TIDMMCON
RNS Number : 1482V
Mincon Group Plc
08 August 2022
Mincon Group plc
("Mincon" or the "Group")
2022 Half Year Financial Results
Mincon Group plc (Euronext:MIO AIM:MCON), the Irish engineering
group specialising in the design, manufacture, sale and servicing
of rock drilling tools and associated products, announces its half
year results for the six months ended 30 June 2022.
H1 2022 Key Financial Highlights (comparison to H1 2021):
* Revenue up 27% to EUR85.1 million
* Of which Mincon manufactured product up 24% to EUR70.9 million
* Of which non-Mincon manufactured product up 48% to EUR14.2 million
* Gross Profit up 18% to EUR27.1 million
* EBITDA up 15% to EUR12.7 million
* Operating Profit up 18% to EUR8.8 million
Joe Purcell, Chief Executive Officer, commenting on the results,
said:
"We carried forward the momentum from H2 2021 into this period
with 27% revenue growth over H1 2021. This was achieved by
continuing to catch up on our strong order books for all our
markets, with growth achieved across all three Industries of
mining, construction, and waterwell/geothermal. The revenue growth
was achieved by increased output from our factories as a result of
investment in 2021 in new capacity, as well as the acquisition of
Attakroc and Spartan Drilling Tools in North America. A
particularly pleasing aspect of the growth was the increase in
construction revenue, most notably from the delivery of products to
a large contract in the USA.
The strong growth in revenue has been accompanied by some
pressure on our margins, consistent with the trends noted in our
final 2021 results and Q1 2022 trading update, due to cost
increases across many fronts, but particularly in raw materials and
energy, as well as freight, partly arising from the use of air
freight to reduce our order backlog.
Sea freight conditions remain challenging, with no improvement
in sight, so we will continue our current policy of holding high
levels of finished goods inventory so that we can give our
customers the excellent service that they expect from Mincon. On a
more positive note, there has been a recent reduction in the
constraints around raw material availability, which has enabled us
to start unwinding raw material inventories, due to better supply
conditions.
We have implemented price increases, and these are starting to
take effect, but constant vigilance is required to keep up with the
pace of the cost inflationary pressures that we are seeing.
On the product development front, we have made some good
progress on the Greenhammer, and I am very pleased to report that
we are in discussions with a major mining contractor in Western
Australia on commercialising the system and we hope to have a
further update on this shortly. This is the culmination of many
years of development work, and we are confident that it can have a
significant impact on both Mincon and hard rock surface mining more
generally. This Greenhammer development has not gone unnoticed by
the mining industry in Western Australia, who are keen to monitor
the performance of this new system.
In other product development news, once Malaysia re-opened for
travel, we made a trip to see how our large hammer and bit
prototype had coped with the drilling conditions. We were pleased
to see that they were in excellent condition which augurs well for
the future of this product for large diameter drilling.
Our Subsea project progresses well, and we have successfully
developed a small-scale prototype water-powered hammer and bit.
This is an important early step, as this design will be the
cornerstone of our offering, once we can develop a commercial
solution on successful completion of the Disruptive Technologies
Innovation Fund (DTIF) project on which we are working with our
consortium partners.
On the topic of sustainability, I am very pleased that Pirita
Mikkanen joined our board in March this year. Pirita brings a
wealth of experience in sustainability and energy efficiency which
are important near-term considerations for Mincon, and she has
agreed to take the chair of our newly formed Environment and
Sustainability board sub-committee.
One of the first tasks of the committee was the oversight and
approval of our first sustainability report which will be published
later this month.
Conclusion
While global conditions remain challenging, we are tackling and
overcoming the difficulties presented. We have introduced price
increases throughout the period and as these take effect they will
ease the pressure on margins in H2 2022. Our engineering skillsets
continue to deliver, and our ambition has been reinforced by the
progress on this front. Our manufacturing strength has grown,
enabling us to reduce backlogs as we manage our strong order books.
Our strong market presence across the globe has ensured that our
customers get the service that they should expect. I would like to
acknowledge the efforts of all my colleagues in ensuring this
strong performance for the first half of 2022 and continuing our
growth for the rest of the year."
Joseph Purcell
Chief Executive Officer
Market Industries and Product Mix
We have achieved strong revenue growth of 27% in this reported
period. The vast majority of our growth has been organic with a
contribution from currency tailwinds, supported by a solid
performance from our H2 2021 acquisition. We had positive revenue
growth across our three industries.
Industry mix (by revenue)
H1 2022 H1 2021
* Mining 48% 52%
* Construction 37% 30%
* Waterwell / Geothermal 15% 18%
Our revenue from the construction industry grew by 55% in the
period, mostly due to large construction projects in North America.
Additionally, we experienced encouraging growth in Europe &
Middle East region as we rolled out improved product performance
for the construction industry. We have expanded our footprint in
the construction industry, and we began invoicing outside of our
two main construction industry regions of the Americas and Europe
& Middle East. Though the amount invoiced is not yet of a
substantial size, it is encouraging for the future, as our products
and service offering to this industry becomes more widely known.
The strong US dollar performance in this period also added to the
growth of our construction revenue.
Mining is our largest industry; it has been the mainstay of our
four regions over the past decade. We gained further inroads in
market share with substantial organic revenue growth in H1 2022.
Overall growth in mining revenue, including acquisitions, was 18%
for the Group during the period. As the Covid-19 restrictions eased
at the end of Q1 2022, it gave us the opportunity to grow our
revenue in the Africa region. We have also had strong organic
mining revenue growth in North America, along with a contribution
from H2 2021 and H1 2022 acquisitions. Our mining revenue in the
Europe & Middle East region increased during the period albeit
with the suspension of supply to Russian customers at the end of
February this year. Australasia mining revenue contracted during
the period as the customer mix changed in the region. Currency
tailwinds also played a material part in our mining revenue growth
for the Group during this period.
The waterwell/geothermal industry is a significant and important
industry for Mincon. It is mostly concentrated in two of our four
regions, the Americas, and Europe & Middle East. We experienced
positive waterwell/geothermal revenue growth in the Americas as the
industry there recovers from the pandemic. Revenue in the Europe
& Middle East region was flat for H1 2022. Most of the revenue
we earn within the waterwell/geothermal industry in the Europe
& Middle East region is through supplying the geothermal
industry, and that industry has not extended past H1 2021 levels in
this period.
The revenue earned by our H2 2021 acquisition has mostly
contributed to the increase in non-Mincon manufactured product
revenue. However, this acquisition is transitioning, where
possible, to sell more Mincon products while reducing its
non-Mincon manufactured inventory. Our increase in revenue to the
mining industry is partially made up of non-Mincon product sales,
due to the nature of mining in certain regions, and that has also
contributed to the change in product mix percentage for the
period.
Earnings
Inflationary factors have had a large impact on our input costs
during the reporting period. We have experienced inflation on all
fronts; in manufacturing, procurement of non-Mincon manufactured
product, employee costs and operational costs in the regions in
which we operate. We have sought to increase prices for our product
and traded product to mitigate the pressure on our margins, however
in some cases, there is a lag between cost increases and price
increases, and therefore we have absorbed some of the increased
costs during the period.
The price increases we have introduced have been rolled out
gradually across the regions, with the majority of planned
increases being fully introduced towards the end of the period
which has eased the pressure on our margins. The increased sales
volume of Mincon manufactured product has also contributed to some
easing on margin pressure, as our fixed overheads, such as
depreciation and fixed rents, are spread across a larger
manufactured volume.
The increase in our raw material costs has had the most
significant impact on our manufacturing margin for the period. The
cost increase is mostly due to our raw material suppliers passing
on their increased production energy costs to their customers.
Our own manufacturing energy costs also significantly increased
in H1 2022, particularly in our European manufacturing plants, as
these costs soared across the region. We are commissioning a more
energy efficient heat treatment plant in our Shannon factory in H2
2022, and once commissioned this will play a part in offsetting
some of these cost increases incurred in H1 2022.
Due to the increase in demand for our products in the period,
our manufacturing lead times increased. To ensure timely delivery
to our customers, we continued to transport high volumes of our own
product by air. We also outsourced some manufacturing to ease the
pressure within the factories. As we roll out further capacity in
H2 2022, we should be able to bring further manufacturing back
in-house and thus increase our manufacturing margin.
Operating costs, excluding acquisitions, have increased also due
to inflationary pressures, particularly employee costs across all
regions, as we endeavour to retain key employees. With the easing
of Covid-19 travel restrictions during the period, our sales team
took the opportunity to visit our overseas customers and to visit
new customers to ensure we maintain strong customer relationships.
This increased travel activity, together with the increase in
post-pandemic travel costs, and an increase the number of in
customers, has led to a considerable operational cost increase for
the Group in this period.
As a result of these inflationary cost increases during the
period, the Group achieved a lower gross margin percentage versus
the prior period. However, through the anticipated impact of
passing on price increases to customers, raw material supply
pressures unwinding and a normalisation of product mix with the
sale of more Mincon-produced product, the Group is confident of
improving this margin performance in the second half of the
year.
Balance sheet and cash
With the sharp increased demand for our product over the
reported period, we have experienced a rise in working capital
requirements and this has significantly reduced cash generated from
our operating activities.
We have been developing new manufacturing techniques with key
plant partners, while also developing property to increase our
manufacturing footprint. We have used the cash generated from our
operations to fund these important projects for the future
development of the Group.
We remain prudent in our approach to borrowing, particularly
during inflationary periods. However, we have borrowed further
across the Group in the period and have used this additional
lending to finance the commissioning of plant and equipment in our
factories, and to support our working capital requirements in the
regions where we have experienced a surge in demand for our
products.
Our concerns in relation to our supply chain are easing as raw
material supplies are becoming more available in most areas in
which we manufacture. As this trend continues across the Group, we
are prepared to reduce the level of raw materials held in terms of
the number of weeks being carried.
Sea freight conditions remain challenging and thus we are
holding larger amounts of Mincon manufactured inventory, and until
these issues within that industry ease we will continue to hold
buffer stocks of our own inventory.
During the period we paid EUR1 million for current year
acquisitions and EUR0.4 million for historical acquisitions. We
also paid a final year dividend for 2021 of EUR2.2 million towards
the end of this period.
The Board of Mincon has approved the payment of an interim
dividend in the amount of 1.05 cent per ordinary share, which will
be paid on 9 September 2022 to shareholders on the register at the
close of business on 19 August 2022.
08 AUGUST 2022
For further information, please contact:
Mincon Group plc Tel: +353 (61) 361
099
Joe Purcell CEO
Mark McNamara CFO
Davy Corporate Finance (Nominated Adviser, Tel: +353 (1) 679
Euronext Growth Adviser and Joint Broker) 6363
Anthony Farrell
Daragh O'Reilly
Shore Capital (Joint Broker) Tel: +44 (0) 20 7408
4090
Malachy McEntyre
Mark Percy
Daniel Bush
Mincon Group plc
2022 Half Year Financial Results
Condensed consolidated income statement
For the 6 months ended 30 June 2022
Unaudited Unaudited
H1 2022 H1 2021
Notes EUR'000 EUR'000
-------------------------------------- ---------------- ------------ --------------
Continuing operations
Revenue 6 85,168 67,000
Cost of sales 8 (58,106) (44,094)
------------ --------------
Gross profit 27,062 22,906
Operating costs 8 (18,238) (15,402)
------------ --------------
Operating profit 8,824 7,504
Finance income 11 15
Finance cost (623) (406)
Foreign exchange gain/(loss) 835 868
Movement on deferred consideration 10 (1)
------------ --------------
Profit before tax 9,057 7,980
-------------------------------------- ------------ --------------
Income tax expense (2,527) (1,623)
-------------------------------------- ---------------- ------------ --------------
Profit for the period 6,530 6,357
-------------------------------------- ---------------- ------------ --------------
Earnings per Ordinary Share
Basic earnings per share 12 3.07c 2.99c
Diluted earnings per share 12 2.99c 2.91c
-------------------------------------- ---------------- ------------ --------------
Condensed consolidated statement of comprehensive income
For the 6 months ended 30 June 2022
Unaudited Unaudited
2022 2021
H1 H1
EUR'000 EUR'000
--------------------------------------------------------- --------- ------------
Profit for the period 6,530 6,357
Other comprehensive income:
Items that are or may be reclassified subsequently
to profit or loss:
Foreign currency translation - foreign operations 3,814 1,340
Other comprehensive profit for the period 3,814 1,340
--------------------------------------------------------- --------- ------------
Total comprehensive income for the period 10,344 7,697
--------------------------------------------------------- --------- ------------
The accompanying notes are an integral part of these financial
statements.
Consolidated statement of financial position
As at 30 June 2022
Unaudited
30 June 31 December
2022 2021
Notes EUR'000 EUR'000
--------------------------------------------- ----- ----------- ------------
Non-Current Assets
Intangible assets and goodwill 14 41,423 40,157
Property, plant and equipment 15 51,167 50,660
Deferred tax asset 10 1,089 1,075
Total Non-Current Assets 93,679 91,892
---------------------------------------------- ----- ----------- ------------
Current Assets
Inventory and capital equipment 16 74,560 63,050
Trade and other receivables 17 29,328 25,110
Prepayments and other current assets 12,347 8,822
Current tax asset 10 75 521
Cash and cash equivalents 15,331 19,049
Total Current Assets 131,641 116,552
---------------------------------------------- ----- ----------- ------------
Total Assets 225,320 208,444
---------------------------------------------- ----- ----------- ------------
Equity
Ordinary share capital 11 2,125 2,125
Share premium 67,647 67,647
Undenominated capital 39 39
Merger reserve (17,393) (17,393)
Share based payment reserve 13 2,959 2,695
Foreign currency translation reserve (1,354) (5,168)
Retained earnings 98,506 94,207
---------------------------------------------- ----- ----------- ------------
Total Equity 152,529 144,152
Non-Current Liabilities
Loans and borrowings 18 24,303 23,265
Deferred tax liability 10 1,897 1,622
Deferred consideration 19 4,123 4,224
Other liabilities 801 852
Total Non-Current Liabilities 31,124 29,963
---------------------------------------------- ----- ----------- ------------
Current Liabilities
Loans and borrowings 18 13,430 11,205
Trade and other payables 19,199 15,683
Accrued and other liabilities 7,676 6,027
Current tax liability 10 1,362 1,414
Total Current Liabilities 41,667 34,329
---------------------------------------------- ----- ----------- ------------
Total Liabilities 72,791 64,292
---------------------------------------------- ----- ----------- ------------
Total Equity and Liabilities 225,320 208,444
---------------------------------------------- ----- ----------- ------------
The accompanying notes are an integral part of these financial
statements.
Condensed consolidated statement of cash flows
For the 6 months ended 30 June 2022
-------------------------------------------------------- -----------------------
Unaudited Unaudited
H1 H1
2022 2021
EUR'000 EUR'000
-------------------------------------------------------- ---------- -----------
Operating activities:
Profit for the period 6,530 6,357
Adjustments to reconcile profit to net cash provided
by operating activities:
Depreciation 3,890 3,442
Amortisation of intangible asset 92 145
Movement on deferred consideration (10) 1
Finance cost 623 406
Finance income (11) (15)
Loss/(Gain) on sale of property, plant & equipment 154 (78)
Income tax expense 2,527 1,623
Other non-cash movements (831) (881)
-------------------------------------------------------- ---------- -----------
12,964 11,000
Changes in trade and other receivables (3,396) (1,193)
Changes in prepayments and other assets (3,333) (3,274)
Changes in inventory (9,362) (4,179)
Changes in trade and other payables 4,599 2,085
-------------------------------------------------------- ---------- -----------
Cash provided by operations 1,472 4,439
Interest received 11 15
Interest paid (623) (406)
Income taxes paid (1,793) (2,146)
-------------------------------------------------------- ---------- -----------
Net cash provided (used in)/by operating activities (933) 1,902
-------------------------------------------------------- ---------- -----------
Investing activities
Purchase of property, plant and equipment (2,327) (2,501)
Proceeds from the sale of property, plant and equipment 605 -
Investment in intangible assets (286) (419)
Proceeds from the issuance of share capital - 8
Acquisitions, net of cash required (1,014) -
Payment of deferred consideration (204) (1,832)
Investment in acquired intangible assets (147) (359)
Proceeds from sale of discontinued operations - 111
Net cash provided used in investing activities (3,373) (4,992)
-------------------------------------------------------- ---------- -----------
Financing activities
Dividends paid (2,231) (4,462)
Repayment of borrowings (1,162) (1,392)
Repayment of lease liabilities (1,349) (1,734)
Drawdown of loans 5,159 5,137
Net cash provided by/(used in) financing activities 417 (2,451)
-------------------------------------------------------- ---------- -----------
Effect of foreign exchange rate changes on cash 171 180
-------------------------------------------------------- ---------- -----------
Net decrease in cash and cash equivalents (3,718) (5,361)
-------------------------------------------------------- ---------- -----------
Cash and cash equivalents at the beginning of the
year 19,049 17,045
-------------------------------------------------------- ---------- -----------
Cash and cash equivalents at the end of the period 15,331 11,684
-------------------------------------------------------- ---------- -----------
The accompanying notes are an integral part of these financial
statements.
Condensed consolidated statement of changes in equity for the 6
months ended 30 June 2022
Foreign
Share based currency Unaudited
Share Share Merger Un-denominated payment translation Retained Total
capital premium reserve capital reserve reserve earnings equity
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
-------------- -------- ------------ ------------ -------------- ------------ ------------ --------- ---------
Balances at 1
July 2021 2,125 67,647 (17,393) 39 2,418 (6,693) 88,195 136,338
-------------- -------- ------------ ------------ -------------- ------------ ------------ --------- ---------
Comprehensive
income:
Profit for the
period - - - - - - 8,243 8,243
Other
comprehensive
income/(:
Foreign
currency
translation - - - - - 1,525 - 1,525
Total
comprehensive
income 1,525 8,243 9,768
------------ --------- ---------
Transactions
with
Shareholders:
Share-based
payments - - - - 277 - - 277
Dividend
payment - - - - - - (2,231) (2,231)
-------- ------------ ------------ -------------- ------------ ------------ --------- ---------
Total
transactions
with
Shareholders - - - - 277 - (2,331) (1,954)
-------- ------------ ------------ -------------- ------------ ------------ --------- ---------
Balances at 31
December 2021 2,125 67,647 (17,393) 39 2,695 (5,168) 94,207 144,152
-------------- -------- ------------ ------------ -------------- ------------ ------------ --------- ---------
Comprehensive
income:
Profit for the
period - - - - - - 6,530 6,530
Other
comprehensive
income:
Foreign
currency
translation - - - - - 3,814 - 3,814
------------ --------- ---------
Total
comprehensive
income 3,814 6,530 10,344
------------ --------- ---------
Transactions
with
Shareholders:
Share-based
payments - - - - 264 - - 264
Dividend
payment - - - - - - (2,231) (2,231)
-------- ------------ ------------ -------------- ------------ ------------ --------- ---------
Total
transactions
with
Shareholders - - - - 264 - (2,231) (1,967)
-------- ------------ ------------ -------------- ------------ ------------ --------- ---------
Balances at 30
June 2022 2,125 67,647 (17,393) 39 2,959 (1,354) 98,506 152,529
-------------- -------- ------------ ------------ -------------- ------------ ------------ --------- ---------
The accompanying notes are an integral part of these financial
statements
Notes to the consolidated interim financial statements
1 Description of business
Mincon Group plc ("the Company") is a company incorporated in
the Republic of Ireland. The unaudited consolidated interim
financial statements of the Company for the six months ended 30
June 2022 (the "Interim Financial Statements") include the Company
and its subsidiaries (together referred to as the "Group"). The
Interim Financial Statements were authorised for issue by the
Directors on 8 August 2022.
2. Basis of preparation
The Interim Financial Statements have been prepared in
accordance with IAS 34, 'Interim Financial Reporting', as adopted
by the EU. The Interim Financial Statements do not include all of
the information required for full annual financial statements and
should be read in conjunction with the Group's consolidated
financial statements for the year ended 31 December 2021 as set out
in the 2021 Annual Report (the "2021 Accounts"). The Interim
Financial Statements do, however, include selected explanatory
notes to explain events and transactions that are significant to an
understanding of the changes in the Group's financial position and
performance since the last annual financial statements.
The Interim Financial Statements do not constitute statutory
financial statements. The statutory financial statements for the
year ended 31 December 2021, extracts from which are included in
these Interim Financial Statements, were prepared under IFRS as
adopted by the EU and will be filed with the Registrar of Companies
together with the Company's 2021 annual return. They are available
from the Company website www.mincon.com and, when filed, from the
registrar of companies. The auditor's report on those statutory
financial statements was unqualified.
The Interim Financial Statements are presented in Euro, rounded
to the nearest thousand, which is the functional currency of the
parent company and also the presentation currency for the Group's
financial reporting.
The financial information contained in the Interim Financial
Statements has been prepared in accordance with the accounting
policies applied in the 2021 Accounts.
3. Use of estimates and judgements
The preparation of interim financial statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets and liabilities, income, and expenses. The
judgements, estimates and associated assumptions are based on
historical experience and other factors that are believed to be
reasonable under the circumstances, the results of which form the
basis of making the judgements about the carrying values of assets
and liabilities that are not readily apparent from other sources.
Actual results may differ materially from these estimates. In
preparing the Interim Financial Statements, the significant
judgements made by management in applying the Group's accounting
policies and the key sources of estimation uncertainty were the
same as those that applied to the 2021 Financial Statements.
4. Changes in significant accounting policies
There have been no changes in significant accounting policies
applied in these interim financial statements, they are the same as
those applied in the last annual audited financial statements.
5. Financial Reporting impact due to the Covid-19 Pandemic:
a. Government Grants
The Group received government grants in certain countries where
the Group operates. These grants differ in structure from country
to country but primarily relate to personnel costs. During the six
months ended 30 June 2022, when the terms attached to the grants
were complied with, the grant was recognised in operating costs in
the consolidated income statement.
b. Expected Credit losses
The Group has not witnessed any trends in its analysis of its
customers that would indicate an adjustment to its trade
receivables as at the 30 June 2022 due to the Covid-19
pandemic.
c. Inventory
The Group has not experienced any material impact on its
valuation of inventory as of 30 June 2022, that can be directly
attributable to the Covid-19 pandemic.
d. Risk Assessment
The Mincon Group's operations are spread globally. This brings
various exposures, such as trading and financial, and strategic
risks. The primary trading risks would encompass operational,
legal, regulatory and compliance. Strategic risks would cover long
term risks effecting the business such as evolving industry trends,
technological advancements, and global economic developments.
Financial risks extend to but are not limited to pricing risks,
currency risks, interest rate volatility and taxation risks. The
risk of managing Covid-19 is encompassed with the abovementioned
risks and therefore the Group considers its management of these
risks as a whole.
6. Revenue
H1 H1
2022 2021
EUR'000 EUR'000
---------------------------- ------- --------
Product revenue:
Sale of Mincon product 70,906 57,390
Sale of third-party product 14,262 9,610
Total revenue 85,168 67,000
---------------------------- ------- --------
7. Operating Segments
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision maker
(CODM). Our CODM has been identified as the Board of Directors.
Having assessed the aggregation criteria contained in IFRS 8
operating segments and considering how the Group manages its
business and allocates resources, the Group has determined that it
has one reportable segment. In particular the Group is managed as a
single business unit that sells drilling equipment, primarily
manufactured by Mincon manufacturing sites.
Entity-wide disclosures
The business is managed on a worldwide basis but operates
manufacturing facilities and sales offices in Ireland, Sweden,
Finland, South Africa, UK, Australia, the United States and Canada
and sales offices in other locations including Australia, South
Africa, Finland, Spain, Namibia, France, Sweden, Canada, Chile and
Peru. In presenting information on geography, revenue is based on
the geographical location of customers and non-current assets based
on the location of these assets.
7. Operating Segments (continued)
Revenue by region (by location of customers):
H1 H1
2022 2021
EUR'000 EUR'000
----------------------------------------- ------- -------------
Region:
Europe, Middle East, Africa 42,805 38,340
Americas 33,649 20,010
Australasia 8,714 8,650
Total revenue from continuing operations 85,168 67,000
----------------------------------------- ------- -------------
Non-current assets by region (location of assets):
30 June 31 December
2022 2021
EUR'000 EUR'000
Region:
Europe, Middle East, Africa 64,745 64,297
Americas 16,026 14,682
Australasia 11,819 11,838
Total non-current assets(1) 92,590 90,817
---------------------------------------------------- ------- -----------
(1) Non-current assets exclude deferred tax assets.
8. Cost of Sales and operating expenses
Included within cost of sales, operating costs were the
following major components:
Cost of sales
H1 H1
2022 2021
EUR'000 EUR'000
------------------------------- -------- --------
Raw materials 22,621 17,633
Third-party product purchases 10,886 7,111
Employee costs 11,599 9,751
Depreciation 2,628 2,259
In bound costs on purchases 2,512 1,767
Energy costs 1,562 999
Maintenance of machinery 1,000 767
Subcontracting 3,860 2,852
Other 1,438 955
------------------------------- -------- --------
Total cost of sales 58,106 44,094
------------------------------- -------- --------
Operating costs
H1 H1
2022 2021
EUR'000 EUR'000
------------------------------- --------
Employee costs 10,835 9,343
Depreciation 1,262 1,183
Amortisation of acquired IP 91 145
Travel 918 499
Other 5,132 4,232
-------------------------------- -------- --------
Total other operating costs 18,238 15,402
-------------------------------- -------- --------
The Group recognised EUR194,000 in Government Grants during H1
2022 (H1 2021: EUR307,000). These grants differ in structure from
country to country, they primarily relate to personnel costs.
Employee information
H1 H1
2022 2021
EUR'000 EUR'000
--------------------------------------------- -------- --------
Wages and salaries 18,817 16,255
Social security costs 2,278 1,935
Pension costs of defined contribution plans 1,075 745
Share based payments (note 13) 264 159
--------------------------------------------- -------- --------
Total employee costs 22,434 19,094
--------------------------------------------- -------- --------
The Group capitalised payroll costs of EUR151,000 in H1 2022 in
relation to research and development.
The average number of employees was as follows:
H1 H1
2022 2021
Number Number
--------------------------------------------------- ------- --------
Sales and distribution 135 126
General and administration 80 71
Manufacturing, service and development 416 370
--------------------------------------------------- ------- --------
Average number of persons employed 631 567
--------------------------------------------------- ------- --------
9. Acquisitions and disposals
Acquisitions
In January 2022, Mincon acquired 100% shareholding in Spartan
Drilling Tools, a manufacturer of drill pipe and related products
based in the USA for a consideration of EUR1,014,000
A. Consideration transferred for acquisitions
Spartan Total
Drilling
Tools
EUR'000 EUR'000
--------------------------------- ---------- --------
Cash 1,014 1,014
Total consideration transferred 1,014 1,014
--------------------------------- ---------- --------
B. Goodwill
Spartan Total
Drilling
Tools
EUR'000 EUR'000
--------------------------------------- ---------- --------
Consideration transferred 1,014 1,014
Fair value of identifiable net assets (815) (815)
Goodwill 199 199
--------------------------------------- ---------- --------
10. Income Tax
The Group's consolidated effective tax rate in respect of
operations for the six months ended 30 June 2022 was 28% (30 June
2021: 20%). The effective rate of tax is forecast at 25% for 2021.
The tax charge for the six months ended 30 June 2022 of EUR2.5
million (30 June 2021: EUR1.6 million) includes deferred tax
relating to movements in provisions, net operating losses forward
and the temporary differences for property, plant and equipment
recognised in the income statement.
The net current tax liability at period-end was as follows:
30 June 31 December
2022 2021
EUR'000 EUR'000
------------------------ ------- ------------
Current tax prepayments 75 521
Current tax payable (1,362) (1,414)
------------------------ ------- ------------
Net current tax (1,287) (893)
------------------------ ------- ------------
The net deferred tax liability at period-end was as follows:
30 June 31 December
2022 2021
EUR'000 EUR'000
----------------------- ------- ------------
Deferred tax asset 1,089 1,075
Deferred tax liability (1,897) (1,622)
----------------------- ------- ------------
Net deferred tax (808) (547)
----------------------- ------- ------------
11. Share capital
Allotted, called- up and fully paid up shares Number EUR000
---------------------------------------------- ----------- ------
01 January 2022 212,472,413 2,125
30 June 2022 212,472,413 2,125
---------------------------------------------- ----------- ------
Share issuances
On 26 November 2013, Mincon Group plc was admitted to trading on the
Enterprise Securities Market (ESM) of the Euronext Dublin and the
Alternative Investment Market (AIM) of the London Stock Exchange.
12. Earnings per share
Basic earnings per share (EPS) is computed by dividing the
profit for the period available to ordinary shareholders by the
weighted average number of Ordinary Shares outstanding during the
period. Diluted earnings per share is computed by dividing the
profit for the period by the weighted average number of Ordinary
Shares outstanding and, when dilutive, adjusted for the effect of
all potentially dilutive shares. The following table sets forth the
computation for basic and diluted net profit per share for the
years ended 30 June:
H1 2022 H1 2021
Numerator (amounts in EUR'000):
Profit attributable to owners of the Parent 6,530 6,357
Denominator (Number):Basic shares outstanding
Restricted share options
Diluted weighted average shares outstanding 212,472,413 212,472,413
----------------------------------------------
5,820,000 6,041,000
218,292,413 218,513,413
---------------------------------------------- ----------- -----------
Earnings per Ordinary Share
Basic earnings per share, EUR 3.07c 2.99c
Diluted earnings per share, EUR 2.99c 2.91c
----------- -----------
13. Share based payment
The vesting conditions of the scheme state that the minimum
growth in EPS shall be CPI plus 5% per annum, compounded annually,
over the relevant three accounting years up to the share award of
100% of the participants basic salary. Where awards have been
granted to a participant in excess of 100% of their basic salary,
the performance condition for the element that is in excess of 100%
of basic salary is that the minimum growth in EPS shall be CPI plus
10% per annum, compounded annually, over the three accounting
years.
Number of
Options in
Reconciliation of outstanding share options thousands
--------------------------------------------- -----------
Outstanding on 1 January 2022 5,820
Forfeited during the period -
Exercised during the period -
Granted during the period -
Outstanding at 30 June 2022 5,820
--------------------------------------------- -----------
14. Intangible Assets
Product Goodwill
development Acquired
intellectual
property Total
EUR'000 EUR'000 EUR'000 EUR'000
----------------------------------------- ------------- --------- --------------- -------
Balance at 1 January 2022 6,986 32,545 626 40,157
----------------------------------------- ------------- --------- --------------- -------
Internally developed 286 - - 286
----------------------------------------- ------------- --------- --------------- -------
Acquisitions - 199 - 199
----------------------------------------- ------------- --------- --------------- -------
Acquired intellectual property - - 147 147
----------------------------------------- ------------- --------- --------------- -------
Amortisation of intellectual property - - (92) (92)
----------------------------------------- ------------- --------- --------------- -------
Foreign currency translation differences - 665 61 726
----------------------------------------- ------------- --------- --------------- -------
Balance at 30 June 2022 7,272 33,409 742 41,423
----------------------------------------- ------------- --------- --------------- -------
15. Property, Plant and Equipment
Capital expenditure in the first half-year amounted to EUR2.3
million (30 June 2021: EUR4.5 million), of which EUR1.9 million was
invested in plant and equipment (30 June 2021: EUR2.5 million) and
EUR400,000 million in ROU assets (30 June 2021: EUR2 million). The
depreciation charge for property, plant and equipment is recognised
in the following line items in the income statement:
H1 H1
2022 2021
EUR'000 EUR'000
-------------------------------------------------- ------- --------
Cost of sales 2,628 2,259
Operating Costs 1,262 1,183
Total depreciation charge for property, plant and
equipment 3,890 3,442
-------------------------------------------------- ------- --------
16. Inventory
30 June 31 December
2022 2021
EUR'000 EUR'000
----------------- ------- ------------
Finished goods 46,795 42,396
Work-in-progress 13,145 9,596
Raw materials 14,620 11,058
----------------- ------- ------------
Total inventory 74,560 63,050
----------------- ------- ------------
The Group recorded an impairment of EUR87,000 against inventory
to take account of net realisable value during the period ended 30
June 2022 (30 June 2021: EURNIL).
17. Trade and other receivables
30 June 31 December
2022 2021
EUR'000 EUR'000
--------------------------------------------------- -------- ----------------
Gross receivable 30,562 26,047
Provision for impairment (1,234) (937)
Net trade and other receivables 29,328 25,110
--------------------------------------------------- -------- ----------------
Provision
for impairment
EUR'000
------------------------------------------------------------- ------------------
Balance at 1 January 2022 (937)
Additions (297)
Balance at 30 June 2022 (1,234)
------------------------------------------------------------- ------------------
The following table provides the information about the exposure
to credit risk and ECL's for trade receivables as at 30 June
2022.
Weighted Gross Loss
average carrying allowance
loss rate amount EUR'000
% EUR'000
Current (not past due) 1% 22,314 223
1-30 days past due 5% 4,200 209
31-60 days past due 12% 2,683 320
61 to 90 days 23% 1,143 260
More than 90 days past due 100% 222 222
-------------------------------- ---------- -----------
Net trade and other receivables 30,562 1,234
-------------------------------- ---------- -----------
The following table provides the information about the exposure
to credit risk and ECL's for trade receivables as at 31 December
2021.
Weighted Gross Loss
average carrying allowance
loss rate amount EUR'000
% EUR'000
Current (not past due) 1% 19,804 198
1-30 days past due 5% 3,749 187
31-60 days past due 14% 1,649 230
61 to 90 days 17% 628 106
More than 90 days past due 100% 216 216
-------------------------------- ---------- -----------
Net trade and other receivables 26,047 937
-------------------------------- ---------- -----------
18. Loans, borrowings and lease liabilities
30 June 31 December
2022 2021
Maturity EUR'000 EUR'000
--------------------------------------------------------- ------- ------------
Loans and borrowings 2022-2036 27,316 23,391
Lease liabilities 2022-2031 10,417 11,079
Total Loans, borrowings and lease liabilities 37,733 34,470
------- ------------
Current 13,430 11,205
------- ------------
Non-current 24,303 23,265
------- ------------
The Group has a number of bank loans and lease liabilities with
a mixture of variable and fixed interest rates. The Group has not
been in default on any of these debt agreements during any of the
periods presented. The loans are secured against the assets for
which they have been drawn down for.
19. Financial Risk Management
The Group is exposed to various financial risks arising in the
normal course of business. Our financial risk exposures are
predominantly related to changes in foreign currency exchange rates
as well as the creditworthiness of our financial asset
counterparties.
The half-year financial statements do not include all financial
risk management information and disclosures required in the annual
financial statements and should be read in conjunction with the
2021 Annual Report. There have been no changes in our risk
management policies since year-end and no material changes in our
interest rate risk.
a) Liquidity and Capital
The Group defines liquid resources as the total of its cash,
cash equivalents and short term deposits. Capital is defined as the
Group's shareholders' equity and borrowings.
The Group's objectives when managing its liquid resources are:
* To maintain adequate liquid resources to fund its
ongoing operations and safeguard its ability to
continue as a going concern, so that it can continue
to create value for investors;
* To have available the necessary financial resources
to allow it to invest in areas that may create value
for shareholders; and
-- To maintain sufficient financial resources to mitigate against
risks and unforeseen events.
Liquid and capital resources are monitored on the basis of the
total amount of such resources available and the Group's
anticipated requirements for the foreseeable future. The Group's
liquid resources and shareholders' equity at 30 June 2022 and 31
December 2021 were as follows:
30 June 31 December
2022 2021
EUR'000 EUR'000
-------------------------- -------- -----------
Cash and cash equivalents 15,331 19,049
Loans and borrowings 37,733 34,470
Shareholders' equity 152,529 144,152
-------------------------- -------- -----------
19. Financial Risk Management (continued)
b) Foreign currency risk
The Group is a multinational business operating in a number of
countries and the euro is the presentation currency. The Group,
however, does have revenues, costs, assets and liabilities
denominated in currencies other than euro. Transactions in foreign
currencies are recorded at the exchange rate prevailing at the date
of the transaction. The resulting monetary assets and liabilities
are translated into the appropriate functional currency at exchange
rates prevailing at the reporting date and the resulting gains and
losses are recognised in the income statement. The Group manages
some of its transaction exposure by matching cash inflows and
outflows of the same currencies. The Group does not engage in
hedging transactions and therefore any movements in the primary
transactional currencies will impact profitability. The Group
continues to monitor appropriateness of this policy.
The Group's global operations create a translation exposure on
the Group's net assets since the financial statements of entities
with non-euro functional currencies are translated to euro when
preparing the consolidated financial statements. The Group does not
use derivative instruments to hedge these net investments.
The principal foreign currency risks to which the Group is
exposed relate to movements in the exchange rate of the euro
against US dollar, South African rand, Australian dollar, Swedish
krona, British Pound and Canadian dollar.
The Group has material subsidiaries with a functional currency
other than the euro, such as US dollar, Australian dollar, South
African rand, Canadian dollar, British pound and Swedish krona.
In 2022, 58% (2021: 56%) of Mincon's revenue EUR85 million (30
June 2021: EUR67 million) was generated in AUD, SEK and USD. The
majority of the Group's manufacturing base has a Euro, US dollar or
Swedish krona cost base. While Group management makes every effort
to reduce the impact of this currency volatility, it is impossible
to eliminate or significantly reduce given the fact that the
highest grades of our key raw materials are either not available or
not denominated in these markets and currencies. Additionally, the
ability to increase prices for our products in these jurisdictions
is limited by the current market factors.
Currency also has a significant transactional impact on the
Group as outstanding balances in foreign currencies are
retranslated at closing rates at each period end. The changes in
the South African Rand, Australian Dollar, Swedish Krona and
British Pound have either weakened or strengthened, resulting in a
foreign exchange loss being recognised in other comprehensive
income and a significant movement in foreign currency translation
reserve.
Average and closing exchange rates for the Group's primary
currency exposures were as disclosed in the table below for the
period presented.
30 June 31 December
2022 H1 2022 2021 H1 2021
Euro exchange rates Closing Average Closing Average
-------------------- ------- -------- ------------ --------
US Dollar 1.04 1.09 1.13 1.20
Australian Dollar 1.52 1.52 1.56 1.56
Canadian Dollar 1.35 1.39 1.44 1.50
Great British Pound 0.86 0.84 0.84 0.87
South African Rand 17.02 16.83 18.06 17.51
Swedish Krona 10.70 10.47 10.26 10.12
-------------------- ------- -------- ------------ --------
There has been no material change in the Group's currency
exposure since 31 December 2021. Such exposure comprises the
monetary assets and monetary liabilities that are not denominated
in the functional currency of the operating unit involved.
19. Financial Risk Management (continued)
c) Fair values
Financial instruments carried at fair value
The deferred consideration payable represents management's best
estimate of the fair value of the amounts that will be payable,
discounted as appropriate using a market interest rate. The fair
value was estimated by assigning probabilities, based on
management's current expectations, to the potential pay-out
scenarios. The fair value of deferred consideration is not
dependent on the future performance of the acquired businesses
against predetermined targets and on management's current
expectations thereof.
Movements in the year in respect of Level 3 financial
instruments carried at fair value
The movements in respect of the financial assets and liabilities
carried at fair value in the period ended to 30 June 2022 are as
follows:
Deferred
consideration
EUR'000
----------------------------------------- --------------
Balance at 1 January 2022 4,224
----------------------------------------- --------------
Arising on acquisition -
----------------------------------------- --------------
Cash payment (204)
----------------------------------------- --------------
Fair value movement (10)
----------------------------------------- --------------
Foreign currency translation differences 113
----------------------------------------- --------------
Balance at 30 June 2022 4,123
----------------------------------------- --------------
20. Commitments
The following capital commitments for the purchase of property,
plant and equipment had been authorised by the directors at 30 June
2022:
Total
EUR'000
------------------- --------
Contracted for 4,617
Not contracted for 37
------------------- --------
Total 4,654
------------------- --------
21. Litigation
The Group is not involved in legal proceedings that could have a
material adverse effect on its results or financial position.
22. Related Parties
The Group has relationships with its subsidiaries, directors and
senior key management personnel. All transactions with subsidiaries
eliminate on consolidation and are not disclosed.
As at 30 June 2022, the share capital of Mincon Group plc was
56.32% owned by Kingbell Company (31 December 2021 56.32%), this
company is ultimately controlled by Patrick Purcell and members of
the Purcell family. Patrick Purcell is also a director of the
Company. The Group paid the final dividend for 2021 in June 2022,
Kingbell Company receive EUR1.3 million.
There were no other related party transactions in the half year
ended 30 June 2022 that affected the financial position or the
performance of the Company during that period and there were no
changes in the related party transactions described in the 2021
Annual Report that could have a material effect on the financial
position or performance of the Company in the same period.
23. Events after the reporting date
Dividend
On 4 August 2022, the Board of Mincon Group plc approved the
payment of an interim dividend in the amount of EUR0.0105 (1.05
cent) per ordinary share. This amounts to a dividend payment of
EUR2.2 million which will be paid on 09 September 2022 to
shareholders on the register at the close of business on 19 August
2022.
24. Approval of financial statements
The Board of Directors approved the interim condensed
consolidated financial statements for the six months ended 30 June
2022 on 08 August 2022.
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