25th Jun 2007 07:00
Delling Group PLC24 June 2007 For Release 7:00 am 25 June 2007 DELLING GROUP PLC (DLG) The AIM-listed marketing services group FINAL RESULTS for the year ended 31 December 2006 Delling Group Plc ("Delling" or the "Company"), the only listed marketingsupport services group on AIM whose principal assets are in Scandinavia,announces its results for the year ended 31 December, 2006. Financials • Turnover for the period was £10.5m with a pre-tax loss of £5.7m. The turnover is in line with expectations. The pretax profit level is disappointing and reflects the scale of investment, both in time and money, of Delling's major acquisition programme during the period and of the restructuring and integration work conducted in the last quarter of 2006 on those acquisitions. • The results include contributions from companies acquired during the period: n3prenor, a Swedish document production company (12 months' contribution) and Eckerud Scandinavia, a Swedish exhibition company (3 months' contribution) and reflect restructuring costs of £600,000. • Although the Company is announcing a disappointing pretax loss for 2006, since then it has experienced a modest recovery and a small group profit at EBIT level was generated in the 1st quarter of 2007. Operations • Contracts with a total expected revenue of £6m per annum have been secured so far in 2006 and 2007. • Four major acquisitions completed including Scandinavian Exhibition Group (Sandbergs) in February 2007. These acquisitions in addition to Delling's secured contracts, leave the group with an annualised turnover of £22m. • The group has built a strategic position in Scandinavia in the exhibition market through the acquisition of Eckerud Scandinavia and Scandinavian Exhibition Group (Sandbergs). Following the integration of its businesses within the exhibition market, which includes Delling's existing exhibition business in Norway, the combined business, which trades now under the name Delling Expo with internal production now located at a single site north of Stockholm, will have a single management structure and one integrated accounting system, the combination of which, Delling believes will prove to be a much stronger force in the market place and will enable the Company to service the largest international companies. Aksel Bratvedt, Executive Chairman of Delling Group Plc, said: "In spite of very disappointing results for 2006, the Company has reachedcritical mass in its market segments, which supports the good potential for netrevenue growth going forward. With all areas of the group currently focused onsecuring growth, and following the small profit generated in the 1st quarterthis year, I look forward to the future with considerable confidence andenthusiasm." For further information please contact: Delling Group PlcAksel Bratvedt, Chairman Tel: 020 7484 5663James Robinson, Finance Director Tel: 020 7484 5664www.dellinggroup.com Seymour PierceNicola Marrin Tel: 020 7107 8000 Adventis Financial PRTarquin Edwards Tel: 020 7034 4758 Notes to Editors Delling Group is a leading supplier of marketing support services for marketingand communication departments throughout The Nordic countries. Delling manages all fields of graphic support in many different forms andformats including trade fairs, exhibitions and interactive digital solutions forthe 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 bothmarketing and information departments. However, its major strength is that theGroup can deliver complete turnkey solutions, tailor-made for its customers'every need. Delling also offers outsourcing solutions that it believes cansubstantially save costs and improve efficiency. The Group's major activities are today concentrated in the Norwegian and Swedishmarkets, however, it is expanding into other Nordic areas, as well as havingcustomers and production facilities in Eastern Europe. It also has wellrespected suppliers as far afield as China and Thailand. Delling Group has 130 employees. It is rapidly developing its organisation byfocusing on supplying its customers with the quality they demand, delivered ontime at the right price. Central to its philosophy lies the fact that itscustomers will obtain greater effects and efficiency for every pound they investin marketing and information. The Group has strong growth, both through furtherdevelopment of existing clients and establishment of many new relationships,together with acquiring companies that enhance and further develop our businessconcept. Delling's goal is within the course of the next two years, through bothsatisfied customers and recommendations, to be the largest and most profitablecompany in the field of marketing support services within the Nordic countries,and a significant player within Eastern Europe. In October 2004 it was the firstScandinavian business to be listed on AIM, the London Stock Exchange'sinternational market for smaller growing companies. This has given Delling theaccess it needs to capital funds needed to maintain and strengthen the furtherdevelopment of the Group. Chairman's statement The last eighteen months have been very active in terms of acquisitions for theGroup, which saw Delling lay the foundations for a tripling of the Group'sturnover from a base of c.£7m at the start of the period. Two acquisitions weremade in Sweden, namely the annual report design and production company, n3prenorand the exhibition company, Eckerud Scandinavia with the acquisition of theScandinavian Exhibition Group (Sandbergs) and D.O.G, a prepress companycompleted at the beginning of 2007. A number of outsourcing contracts were alsoentered into during the year, creating a marketing support services group withan annualised turnover of around £22m. Our turnover in 2006 doubled againcompared to 2005 and currently, the Group is seeing revenues of twice the levelin 2006. This growth should be seen in perspective - in the autumn of 2004, theCompany had an annual turnover of approximately £1.8m pre-listing. However, disappointingly this growth has not been accompanied by the equivalentdevelopment in the pretax profit level. The management believed last year thatthe Group should be in the position to turn a profit. The reason for the belowexpectation performance should be seen in the light of the strains on theorganisation that the speed of acquisitions generated. As previously explainedin the trading update on 27/04/07, Delling's performance predominantly resultedfrom a combination of factors, not least that: the product mix did not developin a manner to improve the gross profit margin in a business with high operatingleverage; a problem with Eckerud Scandinavia, which was both very challengingand led to time consuming financing processes and finally, the fact that thecapacity of our financial systems was insufficient to manage and control thegrowth of the business. All lead to a highly unsatisfactory pretax profit level.The majority of these problems have now been rectified. With this experience behind us the management has taken the decision totemporarily halt the acquisitions process and focus on net revenue growth. Thefirst result of this was a small profit for the Group at EBIT level for thefirst quarter 2007. Apart from cutting and adapting costs in the originalbusiness to the present turnover levels, the management is focusing onintegrating the exhibition business, which is today the leading player in itsarea in Scandinavia. The effect of closing down one production plant, has thepotential within one year of improving the pretax margin by around 5%. Given the importance of net revenue growth in all areas of the Group, the Boardand the management have decided that no major acquisitions will be implementeduntil sustainable revenues are generated. In this respect, developments withinthe first months of this year have been most encouraging. Regarding the financing of Delling's growth, the alternatives to equityfinancing have proven to be challenging. However, we have been able to securebank financing on some of the acquisitions and with Delling showing a smallprofit for the 1st quarter in combination with the current size of the Group'sturnover, the potential for further bank financing should increase. Therefore,the focus of the Board and the management currently is to make the fullest useof debt financing facilities going forward. I would like to thank our staff for all their hard work over last year. Theacquisitions have impressively enhanced the competence and scope of the Group.Today with the size and its competence level the Group is better positioned thanever before to take advantage of its large customer base of multinationalcompanies. Looking to the current financial year, we anticipate less growth compared to ourhistoric rates and more focus on profits. I look forward to the future withconsiderable confidence and enthusiasm. Aksel BratvedtChairman22nd of June 2007 Chief Executive's Statement Introduction Delling Group offers marketing departments in large and medium sized companies aunique opportunity to reduce costs, increase speed to market and increase thequality of production and handling of marketing and information material. Ouroffering includes graphical material as well as the digital distribution ofcontent on to screens or the Web as well as mobile phones. Our wide ranging, butclosely linked service offering makes it possible for customers to takeadvantage of the opportunity to outsource their back office marketing departmentrequirements - further driving our organic growth. Business and operating review In 2006 our business was completely transformed in size as well as product mix.Everything was done to further our strategy which was to develop into a leadingintegrated marketing support group in the Nordic area. Our focus was toestablish the basis for such a group, which was of a substantial size and wasprofitable within 1-2 years. The result in financial terms has disappointed,however we have taken a number of strategic steps forward from which we expectto see benefit in 2007 and an even larger benefit in 2008. We have now 3 business units: the outsourcing businesses operating under thename Delling Group, the Exhibition business operating under the name DellingExpo and the unit for annual and financial reports trading under the name ofn3prenor. The Group companies have offices in Oslo and Stavanger in Norway andStockholm, NorrtTalje, Linkoping, Gothenburg, and Gavle in Sweden. The market The market for our services is currently taking advantage of the good economicconditions in Scandinavia. As long as growth in the world economy issustainable, the management does not see any major threats in our markets atthis point in time. Human resources We focus on getting more and more out of our staff through investments inon-the-job training and competence development. This is vital so that Delling isable to benefit from potential synergies between the business units. We have anextraordinarily loyal and able staff that should be able to exploit thesignificant potential we see in the business in the short as well as the longterm. Outlook In 2007 we are focusing our efforts on reaching profitability. We haveintegrated the acquired businesses both with each other as well as into ourbusiness concept on how to deliver marketing support services. We have taken anumber of steps to reduce costs. Our purchasing power has increasedsubstantially which has made it possible to get reduced prices from suppliersthat have a positive effect on the gross profit margin. This gradually improvesour competitiveness. The same effect follows from the fact that more and more ofour production has been transferred to suppliers in low cost countries inEastern Europe and elsewhere. We have closed down one production unit in theexhibition area so that we now just have one efficient unit. Furthermore somesmaller investments in IT-solutions are improving our efficiency and help us inreducing costs. Our newly established specialist Printcenter in Stockholm isalso expected to have a significant positive impact on profitability throughout2007. We are working according to a cost reduction plan for the remainder of2007 so that the Group is gradually and sustainably reducing the cost basesignificantly during 2007. Part of the drive to substantially increase profitability is to continue andimprove organic growth without increasing costs in the sales processes. Thepossibility of expanding significantly across our existing customer base is aprime target. The response from our customers indicates that synergies betweenour sales efforts in the exhibition area and the rest of our businesses willdeliver significant benefit this year. Geir LollengChief Executive Financial review Turnover Group turnover increased by 97% to £10.5m of which £3.4m arose from the 2acquisitions made during the year; of the total turnover approximately 42% wasattributable to Delling in Norway and 58% attributable to Delling Group inSweden. Operating loss The pre-tax loss for the year was £5.7m which is disappointing and reflects thescale of investment, both in time and money, of Delling's major acquisitionprogramme during the period and of the restructuring and integration workconducted in the last quarter of 2006 on those acquisitions. The results include contributions from companies acquired during the period:n3prenor, a Swedish document production company (12 months' contribution) andEckerud Scandinavia, a Swedish exhibition company (3 months' contribution) andincludes restructuring costs of approximately £600,000. Interest The net interest charge for the year is £472,000 reflecting the increaseddrawdown of funds from our debt facility which has been utilised to finance ouracquisition activities. Tax The tax charge for the year has increased from £Nil in 2005 to £129,000. Thistax charge is purely in respect of profits earned by n3prenor AB, for whom grouplosses could not be utilised to reduce the tax charge. The Group has substantiallosses carried forward to relieve against future profits. Balance sheet and cash flow The balance sheet for the year to 31 December 2005 has been restated to reflectthe change in accounting policy with regard to share options. Please refer tothe Accounting Policies for further information. Intangibles net of amortisation have increased from £3.1m to £7.3m as a resultof our investment in 2 acquisitions during the year Trade debtors have risen from £1.3m in 2005 to £2.1m; an increase of 61%, whileturnover has risen by 97%. During the year the Group issued shares for cash totalling £4.6m which fundedthe acquisitions made by the Group and general working capital. IFRS AiM listed companies are required to produce financial statements in accordancewith International Financial Reporting Standards (IFRS) for accounting periodscommencing on or after 1 January 2007. Delling is progressing its transitionalprogramme and will publish its first IFRS financial statements in respect of theyear ending 31 December 2007. Conclusion The year under review has seen some major changes. We have set out thefoundations for future profit growth. We have completed 2 acquisitions in thetime period and two further acquisitions in early 2007 leaving the Group on avery solid footing going forward. James RobinsonFinance Director Group profit and loss account Year ended 31st December 2006 2006 2005 Note £'000 £'000TurnoverContinuing operations 7,053 5,315Acquisitions 3,409 - ------------- -------------Group turnover 2 10,462 5,315 Cost of sales (6,037) (2,439) _____________ _____________Gross profit 4,425 2,876 Administrative expenses (9,628) (5,741) _____________ _____________Operating lossContinuing operations (5,135) (2,865)Acquisitions (68) _____________ _____________Group operating loss 3 (5,203) (2,865) Interest receivable 4 2Interest payable 6 (472) (131) _____________ _____________Loss on ordinary activities before taxation (5,671) (2,994) Tax on loss on ordinary activities 7 (129) - _____________ _____________Loss for the financial year 9 (5,800) (2,994) ============= ============= Loss per share 8 (5.22)p (4.43)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 Profit and Loss Account. Group Statement of Total Recognised Gains and Losses Year ended 31st December 2006 2006 2005 £000 £000 Loss for the financial year attributable to the shareholders of the (5,800) (2,994)parent company Currency translation differences on foreign currency net investments (238) 114 _______ _______ Total recognised gains and losses relating to the year (6,038) (2,880) ======= ======= Group Balance Sheet 31st December 2006 2006 2005 Note £'000 £'000 Restated Called up share capital not yet paid 11 1,148 1,148 Fixed assetsIntangible assets 12 7,321 3,068Tangible assets 13 599 612 _____ _____ 7,920 3,680 _____ _____Current assetsStocks 15 55 70Debtors 16 3,382 1,748Cash at bank 290 304 _____ _____ 3,727 2,122Creditors: Amounts falling due within one year 17 (11,360) (5,741) _____ _____Net current liabilities (7,633) (3,619) _____ _____Total assets less current liabilities 1,435 1,209 Creditors: Amounts falling due after more than one year 18 (625) (1,101) 810 108 ===== ===== Capital and reservesCalled-up share capital 22 1,566 742Shares to be issued under option 23 239 18Share premium account 24 10,623 4,928Profit and loss account 24 (11,618) (5,580) _____ _____ Shareholder funds 25 810 108 ===== ===== Company Balance Sheet 31st December 2006 2006 2005 Note £'000 £'000 Restated Called up share capital not yet paid 11 1,148 1,148 Fixed assetsTangible assets 13 8 13Investments 14 2,269 1,820 _____ _____ 2,277 1,833 Current assetsDebtors 16 8,466 3,691Cash at bank - - _____ _____ 8,466 3,691Creditors: Amounts falling due within one year 17 (1,780) (1,441) _____ _____ Net current assets 6,686 2,250 _____ _____ Total assets less current liabilities 10,111 5,231 Creditors: Amounts falling due after more than one year 18 (3) (354) _____ _____ 10,108 4,877 ===== ===== Capital and reservesCalled-up share capital 22 1,566 742Shares to be issued under option 23 239 18Share premium account 24 10,623 4,928Profit and loss account 24 (2,320) (811) Shareholders' funds 25 10,108 4,877 ===== ===== Group Cash Flow Statement Year ended 31st December 2006 2006 2005 £000 £000 Net cash outflow from operating activities (3,236) (2,237) Returns on investments and servicing of financeInterest paid (271) (130)Interest element of finance leases (1) (1)Interest received 4 2 _____ _____ Net cash outflow from returns on investments and servicing of finance (268) (129) Taxation - - Capital expenditure and financial investment Payments to acquire intangible fixed assets (2,143) (117)Payments to acquire tangible fixed assets (311) (233) _____ _____ Net cash outflow for capital expenditure and financial (2,454) (350) Investment Acquisition (Overdrafts)/cash acquired with subsidiaries (706) 58 _____ _____ Cash outflow before financing (6,664) (2,658) FinancingIssue of equity share capital 4,670 1,104Capital element of finance leases (6) (2)Repayment of loans (405) -Increase in loans 1,000 683 _____ _____ Net cash inflow from financing 5,259 1,785 _____ _____ Decrease in cash (1,405) (873) ===== ===== Major non-cash transactions In the year ended 31 December 2005 the Company issued a total of 5,468,796ordinary shares of 1p at a price of 21p unpaid to the Directors in accordancewith the Directors Share Acquisition Scheme as approved at the AGM on 15 June2005. In the year ended 31 December 2006 the Company converted short termnon-institutional loans totalling £1.4m into equity. The Company also issuedshares to the value of £271,000 as part payment for the acquisitions of n3prenorAB and Eckerud Scandinavian Group AB. Additionally in the year ended 31 December 2006 the Company had share basedpayments totalling £398,000, being £203,000 (2005: £18,000) in option coststogether with £195,000 as a commitment fee for a loan. Reconciliation of operating loss to net cash outflow from operating activities 2006 2005 £000 £000 Operating loss (5,203) (2,865)Amortisation 481 222Depreciation 203 195Loss on disposal shares held for resale - 3Loss of disposal of fixed assets 121 -Share based payments 398 -Decrease/(increase) in stocks 19 (30)Increase in debtors (749) (1,068)Increase in creditors 1,494 1,306 --------- --------Net cash outflow from operating activities (3,236) (2,237) ========= ======== Analysis of changes in net debt At 31 Cash Flows Foreign At 31 December 2005 exchange December 2006 movement £000 £000 £'000 £000 Net debt:Cash in hand and at bank 304 (29) 15 290Overdrafts (215) (1,376) (12) (1,603) _____ _____ ______ _______ 89 (1,405) 3 (1,313) Loans (750) (595) - (1,345) _____ _____ ______ _______ (661) (2,000) 3 (2,658) ===== ===== ====== ======= Notes to the Financial Statements Year ended 31st December 2006 1. Accounting policies Basis of accounting The financial statements have been prepared under the historical costconvention and in accordance with applicable accounting standards. Basis of consolidation The consolidated financial statements incorporate the financialstatements of the Company and all group undertakings. These are adjusted, whereappropriate, to conform to group accounting policies. Acquisitions are accountedfor under the acquisition method and goodwill on consolidation is capitalisedand written off over twenty years from the year of acquisition. The results ofcompanies acquired or disposed of are included in the Group profit and lossaccount after or up to the date that control passes respectively. As aconsolidated group profit and loss account is published, a separate profit andloss account for the parent company is omitted from the Group financialstatements by virtue of section 230 of the Companies Act 1985. Turnover Turnover comprises the value of goods and services supplied by theGroup, net of value added tax and trade discounts. Amortisation Amortisation is calculated so as to write off the cost of an asset, lessits estimated residual value, over the useful economic life of that asset asfollows: Goodwill - 5%-10% straight line Brands, licences and patents - 10% straight line Fixed assets All fixed assets are initially recorded at cost. Depreciation Depreciation is calculated so as to write off the cost of an asset, lessits estimated residual value, over the useful economic life of that asset asfollows: Plant & Machinery - 3-5 years straight line Stocks Stocks are valued at the lower of cost and net realisable value, aftermaking due allowance for obsolete and slow moving items. Foreign Currencies The assets and liabilities of foreign operations, including goodwill and fairvalue adjustments, are translated into Pounds sterling at the foreign exchangerates ruling at the balance sheet date. The revenues and expenses of foreignoperations are translated to Pounds sterling at the average exchange rate rulingduring the period. All exchange differences are taken to reserves. Assets and liabilities in foreign currencies are translated into sterling at therates of exchange ruling at the balance sheet date. Transactions in foreigncurrencies are translated into sterling at the rate of exchange ruling at thedate of the transaction. Exchange differences are taken into account inarriving at the operating profit. Investments Fixed asset investments are stated at cost less any necessary provision forimpairment. Capital instruments Shares are included in shareholders' funds. Other instruments are classified asliabilities if they contain an obligation to transfer economic benefits and ifnot they are included in shareholders' funds. The finance cost recognised inthe profit and loss account in respect of capital instruments other than equityshares is allocated to years over the term of the instrument at a constant rateon the carrying amount. Operating lease agreements Rentals applicable to operating leases where substantially all of thebenefits and risks of ownership remain with the lessor are charged againstprofits on a straight line basis over the period of the lease. Hire purchase agreements Assets held under hire purchase agreements are capitalised and disclosed undertangible fixed assets at their fair value. The capital element of the futurepayments is treated as a liability and the interest is charged to the profit andloss account on a straight line basis. Share based payments The Group operates a share option scheme to encourage participation by Directorsand employees in the Group's performance. The fair value of the servicesreceived in exchange for the grant of options is recognised as an expense. Thetotal amount to be expensed over the vesting period is determined by referenceto the fair value of any options granted, excluding non-market vestingconditions. Non-market vesting conditions are included in assumptions about thenumber of options that are expected to vest. At each balance sheet date, theCompany revises its estimate of options that are expected to vest. All other share based payments are reflected at fair value within the financialstatements. Pension costs The Group operates a defined contribution pension scheme. The assets of thescheme are held separately from those of the Group. The annual contributionspayable are charged to the profit and loss account. Deferred taxation Deferred tax is recognised in respect of all timing differences thathave originated but not reversed at the balance sheet date where transactions orevents 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 following exceptions: Provision is made for tax on gains arising from the revaluation (andsimilar fair value adjustments) of fixed assets, and gains on disposal of fixedassets that have been rolled over into replacement assets, only to the extentthat, at the balance sheet date, there is a binding agreement to dispose of theassets concerned. However, no provision is made where, on the basis of allavailable evidence at the balance sheet date, it is more likely than not thatthe taxable gain will be rolled over into replacement assets and charged to taxonly where the replacement assets are sold; Deferred tax assets are recognised only to the extent that theDirectors consider that it is more likely than not that there will be suitabletaxable profits from which the future reversal of the underlying timingdifferences can be deducted. Deferred tax is measured on an undiscounted basis at the tax rates thatare expected to apply in the periods in which timing differences reverse, basedon tax rates and laws enacted or substantively enacted at the balance sheetdate. Going concern United Kingdom company law requires the Company's Directors to considerwhether it is appropriate to prepare the financial statements on the basis thatthe Group is a going concern. In considering this matter the Directors havereviewed the Group's budget for 2007 and its plan for 2008. This includedconsideration of the cash flow implications of the budget and plan and thereceipt of an unconditional guarantee provided by a major shareholder. TheDirectors see no reason why the Group and the Company should not continue inoperational existence for the foreseeable future. For this reason the Directorshave adopted the going concern basis in preparing the Group's financialstatements. 2. Turnover The turnover and loss before tax are attributable to the one principalactivity of the Group. An analysis of turnover is given below: 2006 2005 £000 £000 Europe 10,462 5,315 ======= ====== 3. Operating loss Operating loss is stated after charging: 2006 2005 £000 £000 Amortisation 481 222Depreciation of tangible fixed assets: Owned assets 198 192 Leased assets 5 3Loss on disposal of fixed assets 121 - Auditors' remuneration - as auditors 16 14 - non-audit services - taxation 3 4Remuneration of foreign auditors 37 42 ===== ===== 4. Particulars of employees The average number of staff employed by the Group during the financialyear amounted to: 2006 2005 No No Management 10 8Sales 32 24Production and development 78 33Administrative 10 6 ----- ----- 130 71 ===== ===== The aggregate payroll costs of the above were: 2006 2005 £000 £000 Wages and salaries 3,624 2,502Social security costs 860 528Other pension costs, life cover & medical costs 197 142 ------- ------- 4,681 3,172 ======= ======= 5. Directors' emoluments The Directors' aggregate emoluments in respect of qualifying serviceswere: 2006 2005 £000 £000 Emoluments receivable - from the Company 215 227 - from group companies 309 320Benefits receivable 44 25Value of company pension contributions to money purchase schemes 12 7 ------- ------- 580 579 ======= ======= During the year one director participated in a money purchase pensionscheme (2005: one) Emoluments of highest paid director: Total emoluments 200 197 ======= ======= 6. Interest payable and similar charges 2006 2005 £000 £000 Interest payable on bank borrowing 471 130Interest element of finance leases 1 1 ------- ------- 472 131 ======= ======= 7. Taxation on ordinary activities (a) Analysis of charge in the year Current tax: 2006 2005 £000 £000 UK Corporation tax based on the results for the year at 30% (2005: 30%) - -Overseas taxation 129 - -------- ------- Total current tax 129 - ======== ======= (b) Factors affecting current tax charge The tax assessed on the loss on ordinary activities for the year ishigher than the standard rate of corporation tax in the UK. 2006 2005 £000 £000 Loss on ordinary activities before taxation (5,671) (2,994) ======== ======= Loss on ordinary activities by rate of tax at 30% (2005: 30%) (1,701) (898)Disallowed expenditure 13 7Overseas taxation 129 -Losses carried forward 450 200Overseas losses 1238 691 -------- -------Total current tax - debit (note 7(a)) 129 - ======== ======= Deferred tax assets have not been recognised in the financial statements as theDirectors are uncertain as to when they will be utilised. 8. Loss per share 2006 2005 Pence PenceLoss per ordinary share (5.22) (4.43) ========= ======= The basic loss per share is calculated by dividing the loss on ordinaryactivities after tax of £5,800,000 (2005: £2,994,000) and the weighted averagenumber shares in issue and carrying the right to receive dividend during yearended 31 December 2006 being 111,216,685 (2005: 67,467,351), which excludesshares issued to the Directors and not fully paid. The diluted earnings per ordinary share calculation is the same as the basicearnings per share calculation. This is because no dilution arises as there isa loss. 9. Loss attributable to members of the parent company The loss dealt with in the accounts of the parent company was £1,509,000(2005: £672,000). 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 directorswere allotted ordinary shares at the then market price of 21p, under theDirectors' Share Acquisition Scheme, the Directors that held these shares at 31December 2006 were: Director Shares allottedGeir Lolleng 1,298,839Aksel Bratvedt 1,298,839James Robinson 1,435,559Mike Hudgell 1,435,559 These shares were issued and remain unpaid and no application will be made forthe shares to be admitted to trading on AIM whilst they remain unpaid. In thecase of Mr Bratvedt and Mr Lolleng, the shares cannot be paid up until after 8July 2006 and, in the case of Mr Hudgell and Mr Robinson, the shares cannot bepaid up until after 1 June 2007. All directors have until the 15 July 2015 topay up the shares. Whilst the shares remain unpaid they will have no voting ordividend rights. 12. Intangible fixed assets Group Brands, licences Goodwill Total & patents £000 £000 £000 CostAt 1 January 2006 215 3,372 3,587Acquired in year - 4,734 4,734 --------------- --------------- ---------------At 31 December 2006 215 8,106 8,321 =============== =============== =============== Amortisation At 1 January 2006 29 490 519Charge for the year 21 460 481 --------------- --------------- ---------------At 31 December 2006 50 950 1000 =============== =============== =============== Net book valueAt 31 December 2006 165 7,156 7,321 =============== ============== =============== At 31 December 2005 186 2,882 3,068 =============== ============== =============== 13. Tangible fixed assets Group Plant & Total machinery £000 £000 CostAt 1 January 2006 840 840Acquired in year 311 311Disposed in year (145) (145) -------- --------At 31 December 2006 1,006 1,006 ======== ======== DepreciationAt 1 January 2006 228 228Charge for the year 203 203On disposals (24) (24) -------- --------At 31 December 2006 407 407 ======== ======== Net book valueAt 31 December 2006 599 599 ======== ======== At 31 December 2005 612 612 ======== ======== Company Plant & Total machinery £000 £000 CostAt 1 January 2006 16 16Acquired in year - - -------- --------At 31 December 2006 16 16 ======== ======== DepreciationAt 1 January 2006 3 3Charge for the year 5 5 -------- --------At 31 December 2006 8 8 ======== ======== Net book valueAt 31 December 2006 8 8 ======== ========At 31 December 2005 13 13 ======== ======== All of the assets held by the Company are held under hire purchase agreements. 14. Investments Company Total £000 CostAt 1 January 2006 1,820Additions 449 ------At 31 December 2005 2,269 ====== Net book valueAt 31 December 2006 2,269 ====== At 31 December 2005 1,820 ====== Subsidiary undertaking Holding Country of Proportion Nature of incorporation of voting business rights held Name of company Directly Held Azzets Limited Ordinary UK 100% Dormant Shares Butler Systems Limited Ordinary UK 100% Dormant Shares Depicta Limited Ordinary UK 100% Dormant Shares Dellinger Group Holding AB Ordinary Sweden 100% Holding company Shares Dellinger Group Holding II AB Ordinary Sweden 100% Holding company Shares Indirectly HeldDellinger Group AB Ordinary Sweden 100% Outsourced marketing Shares services Delling Group AS (previously called Ordinary Norway 100% Outsourced marketingDepicta Fame AS) Shares services n3prenor AB Ordinary Sweden 100% Preparation of annual Shares reports and other corporate documents Eckerud Scandinavian Group AB Ordinary Sweden 100% Provision of expo Shares services C Mag AB (previously called Dellinger Ordinary Sweden 100% DormantGroup) Shares Full Bredde AS Ordinary Norway 100% Dormant Shares Azzets AB Ordinary Sweden 100% Dormant shares On 1 January 2006 the Group transferred the trades of Depicta AB and Azzets ABinto Dellinger Group AB, resulting in Depicta AB and Azzets AB becoming dormant.Subsequent to this transfer of trade Depicta AB was sold to Kanonladdaren AB forno consideration. Kanonladdaren AB is company controlled by Mr B Dysthe asignificant shareholder in Delling Group plc. In 2005 the trades of Unikum Professional Imaging and Andre Worldwide VisualCommunications were purchased for £75,000 giving rise to the same amount ingoodwill. In 2006 a further payment of £97,000 was made in respect of AndreWorldwide Visual Communications, giving rise to additional goodwill of the sameamount. In 2006 the Group acquired a 100% shareholding of n3prenor AS, a newlyincorporated vehicle, which therefore only had the cash created on incorporationof £22,000. This vehicle then purchased the trade of n3prenor, an unincorporatedbusiness. The consideration comprised: shares to the value of £124,000, cash of£ 1,053,000 and a deferred cash payment of £493,000, giving rise to goodwill of£1,670,000. During 2006 the Group also acquired a 100% shareholding in Eckerud ScandinavianGroup AB. Net assets/liabilities acquired are considered to be at fair value andcomprise: £000 Intangible assets 694Tangible assets 149Debtors 797Cash 35Creditors (1,870)Overdraft (742)Net liabilities acquired (937)Cost: -shares issued 147 -cash 993 -deferred cash 196 ________Goodwill arising 2,273 ======= Since the acquisition date a summary of the trading of the companies acquired in2006 was as follows: Eckerud Scandinavian n3prenor AB Group AB £'000 £'000Turnover 2,368 1,041 Operating profit /(loss) 410 (317) Profit/(loss) before taxation 390 (331) Taxation (129) - Profit /(loss)after taxation 261 (331) 15. Stocks Group Company 2006 2005 2006 2005 £000 £000 £000 £000 Finished goods 55 70 - - ====== ====== ====== ====== 16. Debtors Group Company 2006 2005 2006 2005 £000 £000 £000 £000 Trade debtors 2,115 1,279 - -Amounts owed by group - - 7,866 3,559undertakingsOther debtors 1,267 469 600 132 ------ ------ ------ ------ 3,382 1,748 8,466 3,691 ====== ====== ====== ====== Trade debtors of £408,000 (2005: £288,000) have been factored. 17. Creditors: Amounts falling due within one year Group Company 2006 2005 2006 2005 £000 £000 £000 £000 Amounts due to debt factors 408 288 - -Bank loans & overdrafts 1,603 215 28 82Finance leases 5 5 5 5Trade creditors 3,711 1,691 162 133Other taxation & social 501 952 24 42securityOther creditors 4,178 2,132 1,545 1,146Accruals and deferred income 954 458 16 33 ------ ------ ------ ------ 11,360 5,741 1,780 1,441 ====== ====== ====== ====== The bank loans and overdrafts of the subsidiaries are secured by a fixed andfloating change over the assets of those subsidiaries. Included in othercreditors is a loan for £345,000 which has been guaranteed by a Director. 18. Creditors: Amounts falling due after more than one year Group Company 2006 2005 2006 2005 £000 £000 £000 £000 Other creditors 622 1,092 - 345Finance leases 3 9 3 9 ------ ------ ------ ------ 625 1,101 3 354 ====== ====== ====== ====== Finance leases falling due in more than one are repayable as follows: Group Company 2006 2005 2006 2005 £000 £000 £000 £000 Repayable in more than two years but notmore than five years 3 9 3 9 ====== ====== ====== ====== 19. Treasury policy and financial instruments The Group operates informal treasury policies which include ongoing assessmentsof interest rate management and borrowing policy. The Board approves alldecisions on treasury policy. Facilities are arranged, based on criteria determined by the Board, as requiredto finance the long term requirements of the Group. The Group has financed itsactivities by the raising of funds through the placing of shares. The Group has overdraft facilities across the Group of £1,603,000 at variablerates. The Group has a fixed loan of £345,000 at 7% pa until November 2007. TheGroup also has a loan of £1,000,000 with RAB Capital, further details of whichare given in note 21. The Group has taken advantage of the exemption permitting it not to includeshort term debtors and in the disclosures required by FRS 13 'Derivatives andOther Financial Instruments: Disclosure' other than the currency disclosures. At 31 December 2006 there were no net monetary assets denominated in currenciesother than the functional currencies of the operations. The Group's major operating currencies in its subsidiaries are Norwegian Kronerand Swedish Krona. It is not the Group's policy to hedge this exchange risk. There are no material differences between the book value and fair value of thefinancial assets at the year end. The Group had the following monetary assets and liabilities denominated inSwedish and Norwegian Kronor Swedish Kronor Norwegian Kronor £'000 £'000 Current assets 1,898 939Cash 280 10Current liabilities (7,304) (2,278) 20. Commitments under operating leases At 31 December 2005 the Group had annual commitments undernon-cancellable operating leases as set out below. Group 2006 2005 Land and Other items Land and Other items Buildings Buildings £000 £000 £000 £000 Operating leases which expire: Within 1 year 12 - 77 -Within 2 to 5 years 858 5 185 5 ------ ------ ------ ------ 870 5 262 5 ====== ====== ====== ====== Company 2006 2005 Land and Other items Land and Other items Buildings Buildings £000 £000 £000 £000 Operating leases which expire: Within 1 year 12 - 30 -Within 2 to 5 years - 5 - 5 ------ ------ ------ ------ 12 5 30 5 ====== ====== ====== ====== 21 Related party transactions The Company is exempt from the requirement to disclose related partytransactions with other group companies under the provisions of FinancialReporting Standard No. 8. All group transactions were eliminated onconsolidation. During the year group companies were invoiced £117,000 (2005: £135,000)by Nordic Investment Management Ltd a company under the control of A Bratvedtfor directors' services. There was no outstanding balance at the year end. During the year group companies were invoiced £192,000 (2005: £185,000)by Nordic Investment Management AS, a company under the control of G Lolleng fordirectors' services. There was no outstanding balance at the year end. During the year the Executive Directors held a number of shares unpaid.Further details of which can be found in note 11. The Group is owed £605,000 (2005 was owed: £552,000) by Mr B Dysthe, asignificant shareholder in the company. The loans are interest free andunsecured with no fixed repayment date. The Group has entered into a loan with RAB Capital plc, a significantshareholder in the Company. The amounts owed is £1,000,000 (2005: £Nil) and£200,000 has been accrued in interest costs. Shares to the value of £195,000were also issued and have been treated as a commitment fee. 22. Share capital Authorised share capital 2006 2006 2005 2005 No £000 No £000 Ordinary shares of £0.01 each 200,000,000 2,000 200,000,000 2,000 ============== ============== ============== ============== 2006 2006 2005 2005 No £000 No £000 Allotted, called up and fully paid:Ordinary shares of £0.01 each 151,172,514 1,511 68,726,542 687 Allotted, called up and unpaidOrdinary shares of £0.01 each 5,468,796 55 5,468,796 55 ______________ ______________ ______________ ______________ 156,641,310 1,566 74,195,338 742 ============== ============== ============== ============== The following shares were issued in the year £000 No Reason June 2006 818 10,218,850 PlacingJuly 2006 2,559 31,988,586 PlacingJuly 2006 1,383 17,291,100 Loan conversionAugust 2006 1,955 21,397,436 PlacingSeptember 2006 124 1,550,000 Acquisition -------- ---------- 6,839 82,445,972 ======== ========== Warrants The Company has two warrants in existence as follows: (1) 1% of the issued share capital at admission to AIM at the admission priceexercisable at any time over 5 years from the admission, and (2) 3% of the issued share capital at admission to AIM at the admission priceexercisable at any time over 3 years from the admission. 23. Shares to be issued under option Under FRS20 the prior year has been adjusted for options where the vestingperiod fell into the year ended 31 December 2006. The accounting policy isdetailed in note 1. Options were valued using the Black-Scholes option pricing model. Theassumptions used to value the options are set out below: Option granted on: 15 June 2005 18 September 2006Shares under option 5,265,243 6,802,764Exercise price 14p - 21p 12pExercisable from (years) 2 0Option life (years) 3-10 5Risk free rate 4.34 4.34Expected volatility 28.42% 28.42%Expected dividend yield 0% 0%Forfeiture rate 0% 0%Bid price discount 0% 0%Total fair value of options granted (£'000) 194 188Recognised in the current year 15 188 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 AiMon 14th October 2004. The total fair value has been spread over the relevant vesting periods and hasresulted in a charge to the profit and loss account for the year ended 31December 2006 of £203,000. Options to the value of £18,000 in respect of services received in respect ofshares issued have been debited as a prior year adjustment to the share premiumaccount. 24. Reserves Group Share premium account Profit and loss account 2006 2005 2006 2005 £000 £000 £000 £000 restated At 1 January (restated) 4,928 2,700 (5,580) (2,700)Premium arising on 6,015 2,382 - -shares issuedPrior year adjustment (18) -(note 23)Less share issue costs (320) (136) - - ______ ______ ______ ______ 4,928 (5,580) (2,700)Loss for the year - - (5,800) (2,994)Exchange movement - - (238) 114 ______ ______ ______ ______Balance carried forward 10,623 4,928 (11,618) (5,580) ====== ====== ====== ====== Company Share premium account Profit and loss account 2006 2005 2006 2005 £000 £000 £000 £000 restated At 1 January (restated) 4,928 2,700 (811) (139)Premium arising on shares 6,015 2,382 -issuedLess share issue costs (320) (136) -Retained loss for the year - - (1,509) (672)Prior year adjustment (note - (18) -23) ______ ______ ______ ______Balance carried forward 10,623 4,928 (2,320) (811) ====== ====== ====== ====== 25. Reconciliation of movements in shareholders' funds Group Equity shareholders' funds 2006 2005 £000 £000 Restated Loss for the financial year (5,800) (2,994)Exchange movement (238) 114Dividends - - ------- ------- (6,038) (2,880) Shares to be issued under share options 221 18New equity share capital subscribed 6,519 2,373 ------- -------Net increase/(decrease) to funds 702 (489)Capital reserve movement - (60)Opening shareholders equity 108 657 ------- -------Closing shareholders' equity 810 108 ======= ======= Company Equity shareholders' funds Loss for the financial year (1,509) (672) Shares to be issued under option 221 18New equity share capital subscribed 6,519 2,373 ------- ------- Net addition to funds 5,231 1,719Opening shareholders' funds 4,877 3,158 ------- ------- Closing shareholders' equity funds 10,108 4,877 ======= ======= 26. Contingent liabilities Depicta Guarantee In 2002, Kanonladdaren AB sold software rights to a related party CultmagAS. Kanonladdaren agreed to guarantee Cultmag's bank borrowings for thatpurchase. Subsequently, as part of Kanonladdaren's sale of its assets tomembers of the Group, Depicta took over 2.5 million Swedish kronor of thatguarantee in favour of Sparebanken Spreetogo which it can be called on to payand 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 forthat purchase. Subsequently, as part of Kanonladdaren's sale of its assets tomembers of the Group. Azzets agreed to take over 14.3 million Swedish kronor ofthat guarantee in favour of DNBOR which it can be called on to pay and containsno recourse. 27 Controlling part There is no controlling party 28. Post balance sheet events Subsequent to the year end the Company has issued 11,500,000 shares at 10p pershare. The Company has also acquired Sandbergs Exhibition Group AB, issuing 3,433,633as part of the consideration. 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