NorCom has stable sales in 2019 and is preparing for the crisis
NorCom was able to increase its sales in 2019. At EUR 14.0 million, total output was EUR 1.0 million above the previous year's level. At EUR 1.9 million, EBITDA was also above the previous year's level (EUR 1.1 million).
However, there are one-off effects on the 2019 profit and loss, which must be taken into account when evaluating the figures: A special effect is recognized under other operating income due to the release of a warranty provision: In August 2019 the action brought by the BMVBS was dismissed and NorCom's counterclaim granted. NorCom had set up a provision in the amount of € 1.8 million for a possible warranty obligation, which has now been released. Compared to the previous year, total output increased to a greater extent than sales, which was lower at € 11.9 million (+0.2 million euros) are above the previous year's value.
Business development last year led to a reassessment of the NorCom assets DaSense and EAGLE. The management wrote off all its own work capitalized in recent years. The EBITDA is EUR 1.9 million, but the EBIT is only around EUR 21 thousand (previous year: EUR 0.9 million) due to the high depreciation. The negative effect of the extraordinary depreciation is mitigated by the reversed warranty provision. By adjusting the figures, NorCom also sees itself better equipped for possible bottlenecks that could arise from the Corona crisis.
Business development 2019
At the beginning of the year there were positive signals from the automotive industry: NorCom was able to set up a test installation of DaSense at Detroit Diesel Corporation - a subsidiary of the Daimler group.
At the end of June, NorCom was able to announce an additional order from Audi and the successful integration of DaSense on Microsoft Azure - a prerequisite for using the software at Daimler. The company ALP.Lab also chose DaSense as the central software. However, there were no promised larger orders.
"The crisis in the automotive industry was already noticeable in our business development in 2018. That is why we have already started 2019 with a very cautious forecast, which was based on a stable business development and were able to meet this,” comments Viggo Nordbakk, Managing Director of NorCom, on the business development. "In the first half of 2019, we still expected that the situation with automotive customers could improve soon and worked intensively to position our products - through partners or directly. At the end of the half year, it slowly became clear that there was no sign of a turnaround and we therefore began to identify new growth markets for us with EAGLE.”
The strategic development of EAGLE was made public in October: In future, legal processes should be optimally supported with EAGLE. This provided new perspectives for NorCom's business development.
In mid-December, NorCom was able to announce the Federal Employment Agency's intention to award four lots to the NorCom framework contract, which was confirmed at the end of December.
Strategy and outlook
NorCom relies on four pillars to be able to break new ground without losing existing business.
“We see DaSense as a powerful, specialized analysis platform for the development and testing of cars. We are now expanding this specialization to industrial production and quality assurance,” added Nordbakk. “We want to position EAGLE as a broad solution for the mass market with extensive machine learning functions for searching, editing and sharing documents.
Especially against the background of the Corona crisis, we are striving for an even more intensive, more active cooperation with the Federal Employment Agency and other authorities. In addition, we have established accompanying, low-threshold offers such as the NorCom Academy."
A reliable forecast for the 2020 financial year cannot be made due to the difficult to estimate duration of the Corona crisis and its effects. The business is currently running quite stable despite restrictions from Corona and there may even be opportunities for NorCom from the crisis:
"The large-scale home office could lead to increased investments by companies in their technological equipment," explains Nordbakk. “EAGLE is a platform for working together on documents in distributed teams – and could be a lean, powerful home office solution. With increased sales activities, we want to use EAGLE to solve the challenges that companies face from the crisis.”
Also, some offers and orders from NorCom have not yet been affected by the crisis: "The Academy offer can be kept even in times of limited travel opportunities: All training courses can be carried out in full as webinars," Nordbakk continues. The order situation at the Federal Employment Agency has so far remained unchanged.
Nevertheless, NorCom plans cautiously for 2020 and is assuming a decline in sales due to the ongoing crisis. If the fourth quarter offers better market conditions again, stronger declines in sales due to the crisis in the overall market in the second and third quarters should still be partially offset towards the end of the year.