Cost-cutting efforts, growing critical mass and the fruits of consolidation are driving recovery at Scandinavia-focused marketing support services play Delling.

Shares in Delling are looking decidedly bombed out following a disappointing 2006 in which pre-tax losses widened from £3m to £5.7m after heavy investment of both time and money on a flurry of acquisitions. However, more recent interim results to June revealed a 110% rise in turnover to £10.5m, with good levels of organic growth, new contract wins and acquisitions driving the top line increase. Losses of £1.3m were converted into maiden operating profits of £214,000, with Delling benefiting from improved economies of scale and critical mass.

Chief executive Geir Lolleng remains focused on reducing costs, raising margins and adding clients to an already impressive roster that includes Nike, Mitsubishi Electric and Scandinavian clothing retailer The Warner Group. Delling remains active on deals, having just bought the staff and customers of Swedish exhibition company Hennix for £185,000 in cash. The company made £100,000 pre-tax from £1.6m of sales in 2006. As Delling isn’t taking on any of the business’ fixed costs, the profit contribution from this small deal should comfortably exceed £100,000 under Delling’s ownership.

Delling has paid the price for disappointing the market in the past, but the shares now have a degree of speculative recovery appeal. Not for the risk averse, however.

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Delling Group	AIM	£1.25m	0.62p	0.00p
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