Profits at software firm up as improved regulation boosts demand

PROFITS AT security software firm Norkom rose sharply last year as increased financial regulation around the globe boosted demand for its products.

Norkom, which has its headquarters in Dublin, reported pre-tax profits of €7.5 million for the fiscal year to March 31st 2010, up from €4.9 million a year earlier. Revenues grew 3 per cent to €49.3 million, while EBITA (Earnings Before Interest, Tax and Amortisation) was up 20 per cent at €10.2 million. The company’s gross profit margin improved from 61 per cent to 63 per cent in 2010. Norkom also strengthened its balance sheet significantly, generating cash in excess of €14 million last year.

This brought its “war chest” up to almost €42 million, which means that it is now in a position to look for potential acquisitions, chief executive Paul Kerley said.

“We’re coming out of last year in rude health,” Mr Kerley said.

“We . . . believe that we have navigated through the bottom of the crisis in our core market,” he said.

He is “fairly optimistic” for the year ahead because of the “demand drivers” in Norkom’s market. There has been a significant upswing in fraud attacks on large banks in the US, as well as trojan attacks in Europe, he said. In addition, legislation to regulate financial institutions has been implemented or tightened in many jurisdictions. Both of these trends are positive for Norkom, which provides financial crime and compliance solutions to banks and insurance companies.

The firm won 16 new clients last year, bringing its total client list to 119. It expanded into the Middle East, and grew revenue in continental Europe and the Asia-Pacific region. Revenue shrank by 10 per cent in its North American market, but this was largely due to a key US client entering Chapter 11 bankruptcy.

Davy Stockbrokers reiterated its “outperformance” rating for Norkom yesterday. Davy’s Simon McGrotty said that its 2010 results were impressive in light of the environment in which financial services firms were operating.

“With financial firms beginning to return to profitability, further expansion geographically and greater focus on regulatory requirements (in both developed and emerging markets), we continue to envisage a positive outlook for Norkom,” Mr McGrotty said.