian Group AB. Additionally in the year ended 31 December 2006 the Company had share based payments totalling £398,000, being £203,000 (2005: £18,000) in option costs together with £195,000 as a commitment fee for a loan. During the period ended 30 June 2006 the Company issued 343,633 ordinary shares of 1p at a price of 10.85p in partial consideration of an acquisition. 5. NOTES TO THE INTERIM STATEMENT 5.1. Reconciliation of operating loss to net cash inflow from operating activities 6 months ended 30 June Year ended 31 December (unaudited) (audited) 2007 2006 2006 £'000 £'000 £'000 Operating profit/(loss) 214 (1,264) (5,203) Depreciation and amortisation 234 244 684 Loss on disposal of fixed assets - - 121 Share based payments 8 - 398 Decrease/(increase ) in stocks 20 8 19 Increase in debtors (1,699) (1,006) (749) (Decrease)/increas e in creditors (87) 2,783 1,494 ------- -------- ------------ Net cash inflow/(outflow) from operating activities (1,310) 765 (3,236) ======= ======== ============ 5.2 Financial information and comparatives The results for the half year ended 30 June 2007 and the half year ended 30 June 2006 are unaudited. The financial information set out above, including the audited comparative figures for the year ended 31 December 2006 does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. The Group's published accounts, prepared under UK Generally Accepted Accounting Principles ('UK GAAP') for the year ended 31 December 2006 have been reported on by the Company's auditors and filed with the Registrar of Companies. The report of the auditors' was unqualified and did not contain a statement under section 237 (2) or (3) of the Companies Act 1985. Delling Group plc has adopted International Financial Reporting Standards ('IFRS') from 1 January 2007, in accordance with the European Union Regulations and AIM rules. The first annual report prepared under IFRS will be the year ending 31 December 2007. 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 significant changes to the Group's accounting policies (as set out in the 2006 Annual Report) resulting from the adoption of IFRS and there are no material differences between the results, equity and cash flows as previously reported under UK GAAP and those reported in accordance with IFRS. Consequently, there is no requirement for explanation or note reconciling equity and results for comparative periods reported under UK GAAP to those reported for the periods under IFRS. The Group has elected not to apply IFRS 3 'Business Combinations' retrospectively to business combinations that took place before 1 July 2004. 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 Share capital During the period Delling Group plc issued the Company issued 11,500,000 ordinary shares of 1p at a price of 10p for cash and 3,343,633 ordinary shares of 1p at a price of 10.85p in partial consideration of an acquisition. 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 30 June 31 December 2007 2006 2006 Number '000 Number '000 Number '000 Weighted average number of shares 168,395 69,291 111,217 ========== ========== ========= There is no dilution of earnings per share as a result of losses. Independent review report to the directors of Delling Group plc Introduction We have been instructed by the Company to review the financial information for the six months ended 30 June 2007 which comprises the income statement, the balance sheet, the statement of changes in equity and the cash flow statement and the related notes to the accounts and we have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. This report, including the conclusion, has been prepared for and only for the Company for the purpose of their interim report and for no other purpose. We do not, therefore in producing this report, accept or assume responsibility for any other purpose or 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. Directors' Responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the directors. It is best practice that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. Review Work Performed We conducted our review in accordance with the guidance contained in Bulletin 1999/4: 'The review of interim financial information' issued by the Auditing Practices Board. A review consists principally of making enquiries of management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with International Standards on Auditing (UK and Ireland) and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. Review Conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the period ended 30 June 2007. CLB Littlejohn Frazer Chartered Accountants 1 Park Place Canary Wharf London E14 4HJ 7 September 2007 This information is provided by RNS The company news service from the London Stock Exchange

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