www.norconplc.com
Providing project management and outsourcing services for operators of telecommunications networks including fixed line and mobile telephone systems and data networks, assisting them with the installation, operation or optimisation of telecommunications systems and to countries seeking advice on regulatory matters, defence systems, equipment and command and control facilities.
UPDATE: Norcon remains positive after a 'challenging' year
Updated with broker comments:
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.
