Interim report January–September 2007

• Sale of Nocom Security and Network Innovation – significant improvement in the Group’s earning ability.
• The streamlining process has enhanced Nocom’s profitability – operating margin in continuing operations for the first nine months was 11.0 percent, compared to 5.8 percent including discontinued operations.
• Nocom has raised its operating margin target to 12 percent over a business cycle.
• Investments to expand sales and marketing resources were charged to consolidated profit in an amount of around SEK 15 million for the first nine months of 2007 and SEK 5 million for the third quarter.
• The strong financial position provides opportunities for continued investments and share buy-backs.
• Net sales in continuing operations are reported at SEK 377.6 million (345.0) for the nine-month period and SEK 121.9 million (112.1) for the third quarter
• Profit before amortization of intangible assets (EBITA) in continuing operations was SEK 44.1 million (41.6) for the nine-month period and SEK 14.2 million (13.5) for the third quarter
• Profit after tax in continuing operations amounted to SEK 32.3 million (27.4) for the nine-month period and SEK 10.6 million (9.4) for the third quarter.
• Earnings per share in continuing operations were SEK 0.28 (0.27) for the nine-month period and
SEK 0.09 (0.09) for the third quarter.


Comments from the CEO - “The new Nocom is taking shape with a stronger and more focused business”

In the third quarter we were able see the results of the year’s work to realize our
strategic focus – both the ambitious investments in proprietary products and the
realignment of our distribution business. A look back at the first nine months of
2007 shows that we have made considerable progress – we have successfully
streamlined our distribution operations and our past investments are starting to
have effect. The new Nocom Group is taking shape – with a smaller share of
distribution and a higher share of proprietary products.
Nocom is no longer a distributor. With these divestments in the third quarter, we
have completed the past year’s process of steering the Group’s away from traditional
distribution and towards proprietary products with higher profitability and
growth potential. In pace with a growing share of volume distribution in certain
subsidiaries, margins have come under pressure and profitability has suffered.
We have therefore taken decisive action to reduce the share of volume-related
distribution, change the organizational structure of the companies and withdraw
from unprofitable markets. A final step was taken in September with the sale
of our subsidiaries Nocom Security and Network Innovation, through which we
have left old role as distributor – and by doing so have significantly strengthened
the Group’s profitability and financial position. At the same time, the sold companies
have been given better conditions for development in their respective
markets – Nocom Security by becoming part of a large, specialized IT security
group with obvious potential for synergies and scale economies.
In a single quarter, the distribution share of consolidated sales has fallen from
more than 40 to around 10 percent. Although the divestitures have naturally led
to a sharp drop in sales, shedding of these units has had an immediate positive impact on earnings. No less importantly, total risk exposure in the Group has
been significantly reduced.
Nocom’s strategic course – to shift the company’s focus from third-party distribution
to sales of proprietary products – has also required sizeable investments
during the year. The motive for the change has been to come closer to the
customers and own the products as a means for maximizing growth and profitability.
IAR Systems’ investments in international sales and marketing resources
generated increased license revenue during the third quarter. Northern has
acquired the distributor Copernet in order to accelerate growth in France. In a
continuation of its offensive strategy, Northern launched a new and enhanced
version of Northern Storage Suite after the end of the period. Deltaco is continuing
to build a range of products under its own brand – a total of 600 proprietary
products have been launched so far this year and now account for 11 percent
of the company’s sales.
Nocom is entering the important fourth quarter of the year as a strong and
focused group. The far-reaching process of change in our distribution business
is now completed and the other companies are growing with sustained healthy
profitability. Our investments in sales, marketing and proprietary products are
starting to pay off and our financial position has been strengthened by the year’s
divestitures and positive business development. This gives us scope for ongoing
investment and continuity in our share buy-backs – as part of a more ambitious
acquisition strategy.

Stockholm, Wednesday, November 7, 2007
Stefan Ström, President and CEO , Nocom AB (publ)

Group - “Streamlining of the Group completed – significant improvement in earning ability”

Net sales in continuing operations rose by more than 9 percent to SEK 377.6
million (345.0) for the first nine months of the year and to SEK 121.9 million
(112.1) for the third quarter. Nocom Security, which accounted for the bulk
of sales in the Distribution business area, and Network Innovation were both
sold in September. These divestitures have decreased consolidated sales
since the beginning of the year by SEK 162 million, of which around SEK 39
million in the third quarter.
This represented the final step in the realignment of distribution operations,
and has reduced the business area’s share of total Group sales to around 10
percent. The process of change has been underway throughout the entire
year, with a resulting impact on both sales and earnings. The sold companies
have shown a negative earnings trend in 2007 compared to earlier years.
Continuing operations, on the other hand, posted growth of around 9
percent for both the nine-month period and the third quarter.
Profit before amortization of intangible assets increased in the third quarter. In
continuing operations, profit after amortization of intangible assets was SEK
44.1 million (41.6) for the first nine months and SEK 14.2 million (13.5) for the
third quarter. Operating margin was 11.0 per cent (11.2) for the nine-month
period and 10.9 percent (11.2) for the third quarter. The subsidiaries IAR
Systems, Northern and Deltaco showed stable and strong profitability. The
remaining distribution operations in Nocom Software and Nocom Drift also
performed well and the streamlining process has given the business area
stronger profitability and an operating margin of 18 percent for the first nine
months of the year. Through the sale of the two loss-making units, Nocom
has substantially improved its future earning ability.
The Group’s investments in sales and marketing resources were charged to
nine-month profit in an amount of SEK 15 million, of which SEK 5 million in
the third quarter.
Profit for the first nine months of 2006 was positively affected by one-time items of SEK 3 million – a SEK 2 million gain on the first quarter sale of the
stockholding in ContactorArete and additional purchase consideration of
SEK 1 million for the sale of Arete and Arete Datastöd in the second quarter
of 2006.
Cash flow from operating activities was SEK 20.1 million (42.3) for the first
nine months and SEK 14.8 million (16.9) for the third quarter.
In the third quarter Nocom repurchased 514,000 treasury shares for a
combined price of SEK 2.9 million. Total share buy-backs during the ninemonth
period thus amounted to 953,000 class B shares for a combined SEK
5.8 million. Together with the year’s stockholder dividends for a total of SEK
35.1 million, these items were charged to cash flow and net cash in a total
amount of SEK 41 million. Net cash at September 30, 2007, was SEK 19.5
million (58.6). In the fourth quarter, settlement of receivables from the divested
companies will strengthen net cash by approximately SEK 21 million.
The equity/assets ratio improved further during the period and amounted to
83 percent (72) at September 30, 2007.


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