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The Software business area delivered its best-ever quarterly earnings.
• Operating profit doubled in the first nine months of the year.
• The positive earnings trend led to a dramatically improved cash flow.
• Net sales amounted to SEK 559.3 (401.6) million.
• Operating profit reached SEK 34.8 (16.1) million.
• Operating margin was 6.2 (4.0) percent.
• Profit after financial items was SEK 33.7 (15.2) million.
• Profit after tax totaled SEK 23.7 (11.1) million.
• Earnings per share were SEK 0.21 (0.10).
• Cash flow from operating activities was SEK 35.9 (-8.1) million.
• Available cash and cash equivalents amounted to SEK 127.0 (103.6) million.
• Equity at September 30 was reported at SEK 532.6 (399.8) million.
• Equity per share at September 30 was SEK 4.98 (4.03).
THIRD QUARTER 2006
• Net sales amounted to SEK 169.4 (164.4) million.
• Operating profit reached SEK 11.1 (10.3) million.
• Operating margin was 6.6 (6.3) percent.
• Profit after financial items was SEK 11.3 (10.3) million.
• Profit after tax totaled SEK 8.2 (7.1) million.
• Earnings per share were SEK 0.07 (0.05).
• Cash flow from operating activities was SEK 13.0 (3.7) million.
• In July Northern signed a strategic collaboration agreement with EMC Corporation to facilitate interoperability of Northern Storage Suite with EMC’s storage systems.
• In August IAR Systems won an order from an international medico-technical group. The order includes a development contract, support services and software licenses for a period of three years. The total order value is estimated at between SEK 9 and SEK 12 million, of which SEK 2.4 million in the third quarter.
COMMENTS FROM THE CEO
Nocom has sustained its profitable growth trend and saw improvement in both operating profit and operating margin compared with the successful third quarter of 2005. In the first nine months of the year we doubled our operating profit and grew by 40 percent.
Software continued to stand out in the past quarter as the business area with the fastest growth and the highest operating margin. IAR Systems achieved additional sales successes and Northern reached profitability in the third quarter according to plan. I see tremendous potential in both companies and Software is gaining an increasingly central role in the Group. By stepping up our investments, we will expand our market shares and accelerate growth in this business area.
Our top priority in the Distribution business area has been to boost profitability, and a large part of these operations will reach our ten percent operating margin target for 2006. Deltaco has enlarged its market share in distribution of IT products and Nocom Software reported increased sales of systems integration software to major customers. In the past year Nocom Security has taken a number of profitability enhancement measures, but will fall short of our operating margin target for 2006 since a large share of sales consist of volume-related products with tight margins. Peter Strand will now take over as Nordic President of Nocom Security AB with a focus on strengthening margins. His sales experience, established partner and supplier relationships and high level of technological competency in IT security will provide excellent conditions for Nocom Security’s future development.
We are financially sound and the period’s positive earnings trend led to a dramatic improvement in operating cash flow. The next quarter is the seasonally strongest for Distribution. Profitability in Distribution will give us scope to gear up our investments in Software, which is continuing to perform impressively.
Stockholm, Wednesday, 8 November 2006
Chief Executive Officer
Nocom AB (publ)
THE NOCOM GROUP
All business areas reported a positive operating profit in the third quarter. Software further improved its operating profit and in the third quarter posted the best earnings in the business area’s history, thanks to increased license sales, new development contracts in IAR Systems and Northern’s return to profitability after recording a loss for the second quarter. The third quarter saw rising demand in the Group’s key markets, the USA and Germany.
Distribution showed a stable operating profit compared with the preceding year, when the business area had an unusually strong third quarter. Deltaco and Nocom Software performed well in the third quarter, delivering both growth and profitability. Together with Webcontrol and Network Innovation, they achieved an operating margin of 9.8 percent for the quarter and over 10 percent for the nine-month period. Despite taking a number of profitability enhancement measures during the year, Nocom Security posted a drop in sales compared with the third quarter of last year.
The Services business area accounted for five percent of consolidated sales and was profitable for the quarter, although operating profit for the nine-month period was negative.
Over the 12-month period from October 2005 to September 2006, sales rose from just under SEK 500 million to approximately SEK 800 million. Growth was both acquisition-driven and organic. The strongest organic growth is found in IAR Systems, which reported higher sales of software for chips built on ARM technology, and in Deltaco, which increased its sales to prioritized major customers.