Nocom AB (publ) Year-end Report 2006
• IAR Systems exceeded its targets with growth of 22 percent and a doubling of operating profit
• Northern’s sales and profit are rising with investments to increase sales resources
• Distribution is creating stability in its market mix, where Deltaco and Nocom Software have shown the strongest performance
• Sales are reported at SEK 771.5 (635.6) million for the year and SEK 229.0 (234.0) million for the fourth quarter
• Operating profit reached SEK 54.6 (34.8) million for the year and SEK 19.5 (18.7) million for the fourth quarter
• Profit after tax was SEK 53.4 (57.0) million for the year and SEK 29.7 (45.9) million for the fourth quarter
• Earnings per share were SEK 0.55 (0.57) for the year and SEK 0.31 (0.39) for the fourth quarter
• Net cash increased by SEK 50 million – The Board proposes a dividend of SEK 0.30 per share
COMMENTS FROM THE CEO
2006 was yet another successful year for Nocom. As we sum up the past year, one notable achievement was a continued increase in both sales and earnings. For the fourth consecutive year we posted a substantial improvement in operating profit, from SEK 35 million to SEK 55 million. Recent years’ determined efforts to attain stable long-term profitability are continuing to yield results.
We started 2006 as a strong IT group active in three areas – Software, Distribution and Services. Although our hopes for the focus on our Software business were realized, conditions in Distribution’s various markets remain difficult.
The top performer during the year was the software company IAR Systems. Thanks to its prominent position in the global chip market, IAR increased its sales and double its operating profit in 2006. The Software business was expanded through the acquisition of Northern – a company that has strengthened the Group’s offering and at the same time can leverage synergies within Nocom for its own development and growth.
In the Distribution business area we achieved stability in the market mix. The top priority was to reach strong and stable profitability, and several parts of the business area showed positive development during the year. However, we still have a ways to go in meeting the financial target for Distribution as a whole.
With a sustained operating margin, Deltaco has evolved from being an efficient purchasing organization to also become a successful sales company. As a focused niche distributor, Nocom Software has built successful sales and is showing solid profitability. Both Deltaco and Nocom Software will accelerate their investments in 2007 – Deltaco in its own brand and Nocom Software in an expanded Nordic presence.
Nocom Security saw negative development in both sales and profit during 2006, particularly in the fourth quarter. In the past year we took major steps to reverse the negative trend by adapting our organization, product offering and management. In the fourth quarter Nocom Security experienced declining sales of advanced security solutions and thereby increased its share of volume-related sales, which are exposed to more aggressive competition and tight margins.
We will focus to a greater extent on near-term profitability with limited investment in both Nocom Security and all activities in the Group that we define as s volume distribution.
2006 was also a year of streamlining, primarily through the sale of Nocom Networks. This also signified the wind-up of the Services business area which accounted for only a marginal share of consolidated sales and enjoyed few synergies with our other areas of operation. The subsidiary Webcontrol, active in Distribution, was also sold in 2006. In the past few years Webcontrol has increasingly shifted from pure distribution to more of a service and consulting-oriented role.
Our financial position was further strengthened during the year. Cash flow from operating activities was substantially improved by stable earnings growth in our subsidiaries. Bolstered by these strong cash flows, we will step up the pace of investment in 2007 primarily in Software, where we will gradually increase our presence with new sales offices and additional sales staff to extent our international reach.
It is a pleasure for me to look back on such a successful Nocom year. After taking the CEO post in May, the year has brought a number of challenges. In 2006 we expanded our Software business, shed non-core activities and formulated our important strategic plan for 2007. We have now have entered 2007 with wind in our sails, high ambitions and the will to deliver another successful and exciting year for our subsidiaries and stockholders.
Stockholm, Wednesday, 14 February 2007
Stefan Ström, President and CEO of Nocom AB (publ)
Sales increased by 21 percent through both organic and acquisition-driven growth. Operating profit rose from SEK 34.8 million to SEK 54.6 million, with Software accounting for the sharpest improvement. The Group strengthened its profitability and achieved an operating margin of 7.1 (5.5) percent, an increase that reflects the year’s growth in Software and higher profitability in Distribution.
Fourth quarter profit was the best in Nocom’s history. Software more than doubled its cash flow, while Distribution was down somewhat from the year-earlier level.
Cash flow from operating activities increased from SEK 7.4 million to SEK 44.4 million during the year. Nocom has a strong financial position with net cash of SEK 89.2 (39.9) million and an equity/assets ratio of 74 (63) percent.
PROPOSED DIVIDEND IN 2007
The Board proposes an ordinary dividend of SEK 0.20 per share and an extra dividend of SEK 0.10 per share. No dividend was paid in 2006.
The Annual General Meeting will be held at 6:00 p.m. on Thursday, May 3, 2007, at Scandic Anglais Conference, Humlegårdsgatan 23, in Stockholm.
Starting in early April, Nocom’s complete annual report will be available at the company’s office in Kista Science Tower, Kista, Sweden.
We expect a continued positive climate for IT investments in 2007 to give the Group a strong market position and provide momentum for sustained positive development.
Nocom’s long-term goal is to grow faster than the overall IT market by stepping up its investments in sales resources, product development and global presence.
Our robust earnings, strategic focus and market development are creating new scope to enhance the Group’s business and portfolio.
Our financial priorities for the Group are to maintain stable long-term profitability, increase growth in Software and boost profitability in Distribution.
Annual Report 2006 April 2007
Interim report January-March 2007 May 3, 2007
Interim report January-June 2007 August 21, 2007
Interim report January-September 2007 November 7, 2007
Year-end report 2007 February 2008