TIDMNCON
RNS Number : 1426Z
Norcon PLC
15 September 2015
15 September 2015
NORCON PLC
("Norcon" or the "Company")
INTERIM RESULTS
For the six month period ended 30 June 2015
Norcon plc (LSE/AIM: NCON), the global communications network
specialist, announces unaudited interim results for the six months
ended 30 June 2015 (the "Interim Period").
FINANCIAL HEADLINES:
-- Revenue of US$20.7m (H1 2014: US$20.7m)
-- Operating profit of US$3.0m (H1 2014: US$3.0m)
-- Loss before tax of US$0.2m (H1 2014: US$0.6m loss)
-- Loss after tax of US$0.6m (H1 2014: US$1.4m loss)
-- Net cash balance of US$7.3m (30 June 2014: US$5.0m)
-- Pro forma loss per share of US$0.01 (H1 2014: US$0.03 loss)
OPERATIONAL HEADLINES:
-- Continued progress with diversification into new markets and services
-- New deals secured in Middle East, USA, Europe and Asia Pacific
-- Stable development in revenues for both legacy and other markets
Commenting on the results, Norcon's Chairman, Trond Tostrup,
said:
"After completing our three year transition plan, we have now
entered a new phase where we expect to reap the fruits of the work
done during the last years. We are beginning to see an increase in
our customer base, not only in new markets, but also in our legacy
market. It will, however, still take some time before we will see a
substantial increase in turnover.
Turnover was the same as H1 2014 with slightly improved margins.
Delays in projects experienced in the first half are being resolved
and these projects are expected to contribute during the second
half".
CONTACTS:
Norcon plc
Trond Tostrup, Executive Chairman +47 901 69 369
Arne Dag Aanensen, Chief Financial Officer +357 25736830
finnCap
+44 (0) 20 7220
Corporate Finance- Stuart Andrews 0500
ABOUT NORCON:
Established in 1957, Norcon (LSE/AIM: NCON) has been a trusted
consultant and project manager for more than half a century to
governments and some of the world's largest global firms. These
organisations rely on Norcon to select, implement and maintain a
communication infrastructure that not only matches, but also
supports the critical needs of their operations. Norcon's strength
lies in its understanding of complex communication networks and
their design.
www.norconplc.com
INTERIM STATEMENT FROM EXECUTIVE CHAIRMAN, TROND TOSTRUP
Overview
We are encouraged by growth in the Middle East, the new LTE
rollout project opportunities in Asia Pacific and by new clients
and deals being signed in the USA.
We have continued to develop our product portfolio enabling us
to offer more strategic services to our new and existing clients
who are continuously looking for new initiatives that offer CAPEX
& OPEX improvements.
We continue to attract business to the Company with our expanded
service offering which strengthens our credibility in the market
and also across our expanding customer base.
Operations
Operational efficiencies are being driven from the integration
of regional activities and telecom/defence projects across the
business. This is also having a positive effect on each individual
project's profitability.
The benefit of operating across a variety of markets with a
growing portfolio of different projects supports the creation of a
range of new strategic and engineering services for our
customers.
Outlook
We remain fully committed to achieving further diversification
by geographic markets and services.
The major investments being made in new technologies and cost
saving initiatives by our clients bode well for the future.
Trond Tostrup
15 September 2015
FINANCIAL REVIEW
Summary
Turnover for the Interim Period was US$20.7m (H1 2014,
US$20.7m). We have experienced a delay in some major projects
resulting in a limited contribution to revenue in H1. These
projects are expected to have a more significant impact on H2 and
we still expect revenue for 2015 to be slightly up from 2014.
Operating profit for the Interim Period was US$3.0m (H1 2014
US$3.0m). Operating profit margin remained at the same level as for
H1 2014. We are expecting improved margins for second half of 2015
and are positive for our prospects towards 2016.
The loss before tax was US$0.2m for the Interim Period compared
to the 2014 interim loss US$ 0.8m, and the loss after tax US$0.6m
down from US$1.4m in 2014
Accrued taxes amounted to US$0.4m given the applicable taxation
in the profitable branches. Current taxes are calculated based on
best conservative estimates.
Pro forma loss per share of US$0.01 for the Interim Period
compared to US$0.03 as for H1 2014 and general operating and
administrative expenses were US$3.2m, the same as the previous
year.
Costs
Cost of Sales was US$17.7m (H1 2014: US$17.7m).
Cash Flow
Cash flow from operations remains positive.
Statement of Financial Position
At 30 June 2015 the Company had net cash of US$7.3m, compared to
US$5.0m at 30 June 2014.
Accounts receivable and prepayment balances (including work in
progress) decreased from US$33.0m at 30 June 2014 to US$22.0m at 30
June 2015 due to the receipt of amounts due from customers of the
Group's biggest branch in the Middle East.
Trade and other accounts payable decreased to US$0.4m from
US$9.9m at 30 June 2014.
The provision for employees' terminal (end of service severance)
benefits increased to US$9.0m at 30 June 2015 from US$7.7 at 30
June 2014.
A Consolidated Statement of Changes to Equity is provided in the
note to this announcement.
Taxation
Accrued taxes increased to US$1.8m, compared to US$1.6m at 30
June 2014.
Foreign Exchange
For H1 2015 the effects of foreign exchange movements for the
group has been positive with the strengthening of the USD which is
the group's primary trading currency. The Company is continuing its
policy of denominating revenue and expenses either in the local
currency if pegged to the US dollar or in US dollars to the extent
feasible.
Arne Dag Aanensen
Chief Financial Officer
15 September 2015
FINANCIAL INFORMATION ON NORCON PLC
UNAUDITED INTERIM RESULTS FOR SIX MONTHS ENDED 30 JUNE 2015
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
6 Months 6 Months
to 30 June to 30 June
2015 2014
US$'000 US$'000
Turnover 20,668 20,706
Cost of sales (17,662) (17,714)
---------- ----------
Gross profit 3,006 2,992
Operating and administrative
expenses (3,236) (3,205)
---------- ----------
Loss from operations (230) (213)
Depreciation (19) (28)
Net Finance income/(expense) 27 (586)
---------- ----------
Loss before tax (222) (827)
Minority provision (30) (-)
Income tax expense (362) (614)
---------- ----------
Loss for half year (614) (1,441)
US$ US$
Pro forma loss per share (note
) (0.01) (0.03)
Consolidated STATEMENT OF FINANCIAL POSITION
As At 30 As At 30
June 2015 June 2014
US$'000 US$'000
ASSETS
Non-current assets
Property, plant and equipment 85 120
Investments 64 88
Investment in associate 555 555
---------- ----------
704 763
---------- ----------
Current assets
Work in progress 8,085 12,363
Trade and other receivables 13,882 20,471
Cash and cash equivalents 9,865 7,566
---------- ----------
31,832 40,400
---------- ----------
Total assets 32,536 41,163
Consolidated STATEMENT OF FINANCIAL POSITION (Continued)
As At 30 As At 30
June 2015 June 2014
US$'000 US$'000
EQUITY AND LIABILITIES
Capital and reserves
Share capital 946 946
Legal/LTIP reserve 924 924
Retained earnings* 16,840 17,578
---------- ----------
Equity attributable to the
equity holders 18,710 19,448
Minority interest 17 4
---------- ----------
18,727 19,452
Non-current liabilities
Provision for employees' terminal
benefits 8,974 7,722
---------- ----------
Current liabilities
Trade and other payables 387 9,882
Income tax payable 1,840 1.571
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Short-term borrowings 2,608 2,536
---------- ----------
4,835 13,989
---------- ----------
Total equity and liabilities 32,536 41,163
*see Consolidated Statement of Changes in Equity for more
detail.
Consolidated cash flow statement
6 Months 6 Months
to 30 June to 30 June
2015 2014
US$'000 US$'000
Cash flows from operating activities
Loss for the year before taxation (222) (827)
Adjustments for:
Depreciation 19 28
Interest Income (4) (25)
Interest Expense 38 238
Movement in provision for employees' terminal
benefits 579 184
Movement in foreign exchange/other reserves (58) (1)
-------- ----------
Cash flows from/(used in) operations before
working capital changes 352 (403)
Decrease/(Increase) in Trade and Other Receivables/Work
in Progress 3,945 (2,816)
Decrease in Short Term Deposits - 6,221
(Decrease)/Increase in trade and other payables (2,871) 314
-------- ----------
Cash flows from operations 1,426 3,316
Income tax paid (309) (109)
-------- ----------
Net cash flows from operating activities 1,117 3,207
-------- ----------
Cash flows from investing activities
Payments for purchase of property, plant
and Equipment (10) (17)
Proceeds from Issue of New Shares - 9
Interest Income 4 25
Proceeds from available for sale investments 24 -
-------- ----------
Net cash flows from investing activities 18 17
-------- ----------
Cash flows from financing activities
Net proceeds/(Repayments) from borrowing 2,303 (1,213)
Interest Expense (38) (238)
-------- ----------
Net cash flows from/(used in) financing
activities 2,265 (1,452)
-------- ----------
Consolidated cash flow statement (Continued)
6 Months 6 Months
to 30 June to 30 June
2015 2014
US$'000 US$'000
Net increase in cash and cash equivalents 3,400 1,772
Overdraft facility 233 -
Cash and cash equivalents at the start of
the period 6,232 5,794
------ --------
Cash and cash equivalents at the end of
the period 9,864 7,566
Consolidated statement of changes in equity
Share Retained Other reserves Total Minority Total equity
Capital earnings interest
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
As at 31
December
2014 946 3,712 14,750 19,408 (13) 19,395
Net loss
for half
year - (614) - (614) 30 (584)
Exchange
difference
on translation - (50) (34) (84) (84)
-------- ---------- ---------- ---------- -------- --------
As at 30
June 2015 946 3,048 14,716 18,710 17 18,727
NOTES TO THE FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT accounting policies
The financial information is based on the consolidated financial
statements of the Group which have been prepared under the
historical cost convention and in accordance with International
Financial Reporting Standards. The Group for the 2015 half year
results was composed of those branches and entities (including
Norconsult Telematics, Ltd.) under Norcon plc, the entity created
on 2 June 2008 for the purpose of facilitating the listing on AIM
on 28 July 2008. Norcon plc owns 100% of Norconsult Telematics,
Ltd.
The principal activities of the Group, which are unchanged from
last year, and are the provision of project management and
outsourcing services as well as consulting engineers. The Group
comprises of the holding company Norcon PLC, registered in the Isle
of Man, the subsidiary company Norconsult Telematics Limited,
registered in Cyprus (which includes branches/operations in Saudi
Arabia, U.A.E. Abu Dhabi, Kuwait, Indonesia and Malaysia) and its
subsidiary companies Norconsult Telematics and Company LLC
registered in the Sultanate of Oman, Norconsult Telematics AS
registered in Norway, the group of Norcon Global Management &
Consulting Ltd registered in Cyprus and its subsidiary undertakings
Norcon Global Management & Consulting Inc and Norcon Global
Management and Consulting LLC registered in the state of Delaware,
USA, Norconsult Telematics Integrated Solution Co. Ltd registered
in the Republic of Sudan (dormant), Norconsult Telematics Ltd
registered in Southern Sudan (dormant), Norconsult Telematics Ltd,
registered in the United Kingdom and the associate company
Norconsult Telematics (Saudi) Ltd registered in the Kingdom of
Saudi Arabia (under closure).
In 2015 the Group has operated in the following countries: Saudi
Arabia, Indonesia, Kuwait, UAE, Oman, Thailand, Qatar, Malaysia,
United Kingdom and the United States of America.
The principal accounting policies that are followed by the Group
are shown below for a better understanding and evaluation of the
financial statements.
a) Basis of preparation
The Interim Consolidated Financial Statements of Norcon and its
branches and subsidiary companies ("Norcon Group") are prepared in
conformity with all IFRS Standards (International Financial
Reporting Standards, formerly International Accounting Standards)
and Interpretations of the IASB (International Accounting Standards
Board).
Significant inter-branch balances are eliminated. The financial
statements are prepared in United States Dollars.
b) Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company, its branches, subsidiaries and
associates.
For this purpose a subsidiary is an entity in which the
controlling interest is more than 50% of the voting power and where
the company has the power to govern the financial and operating
policies so as to obtain benefits from its activities.
An associate is an entity over which the Group has significant
influence and that is neither a subsidiary nor an interest in a
joint venture. Significant influence is the power to participate in
the financial and operating policy decisions of the investee but
without control or joint control over those policies.
The results and assets and liabilities of associates are
incorporated in these financial statements using the equity method
of accounting, except when the investment is classified as held for
sale.
The results or subsidiaries acquired or disposed of during the
year are included in the consolidated income statement from the
effective date of acquisition or up to the effective date of
disposal, as appropriate.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting policies into
line with those used by other members of the Group.
All intra-group transactions, balances, income and expenses are
eliminated on consolidation.
Minority interests in the net assets (excluding goodwill) of
consolidated subsidiaries are identified separately from the
Group's equity therein. Minority interests consist of the amount of
those interests at the date of the original business combination
and the minority's interest in the subsidiary's equity are
allocated against the interests of the Group except to the extent
that the minority has a binding obligation and is able to make an
additional investment to cover the losses.
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Goodwill arising on the acquisition of the subsidiaries and
associate is recognised as an asset. The excess of the acquirer's
interest in the net fair value of the acquiree's identifiable
assets, liabilities and contingent liabilities over cost is
recognised in the income statement in the year of acquisition. The
Group annually reviews goodwill arising on the acquisition of
subsidiaries for any impairment. If impairment occurs, this is
transferred to the income statement.
c) Significant accounting estimates and assumptions
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates and
judgements. It also requires management to exercise judgement in
the process of applying the Company's accounting policies.
Estimates and judgements are continually evaluated and are based on
historical experience and other factors, including expectations of
future events that are believed to be reasonable under the
circumstances. Management anticipates that any estimates and
judgements made do not have a material effect on the results.
d) Foreign exchange
The individual financial statements of each Group entity are
presented in the currency of the primary economic environment in
which the entity operates (its functional currency). For the
purpose of the consolidated financial statements, the results and
financial position of each Group entity are expressed in United
States Dollars, which is the functional and presentational currency
of the Group.
In preparing the financial statements of the individual
entities, transactions in currencies other than the entity's
functional currency (foreign currencies) are recorded at the rates
of exchange prevailing at the dates of the transactions. At each
balance sheet date, monetary items denominated in foreign
currencies are retranslated at the rates prevailing at the balance
sheet date. Non-monetary items carried at fair value that are
denominated in foreign currencies are retranslated at the rates
prevailing at the date when the fair value was determined.
Non-monetary items that are measured in terms of historical cost in
a foreign currency are not retranslated.
Exchange differences are recognised in the income statement in
the period in which they arise.
For the purpose of presenting consolidated financial statements,
the assets and liabilities of the Group's foreign operations are
expressed in United States dollars using exchange rates prevailing
at the statement of financial position date. Income and expense
items are translated at the average exchange rates for the period,
unless exchange rates fluctuated significantly during that period,
in which case the exchange rates at the dates of the transactions
are used. Exchange differences arising, if any, are classified as
equity and recognised in the Group's foreign currency translation
reserve. Such exchange differences are recognised in the income
statement in the period in which the foreign operation is disposed
of.
e) Revenue recognition
Revenue from a contract to provide services is recognised by
reference to the progress of completion of the contract based on
the provisions of each contract.
Revenue from time and material contracts is recognised at the
contractual rates as labour hours are delivered and direct expenses
are incurred.
f) Property, plant and equipment
Property, plant and equipment are stated at historical cost less
accumulated depreciation and any accumulated impairment losses.
Depreciation is calculated on the straight-line method so as to
write off the cost of each asset to its residual value over its
estimated useful life.
The estimated useful lives of the assets are as follows:
Months
Furniture, fittings and equipment 15 - 33%
Computer hardware and software 15 - 33%
Motor vehicle 20%
The gain or loss arising on the disposal or retirement of an
item of property, plant and equipment is determined as the
difference between the sales proceeds and the carrying amount of
the asset and is recognised in the statement of comprehensive
income
g) Taxation
Tax is calculated as follows:
The current and deferred taxation are recognized as income or
expense for the year.
The provision for income tax and special defence contribution
for the year is calculated in accordance with the Income Tax Laws.
Deferred taxation is calculated on the basis of the rates ruling at
the balance sheet date.
The debit balances of the deferred taxation arriving from
deductible temporary differences are recognised to the extent of
the anticipated taxable profits.
h) Impairment of tangible and intangible assets excluding goodwill
At each reporting date, the Group reviews the carrying amounts
of its tangible and intangible assets to determine whether there is
any indication that those assets have suffered an impairment loss.
If any such indication exists, the recoverable amount of the assets
is estimated in order to determine the extent of the impairment
loss (if any). Where it is not possible to estimate the recoverable
amount of an individual asset, the Group estimates the recoverable
amount of the cash generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset.
If the recoverable amount of an asset (or cash-generating unit)
is estimated to be less than its carrying amount, the carrying
amount of the asset (or cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised immediately in
the income statement, unless the relevant asset is carried at a
revalued amount, in which case the impairment loss is treated as a
revaluation decrease.
Where an impairment loss subsequently reverses the carrying
amount of the asset (cash generating unit) is increased to the
revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised
for the asset (cash generating unit) in prior years. A reversal of
an impairment loss is recognised immediately in profit or loss
unless the relevant asset is carried at a revalued amount, in which
case the reversal of the impairment is treated as a revaluation
increase
i) Financial assets and trade receivables
Trade receivables, loans, and other receivables that have fixed
or determinable payments that are not quoted in an active market
are classified as loans and receivables. Loans and receivables are
measured at cost, less any impairment. Interest income is
recognised by applying the effective interest rate, except for
short-term receivables when the recognition of interest would be
immaterial.
j) Financial liabilities and equity instruments issued by the Group
Classification as debt or equity
Debt and equity instruments are classified as either financial
liabilities or as equity in accordance with the substance of the
contractual arrangement.
Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the Company are recorded
at the proceeds received, net of direct issue costs.
Financial liabilities
Financial liabilities are classified as either financial
liabilities 'at fair value through profit or loss' or 'other
financial liabilities'. The Group does not have any financial
liabilities 'at fair value through profit or loss'.
Other financial liabilities, including borrowings, are initially
measured at fair value, net of transaction costs.
Other financial liabilities are subsequently measured at cost
with interest expense recognised on an effective yield basis.
The Group derecognises financial liabilities when the obligation
under the liability is discharged, cancelled or expires.
k) Provisions
Provisions are recognised when the Group has a present
obligation as a result of a past event and it is probable that the
Group will be required to settle that obligation. Provisions are
measured at the directors' best estimate of the expenditure
required to settle the obligation at the statement of financial
position date.
When some or all of the economic benefits required to settle a
provision are expected to be recovered from a third party, the
receivable is recognised as an asset if it is virtually certain
that reimbursement will be received and the amount of the
receivable can be measured reliably.
l) Employees' terminal benefits
Provision is made for amounts payable under applicable local
laws and regulations and employment contracts applicable to
employees' accumulated period of service at the statement of
financial position date. The provision at the year-end is
calculated by reference to the benefit accrued at that date.
m) Work in progress
Revenue from a contract to provide services is recognised by
reference to the progress of completion of the contract based on
the provisions of each contract.
Revenue from time and material contracts is recognised at the
contractual rates as labour hours are delivered and direct expenses
are incurred and is based on the value of work performed as well as
on time spent on each contract.
n) Contingent liabilities
Contingent liabilities are disclosed if the confirmation of the
expense or loss is considered possible from future events.
o) Segmental reporting
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