Norkom H1 revenue to be down, but outlook good, board says

13 Sep 2010

Software company Norkom Group’s preliminary revenue and earnings results for its first half year ending 30 September 2010 indicate turnover of €22m to €22.5m, compared with €24.6m in the first half of last year.

EBITDA is expected to be between €1.2m and €1.5m, compared with €4.5m during the same period last year.

Having received advanced payments in fiscal year 2010 against this period’s revenue, cash is expected to be €36m to €36.5m, down on the end of year cash position as expected.

The company, which provides financial crime and compliance software solutions for the global financial services sector, said revenues would be lower than anticipated due mainly to lengthening sales cycles and delays in the passing into law of new regulatory statutes in Asia. It said its sales pipeline volume and activity were higher than in the first half of last year, it is continuing to invest in sales and product development, and its US operations are returning to growth.

“Norkom’s long-term prospects continue to remain positive,” said Paul Kerley, the company’s CEO. “The underlying growth in demand in the market is increasing particularly for our packaged solutions.

“Demand in Norkom’s sales channels is robust. However, due to the increased internal decision cycles and sign-off process within major financial institutions, particularly the phase from selection of the Norkom solution to contract closure, sales cycles have been longer than anticipated.

“Norkom has invested significantly in sales and product development in anticipation that this growth would feed through during the first six months of fiscal year 2011. The delay in closing high margin licence revenue and an increase in operational expenditure has therefore impacted group profitability in the short-term.

“Having rigorously reviewed all of our markets and operations we are confident that our near-term revenue performance is a factor of timing and not reflective of the underlying market opportunity.”

The board said it expects a modest return to revenue growth in the second six months of fiscal year 2011 against the same period last year. It said Norkom’s long-term prospects remain positive and that its confidence is founded on the strength of the company’s solutions and the visible step up of demand in its core markets.

Results for the first half ended 30 September 2010 will be reported on 9 November 2010.

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