Re Strategic Review and Group

RNS Number : 8435J

Delling Group PLC

09 December 2008

 



Embargo 7.00am

10 December 2008

DELLING GROUP PLC (DLG/L)

('Delling' or the 'Company')

 The AIM-listed marketing services group

RE: STRATEGIC REVIEW AND GROUP RESTRUCTURING, GROUP FINANCING AND BOARD CHANGES 

Strategic Review and Group Restructuring

Delling Group PLC ('Delling' or the 'Group'), the AIM listed marketing support services group, whose principal assets are in Scandinavia, announces that it has completed a strategic review that will result in the restructuring of the group. Following a review of the Company's operations in Sweden, the Board has concluded that the high level of supplier debt and the large fixed cost base in terms of employees and rent carried by the Swedish division of its marketing services outsourcing business (the business has two divisions, one based in Norway and the other in Sweden) has recently become unsustainable and that it is out of balance with anticipated revenues and prevailing market conditions going into 2009.  To be able to save as much of this Swedish business going forward as possible, these Swedish operations are being put into administrative receivership. The operation consists of around 70 employees in Stockholm and Linkoping in Sweden and represents approximately 60% of Delling's total business volume. The directors are putting the following businesses into receivership:

* Dellinger Group AB, Stockholm, Sweden

* Dellinger Marketing Support Services AB, Stockholm, Sweden

Although the preferred strategy would have been to gradually repay debt and steadily reduce the size of the workforce, the hard decision of putting these businesses into receivership is based on the fact that the crisis in the financial markets has had an unexpected dramatic effect on the economy and makes it unsustainable to continue with the operation as it was. 

Delling Group however intends to initiate a new Swedish based company with a strategy adjusted to the conditions generated by the financial crises and the recession. In this new company, Delling Group Plc will implement a strategy for organic sustainable growth that will enhance and support Delling's profitable activities. Thus, the Company will continue to service clients with an unchanged commitment to offering a high quality service, albeit from a smaller operational base. 

The Board believes that by reducing its fixed cost base by more than 50% and with the removal of its debt, the remaining outsourcing businesses within Delling are well placed to quickly demonstrate their profitability, albeit in a smaller format, and despite the anticipated substantial downturn in the market in 2009. The Board of Delling believes that this action is necessary to secure the continued existence of a fundamentally sound business as well as the jobs of a substantial number of employees in Sweden and the interests of other stake holders in the company.

Delling's business model, which is based on the outsourcing of marketing services and the delivery of cost reductions for marketing departments across the corporate arena, remains unchanged, however the growth strategy is new. The company will now focus on profitable and stable growth based on gradual organic expansion, but from a substantially lower cost base and with a stronger balance sheet. 

Group Financing

The Board is also pursuing efforts to convert into equity the large amount of shareholder debt on the balance sheet of the Group as well as to finalise a new issue of equity to further strengthen the Group's balance sheet and its working capital. The Board looks forward to updating shareholders on progress in this respect in due course.

Board and Management Changes

As a consequence of the strategic review, Geir Lolleng, currently Group CEO, has resigned his directorship of the Company effective from today. The Board would like to thank Geir for his efforts and major contribution to Delling Group since its foundation in 2004. Geir's knowledge and experience will be drawn upon in his new capacity as a consultant to the Group. There will be no replacement of the Group CEO role as a new managing director for the Swedish operation is being recruited internally and together with the managing director of the Norwegian division, both executives will manage together the operational aspects of the marketing services outsourcing business, whilst reporting directly to Aksel Bratvedt, Executive chairman.

Due to personal reasons Mikael von Schedvin will also resign his non-executive directorship of the Company with immediate effect. We thank Mikael for his contribution to the board.  

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

'Although it is with a heavy heart that these actions have been taken, it does leave the Group with a profitable operation, whilst securing the future of the company and its remaining employees in Sweden, as we go into the most difficult market conditions in recent history'. 

'I believe the financial restructuring and the organisational changes we have taken, in combination with our new strategy, positions Delling both to survive in the coming years, but also to take advantage of and grow its unique business concept based on outsourcing, in which Delling has invested heavily and built up over recent years.   

ENDS

For further information please contact:

Contact:

Delling Group Plc
Aksel Bratvedt, Chairman	Tel: [phone]
www.dellinggroup.com
Zimmerman Adams International Ltd - Nominated Advisor (www.zimmint.com)
Ray Zimmerman/Graeme Thom/Thilo Hoffmann	Tel: [phone]
Adventis Financial PR
Tarquin Edwards	Tel: [phone]

 

END

 

 

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