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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Mincon Group Plc | LSE:MCON | London | Ordinary Share | IE00BD64C665 | ORD EUR0.01 (CDI) |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 45.00 | 42.00 | 48.00 | 45.00 | 45.00 | 45.00 | 40,000 | 08:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Mng Machy, Eq, Ex Oil Field | 156.93M | 7.47M | 0.0352 | 12.78 | 95.61M |
TIDMMCON
RNS Number : 6016H
Mincon Group Plc
19 August 2016
Mincon Group plc
2016 Half Year Financial Results
Mincon Group plc (ESM: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 2016.
Percentage change 30 June 30 June in 2016 2015 period -------------------------------------- ------- -------- ----------- Product revenue: Sale of Mincon product (EUR'000) 27,877 25,460 9% Sale of third party product (EUR'000) 8,436 7,280 16% Total revenue (EUR'000) 36,313 32,740 11% -------------------------------------- ------- -------- ----------- Sale of Mincon product as a % of total revenue 77% 78% -------------------------------------- ------- -------- ----------- Operating profit (EUR'000) 4,903 4,507 9% -------------------------------------- ------- -------- ----------- Profit before tax (EUR'000) 5,008 4,499 11% -------------------------------------- ------- -------- ----------- Profit attributable to shareholders of the parent company (EUR'000) 4,068 3,514 16% -------------------------------------- ------- -------- ----------- Earnings per share (EUR) 0.019 0.017 12% -------------------------------------- ------- -------- -----------
Joe Purcell, Chief Executive Officer, commenting on the results, said:
"Revenue for H1 was 11% ahead of last year at EUR36.3 million, which tracked through to an improvement of 11% in profit before tax to EUR5.0 million (H1 2015 EUR4.5 million), and a 12% improvement in earnings per share.
The gross profit margin in the first half of 2016 of 41% was consistent with the same period last year (H1 2015: 41%), the operating profit margin was 13.5% (H1 2015 13.8%), and the profit attributable to shareholders improved to 11.2% of sales (H1 2015 10.7%).
These are relatively satisfactory numbers against the backdrop of the cyclically depressed volumes and margins in some of the sectors we service.
These results were achieved after increasing provisions to continue building a robust balance sheet, increased R&D investment which we expense, and incurring a EUR0.4 million charge to reduce head count in operations. While some of these charges are not expected to repeat, we believe it is appropriate to approach our reserves on a considered basis while delivering organic growth in profits and sales.
We are seeing growth in the Americas and Australia, with only Africa retrenching in the first half. The instability of the South African rand, while relatively neutral in it's effect on our accounts during the first half of the year, has caused significant caution and margin pressure in the South African market in the short term and has had a knock on effect to neighbouring African countries.
We are investing in our factories to provide for the expansion of our product ranges, and new equipment is in the process of being commissioned in several of our manufacturing plants. We expect to begin to see sales growth from these products in the 2017 year, with the rest of 2016 being used to test and complete designs, and to develop marketing and sales plans.
In conjunction with the release of these half year results, the Board of Mincon Group plc has recommended the payment of an interim dividend in the amount of EUR0.01 (1 cent) per ordinary share, payable in September 2016".
Products & markets
Over 50% of Group revenue is derived from sales of Down The Hole (DTH) products and 77% of turnover is manufactured in the Mincon factories. Within the product line-up we have seen some cyclical lows in, for example, Reverse Circulation (RC) products for the exploration market, but on the other hand, some products have begun to grow quickly as drilling techniques change and new uses are found for existing and newly developed products.
We have been considering how to best develop the Group, and have followed up on our analysis by beginning to establish regional hubs in Chile for South America and in Perth for Australasia. Ireland acts as the base for Europe. In setting up these regional hubs we can locate inventory for onward distribution and facilitate better informed and timely decision making. Combining this with standardised, more operationally oriented reporting metrics and systems, we should see benefits in the years to come. The Americas and Australia are the fastest growing markets for the Group.
Since the majority of what we sell is Mincon-manufactured product, most of the inventory is either the raw materials that we use, our own products going through the factories as work in progress (WIP) or finished products located at our distribution points. Inventory reductions should be obtainable from redeploying our own inventory, and turning production over to back orders or tuning it down while we trade inventory down to target levels.
Acquisitions
We have been active in approaching potential acquisition targets, but we did not see value for the Group in the terms that were being sought by vendors, compared with the cost of investing in our own engineering competencies to build a competitive offering. We consider these opportunities on a case-by-case basis.
Through the cycle we have seen Private Equity owned companies being withdrawn from sale and refinanced, and other companies seeking unrealistic prices even while their sales and profits fall. However, we are still committed to growing both organically and by acquisition. We prefer to control our own products and our own channels to market.
We have elected to invest primarily in organic growth rather than exhaust our resources by buying that which we could competitively make ourselves. We also continue to invest in new products as they move into beta testing from the research stage, and in keeping with our R&D policy, we expense those costs as they are incurred.
Currency movements
We have put work into understanding and planning to mitigate the P&L impacts of currency movements, should these steps be required, but we have seen a broadly neutral position in the first half of the year. We make our decisions based on what the operations require for long term funding, and the standard operating terms between subsidiaries that allow predictability to our internal cash flows. We monitor this carefully with the aim of achieving neutrality in the P&L impact of movements.
Profit margins
The gross margin has been steady at 41% for the last few reporting periods as the growth of the Group normalises. Added volume delivers additional profit at these levels, and we continue to invest through the down cycle to improve our factories and the availability of our products to our customers. Our operating profit margin has been steady at 13.5% (H1 2015, 13.8%), and the profit attributable to shareholders at 11.2% (H1 2015, 10.7%) has improved over the same period last year.
Balance sheet and cash flows
The Mincon Group balance sheet remains strong with net assets of EUR99.9 million. Receivables have increased by EUR3.1 million in H1 this year, following the normal seasonal pattern, and 74% of these balances are current, which is not significantly different from usual.
Inventory has seen some growth since the year end, due to a number of factors including replacing inventory that was previously consignment inventory from third parties, and taking back inventory from distributors being replaced by our own subsidiaries. Raw materials also increased as orders reached a seasonal peak for volumes to be delivered in the second half. Working capital again absorbed approximately EUR5 million of cash in H1 as it did during the same period last year, and if the cycle follows through we should aim to recover this from working capital by the year end, subject to the requirements of the new product cycles.
The Group had net cash of EUR33.8 million at 30 June 2016, (31 December EUR38.6 million), with capital expenditure of c.EUR3 million (H1 2015, EUR0.84 million) replacing acquisition investment in the first half compared to last year. The investment is directed at expanding production of the current ranges, improved processes and equipment for the underinvested Marshall's factory and on the equipment for new products. We see this investment trend continuing for the next two years, subject to the strategy being successful, and itemised approval from the Board.
This engineering investment path is designed to result in external work being brought in-house and manufacturing being expanded and standardised to protect quality, deliver improved consistency and support production efficiency.
Dividend
The Board of Mincon Group plc has recommended the payment of an interim dividend in the amount of EUR0.01 (1 cent) per ordinary share, which will be paid on 26 September, 2016 to shareholders on the register at the close of business on 2 September, 2016.
Outlook
We are seeing growth in our sales, which we believe is due to increased market share rather than a general improvement in our target markets. Having said that, there are improvements in some commodity prices and certain end-markets appear to be beginning to return to growth. This should lead on to a recovery in the exploration businesses in due course and then across the mining sector. We believe that the underlying tone is improving, even if this is anecdotal rather than observable.
We continue to engage in dialogue with potential acquisitions and investments, but in some cases, the asking price is not supported by the earnings, and others have withdrawn to work through the down-turn in private. Nevertheless there are fine companies in the sector, worth acquiring, and we are actively continuing to identify and engage with those that we believe would add more than they would cost, and which would continue to fill out our geographic footprint, and our product and service offering.
19 AUGUST 2016
For further information, please contact:
Mincon Group plc Joe Purcell Chief Tel: + 353 (61) 361 Executive Officer 099 Peter E. Lynch Chief Operating Officer Davy Corporate Finance Tel: +353 (1) 679 6363 (Nominated Adviser and ESM Adviser) Anthony Farrell Daragh O'Reilly Unaudited condensed consolidated income statement For the 6 months ended 30 June 2016 Notes 2016 2015 H1 H1 EUR'000 EUR'000 -------------------------------------------------- ----- --------- --------- Continuing operations Revenue 2 36,313 32,740 Cost of sales 4 (21,381) (19,262) -------------------------------------------------- ----- --------- --------- Gross profit 14,932 13,478 General, selling and distribution expenses 4 (10,029) (8,971) Operating profit 4,903 4,507 Finance cost (85) (98) Finance income 90 179 Foreign exchange gain/(loss) 135 2 Fair value movement on contingent consideration (35) (91) Profit before tax 5,008 4,499 -------------------------------------------------- ----- --------- --------- Income tax expense (930) (951) -------------------------------------------------- ----- --------- --------- Profit for the period 4,078 3,548 -------------------------------------------------- ----- ========= ========= Profit attributable to: - owners of the Parent 4,068 3,514 - non-controlling interests 10 34 Earnings per Ordinary Share Basic earnings per share, EUR 7 0.019 0.017 Diluted earnings per share, EUR 7 0.019 0.017 -------------------------------- ------ -----
The accompanying notes are an integral part of these financial statements.
Unaudited condensed consolidated statement of comprehensive income For the 6 months ended 30 June 2016 2016 2015 H1 H1 EUR'000 EUR'000 ------------------------------------------- ------- -------- Profit for the period 4,078 3,548 Other comprehensive income/(loss): Items that are or may be reclassified subsequently to profit or loss: Foreign currency translation - foreign operations 31 1,829 Other comprehensive income/(loss) for the period 31 1,829 ------------------------------------------- ------- -------- Total comprehensive income for the period 4,109 5,377 ------------------------------------------- ------- -------- Total comprehensive income attributable to: - owners of the Parent 4,099 5,343 - non-controlling interests 10 34 ------------------------------------------- ------- --------
The accompanying notes are an integral part of these financial statements.
Unaudited consolidated statement of financial position As at 30 June 2016 30 June 31 December 2016 2015 Notes EUR'000 EUR'000 ------------------------------------- ----- -------- ------------ Non-Current Assets Goodwill 9 11,901 11,459 Property, plant and equipment 10 18,690 17,277 Deferred tax asset 6 556 480 Other non-current assets 282 342 -------------------------------------- ----- -------- ------------ Total Non-Current Assets 31,429 29,558 -------------------------------------- ----- -------- ------------ Current Assets Inventory 11 33,776 32,045 Trade and other receivables 12 16,180 13,021 Other current assets 1,094 649 Current tax asset 6 484 733 Short term deposits 14(a) 30,860 30,781 Cash and cash equivalents 5,223 10,644 Total Current Assets 87,617 87,873 -------------------------------------- ----- -------- ------------ Total Assets 119,046 117,431 -------------------------------------- ----- -------- ------------ Equity Ordinary share capital 2,105 2,105 Share premium 67,647 67,647 Merger reserve 39 39 Capital redemption reserve (17,393) (17,393) Share based payment reserve 8 26 16 Foreign currency translation reserve (1,429) (1,460) Retained earnings 48,448 46,485 -------------------------------------- ----- -------- ------------ Equity attributable to owners of Mincon Group plc 99,443 97,439 -------------------------------------- ----- -------- ------------ Non-controlling interests 475 465 Total Equity 99,918 97,904 Non-Current Liabilities Loans and borrowings 13 1,586 2,141 Deferred tax liability 6 193 556 Deferred contingent consideration 14(c) 6,335 6,347 Other liabilities 670 722 Total Non-Current Liabilities 8,784 9,766 -------------------------------------- ----- -------- ------------ Current Liabilities Loans and borrowings 13 683 674 Trade and other payables 6,123 6,780 Accrued and other liabilities 3,023 2,009 Current tax liability 6 515 298 Total Current Liabilities 10,344 9,761 -------------------------------------- ----- -------- ------------ Total Liabilities 19,128 19,527 -------------------------------------- ----- -------- ------------ Total Equity and Liabilities 119,046 117,431 -------------------------------------- ----- -------- ------------
The accompanying notes are an integral part of these financial statements.
Unaudited condensed consolidated statement of cash flows For the 6 months ended 30 June 2016 --------------------------------------------- ----------------- H1 H1 2016 2015 EUR'000 EUR'000 --------------------------------------------- ------- -------- Operating activities: Profit for the period 4,078 3,548 Adjustments to reconcile profit to net cash provided by operating activities: Depreciation 1,115 1,146 Finance cost 85 98 Finance income (90) (179) Income tax expense 930 951 Other non-cash movements (149) 128 --------------------------------------------- ------- -------- 5,969 5,783 Changes in trade and other receivables (3,090) (2,925) Changes in prepayments and other assets (449) (747) Changes in inventory (1,314) (1,357) Changes in capital equipment inventory (122) (498) Changes in trade and other payables 365 246 --------------------------------------------- ------- -------- Cash provided by operations 1,359 502 Interest received 90 179 Interest paid (85) (98) Income taxes paid (960) (1,183) --------------------------------------------- ------- -------- Net cash provided by/(used in) operating activities 404 (600) --------------------------------------------- ------- -------- Investing activities Purchase of property, plant and equipment (2,977) (840)
Proceeds from sale of property, plant 86 - and equipment Payment of deferred contingent consideration (340) - Investment in short term deposits (79) (151) (Investment in)/proceeds from joint venture investments 54 46 Acquisitions, net of cash acquired - (3,832) Net cash provided by/(used in) investing activities (3,256) (4,777) --------------------------------------------- ------- -------- Financing activities Dividends paid (2,105) (2,105) Repayment of loans and finance leases (591) (510) Drawdown of loans 40 1,100 Net cash provided by/(used in) financing activities (2,656) (1,515) --------------------------------------------- ------- -------- Effect of foreign exchange rate changes on cash 87 91 --------------------------------------------- ------- -------- Net increase/(decrease) in cash and cash equivalents (5,421) (6,801) --------------------------------------------- ------- -------- Cash and cash equivalents at the beginning of the year 10,644 14,082 --------------------------------------------- ------- -------- Cash and cash equivalents at the end of the period 5,223 7,281 --------------------------------------------- ======= ========
The accompanying notes are an integral part of these financial statements.
Unaudited condensed consolidated statement of changes in equity for the 6 months ended 30 June 2016
Share Foreign Capital based currency Share Share Merger Other redemption Capital payment translation Retained Non-controlling Total capital premium reserve reserve reserve contribution 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 EUR'000 EUR'000 ---------------- -------- ------- -------- ------- ---------- ------------ ------- ----------- -------- ------- --------------- ------- Balances at 30 June 2015 2,105 67,647 (17,393) - 39 - 16 1,713 44,124 98,251 451 98,702 ---------------- -------- ------- -------- ------- ---------- ------------ ------- ----------- -------- ------- --------------- ------- Comprehensive income: Profit for the period - - - - - - - - 4,466 4,466 14 4,480 Other comprehensive income/(loss): Foreign currency translation - - - - - - - (3,173) - (3,173) - (3,173) ----------- -------- ------- --------------- ------- Total comprehensive income (3,173) 4,466 1,293 14 1,307 ----------- -------- ------- --------------- ------- Transactions with Shareholders: Acquisition of - - - - - - - - - - - - non-controlling interest Recognition of - - - - - - - - - - - - non-controlling interest on acquisition Dividend payment - - - - - - - - (2,105) (2,105) - (2,105) Share-based - - - - - - - - - - - - payments Redemption of - - - - - - - - - - - - subscriber shares ---------------- -------- ------- -------- ------- ---------- ------------ ------- ----------- -------- ------- --------------- ------- Balances at 31 December 2015. 2,105 67,647 (17,393) - 39 - 16 (1,460) 46,485 97,439 465 97,904 ---------------- -------- ------- -------- ------- ---------- ------------ ------- ----------- -------- ------- --------------- ------- Comprehensive income: Profit for the period - - - - - - - - 4,068 4,068 10 4,078 Other comprehensive income/(loss): Foreign currency translation - - - - - - - 31 - 31 31 ----------- -------- ------- --------------- ------- Total comprehensive income 31 4,068 4,099 10 4,109 ----------- -------- ------- --------------- ------- Transactions with Shareholders: Share-based payments - - - - - - 10 - - 10 - 10 Dividend payment - - - - - - - - (2,105) (2,105) - (2,105) Balances at 30 June 2016 2,105 67,647 (17,393) - 39 - 26 (1,429) 48,448 99,443 475 99,918 ---------------- -------- ------- -------- ------- ---------- ------------ ------- ----------- -------- ------- --------------- -------
The accompanying notes are an integral part of these financial statements.
Notes to the consolidated interim financial statements
1 General information and basis of preparation
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 2016 (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 18 August 2016.
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 2015 as set out in the 2015 Annual Report (the "2015 Accounts").
The Interim Financial Statements do not constitute statutory financial statements. The statutory financial statements for the year ended 31 December 2015, extracts from which are included in these Interim Financial Statements, were prepared under IFRSs as adopted by the EU and will be filed with the Registrar of Companies with the Company's 2015 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 2015 Accounts.
Critical accounting 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 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 2015 Accounts.
2. Revenue
H1 H1 2016 2015 EUR'000 EUR'000 ---------------------------- ------- -------- Product revenue: Sale of Mincon product 27,877 25,460 Sale of third party product 8,436 7,280 Total revenue 36,313 32,740 ---------------------------- ------- --------
3. 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, Australia, the United States and Canada and sales offices in nine other locations including South Africa, Senegal, Ghana, Namibia, Tanzania, Sweden, Poland, 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.
Revenue by region (by location of customers):
H1 H1 2016 2015 EUR'000 EUR'000 ----------------------------------------- ------- -------- Region: Ireland 390 371 Americas 12,539 9,508 Australasia 8,521 7,083 Europe, Middle East, Africa 14,863 15,778 Total revenue from continuing operations 36,313 32,740 ----------------------------------------- ------- -------- Non-current assets by region (location of assets): 30 June 31 December 2016 2015 EUR'000 EUR'000 Region: Ireland 6,176 5,681 Americas 13,659 12,303 Australasia 6,913 6,846 Europe, Middle East, Africa 4,125 4,248 Total non-current assets(1) 30,873 29,078 ---------------------------------------------------- ------- ----------- (1) Non-current assets exclude deferred tax assets.
4. 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 2016 2015 EUR'000 EUR'000 ------------------------------ ------- ------- Raw materials 7,939 7,310 Third party product purchases 6,369 5,706 Employee costs 3,645 3,287 Depreciation 847 854 Other 2,581 2,105 Total cost of sales 21,381 19,262 ------------------------------ ------- -------
Other operating expenses
H1 H1 2016 2015 EUR'000 EUR'000 ------------------------------------------------- ----------------- ----------------- Employee costs (including director emoluments) 5,914 5,030 Depreciation 268 292 Gain on Sale of Fixed Asset (86) - Other 3,933 3,649 Total other operating costs 10,029 8,971 -------------------------------------------------- ----------------- ----------------- 5. Employee information H1 H1 2016 2015 EUR'000 EUR'000 ----------------------------------------- ------- -------- Wages and salaries - including directors 8,175 7,276 Severance payments 400 - Social security costs 601 622 Pension costs of defined contribution plans 373 418 Share based payments 10 - Total employee costs 9,559 8,316 ----------------------------------------- ------- -------- The average number of employees was as follows: H1 H1 2016 2015 Number Number --------------------------------------- ------ ------- Sales and distribution 75 79 General and administration 59 52 Manufacturing, service and development 164 144 --------------------------------------- ------ ------- Average number of persons employed 298 275 --------------------------------------- ------ -------
6. Income Tax
The Group's consolidated effective tax rate in respect of operations for the six months ended 30 June 2016 was 18.6% (30 June 2015: 21.3%). The decrease in the effective rate of tax to 18.6% in 2016 was due to the change in the geographic spread of profits of the Group entities, reflective of the impact on margins of the strengthening of currencies in non-euro jurisdictions. The tax charge for the six months ended 30 June 2016 of EUR0.9 million (30 June 2015: EUR1 million) comprises a deferred tax charge 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 2016 2015 EUR'000 EUR'000 ------------------------ ------- ------------ Current tax prepayments 484 733 Current tax payable (515) (298) ------------------------ ------- ------------ Net current tax (31) 435 ------------------------ ------- ------------
The net deferred tax liability at period-end was as follows:
30 June 31 December 2016 2015 EUR'000 EUR'000 ----------------------- ------- ------------ Deferred tax asset 556 480 Deferred tax liability (193) (556) ----------------------- ------- ------------ Net deferred tax 363 (76) ----------------------- ------- ------------
7. 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 six months ended 30 June:
H1 H1 2016 2015 Numerator (amounts in EUR'000): Profit attributable to owners of the Parent 4,068 3,514 Earnings per Ordinary Share Basic earnings per share, EUR 0.019 0.017 Diluted earnings per share, EUR 0.019 0.017 Denominator (Number): Basic weighted-average shares outstanding 210,541,102 210,541,102 Diluted weighted-average shares outstanding 210,554,991 210,541,102
8. Share based payment
During the half year ended 30 June 2016, the Remuneration Committee of the Board of Directors made a grant of approximately 500,000 Share Awards (SAs) to members of the senior management team, excluding executive directors. Vesting of awards is conditional on the Company attaining specified performance targets over a period of at least three financial years. Those targets will be aligned with the Company's long term business strategy. These awards will vest three years after the date of the award, subject to the group achieving compound growth in EPS of CPI plus 5% over 2016, 2017 and 2018.
The fair value of services received in return for SAs granted is measured by market value of the shares, at EUR0.70 per share, on the day the awards were granted.
9. Goodwill
EUR'000 ----------------------------------------- --------------------------- Balance at 1 January 2016 11,459 ----------------------------------------- --------------------------- Acquisitions - ----------------------------------------- --------------------------- Foreign currency translation differences 442 ----------------------------------------- --------------------------- Balance at 30 June 2016 11,901 ----------------------------------------- ---------------------------
10. Property, Plant and Equipment
Capital expenditure in the first half-year amounted to EUR3 million (30 June 2015: EUR0.8 million) of which EUR0.2 million (30 June 2015: EUR0.1 million) was invested in buildings and EUR2.8 million (30 June 2015: EUR0.7 million) was invested in plant and machinery.
The depreciation charge for property, plant and equipment is recognised in the following line items in the income statement:
H1 H1 2016 2015 EUR'000 EUR'000 --------------------------------------------- ------- -------- Cost of sales 847 854 Selling, general and administrative expenses 268 292 Total depreciation charge for property, plant and equipment 1,115 1,146 --------------------------------------------- ------- --------
11. Inventory
30 June 31 December 2016 2015 EUR'000 EUR'000 ------------------------------------ ------- ------------ Finished goods and work-in-progress 23,969 23,408 Capital equipment 3,928 3,805 Raw materials 5,879 4,832 ------------------------------------ ------- ------------ Total inventory 33,776 32,045 ------------------------------------ ------- ------------
There was no material write-down of inventories to net realisable value during the period ended 30 June 2016 (30 June 2015: EURNil).
12. Trade and other receivables
30 June 31 December 2016 2015 EUR'000 EUR'000 -------------------------------- ------- ------------ Gross receivable 17,025 13,669 Provision for impairment (845) (648) Net trade and other receivables 16,180 13,021 -------------------------------- ------- ------------ 30 June 31 December 2016 2015 EUR'000 EUR'000 Less than 60 days 11,900 9,607 61 to 90 days 2,177 1,931 Greater than 90 days 2,103 1,483 -------------------------------- ------- ------------ Net trade and other receivables 16,180 13,021 -------------------------------- ------- ------------
At 30 June 2016, EUR2.1 million (13%) of trade receivables of our total trade and other receivables balance was past due but not impaired (31 December 2015, EUR1.5 million (11%)).
No customer accounted for more than 10% of trade and other receivables balance at any period end.
Credit Risk
The majority of the Group's customers are third party distributors of drilling tools and equipment. The maximum exposure to credit risk for trade and other receivables by geographic region was as follows at the balance sheet dates presented:
30 June 31 December 2016 2015 EUR'000 EUR'000 ------------------------------------- ------- ----------- Ireland 69 51 Americas 5,791 3,693 Australasia 2,946 2,746 Europe, Middle East, Africa 7,374 6,531 Total amounts owed, net of provision for impairment 16,180 13,021 ------------------------------------- ------- -----------
13. Loans and borrowings
30 June 31 December 2016 2015 Maturity EUR'000 EUR'000 -------------------------------------- ------- ------------ Bank loans 2016-2021 1,452 1,684 Finance leases 2016-2020 817 1,131 --------------------------- ---------- Total Loans and borrowings 2,269 2,815 ------- ------------ Current 683 674 ------- ------------ Non-current 1,586 2,141 ------- ------------
The Group has a number of bank loans and finance leases in Australia, the United States, Canada, Chile and Namibia with a mixture of variable and fixed interest rates. The Group has been in compliance with all debt agreements during the periods presented. None of the debt agreements carry restrictive financial covenants. Bank loans are secured on land & buildings with a net book value of approximately AUS$3,500,000 (circa EUR2.3 million) and on plant and equipment with a net book value of US$682,000 (circa EUR0.6 million).
During the year there was a drawdown of EUR40,000 in new finance debt and repayment of EUR0.6 million of existing finace debt.
14. Financial Risk Management
We are 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 2015 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 2016 and 31 December 2015 were as follows:
30 June 31 December 2016 2015 EUR'000 EUR'000 -------------------------- -------- ----------- Cash and cash equivalents 5,223 10,644 Short term deposits 30,860 30,781 Loans and borrowings (2,269) (2,815) Shareholders' equity 99,443 97,439 -------------------------- -------- -----------
14. 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 euros. 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'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, Sterling and Swedish Krona.
Almost 63% of Mincon's revenue is generated in these currencies, compared to less than 15% of the Group's cost of sales. This had a significant translational impact on revenue when sales in local currency are converted into euro with a knock-on impact on the Group's gross margin and net margin. The majority of the group's manufacturing base has a euro or US dollar 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 strengthening of the US Dollar and other currencies has impacted upon equity with an increase in recognised net assets of non-Euro reporting subsidiaries of EUR2 million due to foreign exchange movements in the year on the retranslation of the net investment in foreign operations.
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 2016 H1 2016 2015 H1 2015 Euro exchange rates Closing Average Closing Average -------------------- ------- -------- ------------ -------- US Dollar 1.11 1.12 1.09 1.12 Australian Dollar 1.49 1.52 1.49 1.93 South African Rand 16.40 17.19 16.93 13.31 Swedish Krona 9.41 9.30 9.18 9.34 Sterling 0.84 0.79 0.74 0.72 -------------------- ------- -------- ------------ --------
There has been no material change in the Group's currency exposure since 31 December 2015. Such exposure comprises the monetary assets and monetary liabilities that are not denominated in the functional currency of the operating unit involved.
14. Financial Risk Management (continued)
c) Fair values
Fair value is the amount at which a financial instrument could be exchanged in an arms-length transaction between informed and willing parties, other than in a forced or liquidation sale. The contractual amounts payable less impairment provision of trade receivables, trade payables and other accrued liabilities approximate to their fair values. Under IFRS 7, the disclosure of fair values is not required when the carrying amount is the reasonable approximation of fair value.
There are no material differences between the carrying amounts and fair value of our financial liabilities as at 31 December 2015 or 30 June 2016.
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 primarily dependent on the future performance of the acquired businesses against predetermined targets and on management's current expectations thereof. An increase and decrease of 10% in management's expectation as to the amounts that will be paid out would increase or decrease the value of contingent deferred contingent consideration at 30 June 2016 by EUR0.6 million. The significant unobservable inputs are the performance of the acquired businesses and the timing of the pay-out.
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 year to 30 June are as follows:
Deferred contingent consideration EUR'000 ----------------------------------------- -------------- Balance at 1 January 2016 6,347 ----------------------------------------- -------------- Cash payment (340) ----------------------------------------- -------------- Fair value movement 35 ----------------------------------------- -------------- Foreign currency translation differences 293 ----------------------------------------- -------------- Balance at 30 June 2015 6,335 ----------------------------------------- --------------
15. Litigation
The Group is not involved in legal proceedings that could have a material adverse effect on its results or financial position.
16. Related Parties
We have related party relationships with our subsidiaries, directors and senior key management personnel. All transactions with subsidiaries eliminate on consolidation and are not disclosed.
As at 30 June 2016 and 31 December 2015, the share capital of Mincon Group plc was 56.84% owned by Kingbell Company which is ultimately controlled by Patrick Purcell and members of the Purcell family. Patrick Purcell is also a director of the Company. On 9 and 10 June 2016, Ballybell Ltd, a compay controlled by non-Executive Director Kevin Barry, reduced it's shareholding in Mincon Group to 7.09% (31 December 2015 14.21%). In June 2016, the Group paid a final dividend of EUR0.01 to all shareholders on the register at 27 May 2016. The total dividend paid to Kingbell and Ballybell Limited was EUR1,196,712 and EUR299,178 respectively.
There were no other related party transactions in the half year ended 30 June 2016 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 2015 Annual Report that could have a material effect on the financial position or performance of the Company in the same period.
17. Events after the reporting date
Dividend
On 18 August 2016, the Board of Mincon Group plc approved the payment of an interim dividend in the amount of EUR0.01 (1 cent) per ordinary share. This amounts to a total dividend payment of EUR2.1m which will be paid on 26 September 2016 to shareholders on the register at the close of business on 2 September 2016.
18. Approval of financial statements
The Board of Directors approved the interim condensed consolidated financial statements for the six months ended 30 June 2016 on 18 August 2016.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LLFLDTIITLIR
(END) Dow Jones Newswires
August 19, 2016 02:00 ET (06:00 GMT)
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