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• Deltaco grew by 17 percent with strong profitability – investments in the launch of 1,000 products under its own brand in 2007
• Continued robust demand for IAR Systems’ licenses for applications based on ARM microprocessor architecture
• Northern is setting up an international sales organization and developing a product for the new markets
• The Distribution business area discontinued its volume-related sales in order to boost profitability - Nocom Security wound up operations in Finland and the Baltic countries
• Net sales amounted to SEK 203.3 million (205.8)
• Profit before amortization of intangible assets (EBITA) is reported at SEK 13.1 million (15.7)
• Profit after tax was SEK 8.6 (10.2) million
• Earnings per share were SEK 0.07 (0.09)
Comments from the CEO
Nocom is stepping up its investments in sales and marketing resources, an expanded product offering and global presence. More than half of Group sales are now attributable to proprietary products with high profitability and growth potential.
Through a determined strategic effort, Deltaco has succeeded in creating powerful growth with sustained strong profitability. In 2007 the company will launch 1,000 products under its own brand. This strategy will improve Deltaco’s competitiveness as brands become an increasingly important factor in end-user sales. The computer accessories market is changing and expanding into the retail trade and cash-and-carry outlets.
IAR Systems has increased its licenses sales for wireless solutions built on 32-bit technology. Demand for software based on the leading ARM technology is showing continued rapid growth at the international level. IAR Systems is recruiting new sales staff in the USA, China, Japan and the Nordic countries.
Northern is in the process of establishing an international sales organization and stepping up its marketing activities. The company has improved its profitability through an increased share of license revenues with a high gross margin. An extended partnership with NetApps, a global supplier of storage hardware, will enable Northern’s products to reach a wider market through a new channel. NetApps is the fastest-growing hardware supplier in the data storage market. These investments are expected to provide good potential for growth during the year.
In the Distribution business area, increased profitability remains the top priority and volume-related sales with low profitability were discontinued during the quarter. Nocom Security has wound up its operations in Finland and the Baltic countries, where sales are predominantly volume-related. We are continuing our efforts to change the product portfolio and adapting the organization to achieve profitability more quickly.
The year has started with vigorous activity and sustained robust profitability. Moving forward, Nocom will continue to focus on enhancing profitability in its distribution business and raising the level of investment in proprietary products with significant growth potential.
Stockholm, Thursday, May 3, 2007
Stefan Ström, President and CEO
Consolidated sales are reported at SEK 203.3 million (205.8). Overall, the Group reports stable sales with some variation within the respective areas of operation compared to the preceding year.
After Deltaco’s realignment from distributor to supplier of products under its own brand, the Group has decreased the share third-party products in favor of proprietary products, which accounted for 56 percent of the Group’s first quarter sales. Deltaco is no longer included in the Distribution business area but is now reported as a separate operating segment, as are the other product owners IAR Systems and Northern.
Net sales in the Distribution business area declined from same period of 2006 due to lower sales of volume-related products in Nocom Security and the fact that Nocom Software recorded its largest-ever order for host computer access products in February 2006. The order was worth nearly SEK 15 million and referred to the software product Attachmate WRQ Reflection.
Profit before amortization of intangible assets was SEK 13.1 million (15.8) and the profit margin (EBITA) was 6.4 (7.7) percent. Strong profitability has been noted in all of the subsidiaries with proprietary products – IAR Systems, Northern and Deltaco and the distribution company Nocom Software. To a large extent, distribution of third-party products is a fiercely competitive market where the Group is taking steps to boost profitability.
The Group’s investments in sales and marketing resources were charged to profit for the first quarter of 2007 in an amount of approximately SEK 2 million.
In February 2006 Nocom sold its holding in ContactorArete Gruppen AB for a price of SEK 3 million, generating a profit effect of SEK 2 million in 2006 that is reported under “other income”.
First quarter cash flow from operating activities was SEK -5.6 million (17.9). Investments during the quarter were made in sales and marketing resources and a substantial inventory build-up in Deltaco. Nocom has a very solid financial position with net cash of SEK 78.0 million (59.1) and an equity/assets ratio of 78 (66) percent.