TIDMMCON
RNS Number : 9287H
Mincon Group Plc
09 August 2021
Mincon Group plc
("Mincon" or the "Group")
2021 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 2021.
H1 2021 Highlights (comparison to H1 2020):
* Revenue up 4% to EUR67.0 million
* Gross Profit down 2% to EUR22.9 million
* Profit Before Tax up 4% to EUR8.0 million
* Growth of 4% in both revenue and profit before tax in
H1 2021 despite the previously announced pandemic
challenges interrupting production in Shannon at the
beginning of the year, as well as increases in
transport costs and lead times during the period;
* Trading and production has continued to strengthen
into H2 2021 and the Group's pipeline and order books
remain strong as additional projects are expected to
commence in H2 2021.
Joe Purcell, Chief Executive Officer, commenting on the results,
said:
"Our sales growth during the first six months of 2021 reflected
a very strong performance from a number of our regions and
industries, however this was offset somewhat by the continuing
impact of the pandemic in two of our regions. Our operating margins
were impacted due to pandemic issues in our production at the
beginning of the year, particularly in Shannon, increased transport
costs and start-up costs on a new contract in South America.
The European region performed strongly, particularly in the
mining and construction industries, while the North American mining
industry also performed very well during the period. Australasia,
Southern Africa and South America remain impacted by the pandemic.
In the case of Australia, in the area of new business developments,
there were a number of trials that were curtailed. There were no
large-scale construction projects in North America during the
period, however we have a strong pipeline of tenders and remain
positive about the outlook for the industry in the second six
months of the year.
The Group is quickly adapting to some of the challenges
presented in the current market. We have experienced significant
increases in transit times and costs in relation to sea freight,
while raw material availability and prices have also been a
challenge. As a result of these issues, we made a conscious
decision to increase inventory levels, to ensure that we can
continue to supply our customers on time. We are also passing on
price increases where we can and that will have a positive result
on our margins in H2 2021.
Our regional management structure has continued to deliver, and
our strong global coverage has meant that we have been able to run
the business with a minimum level of international travel to try
and mitigate any Covid-19 risks and we will continue to review our
travel policies as the global situation develops.
These results for the first six months of 2021 have further
demonstrated that we are embedded in a wide range of cultures and
communities across our global operations and markets. As a
significant employer in these communities, Mincon has a meaningful
role to play and we are committed to increasing opportunities for
our employees as well as for the wider communities. As local
governments imposed restrictions to contain the Covid-19 pandemic,
our businesses in those markets have responded with the health and
safety of our workforce as the primary concern.
As a result of the disruption caused by Covid-19, progress in
product development has been challenging. Our Greenhammer system is
still waiting to get onsite in Australia where there is a very
strict site access policy across the mining industry. When this
situation eases, we are ready to get onsite and start drilling to
commercialise this exciting opportunity for Mincon and the hard
rock mining industry. Several other product development projects
are on hold waiting on an easing of travel/site access
restrictions. Despite these delays in delivering these projects,
our ambition has not waned. If anything, it is growing and a good
example of this is the disruptive innovation fund grant that was
awarded in May for the development of mooring systems for offshore
wind installations. This is an exciting new opportunity for Mincon
and marks our entry into the exciting and expanding renewables
market.
Part of our acquisition strategy has been to build out our
product offering to deliver a complete consumable package to the
various markets that we are targeting. In January 2021, we
completed the acquisition of Hammer Drilling Rigs, a US based
business involved in the design and manufacture of bespoke drilling
rigs and attachments for a variety of geotechnical applications.
The products are characterised by elegant, user friendly and robust
design with added benefits of serviceability and readily available
spare parts. They add to our offering in the geotechnical space by
giving us the ability to offer the full package to several
specialist applications such as limited access drilling and solar
field anchoring.
Prior to acquisition of Hammer Drilling Rigs, all the rig
manufacturing was outsourced. That has now been integrated with our
plant in Benton, Illinois bringing the manufacturing margin
inhouse. As part of the manufacturing integration in Benton, we
acquired one of the outsourced contractors that the Hammer Drilling
Rigs team worked with, Campbell's Welding & Fabrication. This
business has now been relocated to Benton to run the manufacturing
operations for the product line. An added benefit of the
acquisition is that the grout plant product line that the
contractor produces can be used extensively in construction
applications, including solar field installations. The experienced
team that has joined us with this acquisition will also form an
integral part of our development team for the offshore mooring
project, as well as bringing novel and highly efficient
installation technology to the terrestrial solar field sector.
Another important part of our acquisition strategy has been to
add talented and strategically located customer service businesses
to increase our direct customer access and help to promote revenue
growth for our Mincon manufactured products. As part of this
strategy, in July 2021 we acquired Attakroc, a distributor based in
Quebec City, Canada. We have built a strong relationship with
Attakroc over a number of years and have been impressed with its
customer service ethos as well as the growth potential in the
Eastern Canadian market for our products in mining, construction
and waterwell/geothermal drilling. This follows on from our
successful acquisition in 2019 of Pacific Bit in Western Canada and
gives us a more comprehensive customer service footprint to assist
our growth in this important area for Mincon.
Our focus on the engineering efficiency of our products has
meant that we have always looked to minimise our carbon footprint.
This is more obvious on projects such as Greenhammer and will be
further emphasised by our move into renewables with solar field and
offshore wind installations. We are also looking at production
efficiencies and are investing in new technologies to further
reduce our impact on the environment.
Concluding comments
Since our IPO in 2013, we have been on a journey that has filled
out our product offering so that we can now supply the full range
of consumables to the mining, construction, and
waterwell/geothermal markets. Our engineering capacity has been
transformed by adding to our team through acquisition and strategic
hiring. Our undertaking of ambitious and challenging product
development projects that are now poised to deliver, has built a
knowledge base and honed our abilities. These engineering skillsets
can now be deployed for new product development in existing markets
as well as new areas such as the renewables space. This expertise,
combined with the global spread of our manufacturing and customer
service centres, means that we have created a platform for future
growth. Indeed, with very strong order books and the additional
opportunities that we see for the second six months of 2021, we
believe that platform is now starting to deliver. Of course, we
must always be aware of the variable environment which Covid-19
presents and endeavour to mitigate the effect on our people. On
that note I would like to thank all my colleagues for their work,
vigilance and perseverance through these challenging times and,
together, we look forward to better days ahead."
Joseph Purcell
Chief Executive Officer
Market Industries and Product Mix
Our revenue has continued to grow during the period, albeit the
pandemic has created some difficulties for growth in some regions
where we operate.
Industry mix (by revenue)
H1 2021 H1 2020
* Mining 52% 52%
* Construction 30% 29%
* Waterwell / Geothermal 18% 19%
Our largest growth in revenue during the first six months of
2021 was into the construction industry where we grew by 10%,
though we did not invoice any large construction projects in North
America during the period. Construction revenue grew through
winning smaller projects in Europe and North America as Covid-19
restrictions eased in these regions during the period and gave us
the opportunity to gain more access with our partners in the
industry.
Our revenue into the mining industry grew by 2%, but this growth
was not spread evenly across all our regions. We grew in areas
where Covid-19 restrictions have eased or did not have a material
impact on the industry, mostly in our Europe Middle East region and
North America. The impact of Covid-19 was a major challenge for the
industry in South America, Southern Africa, and Southeast Asia. The
mining industry in Australia remains buoyant, but mine operators
continue to ban non-essential access to their sites. This allows
incumbent suppliers to continue supplying and has thus prevented
our growth with new customers in this region during the period.
The waterwell/geothermal industry is recovering from the initial
effects of the pandemic, and our revenue in the industry was flat
for the first six months of 2021. This industry is mostly made up
of smaller drilling companies, and we have observed that a number
of these businesses in central Europe, where Covid-19 restrictions
impacted the industry heavily in 2020, have not returned to
trade.
Our sales mix of Mincon manufactured products and non-Mincon
manufactured products changed in the period as revenue was
generated from different projects and from other mining activity.
Revenue from large construction projects supplied in H1 2020 in the
Americas region had a sales mix close to 100% of Mincon
manufactured products whereas, as noted above, we have not invoiced
any similar large construction projects in the first half of this
year. The increase in mining revenue in certain regions gave us an
increase in non-Mincon manufactured revenue due to the nature of
mining in that region.
Earnings
At the beginning of the year, including all of January and most
of February, we experienced interruption in our manufacturing in
some of our plants due to the pandemic. The largest impact was at
our hammer factory in Shannon. Our capacity in the Shannon plant
was severely disrupted, with a 35% reduced manufacturing workforce
during those initial months of this year. This was mostly due to
employees deemed to be in close contact with people who tested
positive for Covid-19 outside the factory and in the wider
community, with the effect being that those employees were
instructed to self-isolate in their homes for a period of time
before returning to the Shannon factory.
The reduced manufacturing workforce in Shannon resulted in the
plant producing significantly less product for our customer centres
during the period and this has had a negative impact on our gross
margin during the first half of the year. However, during March the
Covid situation improved in Shannon, and by Q2 2021 the plant was
manufacturing at a much higher monthly run-rate than had been
achieved in the past and this should help to improve gross margin
in the second half of the year.
At the beginning of this year, when we were impacted hardest due
to the pandemic, we were often compelled to use expensive air
freight to ensure on-time deliveries to our customers. During the
period, we also incurred sharp increases in raw materials and sea
freight costs, and these led to increased pressure on our gross
margin during the period. We have passed on the raw material price
increases to customers where it is appropriate to do so. Our sea
freight costs increased considerably during the period as ocean
carriers capitalised on the congestion at seaports and overall sea
freight market conditions.
Our operating profit for the first six months was down 9% versus
the same period in 2020. This was primarily due to the lower gross
margin, as noted above, while the prior year comparable period also
reflected the invoicing of the large construction projects in North
America which earn a much higher operating profit margin than our
other businesses.
Balance sheet and cash
Cash generated through the business increased slightly on the
prior period. We have used the cash generated to further increase
capacity and modernise our factories to ensure that we support our
customers operations with on-time deliveries, and we are also
pleased to have resumed the payment of dividends to our
shareholders.
During the second half of 2020 and Q1 2021 we witnessed longer
lead times and less on-time delivery of raw materials. To reduce
the risks to our supply chain, we purchased greater quantities of
raw material to allow us to hold larger volumes at our factories to
ensure our manufacturing is not affected by supply shortages.
In the past twelve months, all industries have had to deal with
sea freight challenges. We continue to see longer shipping times
from our factories to our customer centres or customers due to
vessel capacity and congestion at seaports and, in some cases,
shipping times have doubled over the past twelve months. This has
had a direct impact on our inventory, as we have witnessed a
significant increase of inventory in transit from our factories to
our customer centres and unreliable dates of seaport arrivals.
During the period, we decided to invest cash into holding larger
stocks of finished goods at our customer centres to ensure supply
to local customers.
We have also borrowed a further EUR5.1 million during the period
and invested this in property, plant and equipment. During the
period a net EUR2.5 million of plant and equipment has been
commissioned at our factories, and EUR3 million has been prepaid to
increase future capacity and to modernise manufacturing techniques
at our factories.
We have paid EUR1.8 million of deferred consideration for past
acquisitions and EUR0.4 million for current year acquisitions. We
also paid a full year dividend for 2020 of EUR4.5 million in June
2021.
The Board of Mincon Group plc has recommended the payment of an
interim dividend in the amount of 1.05 cent per ordinary share,
which will be paid on the 10 September 2021 to shareholders on the
register at
the close of business on the 20 August 2021.
Covid-19
The Group continues to adhere to local government advice and
restrictions to curb the spread of Covid-19. All employees follow
our own health and safety policies that incorporate the relevant
national health guidelines in relation to the pandemic.
The majority of our business partners have managed to operate
their businesses during the pandemic, though not all our regions
are at the same level of recovery from the pandemic. New strains of
the virus and other local issues can compound the damage the
pandemic has caused. We are striving to find new methods to
overcome these challenges and improve our businesses locally to
work with our partners, and our regional structure within Mincon
has been key to developing these methods.
09 AUGUST 2021
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
2021 Half Year Financial Results
Condensed consolidated income statement
For the 6 months ended 30 June 2021
Unaudited Unaudited
2021 2020
Notes EUR'000 EUR'000
----------------------------- ------- ------------ ----------------
Continuing operations
Revenue 6 67,000 64,654
Cost of sales 8 (44,094) (41,197)
------------ ----------------
Gross profit 22,906 23,457
Operating costs 8 (15,402) (15,194)
------------ ----------------
Operating profit 7,504 8,263
Finance income 15 18
Finance cost (406) (412)
Foreign exchange gain/(loss) 868 (227)
Contingent consideration (1) 13
------------ ----------------
Profit before tax 7,980 7,655
----------------------------- ------------ ----------------
Income tax expense (1,623) (1,297)
----------------------------- ------- ------------ ----------------
Profit for the period 6,357 6,358
----------------------------- ------- ------------ ----------------
Profit attributable to:
- owners of the Parent 6,357 6,198
- non-controlling interests - 160
----------------------------- ------- ------------ ----------------
Earnings per Ordinary Share
Basic earnings per share, 12 2.99 2.93
Diluted earnings per share, 12 2.91 2.86
----------------------------- ------- ------------ ----------------
Condensed consolidated statement of comprehensive income
For the 6 months ended 30 June 2021
Unaudited Unaudited
2021 2020
H1 H1
EUR'000 EUR'000
--------------------------------------------------------- --------- ----------
Profit for the period 6,357 6,358
Other comprehensive income/(loss):
Items that are or may be reclassified subsequently to
profit or loss:
Foreign currency translation - foreign operations 1,340 (3,734)
Other comprehensive profit / (loss) for the period 1,340 (3,734)
--------------------------------------------------------- --------- ----------
Total comprehensive income for the period 7,697 2,624
--------------------------------------------------------- --------- ----------
Total comprehensive income attributable to:
- owners of the Parent 7,697 2,464
- non-controlling interests - 160
--------------------------------------------------------- --------- ----------
The accompanying notes are an integral part of these financial
statements.
Consolidated statement of financial position
As at 30 June 2021
Unaudited
30 June 31 December
2021 2020
Notes EUR'000 EUR'000
---------------------------------------------- ----- --------------------- --------------------
Non-Current Assets
Intangible assets and goodwill 14 40,293 36,987
Property, plant and equipment 15 47,492 45,820
Deferred tax asset 10 615 1,093
Total Non-Current Assets 88,400 83,900
----------------------------------------------- ----- --------------------- --------------------
Current Assets
Inventory and capital equipment 16 58,214 53,017
Trade and other receivables 17 22,248 20,640
Prepayments and other current assets 7,532 4,186
Current tax asset 10 248 311
Cash and cash equivalents 11,684 17,045
Total Current Assets 99,926 95,199
----------------------------------------------- ----- --------------------- --------------------
Total Assets 188,326 179,099
----------------------------------------------- ----- --------------------- --------------------
Equity
Ordinary share capital 11 2,125 2,117
Share premium 67,647 67,647
Undenominated capital 39 39
Merger reserve (17,393) (17,393)
Share based payment reserve 13 2,418 2,259
Foreign currency translation reserve (6,693) (8,033)
Retained earnings 88,195 86,300
----------------------------------------------- ----- --------------------- --------------------
Equity attributable to owners of Mincon Group
plc 136,338 132,936
----------------------------------------------- ----- --------------------- --------------------
Total Equity 136,338 132,936
Non-Current Liabilities
Loans and borrowings 18 16,738 14,789
Deferred tax liability 10 1,034 1,832
Deferred contingent consideration 19 5,054 4,723
Other liabilities 645 503
Total Non-Current Liabilities 23,471 21,847
----------------------------------------------- ----- --------------------- --------------------
Current Liabilities
Loans and borrowings 18 8,981 6,822
Trade and other payables 12,640 10,457
Accrued and other liabilities 5,655 5,529
Current tax liability 10 1,241 1,508
Total Current Liabilities 28,517 24,316
----------------------------------------------- ----- --------------------- --------------------
Total Liabilities 51,988 46,163
----------------------------------------------- ----- --------------------- --------------------
Total Equity and Liabilities 188,326 179,099
----------------------------------------------- ----- --------------------- --------------------
The accompanying notes are an integral part of these financial
statements.
Condensed consolidated statement of cash flows
For the 6 months ended 30 June 2021
--------------------------------------------------------- ---------------------
Unaudited Unaudited
H1 H1
2021 2020
EUR'000 EUR'000
--------------------------------------------------------- --------- ----------
Operating activities:
Profit for the period 6,357 6,358
Adjustments to reconcile profit to net cash provided
by operating activities:
Depreciation and amortisation 3,587 3,149
Fair value movement on deferred contingent consideration 1 (13)
Finance cost 406 412
Finance income (15) (18)
Gain on sale of property, plant & equipment (78) -
Income tax expense 1,623 1,297
Other non-cash movements (881) (244)
--------------------------------------------------------- --------- ----------
11,000 10,941
Changes in trade and other receivables (1,193) 422
Changes in prepayments and other assets (3,274) 3,160
Changes in inventory (4,179) (3,440)
Changes in trade and other payables 2,085 189
--------------------------------------------------------- --------- ----------
Cash provided by operations 4,439 11,272
Interest received 15 18
Interest paid (406) (412)
Income taxes paid (2,146) (1,153)
--------------------------------------------------------- --------- ----------
Net cash provided by operating activities 1,902 9,725
--------------------------------------------------------- --------- ----------
Investing activities
Purchase of property, plant and equipment (2,501) (4,469)
Investment in intangible assets (419) (459)
Proceeds from the issuance of share capital 8 7
Payment of deferred contingent consideration (1,832) (1,023)
Acquisitions, net of cash required (359) (7,225)
Proceeds from sale of discontinued operations 111 -
Net cash provided used in investing activities (4,992) (13,169)
--------------------------------------------------------- --------- ----------
Financing activities
Dividends paid (4,462) -
Repayment of loans and finance leases (3,126) (1,984)
Drawdown of loans 5,137 5,441
Net cash provided (used in)/by financing activities (2,451) 3,457
--------------------------------------------------------- --------- ----------
Effect of foreign exchange rate changes on cash 180 (346)
--------------------------------------------------------- --------- ----------
Net decrease in cash and cash equivalents (5,361) (333)
--------------------------------------------------------- --------- ----------
Cash and cash equivalents at the beginning of the
year 17,045 16,368
--------------------------------------------------------- --------- ----------
Cash and cash equivalents at the end of the period 11,684 16,035
--------------------------------------------------------- --------- ----------
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 2021
Share Foreign
based currency Unaudited
Share Share Merger Un-denominated payment translation Retained Non-controlling Total
capital premium reserve capital reserve reserve earnings Total interests equity
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
---------------- ------- ------- -------- -------------- ------- ----------- -------- ------- --------------- ---------
Balances at 1
July 2020 2,117 67,647 (17,393) 39 1,945 (7,602) 81,064 127,817 1,275 129,092
---------------- ------- ------- -------- -------------- ------- ----------- -------- ------- --------------- ---------
Comprehensive
income:
Profit for the
period - - - - - - 8,022 8,022 5 8,027
Other
comprehensive
income/(loss):
Foreign currency
translation - - - - - (431) - (431) - (431)
Other - - - - - - 156 156 - 156
----------- -------- ------- --------------- ---------
Total
comprehensive
income (431) 8,178 7,747 5 7,752
----------- -------- ------- --------------- ---------
Transactions
with
Shareholders:
Share-based
payments - - - - 314 - - 314 - 314
Dividend payment - - - - - - (2,222) (2,222) - (2,222)
Acquisition of
non-controlling
interest
without a
change
in control - - - - - - (720) (720) (1,280) (2,000)
Balances at 31
December
2020 2,117 67,647 (17,393) 39 2,259 (8,033) 86,300 132,936 - 132,936
---------------- ------- ------- -------- -------------- ------- ----------- -------- ------- --------------- ---------
Comprehensive
income:
Profit for the
period - - - - - - 6,357 6,357 - 6,357
Other
comprehensive
income/(loss):
Foreign currency
translation - - - - - 1,340 - 1,340 - 1,340
----------- -------- ------- --------------- ---------
Total
comprehensive
income 1,340 6,357 7,697 - 7,697
----------- -------- ------- --------------- ---------
Transactions
with
Shareholders:
Equity-settled
share-based
payment 8 - - - - - - 8 - 8
Share-based
payments - - - - 159 - - 159 - 159
Dividend payment - - - - - - (4,462) (4,462) - (4,462)
Balances at 30
June 2021 2,125 67,647 (17,393) 39 2,418 (6,693) 88,195 136,338 - 136,338
---------------- ------- ------- -------- -------------- ------- ----------- -------- ------- --------------- ---------
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 2021 (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 9 August 2021.
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 2020 as set out
in the 2020 Annual Report (the "2020 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 2020, 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 2020 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 2020 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 2020 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 2021, when the terms attached to the grants
were complied with, the grant was recognised in Administration
expenses 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 2021 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 2021, 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
2021 2020
EUR'000 EUR'000
---------------------------- ------- --------
Product revenue:
Sale of Mincon product 57,390 55,565
Sale of third-party product 9,610 9,089
Total revenue 67,000 64,654
---------------------------- ------- --------
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
2021 2020
EUR'000 EUR'000
----------------------------------------- ------- -------------
Region:
Europe, Middle East, Africa 38,340 32,573
Americas 20,010 21,509
Asia Pacific 8,650 10,572
Total revenue from continuing operations 67,000 64,654
----------------------------------------- ------- -------------
Non-current assets by region (location of assets):
30 June 31 December
2021 2020
EUR'000 EUR'000
Region:
Europe, Middle East, Africa 64,072 60,159
Americas 12,795 11,310
Asia Pacific 10,918 11,338
Total non-current assets(1) 87,785 82,807
---------------------------------------------------- ------- -----------
(1) Non-current assets exclude deferred tax assets.
8. Cost of Sales and operating expenses
Included within cost of sales, selling and distribution expenses
and general and administrative expenses were the following major
components:
Cost of sales
H1 H1
2021 2020
EUR'000 EUR'000
---------------------------------------- -------- --------
Raw materials 18,651 17,517
Third party product purchases 7,111 7,122
Employee costs 9,751 8,438
Depreciation 2,259 2,024
Impairment of finished goods inventory - 257
Other 6,322 5,839
---------------------------------------- -------- --------
Total cost of sales 44,094 41,197
---------------------------------------- -------- --------
The level of finished goods inventory impairment within cost of
sales amounted to EURNIL (30 June 2020: EUR257,000).
General and selling expenses
H1 H1
2021 2020
EUR'000 EUR'000
--------------------------------- --------
Employee costs 9,343 8,880
Depreciation 1,183 1,125
Acquisition and related costs - 343
Other 4,876 4,846
---------------------------------- -------- ---------
Total other operating costs 15,402 15,194
---------------------------------- -------- ---------
The Group provides for all receivables where there is objective
evidence, including historical loss experience, that amounts are
irrecoverable. The Group considers all receivables fully
recoverable.
Employee information
H1 H1
2021 2020
EUR'000 EUR'000
--------------------------------------------- -------- --------
Wages and salaries 16,255 14,591
Social security costs 1,935 1,648
Pension costs of defined contribution plans 745 763
Share based payments (note 13) 159 316
--------------------------------------------- -------- --------
Total employee costs 19,094 17,318
--------------------------------------------- -------- --------
The Group capitalised payroll costs of EUR295,000 in H1 2021 in
relation to research and development.
The average number of employees was as follows:
H1 H1
2021 2020
Number Number
--------------------------------------------------- ------- -------
Sales and distribution 126 126
General and administration 71 61
Manufacturing, service and development 370 340
--------------------------------------------------- ------- -------
Average number of persons employed 567 527
--------------------------------------------------- ------- -------
9. Acquisitions and disposals
Acquisitions
In January 2021, Mincon acquired Hammer Drilling Rigs (HDR), a
specialist in supply of hard rock drilling attachments based in the
USA, for a consideration of EUR2.1 million This was made up of a
cash consideration of EUR275,000 and deferred consideration of
EUR1.8 million.
In June 2021, Mincon acquired Campbell's Welding &
Fabrication, for a consideration of EUR421,000. This was made up of
a cash consideration of EUR84,000 and deferred consideration of
EUR337,000.
A. Consideration transferred for Intellectual Property
HDR Campbell's Total
Welding
& Fabrication
EUR'000 EUR'000 EUR'000
----------------------------------- -------- --------------- --------
Cash 275 84 359
Deferred contingent consideration 1,785 337 2,122
----------------------------------- -------- --------------- --------
Total consideration transferred 2,060 421 2,481
----------------------------------- -------- --------------- --------
10. Income Tax
The Group's consolidated effective tax rate in respect of
operations for the six months ended 30 June 2021 was 20% (30 June
2020: 17%). The effective rate of tax is forecast at 20% for 2021.
The tax charge for the six months ended 30 June 2021 of EUR1.6
million (30 June 2020: EUR1.3 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
2021 2020
EUR'000 EUR'000
------------------------ ------- ------------
Current tax prepayments 248 311
Current tax payable (1,241) (1,508)
------------------------ ------- ------------
Net current tax (993) (1,197)
------------------------ ------- ------------
The net deferred tax liability at period-end was as follows:
30 June 31 December
2021 2020
EUR'000 EUR'000
----------------------- ------- ------------
Deferred tax asset 615 1,093
Deferred tax liability (1,034) (1,832)
----------------------- ------- ------------
Net deferred tax (419) (739)
----------------------- ------- ------------
11. Share capital
Allotted, called- up and fully paid up shares Number EUR000
---------------------------------------------- ----------- ------
01 January 2021 211,675,024 2,117
Allotted in March 2021 516,128 5
Allotted in April 2021 281,261 3
---------------------------------------------- ----------- ------
30 June 2021 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.
In March 2021, 516,128 Restricted Share Awards (RSAs) met the
vesting conditions set down by the board of directors and were
allotted to the recipients of the awards.
In April 2021, a further 281,261 Restricted Share Awards (RSAs)
met the vesting conditions set down by the board of directors and
were allotted to the recipients of the awards.
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 2021 H1 2020
Numerator (amounts in EUR'000):
Profit attributable to owners of the Parent 6,357 6,198
Denominator (Number):Basic shares outstanding
Restricted share awards
Restricted share options
Diluted weighted average shares outstanding 212,472,413 211,675,024
----------------------------------------------
- 844,000
6,041,000 3,981,000
218,513,413 216,500,024
---------------------------------------------- ----------- -----------
Earnings per Ordinary Share
Basic earnings per share, EUR 2.99c 2.93c
Diluted earnings per share, EUR 2.91c 2.86c
----------- -----------
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
Awards in
Reconciliation of outstanding share awards thousands
-------------------------------------------- ----------
Outstanding on 1 January 2021 844
Forfeited during the period (47)
Exercised during the period (797)
Granted during the period -
Outstanding at 30 June 2021 -
-------------------------------------------- ----------
Number of
Options in
Reconciliation of outstanding share options thousands
--------------------------------------------- -----------
Outstanding on 1 January 2021 3,981
Forfeited during the period -
Exercised during the period -
Granted during the period 2,060
Outstanding at 30 June 2021 6,041
--------------------------------------------- -----------
14. Intangible Assets
Acquisition Product
of intellectual development Goodwill
property Total
EUR'000 EUR'000 EUR'000 EUR'000
----------------------------------------- ----------------- ------------- ----------- -------
Balance at 1 January 2021 - 5,847 31,140 36,987
----------------------------------------- ----------------- ------------- ----------- -------
Investments / Internally developed - 419 - 419
----------------------------------------- ----------------- ------------- ----------- -------
Acquisitions 2,481 - - 2,481
----------------------------------------- ----------------- ------------- ----------- -------
Disposals - - -
----------------------------------------- ----------------- ------------- ----------- -------
Amortisation of intellectual property (145) (145)
----------------------------------------- ----------------- ------------- ----------- -------
Impairment of goodwill - - - -
----------------------------------------- ----------------- ------------- ----------- -------
Foreign currency translation differences 42 - 509 551
----------------------------------------- ----------------- ------------- ----------- -------
Balance at 30 June 2021 2,378 6,266 31,649 40,293
----------------------------------------- ----------------- ------------- ----------- -------
15. Property, Plant and Equipment
Capital expenditure in the first half-year amounted to EUR4.5
million (30 June 2020 EUR9.8 million), of which EUR2.5 million was
invested in plant and equipment (30 June 2020 EUR4.5 million) and
EUR2 million in ROU assets (30 June 2020 EUR5.3 million). The
depreciation charge for property, plant and equipment is recognised
in the following line items in the income statement:
H1 H1
2021 2020
EUR'000 EUR'000
-------------------------------------------------- ------- --------
Cost of sales 2,259 2,024
Operating Costs 1,183 1,125
Total depreciation charge for property, plant and
equipment 3,442 3,149
-------------------------------------------------- ------- --------
16. Inventory
30 June 31 December
2021 2020
EUR'000 EUR'000
------------------------------------ ------- ------------
Finished goods and work-in-progress 46,339 42,326
Capital equipment 532 504
Raw materials 11,343 10,187
------------------------------------ ------- ------------
Total inventory 58,214 53,017
------------------------------------ ------- ------------
The Group recorded an impairment of EURNIL against inventory to
take account of net realisable value during the period ended 30
June 2021 (30 June 2020: EUR257,000).
17. Trade and other receivables
30 June 31 December
2021 2020
EUR'000 EUR'000
-------------------------------- ------- ----------------
Gross receivable 23,553 21,830
Provision for impairment (1,305) (1,190)
Net trade and other receivables 22,248 20,640
-------------------------------- ------- ----------------
Provision
for impairment
EUR'000
----------------------------------------- ------------------
Balance at 1 January 2021 (1,190)
Additions (115)
Balance at 30 June 2021 (1,305)
----------------------------------------- ------------------
30 June 31 December
2021 2020
EUR'000 EUR'000
Less than 60 days 20,499 17,878
61 to 90 days 1,271 1,350
Greater than 90 days 478 1,412
-------------------------------- ------- ------------
Net trade and other receivables 22,248 20,640
-------------------------------- ------- ------------
At 30 June 2021, EUR1.7 million (8%) of trade receivables
balance were past due but not impaired (31 December 2020, EUR3.8
million (13%).
18. Loans, borrowings and lease liabilities
30 June 31 December
2021 2020
Maturity EUR'000 EUR'000
--------------------------------------------------------- ------- ------------
Loans and borrowings 2021-2034 14,231 11,090
Lease liabilities 2021-2026 5,407 5,494
ROU lease liability 2021-2029 6,081 5,027
---------------------------------------------- ----------
Total Loans, borrowings and lease liabilities 25,719 21,611
------- ------------
Current 8,981 6,822
------- ------------
Non-current 16,738 14,789
------- ------------
The Group has a number of bank loans and lease liabilities in
Ireland, the United Kingdom, USA, Sweden, Peru, Australia, Namibia
and Chile with a mixture of variable and fixed interest rates. The
Group has been in compliance with all debt agreements during the
periods presented. The loan agreements in Ireland carry restrictive
financial covenants.
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
2020 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 2021 and 31
December 2020 were as follows:
30 June 31 December
2021 2020
EUR'000 EUR'000
-------------------------- -------- -----------
Cash and cash equivalents 11,684 17,045
Loans and borrowings 25,719 21,611
Shareholders' equity 136,338 132,936
-------------------------- -------- -----------
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 2021, 56% (2020: 67%) of Mincon's revenue EUR67 million (30
June 2020: EUR64 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
2021 H1 2021 2020 H1 2020
Euro exchange rates Closing Average Closing Average
-------------------- --------------- -------- ------------ --------
US Dollar 1.19 1.20 1.22 1.12
Australian Dollar 1.58 1.56 1.59 1.65
Canadian Dollar 1.47 1.50 1.56 1.53
Great British Pound 0.86 0.87 0.89 0.90
South African Rand 16.98 17.51 17.91 18.31
Swedish Krona 10.13 10.12 10.06 10.48
-------------------- --------------- -------- ------------ --------
There has been no material change in the Group's currency
exposure since 31 December 2020. 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 contingent 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 contingent
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 2021 are as
follows:
Deferred
contingent
consideration
EUR'000
----------------------------------------- --------------
Balance at 1 January 2021 4,723
----------------------------------------- --------------
Arising on acquisition 2,122
----------------------------------------- --------------
Cash payment (1,832)
----------------------------------------- --------------
Fair value movement 1
----------------------------------------- --------------
Foreign currency translation differences 40
----------------------------------------- --------------
Balance at 30 June 2021 5,054
----------------------------------------- --------------
20. Commitments
The following capital commitments for the purchase of property,
plant and equipment had been authorised by the directors at 30 June
2021:
Total
EUR'000
------------------- --------
Contracted for 2,705
Not contracted for 2,227
------------------- --------
Total 4,932
------------------- --------
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 2021, the share capital of Mincon Group plc was
56.32% owned by Kingbell Company (31 December 2020 56.54%), 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 2020 in June 2021,
Kingbell Company receive EUR2.5 million.
There were no other related party transactions in the half year
ended 30 June 2021 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 2020
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 5 August 2021, 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 10 September 2021 to
shareholders on the register at the close of business on 20 August
2021.
Acquisition of Attakroc Inc
On the 28th July 2021, the Group completed the acquisition of
Attakroc Inc., a reseller of drilling consumables for a
consideration of CAD$2.7 million. The goodwill arising on
acquisition is circa EUR700,000 million, with expected 2021 revenue
of CAD$1.2 million.
24. Approval of financial statements
The Board of Directors approved the interim condensed
consolidated financial statements for the six months ended 30 June
2021 on 09 August 2021.
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END
IR FFFFITFITIIL
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