CONSOLIDATED STATEMENT OF CASH FLOWS

Year ended 31 December 2015

Selected notes to the accounts

1. Incorporation and principal activities

Country of incorporation

The Company NORCON PLC (the ''Company'') was incorporated in the Isle of Man on 2 June 2008, as a company limited by shares under the Isle of Man companies act 2006.  On the 28 July 2008, the company became public and its shares were admitted to trading on the AIM market of the London Stock Exchange.  Its registered office is at Fort Anne, Douglas, IM1 5PD, Isle of Man.

Principal activities

The principal activities of the Group, which are unchanged from last year, 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 UK registered in the United Kingdom and the associate company Norconsult Telematics (Saudi) Ltd registered in the Kingdom of Saudi Arabia(under liquidation).

In 2015 the Group has operated in the following countries: Saudi Arabia, Indonesia, Kuwait, UAE Abu Dhabi, Philippines, Myanmar, Oman, Malaysia, Qatar, United Kingdom, Thailand and the United States of America.

2. Accounting policies

The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all years presented in these consolidated financial statements unless otherwise stated.

Going Concern Basis

From the liquidity perspective, based on management analysis and cash flow forecasts, the Group's management is confident that the Group has adequate access to liquidity sources for the carrying years (exceeding beyond 12 months) and that no going concern issues are seen, as of the date of approval of these financial statements.

Basis of preparation

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union (EU). The consolidated financial statements have been prepared under the historical cost convention.

The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates and requires Management to exercise its judgment in the process of applying the Group's accounting policies. It also requires the use of assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Although these estimates are based on Management's best knowledge of current events and actions, actual results may ultimately differ from those estimates.

Adoption of new and revised IFRSs 

During the current period the Group adopted all the new and revised IFRSs and International Accounting Standards (IAS), which are relevant to its operations and are effective for accounting periods beginning on 1 January 2015.  This adoption did not have a material effect on the accounting policies of the Group.

At the date of authorization of these financial statements some Standards were in issue but not yet effective. The Board of Directors expects that the adoption of these Standards in future periods will not have a material effect on the consolidated financial statements of the Group.

Comparatives

Where necessary, comparative figures have been adjusted to conform to changes in presentation in the current year.

3. Segmental analysis

The consolidated entity operates in one business segment (telecommunications, IT and defence systems consulting) for primary reporting and four geographical segments for secondary reporting being as follows: United States of America, Europe, Middle East and Asia.

4. Tax

The tax on the Group's results before tax differs from the theoretical amount that would arise using the applicable tax rates as follows:

The corporation tax rate is 12.5%.   The Board of Directors has decided to register the company as a Cyprus tax resident, as it is deemed that the management and control of the company is exercised in Cyprus.  The tax computation has therefore been prepared under Cyprus tax law.

Under certain conditions interest income may be subject to defence contribution at the rate of 30%. In such cases this interest will be exempt from corporation tax. In certain cases, dividends received from abroad may be subject to defence contribution at the rate of 20% for the tax years 2012 and 2013 and 17% for 2014 and thereafter

Income tax on the Saudi Arabia branches have been provided for on the estimated taxable profit at 20% (2014: 20%).  Income tax returns have been filed with the Department of Zakat and Income tax (the DZIT) up to 2014.The income taxes due have been settled accordingly. Income tax assessments have been agreed with the DZIT for all years up to 2012.The assessment for the year 2013 and 2014 have not yet been raised by the DZIT, yet.

Income tax on the Kuwait branch has been provided for on the estimated taxable profit at 15% (2014: 15%).

Income tax on the SE Asia Operations branch has been provided for on the estimated taxable profit at 25% plus 20% on the profit after tax ‑ repatriation of profits (2014: 25% plus 20% on the profit after tax ‑ repatriation of profits).

Income tax of the Malaysia branch has been provided for on the estimated taxable profit at 25% (2014:25%).

The subsidiary company in Norway is subject to 27% tax of its income (2014: 27%).

The subsidiary company in Oman is subject to income tax at the rate of 12% on taxable income in excess of RO30.000. 

The subsidiary company in United Kingdom is subject to an average rate of 20.25% (2014: 21.49%) income tax on its taxable income.

5. Loss per share attributable to equity holders of the parent

6. Dividends

The Board of Directors does not recommend the payment of a dividend for the year 2015.

Dividends are subject to a deduction of special contribution for defence at 20% for the tax years 2012 and 2013 and 17% for 2014 and thereafter for individual shareholders that are resident in Cyprus. Dividends payable to non‑residents of Cyprus are not subject to such a deduction.

7.  Trade and other receivables

As at 31 December, the ageing of trade receivables is as follows:

Of the Unbilled receivables as at 31^st December 2015, the amount of US$6.101.370 has been invoiced and US$ 1.058.458 has been settled as of the date of the statements.

The fair values of trade and other receivables due within one year approximate to their carrying amounts as presented above.

8. Trade and other payables

The fair values of trade and other payables due within one year approximate to their carrying amounts as presented above.

9. Contingent liabilities

The bankers of the Saudi Arabia branch have given bank guarantees to the equivalent of US$ 436.106 (2014: US$nil) in the normal course of the branch's business.

Letters of guarantee (Performance Bonds) for the Group's operations in UAE Abu Dhabi amounting to US$2.602.200 (2014:US$2.602.200) were in issue as at 31st December 2015.  An amount of US$650.550 (2014: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.  In addition, a letter of guarantee for AED50.000 for the registration of the Norconsult Abu Dhabi branch was in issue as at 31st December 2015 (2014:AED50.000).

An amount of US$ 10.052 (RO3.860) is blocked as guarantee for a tender bond given by the company's subsidiary Norconsult Telematics and company LLC. Tender bond expired in 2016 and funds blocked for the guarantee have been released.

The company has provided a corporate guarantee of US$750.000 to its subsidiary company Norconsult Telematics Limited in favour of Societe Generale Bank‑ Cyprus Limited as a security among others for credit facilities provided by the bank to the subsidiary.

10. Events after the reporting period

On 17 February 2016, the company Norconsult Telematics Holding Ltd and Mr. Trond Tostrup executive chairman purchased 1.000.000 and 140.000 ordinary shares of 1 pence each respectively in Norcon Plc. Currently, Norconsult Telematics Holding Ltd holds 55.11% while Mr. Trond Tostrup holds 1.04% of the company's issued share capital and voting rights, respectively.

The Group is in the process of registering a branch in The Philippines.

11. Annual accounts

Annual accounts for the year ended 31 December 2015 will be sent to shareholders shortly and will be available to view from the Company's website, www.norconplc.com