TIDMNCON
RNS Number : 8608R
Norcon PLC
17 September 2014
17 September 2014
NORCON PLC
("Norcon" or the "Company")
INTERIM RESULTS
For the six month period ended 30 June 2014
Norcon plc (LSE/AIM: NCON), the global communications network
specialist, announces unaudited interim results for the six months
ended 30 June 2014 (the "Interim Period").
FINANCIAL HEADLINES:
-- Revenue of US$20.7m (H1 2013: US$22.9m)
-- Gross profit of US$3.0m (H1 2013: US$3.1m)
-- EBITDA loss of US$0.6 (H1 2013: US$0.3 loss)
-- Loss after tax of US$1.4m (H1 2013: US$1.4m loss)
-- Net cash balance of US$5.0m (30 June 2013: US$1.5m)
-- Pro forma loss per share of US$0.03 (H1 2013: US$0.03 loss)
OPERATIONAL HEADLINES:
-- Continued progress with diversification into new markets and services
-- New deals secured in USA, Europe, Middle East and Asia Pacific
-- Continued growth in revenues outside legacy market
- now account for close to 60% of total H1 revenues compared to
50% in H1 2013 and 30% in H1 2012.
Commenting on the results, Norcon's Chairman, Trond Tostrup,
said:
"We continue to see the benefit from our strategy of
diversification into wider markets with a further increase in our
customer base, and are confident our three year plan is on
track.
Although turnover is slightly down on 2013 our margins have
increased and our dependence on our legacy market continues to
reduce as planned. Delays in projects experienced in the first half
have now been resolved and these projects are now up and running
and expected to contribute significantly to 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
Charlotte Stranner, 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
The Interim Period has seen a continuance of our strategy of
diversification into wider geographical markets and lower
dependence on our legacy market.
We are encouraged by growth in the USA and by new clients and
deals being signed in the Asia Pacific area.
We have continued to develop our product offering enabling us to
offer more strategic services to our clients.
Operations
Operational efficiencies are being derived from the integration
of regional activities and telecom/defence projects across the
business. This is also having a positive effect on individual
projects' profitability.
We continue to attract key business individuals to the Company
which strengthens our credibility in the market and also across our
expanding customer base.
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 are starting to see the benefits expected from our investment
into and implementation of a diversification plan and remain fully
committed to continue executing on this.
The major investments being made in new technologies and cost
saving initiatives across our markets of operations bode well for
the future.
Trond Tostrup
17 September 2014
FINANCIAL REVIEW
Summary
Turnover for the Company during the Interim Period was US$20.7m
in H1 2014, compared to US$22.9m in H1 2013. This reduction is
mainly due to delayed start in some major projects resulting in
little contribution to the revenue in H1. These projects are now up
and running with significant impact on H2 expected. For the full
year 2014 we still expect revenue to be at the same level as
2013.
Gross profit stood at US$3.0m for the Interim Period compared to
US$3.1m in H1 2013. Gross margin has increased from 13.6% in the
prior year to 14.4% as a result of the restructuring of our cost
base and the diversification into new markets and services. As
announced with the 2013 annual statements, the impact on overall
performance will not be significant before 2015.
Lossbefore tax was US$0.8m for the Interim Period compared to
the 2013 interim loss US$ 0.6m, and the loss after tax remains the
same for both years at US$1.4m. Income tax in Saudi has been
charged with tax in connection with a tax examination carried out
for the years 2006 - 2012 by local tax authorities. The total
charge is US$0.54 of which US$0.41 relates to tax, and the
remainder is interest. An objection for the claim has been
raised.
Accrued taxes amounted to US$0.6m given the applicable taxation
in the profitable branches. Current taxes are calculated based on
best conservative estimates. Available tax credits in Saudi Arabia
have not been taken into account at this stage.
Pro forma loss per share of US$0.03 for the Interim Period
compares to the same as for H1 2013, using the same weighted
average share base.
Costs
Cost of Sales totalled US$17.7m for the period compared to a
2013 interim figure of US$19.8m, demonstrating progress with our
cost saving initiatives.
General operating and administrative expenses totalled US$3.2m
same as for H1 2013.
Cash Flow
Cash flow from operations is positive for the period as a result
of the release of deposits held against guarantees towards the tax
authorities in Saudi Arabia.
Statement of Financial Position
At 30 June 2014 the Company had net cash of US$5.0m, compared to
US$1.5m half year 2013. The increase in net cash was primarily due
to the release of deposits held against guarantees towards the
Saudi Arabian tax authority, as mentioned above.
Accounts receivable and prepayment balances (including work in
progress) decreased from US$37.0m at half year in 2013 to US$33.0m
as at 30 June 2014 due to amounts having been received from
customers of the Group's biggest branch in the Middle East.
Included in trade receivables are amounts due from governmental and
quasi governmental institutions in Saudi Arabia of approximately
US$9.81m which are older than 1 year. No provision has been made as
the Company still believes the full amounts will be collected.
Trade and other accounts payable increased to US$9.9m from
US$8.7m at half year 2013.
The provision for employees' terminal (end of service severance)
benefits decreased to US$7.7m at 30 June 2014 from US$8.5 at 30
June 2013.
A Consolidated Statement of Changes to Equity is provided in the
unaudited tables appended to this announcement.
Taxation
Accrued taxes increased to US$1.6m, compared to US$0.6m 30 June
2013.
Foreign Exchange
Foreign exchange losses in the period were within expectations
The Company is continuing its policy of denominating revenue and
expenses either in the local currency if pegged to the US dollar or
in US dollars to the extent feasible.
Arne Dag Aanensen
Chief Financial Officer
17 September 2014
FINANCIAL INFORMATION ON NORCON PLC
UNAUDITED INTERIM RESULTS FOR SIX MONTHS ENDED 30 JUNE 2014
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
6 Months 6 Months
to 30 June to 30 June
2014 2013
US$'000 US$'000
Turnover 20,706 22,955
Cost of sales (17,714) (19,823)
---------- ----------
Gross profit 2,992 3,132
Operating and administrative
expenses (3,205) (3,236)
---------- ----------
Loss from operations (213) (104)
Depreciation (28) (31)
Net Finance expense (586) (446)
---------- ----------
Loss before tax (827) (581)
Minority provision (-)
Income tax expense (614) (793)
---------- ----------
Loss for half year (1,441) (1,374)
US$ US$
Pro forma loss per share (note
) (0.03) (0.03)
Consolidated STATEMENT OF FINANCIAL POSITION
As At 30 As At 30
June 2014 June 2013
US$'000 US$'000
ASSETS
Non-current assets
Property, plant and equipment 120 156
Investments 88 88
Investment in associate 555 561
---------- ----------
763 805
---------- ----------
Current assets
Work in progress 12,363 4,771
Trade and other receivables 20,471 32,207
Short term deposits 0 6,862
Cash and cash equivalents 7,566 2,110
---------- ----------
40,400 45,950
---------- ----------
Total assets 41,163 46,755
Consolidated Balance sheet(Continued)
As At 30 As At 30
June 2014 June 2013
US$'000 US$'000
EQUITY AND LIABILITIES
Capital and reserves
Share capital 946 937
Legal/LTIP reserve 924 800
Retained earnings* 17,578 19,692
---------- ----------
Equity attributable to the
equity holders 19,448 21,429
Minority interest 4 9
---------- ----------
19,452 21,438
Non-current liabilities
Provision for employees' terminal
benefits 7,722 8,469
---------- ----------
Current liabilities
Trade and other payables 9,882 8,712
Income tax payable 1,571 617
Short-term borrowings 2,536 7,519
---------- ----------
13,989 16,848
---------- ----------
Total equity and liabilities 41,163 46,755
*see Consolidated Statement of Changes in Equity for more
detail.
Consolidated cash flow statement
6 Months 6 Months
to 30 June to 30 June
2014 2013
US$'000 US$'000
Cash flows from operating activities
(Loss)/Profit for the year before taxation (827) (581)
Adjustments for:
Depreciation 28 31
Interest Income (25)
Interest Expense 238 205
Movement in provision for employees' terminal
benefits 184 86
Movement in foreign exchange/other reserves (1) 13
---------- ----------
Cash flows used in operations before working
capital changes (403) (246)
Increase in Trade and Other Receivables/Work
in Progress (2,816) (7,019)
Decrease in Short Term Deposits 6,221 0
Increase in trade and other payables 314 989
---------- ----------
Cash generated from operations 3,316 (6,276)
Income tax paid and other items (109) (330)
---------- ----------
Net cash flows from/(used in) operating
activities 3,207 (6,606)
---------- ----------
Cash flows from investing activities
Payments for purchase of property, plant
and Equipment (17) (16)
Proceeds from Issue of New Shares 9 -
Interest Income 25
Proceeds from Disposal of property, plant
and equipment - 1
---------- ----------
Net cash flows from/(used in) investing
activities 17 (15)
---------- ----------
Cash flows from financing activities
(Repayments) /Net proceeds from borrowing (1,213) 6,605
Net interest paid (238) (205)
-------- ----------
Net cash flows (used in)/ from financing
activities (1,452) 6,400
-------- ----------
Consolidated cash flow statement (Continued)
6 Months 6 Months
to 30 June to 30 June
2014 2013
US$'000 US$'000
Net increase/(decrease) in cash and cash
equivalents 1,772 ( 222)
Overdraft facility - 915
Cash and cash equivalents at the start of
the period 5,794 8,279
-------- --------
Cash and cash equivalents at the end of
the period 7,566 8,972
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
2013 937 5,096 14,854 20,887 7 20,894
Net loss
for half
year - (1,441) - (1,441) (3) (1,444)
Issue of
New Ltip
Shares 9 - - 9 - 9
Other activity - - (7) (7) - (7)
---------- ---------- ---------- ---------- ---------- ----------
As at 30
June 2014 946 3,655 14,847 19448 4 19,452
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 2014 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 2014 the Group has operated in the following countries: Saudi
Arabia, Indonesia, Kuwait, UAE Abu Dhabi, Oman, Malaysia, United
Kingdom, Thailand 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.
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 balance sheet 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 it's
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
The Group does not have any financial assets other than 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
Contract work in progress is calculated at cost, plus
attributable profit, less the amount received or receivable as
progress payments.
n) Contingent liabilities
Contingent liabilities are disclosed if the confirmation of the
expense or loss is considered possible from future events.
o) Segmental reporting
A segment is a component of the Group distinguishable by
economic activity (business segment) or by its geographical
location (geographical segment), which is subject to risks and
rewards that are different from those of other segments.
p) Events after the reporting date
Current assets and liabilities of the company are adjusted to
reflect any post balance sheet events and include additional
information for amounts calculated on the basis ruling at the
statement of financial position date.
q) Turnover
Value of work executed represents engineering consultancy work
executed in the company's operating markets, stated at invoiced
value net of discounts.
r) Earnings/Loss per share
The following reflects the income and share data used in
calculating basic and diluted earnings per share.
Period End:
30 June 30 June
2014 2013
Loss for the period (1,441) (1,374)
Weighted average number of
ordinary shares used in the
Calculation of EPS (No.) 48,814,587 48,800,808
US$ US$
Basic and diluted loss per
share (EPS) (0.03) (0.03)
There is no dilution applicable to the 2014 interim results. The
fully diluted loss per share as of 30 June 2014 was likewise
US$0.03.
s) Investment in associates/Investments
The investment in associate relates to the Group's 50% interest
in NT Saudi, Ltd., a dormant entity. The investment related to
amounts in the Kuwaiti investment fund invested as per the Kuwaiti
offset requirement.
t) Short-term loan
The short term loan is secured over the assignment of certain
trade receivable invoices. It carries interest at commercial rates
and is repayable within one year.
u) Contingent liabilities
The bankers of the Saudi Arabia branch have given bank
guarantees limited to the equivalent of US$ 226,058 (2013: US$
6,540,485) in the normal course of the branch's business.
Letters of guarantee (Performance Bond) for the Group's
operations in UAE Abu Dhabi amounting to US$2,602,200 were in issue
as at 30 June 2014 (2013: US$2,602,200). An amount of US$650,550
(2013: US$650,550 which represents 25% of the performance bond) is
blocked from the branch's bank balances as security for the issue
of this performance bond with the remaining balance being secured
by the issue of a corporate guarantee from the branch's ultimate
holding company Norcon Plc. Also a letter of guarantee for
AED50,000 for the registration of the Norconsult Abu Dhabi branch
was in issue as at 30 June 2014 (2013: AED50,000).
The Company has provided a corporate guarantee of US$ 750,000 to
its subsidiary Norconsult Telematics Limited in favour of Societe
Generale Bank-Cyprus as a security among others for credit
facilities provided by the bank to the subsidiary.
v) Share Based Payment
The company has adopted a Long Term Incentive Plan (LTIP) for
eligible employees and directors. The initial plan provided for
2,274,999 shares granted to those employees and directors over a
three year period based on the company's performance year by year.
These shares represented 5.25% of the Company's issued share
capital.
Vesting conditions were met for the years 2008 and 2009 and
758,833 new shares were issued in each year.
In 2013 the Company revised the LTIP plan for two more years,
2013 and 2014.
Performance targets based on share price and financial targets
were set for each year towards eligible employees.
In April 2014 the Remuneration Committee confirmed that vesting
conditions for certain employees have been met based on the results
of the financial year end 31 December 2013 and 498,800 new shares
were issued in June 2014.
w) Financial instruments and risk management
Financial instruments consist of financial assets and financial
liabilities. Financial assets and financial liabilities are
recognised on the Group's statement of financial position when the
Group becomes a party to the contractual provisions of the
instrument.
Financial assets of the Group include investments, cash and cash
equivalents, deposits and receivables.
Financial liabilities of the Group include payables, bank
overdraft and other creditors and accrued liabilities.
The risks involved with financial instruments and the Group's
approach to controlling such risks are explained below:
Capital risk management
The Group manages its capital to ensure that entities in the
Group will be able to continue as a going concern while maximising
the return to stakeholders through the optimisation of the debt and
equity balance.
The capital structure of the Group consists of debt, which
includes borrowings, cash and cash equivalents and equity
attributable to equity holders of the parent, comprising issued
capital, reserves and retained earnings as disclosed the statement
of changes in equity.
Currency risk
Currency risk is the risk that the value of a financial
instrument will fluctuate due to changes in foreign exchange rates.
The Group's functional currency is the United States Dollar. The
Group does not have significant exposure in other currencies, other
than those recognised and disclosed in the Financial Statements.
The exchange rate for the majority of the receivables is fixed
(i.e. Saudi Arabia) or denominated in United States Dollars.
Market risk
Market risk is the risk that the value of a financial instrument
will fluctuate as a result of changes in market conditions. The
Group is exposed to market risk with respect to its investments and
receivables.
The Group limits its market risk by maintaining a conservative
investment portfolio and continuously monitoring the related
factors which affect their valuation.
Interest rate risk
Interest rate risk is the risk that the value of a financial
instrument will fluctuate due to changes in market interest
rates.
The Group has time deposits that are subject to interest rate
risk. Interest rate risk to the Group is the risk of changes in
market interest rates reducing the overall return on its interest
bearing time deposits. The Group limits interest rate risk by
following up changes in interest rates in the currencies in which
its time deposits are denominated.
Credit risk
Credit risk is the risk that one party to a financial instrument
will fail to discharge an obligation and cause the other party to
incur a financial loss. The Group employs certain policies and
procedures in order to maintain credit risk exposures within
reasonable limits.
The Group monitors receivables on an on-going basis and
continuously follows up outstanding balances for collection.
The credit risk on liquid funds is limited, as the counter
parties are well known banks, with high credit rating by
international credit rating agencies.
The maximum exposure to credit risk for the Group is represented
by the carrying amount of each financial asset as disclosed in the
financial statements.
Liquidity risk
Liquidity risk is the risk that an enterprise will encounter
difficulty in raising funds to meet commitments associated with
financial liabilities. Liquidity requirements are monitored on a
regular basis and management is confident that sufficient funds are
available to meet any commitments as they may arise.
x) Fair value
Fair value is the amount for which an asset could be exchanged
or a liability settled between knowledgeable, willing parties in an
arm's length transaction.
The fair value of assets and liabilities, approximate their
carrying values at the balance sheet date, assuming the company
will continue as a going concern without any intention or need to
liquidate, undertake transactions on adverse terms or materially
discontinue its operations.
y) A copy of this announcement is available from the Company's website www.norconplc.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR QQLFFZKFEBBB
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