Norcon (LON:NCON), the provider of services to telecoms network operators, reported this morning that it secured “important new beachheads” into key expansion markets during the first half of this year.

The firm, which announced interim results today, said that progress made in winning new clients in H2 2010 continued into the first half of 2011, and that efforts to diversify the business into new geographies have been successful – generating new business for the company in South East Asia, Europe and Central Asia.

These new contracts do not initially generate individually large volumes of revenue. But they are in line with the firm’s policy of taking on small initial contracts that require highly-qualified personnel with a view to growing revenues by demonstrating to clients the added value to their operations of Norcon’s presence.

Norcon said that it had also been successful in renewing key contracts in core Middle Eastern markets, as well as renewing and extending important client relationships in Indonesia and Abu Dhabi.

Norcon said that as well as making progress in diversifying its list of clients, its longer-term clients are actively considering the impacts of new technologies in the telecoms space, such as 4G, LTE and NGN (Next Generation Networks), and they are looking at further investments in these technologies. The firm said this market dynamic has enabled it to improve its first-half revenue performance year on year.

As far as figures for the first half are concerned, the firm improved its H1 revenue to US$35.9 million (H1 2010: US$34.2 million) in spite of difficult economic conditions around the world. The firm’s gross margin declined from 19 per cent to 18 per cent, which reflected the impact of starting up new contracts and pre-tax profits came in at US$2.4 million (H1 2010: US$2.8 million).

Net cash at the firm was US$1.1 million at June 30, compared with US$5 million a year earlier, although Norcon said that net cash improved by more than US$7 million since the end of June.

“Our ongoing contracts and high levels of client retention have given us a solid base on which to successfully expand our activities into new clients and territories in this first half of 2011,” said Trond Tostrup, Norcon’s chairman. “Whilst many of our new contract wins are currently small in volume terms, they represent important new beachheads for us into key expansion markets and have the potential to grow into larger long term relationships over time. We have good visibility through the fourth quarter of 2011 and we look forward to another profitable outcome for the year as a whole whilst remaining focused for the long term on developing and diversifying our business.”

Communications specialist Norcon (LON:NCON) says the firm remains positive about 2011 after what it described as a challenging year.

Pre-tax profit for the year to December 31 fell to US$6.7mln from US$10.7 million, though this was in line with revised management guidance. Revenues were US$68.6mln (2009:US$78.2mln).

The firm put the reductions down to contracts with new clients being slower to emerge, mainly due to M&A activities amongst telecom operators, delays to projects coupled with unusual end of service costs and aborted acquisition activities.

Norcon, which provides project management, outsourcing and consulting services to major telecommunications groups, also confirmed this morning its policy of paying out half its net income in dividends.

Cash at year-end stood at US$12.1mln.

The firm's chairman Trond Tostrup said: "We have worked diligently to conclude a profitable outturn to the year.

"Our core client relationships have been maintained and in some cases strengthened and we also continue to make progress in expanding our presence in core target markets such as the Middle East, Africa and South East Asia.

"At the same time, we remain optimistic about the long term prospects in our target markets around the world given the fundamental demand drivers in those markets."

He added that, as the company had stated in a trading update in December 2010, a number of challenges had affected the financial performance.

"Our efforts to further expand geographically and into new end-markets have continued in to the start of 2011 and will be our focus throughout the year ahead.

"We are seeing some of the delayed projects advance and further opportunities emerging with new clients to support our 2011 expectations and longer term growth ambitions.

"While Norcon has not in 2010 been able to achieve growth, we have demonstrated the inherent stability of our business in core markets and that of our client relationships."

Operationally, the company had made gains in core markets and in defined future growth areas and important renewals had been secured or were underway in middle eastern markets where demand was strong, added Norcon.

FinnCap's Mark Paddon has upped the broker's pretax profit forecast for the current year by 10 percent and reiterated the 65 pence price target.

Although the revenue and profit figures were lower year-on year, they came in above finnCap's expectations.  The broker also highlighted Norcon's relatively upbeat outlook on growth opportunites highlighting discussion on 4G deployments in Scandinavia, opportunities to further extend into the Southeast Asia and African regions and some opportunities for new projects in the defence sector.

Following today's results, Paddon is now looking at a pretax profit of US$7.2 million on revenue of US$70 million for the 2011 financial year.

"The low relative valuation (7.9x 2011 P/E and 6.3% yield) in our view reflects the client concentration. However, as the company increasingly gains traction in its customer and market diversification strategy, we would expect the stock to be re-rated. We retain our 65p target price," the analyst added.

Norcon (LON:NCON) has won a contract to support an unnamed mobile phone operator in Thailand, which is carrying out an upgrade to its national network.

At the beginning of the month, the AIM-listed communications specialist renewed a multi-million dollar contract with a key telecoms customer in Kuwait, and in January it extended an agreement with Indonesia’s Axis that was first inked in 2005.

“We have made the diversification of our revenue base into new geographies a key strategic priority for our business,” said chief executive of Norcon Arnold Rørholt.

“I am delighted to show that we are making progress in this regard, particularly here in the dynamic markets of South East Asia where the long term opportunity for developing our business remains significant.”

Norcon’s business development efforts remain focused on the conversion of pipeline prospects in the target regions of South East Asia, India, Middle East, Africa, and select locations in Europe.

In its interim report that was released in September, Norcon said that the outlook was positive, projecting another profitable outcome for the year, with its long-term contracts and high levels of client retention giving it good visibility beyond 2010.

Norcon’s first half revenues amounted to US$34.2 million, while gross profit ad pre-tax profit reached US$6.6 million and US$4.1 million respectively.

Telecom networks specialist Norcon (LON:NCON) had some welcome good news for investors as it revealed that a major contract had been extended into 2011.

The agreement is with Indonesia’s Axis and was first inked in 2005. 

It means Norcon will continue to manage Axis' network expansion and project implementation activities.   

The group said has also continued to renew contracts with a number of retained telecom clients in the Middle East and Norway.  

Business development efforts remain focused on the conversion of pipeline prospects in the target regions of SE Asia, India, Middle East, Africa, and select locations in Europe, it added.

Chief executive Arnold Rørholt: "This important contract renewal in Indonesia confirms our ability to retain clients, establish solid long-term client relationships and offer services that provide value.  

“We look forward to continuing our efforts in the year ahead to expand our client base and further diversify our sources of revenue."

Updating investors on the year to date, Norcon said that turnover in the second half is quite similar to the first.  However, it revealed that contracts with new clients have been slower picking up than it had anticipated, in Setember's interim results. 

According to Norcon this is mainly the result of delays caused by ongoing mergers and acquisition activity in the sector.

It also experienced higher than expected costs due to its own aborted acquisition activities. Other costs were also higher and gross margins have been reduced.

Norcon said that whilst it remains profitable, pre-tax profit for the full year is now expected to be considerably lower than expected.

The company is still backing its generous dividend policy - which is one of the stock's main attractions for investors.

It recently paid its first interim dividend and it is still committed to pay-out at least 50 percent of net income, which is consistent with previous years.

"The long term demand for our services remains robust,” chief executive Arnold Rørholt said.

“We continue to experience longer lead times and competition for contracts. These circumstances reduce visibility on new contract wins with new clients, while visibility and retention with our existing clients remain very high.”

He adds: “we remain optimistic on our prospect for organic growth looking ahead. We expect the core business in 2011 to be broadly comparable to 2010."

The group had flagged in its interim results statement in mid-September its intention to recommend an interim dividend that would be payable before the year-end. It had added that, subject to unforeseen adverse events, it would also declare a final dividend with the publication of the full year results in April payable in the autumn of the given year.

The interim payout comes to a fraction over 2 US cents per share.

Norcon announced on September 14 that it had continued its strategic expansion into target geographies with a new contract in Norway, while reporting positive interim results that it said reflected a resilient performance from its core business.

Under the terms of the deal, the AIM-listed global communications network specialist is assisting one of Norway’s largest telecom companies, Ventelo, which provides both mobile and fixed line services to all market segments in the country, with designing and implementing Operating Support Systems (OSS).

“[The Norwegian deal] marks another sensible, strategic step in our plans to expand into new target geographies and I look forward to continuing our progress here, driven by a long-term demand for OSS and 4G roll-outs in the years ahead,” chief executive Arnold Rørholt had said in an accompanying statement.

Norcon’s first half revenues were slightly below those of H1 2009 at US$34.2 million compared to US$37.4 million. Gross profit and pre-tax profit amounted to US$6.6 million and US$4.1 million respectively, down from US$7.8 million and US$5.2 million a year earlier.

A successful placing conducted by Norcon in March helped it increase its cash reserves from US$5 million to the US$8.5 million as of mid-September.

The outlook was positive with Norcon projecting another profitable outcome for the year, with its long-term contracts and high levels of client retention giving it good visibility for the rest of 2010 and beyond.

Under the terms of the deal, the AIM-listed global communications network specialist will provide one of Norway’s largest telecom companies Ventelo, which provides both mobile and fixed line services to all market segments in the country, with assistance in designing and implementing Operating Support Systems (OSS).

Norcon said that the contract confirmed its strength in, and commitment to, advisory services in the OSS domain and called it a key step in further developing the business in Scandinavia and other territories around the world.

“I am delighted to announce this contract today, confirming the promising pipeline of demand we are seeing for projects again in Europe, particularly in Scandinavia.

“Today's announcement marks another sensible, strategic step in our plans to expand into new target geographies and I look forward to continuing our progress here, driven by a long-term demand for OSS and 4G roll-outs in the years ahead,” said chief executive Arnold Rørholt.

The news of the contract win complemented the company’s interim report that also came out this morning.

Norcon said its revenues were slightly below those of H1 2009 at US$34.2 million compared to US$37.4 million. Gross profit and pre-tax profit amounted to US$6.6 million and US$4.1 million respectively, down from US$7.8 million and US$5.2 million a year earlier.

A successful placing conducted by Norcon in March helped it increase its cash reserves from US$5 million to the current US$8.5 million.

Cost of sales decreased from US$29.6 million to US$27.7 million, while general, administrative and financial expenses rose marginally from US$2.2 million to US$2.4 million.

Despite lower profits and revenues, Norcon was satisfied with the results, which it said reflected a “continued strong performance from the company’s core business, albeit against a strong 2009 comparative period”.

Besides the Ventelo contract announced today, Norcon signed other major deals to manage roll-out of key Border Control project in the Middle East and assist Telenor with roll-out of 4G networks in Norway.

Other operational highlights included strong sales and demand its from core client base in Asia and the Middle East and continued strong client retention.

The outlook was positive with Norcon projecting another profitable outcome for the year, with its long-term contracts and high levels of client retention giving it good visibility for the rest of 2010 and beyond.

“Beyond 2010, Norcon is focused on the further development of our business with a view to generating continued profitable growth through the broadening of our services with existing clients, focusing on new areas as well as on acquisitions.

“The rate of this growth will depend in part upon the relative pace of telecom spending in emerging markets and 4G deployments in Europe, and our continued success in our expansion strategy,” commented Rørholt.

Norcon has been a consultant and project manager for more than 50 years to the private sector and various government agencies.  These organisations rely on Norcon to select, implement and maintain a communication infrastructure that supports the critical needs of their operations.

Nordic countries remain at the forefront in rolling out the newest technology, and the company said it is targeting particular opportunities in Norway, Sweden and Denmark.

The company has been operating in Saudi Arabia for over 40 years.

“I am delighted to be announcing this extension in our relationship which is an expression of satisfaction on the part of our customer in the services we offer and I would like to thank them for their continued confidence in Norcon,” said Chief Executive of Norcon Arnold Rorholt.

Norcon has stepped up activities in other geographical regions, too, having re-established an active office in Scandinavia in February with a view for it to develop into a regional sales base. According to Norcon, Nordic countries remain at the forefront in rolling out the newest technology, and the company said it is targeting particular opportunities in Norway, Sweden and Denmark. In Sweden and Norway, mobile network operators launched the new 4G network recently, and the network’s roll-out is planned throughout the region.

The company raised £4.5 million in March to support organic growth. In 2009, the company achieved  16% revenue growth from a year earlier to US$78.2 million while net profit increased by 20% to US$7.7 million.