Strong start to 2006 for the new and bigger Nocom - Organic growth was 40 percent – net sales reached SEK 211.8 million - Operating profit up by over SEK 19 million – reported at SEK 15.4 million - Net cash rose by 48 percent in the first quarter – cash and cash equivalents amounted to SEK 100.2 million January - March 2006 • Net sales amounted to SEK 211.8 (60.5) million. • Operating profit was SEK 15.4 (-2.9) million. • Profit after financial items was SEK 15.3 (-3.1) million. • Profit after tax totaled SEK 10.7 (-3.2) million. • Earnings per share were SEK 0.09 (-0.08) million. • Cash flow from operating activities was SEK 17.9 (-2.9) million. • Available cash and cash equivalents amounted to SEK 129.7 (130.3) million. • Equity at March 31 is reported at SEK 460.1 (327.5) million. • Equity per share at March 31 was SEK 4.61 (3.82). • IAR Systems won two major license contracts, worth around SEK 3.7 million, from leading Japanese electronics manufacturers. • IAR Systems signed a sizeable development contract with one of the world’s foremost manufacturers of microprocessors. The contract is an extension of a longstanding partnership between the companies and is valued at approximately SEK 3.5 million. • In March, Nocom Software was awarded a three-year contract worth close to SEK 15 million from one of its largest Swedish customers to supply products and services for host computer access. • In February, operations in Nocom Distribution were divided into three companies − Nocom Security, Nocom Software and Webcontrol. The companies are specialized in the areas of information security, IT infrastructure and web analytics, respectively. • As of 2006 the Nocom share is quoted on Attract 40 − Stockholm Stock Exchange’s segment for the most actively traded shares on the O list. Subsequent events • Northern Parklife − strategic acquisition strengthens software business At the beginning of April Nocom acquired the Swedish software company Northern Parklife, a leading provider of proprietary software for Storage Resource Management (SRM). Northern has annual sales of around SEK 20 million and 22 employees, of whom seven are based in the USA. The initial purchase price was SEK 17 million, with additional purchase consideration of SEK 7 million payable over a period of three years.
Comments from the CEO After an intensive year marked by large-scale acquisitions and dramatic expansion, Nocom entered 2006 as a strong IT group. The new and bigger Nocom Group has made a fantastic start to the new year. Net sales have risen sharply – primarily through the past year’s acquisitions but also thanks to impressive performance in the market – and organic growth for the first quarter of 2006 reached 43 percent. Parallel to this, we have strengthened our profitability – turning the past year’s negative first quarter earnings into an operating surplus of over SEK 15 million. A renewed sense of optimism in the IT market has stimulated an upswing in business ventures and investments, which has naturally also benefited Nocom. Nonetheless, our growth has outpaced the market and several of our subsidiaries showed a substantial increase in sales for the first quarter. The past year’s swift and decisive integration and development process has borne fruit and provided a solid platform from which to continue building for the future. Our focus in 2006 will be on identifying and tapping into the potential still available in the individual subsidiaries and the Group as a whole. Our largest business area, Distribution, began the year with a sharp rise in sales and profitability over the previous year. In February Nocom Distribution, the Nocom Group’s original software distribution business, was divided into three companies specializing in different technical areas – information security, web analytics and IT infrastructure. The expansive and fiercely competitive information security segment is the main area where focusing of resources and expertise is needed to establish a leading market position. After restructuring, the newly formed Nocom Security has widened its product range with information security products and dramatically improved its sales over the relatively weak first quarter of 2005. The other new units, Nocom Software (IT infrastructure) and Webcontrol (web analytics), are primarily active in the Swedish market and have well established products, longstanding supplier partnerships and stable profitability. The Group’s Software business area started the year with a quarter that was both eventful and rewarding. IAR Systems is continuing to gain ground in the international market and the past year’s strategic realignment – with a stronger emphasis on software sales and a lower share of consulting services – has yielded tangible improvement in both sales and profit. In the first quarter, IAR Systems signed two major license contracts with leading Japanese electronics manufacturers. One of these contracts refers to the fast-growing ARM technology, where IAR Systems has a technological and market lead. IAR Systems was early to identify the major potential of ARM technology, and this is starting to visible results. We will increase our focus and investments in this area and see the ARM segment as a key growth area for IAR Systems. In addition, IAR Systems has won a significant development contract from a world-leading supplier of microprocessors to whom IAR Systems will deliver a development tool for the company’s new 32-bit chip architecture. The new contract has strengthened IAR Systems’ position as the foremost supplier of development tools to Japanese chip makers. These orders are good examples of IAR Systems’ strategy to pursue long-term growth by achieving a profitable balance between pure software sales and development contracts. In early April, Nocom’s Software business area was enlarged through the acquisition of Northern Parklife, a successful Swedish provider of proprietary software for Storage Resource Management (SRM). Northern has many of the qualities we seek in an acquisition. It is a stable and profitable company with a leading position and unique knowhow in its segment. Furthermore, the company has a strong and driven management and has been very successful internationally. Over half of the Global Fortune 100 companies have chosen software from Northern for their enterprise storage solutions. Customers who have standardized on solutions from Northern include world-leaders like Microsoft, Nokia, Boeing, Nike, Siemens and Bank of America. Northern will now operate as an independent company in the Nocom Group and we see promising opportunities for synergies with our other subsidiaries. Among other things, Nocom Security has supplemented its product portfolio with solutions from Northern. Just a few weeks after the acquisition, Northern was awarded a major contract from the U.S. Army Accessions Command at Fort Knox. This strategically important contract covers the purchase of multiple licenses for immediate deployment of Northern Storage Suite for efficient and secure management of enterprise storage resources. In the Services business area, growth was more limited and the operating margin was lower than in the rest of the Group. The industry is still being held back by aggressive price pressure and competition for both operating and Internet-based services. The business area’s two companies, Nocom Drift and Nocom Networks, are continuing to move towards a more integrated offering. Today we are a group with considerable resources and tremendous potential. Our financial position is excellent – with cash and cash equivalents of SEK 100 million and stable cash flows from operations. This naturally gives us financial security, but also the means to seize new business opportunities and lay a foundation for the Group’s long-term development. Nocom has successfully served the Nordic IT distribution market for many years, and our subsidiaries in software operations have now broadened their horizons to enter the global arena. Both IAR Systems and Northern Parklife are internationally established and sell mainly to major overseas markets like North America and Japan. But our market is not only growing in geographical terms. Nocom’s software companies market and sell proprietary products, and this is an area where we can leverage both our longstanding experience in distribution of external products and the knowledge and sales resources of our other subsidiaries. We believe that 2006 will be the year when we demonstrate our potential and highlight what we have to offer and where we are headed. The Group has a great deal of untapped potential. We see opportunities to enhance efficiency and profitability in Distribution and to increase growth in Software, not least after IAR Systems’ strong start to the year and the spring’s acquisition of Northern Parklife. We also see scope to realize additional cost and income synergies in Services. Looking ahead, we expect continued robust sales and earnings growth through the rest of 2006, with certain variations between quarters. The IT market is growing, and we anticipate even more positive development for the Nocom Group. We have sustainably profitable subsidiaries with the means and momentum to continue moving forward. Nocom has never been stronger nor had such enormous long-term potential. Stable profitability will remain our top priority – at the same time that we step up the pace of strategic development in the Group. Solna, Thursday, April 27, 2006 Stefan Skarin Chief Executive Officer Nocom AB (publ)