Norcon plc

("Norcon" or the "Company")

FINAL RESULTS

For the twelve months ended 31 December 2014

Norcon plc (LSE/AIM: NCON), the global communications network specialist, is pleased to announce audited results for the year ended 31 December 2014.  Despite a decline in annual revenues, in line with the Directors' expectations under the 3 year long-term investment strategy that commenced in 2012, the Group has diversified into new markets and continued to expand its services portfolio.

The Group's transition plan has continued to deliver a stable platform for future growth and has limited the business' exposure to single markets/customers. Furthermore it has enabled the Group's portfolio of services to widen to include key differentiators across our propositions.

In 2014 new customers and projects were added across all the Group's markets with a mix of legacy and new services. These projects are of significant strategic value, in that they open up new key accounts and also lower Norcon's dependency on certain markets/customers.

With the Group's transition plan, the Directors believe the business is now positioned on a much stronger platform to achieve future growth across all the Group's markets.

FINANCIAL HIGHLIGHTS

Trading has been consistent with the Directors' expectations for the year:

·      Revenue of US$43.5m (FY 2013: US$46.1m)

·      Operating profit of US$0.3m (FY 2013: US$0.4m)

·      Loss before tax of US$0.3m (FY 2013: loss of US$0.3m)

·      Loss after tax of US$1.5m (FY 2013: loss of US$2.0m)

·      Available cash at year-end US$7.2m of which unrestricted balance is US$6.2m

·      Pro forma loss per share on a basic basis of US$0.03 (FY 2013: loss per share of US$0.04)

OPERATIONAL HIGHLIGHTS

·      Business in North America continues to expand its customer base and market presence   

·      European business continues to improve under competitive market conditions

·      Services product portfolio continues to expand

·      Expansion of Defence services into new markets

·      Engagements secured in Asia utilising the combination of legacy and newly developed services

OUTLOOK

The early success we have seen from the deployment of some of our new solutions is encouraging.  We will continue to grow this portfolio along with our customer base and enter new markets with these proven references. 

In 2015 the Group will continue to focus on diversification into new markets and services. The Directors expect 2015 revenue to show an upward trend compared to 2014.

Commenting on the results Norcon Chairman, Trond Tostrup, said:

"Norcon now has a new corporate structure and business model allowing us to offer customers a more sophisticated product mix and a better value proposition making us more competitive in the market place.

Whilst we are not complacent about our overall financial performance in 2014, it has been highly cash generative and accordingly our balance sheet is stronger than it has been for many years with an equity ratio of 57.34%.

As a result of this we have the necessary financial resources to achieve the goals we set."

For further information, please contact:

About Norcon:

Established in 1957, Norcon (LSE/AIM: NCON) has been a trusted consultant and project manager for more than half a century to the private sector and government agencies.  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

CHAIRMAN'S STATEMENT

In 2012 our board initiated a three year plan to transition the company from its heavy reliance on one primary client to a wider and more geographically spread client base.

2014 was the final year of this plan. Norcon now has a new corporate structure and business model allowing us to offer customers a more sophisticated product mix and a better value proposition which in turn makes us more competitive in the market place.

The last decade has witnessed a tremendous growth in information technology. This is bringing diversified innovative applications and mobile broadband to over 3 billion internet users globally.

Research shows that investment in such technologies brings associated economic benefits such as increased productivity, lower costs and new commercial opportunities.  Our aim, at Norcon, is to be a player in this exciting megatrend and to use our knowledge and expertise in our sector to produce profit for our shareholders.

Whilst we are not complacent about our overall financial performance in 2014, it has been highly cash generative and accordingly our balance sheet is stronger than it has been for many years with an equity ratio of 57.34%.

As a result of this we have the necessary financial resources to achieve the goals we set, foremost of which is delivering shareholder value to our investors who have shown patience and support as our plan has been implemented.

We continue to benefit from a highly dedicated and capable team which I believe is our greatest asset.

I thank every one of my Norcon colleagues for their commitment, enthusiasm and efforts throughout the past year.

Trond Tostrup

Executive chairman

Financial Review

We are pleased to release our audited numbers for the full year 2014.

Summary

We experienced reduced revenue in 2014 but managed to maintain reasonable operating margins. Norcon continued its investment plan to further diversify in the market and had a strong net asset position of US$19.4m at the year end.

Revenue for 2014 totalled US$43.4m (FY 2013: US$46.0m). In 2014 we reduced our revenue dependency on a primary client from 46% in 2013 to 39% in 2014.  This is evidence that our diversification strategy is going to plan.

EBIT for 2014 was US$0.3m (FY 2013: US$0.4m).  

Loss after tax of US$1.5m for 2014 compared to a loss for 2013 of US$2.0m.  The underlying tax rates in the respective jurisdictions are detailed in the notes to the accounts.

Pro forma basic loss per share was US$0.03 for the full year compared to a loss per share of US$0.04 in 2013.  The weighted average number of shares in 2014 was 49,091,775, compared to, 48,800,808 in 2013 respectively.

Costs

Cost of sales totalled US$37.4m for the year compared to US$39.4m in 2013.  Our margins are in line with 2013 where we benefitted from a cost cutting program.

Other operating costs, including net, operating and administration expenses totalled US$5.8m for the year, down from US$6.3m in 2013.

Net other costs decreased to US$0.6m from US$0.7m.  

Taxation

Accrued taxes amounted to US$1.1m during 2014 (FY 2013: US$1.7m). The underlying tax rates in the countries in which we operate are detailed in the notes to the accounts. Though the Consolidated Statements show a negative margin, some highly profitable projects create taxable profits.

Foreign Exchange

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.  Foreign exchange translation gains and losses in the period are shown in the accounts, and remained at a similar level compared to last year.

Cash Flow

Cash flow continued to be positive for the year as a whole.  Our cash position for 2014 is lower compared to 2013 due to a decrease in borrowings of 2.7m.  2014 showed an increase in net cash flows from operating activities from US$0.3m in 2013 to US$4.3m.

Balance Sheet

The balance sheet of the Company is strong.

As at 31 December 2014, available cash was US$7.2m (FY 2013: US$12,0m) with unrestricted cash of US$6.2m (FY 2013: US$5.1m).

The Company remains in a net asset position, with net assets decreasing to US$19.4m in 2014 (FY 2013: US$20.9m). 

Total trade and other receivables decreased to US$26.0m compared to US$30.1m for 2013.  Trade and unbilled receivable balances decreased year on year to a total of US$17.6m from a total of US$25.8m in 2013. Work in Process (unbilled receivables) decreased to US$6.0m in 2014 compared to US$6.3m in 2013. Retentions receivable remained at US$0.5m as in 2013. 

Trade payables have decreased to US$3.3m as at year-end 2014 compared to US$9.6m in the preceding year.

In non-current liabilities, the accrual related to employees terminal benefits increased to US$8.4m from US$7.5m in 2013. Out of the total liability to employees terminal benefits, advances have been made with US$4.1m compared to US$2.5m in 2013. 

Retained earnings and other reserves totalled US$18.5m as at the end of 2014 compared to US$20.0m as at the end of the 2013.  Share capital remains at US$ 0.9m.

International Financial Reporting Standards (IFRS)

The Consolidated Financial Statements of Norcon and its branches and subsidiary companies have been audited by PKF Savvides & Co Ltd., the Company's auditor.  These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union (EU) under the historical cost convention.

Arne Dag Aanensen

Chief Financial Officer

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME 

Year ended 31 December 2014

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

31 December 2014