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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% | 46.00 | 42.00 | 50.00 | 46.00 | 46.00 | 46.00 | 0.00 | 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 | 13.07 | 97.74M |
From Apr 2019 to Apr 2024
TIDMMCON
RNS Number : 2123O
Mincon Group Plc
17 August 2017
Mincon Group plc
2017 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 2017.
Hot Features
Premium
Percentage
30 June 30 June change
2017 2016 in
EUR'000 EUR'000 Period
-------------------------------------- ------- -------- -----------
Product revenue:
Sale of Mincon product (EUR'000) 35,211 27,877 26%
Sale of third party product (EUR'000) 11,745 8,436 39%
Total revenue (EUR'000) 46,956 36,313 29%
-------------------------------------- ------- -------- -----------
Sale of Mincon product as a %
of total revenue 75% 77%
-------------------------------------- ------- -------- -----------
Profit before tax (EUR'000) 6,317 5,008 26%
-------------------------------------- ------- -------- -----------
Profit attributable to shareholders
of the parent company (EUR'000) 5,072 4,068
-------------------------------------- ------- -------- -----------
Earnings per share (EUR) 0.024 0.019 26%
-------------------------------------- ------- -------- -----------
Joe Purcell, Chief Executive Officer, commenting on the results, said:
"We said with the financial accounts for 2016 that we had begun to set ourselves aggressive targets for growth in sales and profits. The growth we referred to at the end of Q1 has been sustained for the remainder of the first half with 29% growth across all the revenue categories, and 23% in constant currency terms.
We have also made a significant contingent gain, and taken some exceptional charges in the half year, and the outcome of those amendments has been a very minor adjustment to the profit before tax. Without those exceptional items the key numbers for H1, 2017 are:
-- Revenue up 29% to EUR47 million -- Mincon manufactured product up 26% to EUR35.2 million -- Third party product sales up 39% to EUR11.7 million -- Gross profit up 23% to EUR18.4 million -- Ebitda up 35% to EUR8.15 million -- Operating profit up 38% to EUR6.8 million
In the table above we see that the profit before tax in H1, 2017 has increased by 26% to EUR6.3 million from EUR5 million in H1, 2016, and the earnings per share also increased by 26%. We are beginning to make real headway as a Group as the sector improves.
The underlying momentum is greater than this, since we had to absorb an FX charge of EUR0.5 million as the rand and dollar weakened. We will continue to seek longer term solutions that mitigate these movements.
This overall growth is very substantially organic with only a small acquisition of IP in H1, 2017, with PPV, which we spoke about in the Q1 Interim Trading Update. We have also acquired the remaining minority interest in Rotacan, along with the acquisition of the Viqing group in July, 2017, neither of which are reflected in these figures for the half year. Viqing adds to our pipe range, and over time we will increase the sales of own manufactured products and move away from third parties.
We have three very substantial projects moving into their sales and marketing phases, with the extended range of large hammers and bits, the new hammer range, and the rapid build-up of our Mincon Nordic subsidiary.
We have driven good growth in our current product ranges, and we have the new products, the new factories and the investment of the last couple of years to come on stream. We have a very strong balance sheet, adequate cash resources and an ambitious, experienced team in a sector that continues to improve.
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, 2017"
Products and markets
We continue to manufacture 76% of what we sell, which gives us deeper control on engineering, on quality control and on margins. After years of retrenchment on pricing we have begun to see a more normal expectation of recovering our cost increases in the markets, though we do not look for leadership in this area. Our approach has been to deliver better engineered products and our market positions, and to some degree pricing, reflects this.
We have added to our ranges in hammers and bits, and to our consumables offering through the recent acquisition of our drill pipe company, Viqing. We also initiated drill pipe manufacturing in Australia. In general we will seek to add to the product ranges and competence by acquisition where we believe this offers value to our shareholders, and by organic growth where the acquisition pricing is not justified by the opportunity.
During the first six months of 2017 we saw very strong growth in Southern and West Africa, and good growth in Australia, Europe and North America. Only South America had a set back with the loss of a key customer, but we are working hard there to continue to build our base in Chile, and developing customers in adjacent markets such as Peru.
Mincon Nordic Oy
As disclosed in the Q1 Interim Trading Update we acquired PPV in Tampere, Finland to widen our product range and to develop our Mincon Nordic base. In July 2017 we acquired Viqing Drilling Equipment AB in Sunne, Sweden for an initial payment of EUR3.2 million and additional conditional consideration of EUR4.7 million over a five year period. This business was also bought into the Mincon Nordic hub.
Viqing is a drill pipe manufacturer of excellent quality and is already a supplier to the Group. It is a great vertical fit since we already sell their products right across our subsidiaries, and we would have several million euro of turnover to direct towards the factory. We understand the business, and their ranges are entirely congruent with the hammers and bits we already sell. We are glad to welcome the very experienced and committed management team to the Group. Specifying the factory to the Group standard is already underway.
We expect strong growth in Mincon Nordic over the next three years and will resource it accordingly. We are expensing the costs of the Mincon Nordic build up as we build the hub, and we should see this initiative move into profitability in 2018.
The new product category
We capitalised some EUR627,000 of development research and development on this project in the first half, as we flagged at the year end, and delivered the required sizes of hammers on time and on budget. Those products are already on site and beta testing in Australia with a very substantial customer, managed and supervised by our own team. The products run on a development rig acquired and engineered to operate the new products so that we can deliver a turn-key solution to end customers. It is also important to collect accurate performance measurements, handle the products properly, and protect our investment in IP. We expect to spend H2 running and testing the products to ensure that their cost effectiveness and longevity achieves the desired engineering specifications ahead of the planned 2018 launch.
Large hammers and bits
We have invested in very modern equipment to handle the larger sizes of hammers and bits and extended our ranges, and the potential sectors we can address. This is consistent with the acquisition of PPV in Q1. We have applied much of the machinery availability on the development of the new product category referred to above, and addressing the heightened volume of orders coming into the factories. This has caused us some production constraints which should clear in H2 and allow us to finish out the engineering of the large hammer range which we are then in a position to launch in H2.
Mincon Australia Group
Outside of Mincon Nordic we also opened a drill pipe manufacturing factory in Perth in Australia under the regional hub management team, and sales from there have also commenced, albeit at a low base volume in H1.
Contingent consideration gain and exceptionals
When we bought the majority stake in Rotacan we added the elements of put and call options between the vendor and ourselves in order to establish an exit price mechanism. As a consequence of the recession, which hit rotary customers very hard, neither element of the option pricing exit mechanism created grounds for agreement on price. The vendor and Mincon Group reached an accommodation and priced the minority at a small percentage over net assets and the transaction was completed on the 30(th) June, 2017.
This created a non-cash contingent gain of EUR3.1 million for Mincon Group plc. During the half year period we have also reviewed our asset categories and decided to take specific write-offs in third party inventory, and debtors, totalling approximately an equivalent amount. (See Note 6).
Profit margins
As we expected, the increase in our volumes delivered additional profits, and while we lost a bit on the gross margin in part due to mix, we are seeing the uplift that we expected on the bottom line. We continue to seek to improve the margins down to the profit after tax level in order to drive the earnings per share and the return on capital employed. We still have work to do with the deployment of our cash and previous investments, but we believe there is considerable value to be added to the Group if we are as successful as expected with the investments noted above.
Balance sheet and Cash Flow
With net assets of EUR106 million, and net cash of EUR32 million at the end of H1, 2017, the Group balance sheet remains very robust. Even with sales increasing by EUR10 million over H1 last year, and excluding exceptionals referred to in Note 6, working capital has remained largely flat. This is a contrast with the trends of the last two years where we saw up to EUR5 million being absorbed with less growth, and we expect to continue to manage the cash tied up under this heading in order to increase the efficiency of the Group. The intangible assets increased in the period by the acquisition of PPV.
The "other current assets" have increased largely by the deposits on the incoming capital equipment.
The cash flow statement shows the improvement in cash flow with EUR4.6 million from operating activities compared to EUR404,000 last year in H1, and the application of that cash in capital expenditure of EUR3.1 million, the cash payment on the PPV acquisition of EUR2 million, and the dividends paid of EUR2.1 million being the difference in the cash balance for the year to date. It should be noted that the Rotacan payment occurred in early July, and the Viqing acquisition in late July and those will be outflows as H1 post balance sheet events. We are not flagging Viqing as a profit contributor in the 2017 year as it will counterbalance the Mincon Nordic start-up losses to some degree, but we expect a positive contribution from 2018 forward.
Dividend
The Board of Mincon Group plc has recommended the payment of an interim dividend in the amount of 0.01 (1 cent) per ordinary share, which will be paid on the 26 September, 2017 to shareholders on the register at the close of business on the 1 September, 2017.
Outlook
We had sales of c. EUR40 million in H2 last year, and while the growth in this reported half year has been strong, we will need to keep growing to add significantly to that run rate. Having said that we have three good investment projects coming to fruition in the remainder of 2017 and 2018 and believe a reasonable strike rate will deliver meaningful growth and profitability from these for the Group. We have other investments at earlier stages coming through behind them to deliver improved customer access in key markets, next generation products, and improved manufacturing and distribution efficiencies. We continue to engage with acquisition opportunities to increase our customer access, and add to our people, our products and our service offering.
I would like to thank the shareholders for their support through the last few years, and the Mincon staff for their commitment to the success of the business.
17 AUGUST 2017
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 2017
2017 2016
Notes Excluding Exceptional Including
exceptional items exceptional
items (Note 6) items H1
EUR'000 EUR'000 EUR'000 EUR'000
----------------------------- ----- ------------- ------------ ------------- ----------
Continuing operations
Revenue 2 46,956 - 46,956 36,313
Cost of sales 4 (28,589) (1,849) (30,438) (21,381)
----------------------------- ----- ------------- ------------ ------------- ----------
Gross profit 18,367 (1,849) 16,518 14,932
General, selling and
distribution expenses 4 (11,578) (1,198) (12,776) (10,029)
Operating profit 6,789 (3,047) 3,742 4,903
Finance cost (58) - (58) (85)
Finance income 14 - 14 90
Foreign exchange gain/(loss) (505) - (505) 135
Settlement gain - 3,124 3,124 (35)
Profit before tax 6,240 77 6,317 5,008
----------------------------- ----- ------------- ------------ ------------- ----------
Income tax expense (1,091) - (1,091) (930)
----------------------------- ----- ------------- ------------ ------------- ----------
Profit for the period 5,149 77 5,226 4,078
----------------------------- ----- ------------- ------------ ------------- ----------
Profit attributable
to:
- owners of the Parent 5,072 4,068
- non-controlling interests 154 10
-------------
Earnings per Ordinary
Share
Basic earnings per share,
EUR 9 0.024 0.019
Diluted earnings per
share, EUR 9 0.024 0.019
----------------------------- ----- ------------- ------------ ------------- ----------
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 2017
2017 2016
H1 H1
EUR'000 EUR'000
------------------------------------------- ------- --------
Profit for the period 5,226 4,078
Other comprehensive income/(loss):
Items that are or may be reclassified
subsequently to profit or loss:
Foreign currency translation - foreign
operations (2,609) 2,464
Other comprehensive income/(loss) for
the period (2,609) 2,464
------------------------------------------- ------- --------
Total comprehensive income for the period 2,617 6,542
------------------------------------------- ------- --------
Total comprehensive income attributable
to:
- owners of the Parent 2,463 6,532
- non-controlling interests 154 10
------------------------------------------- ------- --------
The accompanying notes are an integral part of these financial statements.
Unaudited consolidated statement
of financial position
As at 30 June 2017
30 June 31 December
2017 2016
Notes EUR'000 EUR'000
------------------------------------- ----- -------- ------------
Non-Current Assets
Intangible assets 11 17,195 13,120
Property, plant and equipment 12 20,574 20,052
Deferred tax asset 8 393 529
Other non-current assets 163 238
-------------------------------------- ----- -------- ------------
Total Non-Current Assets 38,325 33,939
-------------------------------------- ----- -------- ------------
Current Assets
Inventory 13 31,267 35,310
Trade and other receivables 14 17,338 16,437
Other current assets 2,451 996
Current tax asset 8 338 954
Cash and cash equivalents 33,701 36,836
Total Current Assets 85,095 90,533
-------------------------------------- ----- -------- ------------
Total Assets 123,420 124,472
-------------------------------------- ----- -------- ------------
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 10 251 89
Foreign currency translation reserve (1,574) 1,035
Retained earnings 54,476 51,509
-------------------------------------- ----- -------- ------------
Equity attributable to owners of
Mincon Group plc 105,551 105,031
-------------------------------------- ----- -------- ------------ Non-controlling interests 638 484 Total Equity 106,189 105,515 Non-Current Liabilities Loans and borrowings 15 755 1,142 Deferred tax liability 8 383 714 Deferred contingent consideration 16(c) 2,256 5,669 Other liabilities 599 595 Total Non-Current Liabilities 3,993 8,120 -------------------------------------- ----- -------- ------------ Current Liabilities Loans and borrowings 15 589 734 Trade and other payables 6,596 6,561 Accrued and other liabilities 5,351 2,823 Current tax liability 8 702 719 Total Current Liabilities 13,238 10,837 -------------------------------------- ----- -------- ------------ Total Liabilities 17,231 18,957 -------------------------------------- ----- -------- ------------ Total Equity and Liabilities 123,420 124,472 -------------------------------------- ----- -------- ------------
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 2017
----------------------------------------------- -----------------
H1 H1
2017 2016
EUR'000 EUR'000
----------------------------------------------- ------- --------
Operating activities:
Profit for the period 5,226 4,078
Adjustments to reconcile profit to net
cash provided by operating activities:
Depreciation 1,362 1,115
Fair value movement on deferred contingent (3,124) -
consideration
Finance cost 58 85
Finance income (14) (90)
Income tax expense 1,091 930
Other non-cash movements 2,180 (149)
----------------------------------------------- ------- --------
6,779 5,969
Changes in trade and other receivables (3,099) (3,090)
Changes in prepayments and other assets (1,511) (449)
Changes in inventory 2,426 (1,436)
Changes in trade and other payables 555 365
----------------------------------------------- ------- --------
Cash provided by operations 5,150 1,359
Interest received 14 90
Interest paid (58) (85)
Income taxes paid (485) (960)
----------------------------------------------- ------- --------
Net cash provided by/(used in) operating
activities 4,621 404
----------------------------------------------- ------- --------
Investing activities
Purchase of property, plant and equipment (3,092) (2,891)
Acquisitions, net of cash acquired (2,000) -
Payment of deferred contingent consideration - (340)
Investment in short term deposits - (79)
Proceeds from former joint venture investments 56 54
Net cash provided by/(used in) investing
activities (5,036) (3,256)
----------------------------------------------- ------- --------
Financing activities
Dividends paid (2,105) (2,105)
Repayment of loans and finance leases (416) (591)
Drawdown of loans - 40
Net cash provided by/(used in) financing
activities (2,521) (2,656)
----------------------------------------------- ------- --------
Effect of foreign exchange rate changes
on cash (199) 87
----------------------------------------------- ------- --------
Net increase/(decrease) in cash and
cash equivalents (3,135) (5,421)
----------------------------------------------- ------- --------
Cash and cash equivalents at the beginning
of the year 36,836 10,644
----------------------------------------------- ------- --------
Cash and cash equivalents at the end
of the period 33,701 5,223
----------------------------------------------- ------- --------
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 2017
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 1
July
2016 2,105 67,647 (17,393) - 39 - 26 (1,429) 48,448 99,443 475 99,918
--------------- -------- ------- -------- ------- ---------- ------------ ------- ----------- -------- ------- --------------- -------
Comprehensive
income:
Profit for the
period - - - - - - - - 5,166 5,166 9 5,175
Other
comprehensive
income/(loss):
Foreign
currency
translation - - - - - - - 2,464 - 2,464 - 2,464
----------- -------- ------- --------------- -------
Total
comprehensive
income 2,464 5,166 7,630 9 7,639
----------- -------- ------- --------------- -------
Transactions
with
Shareholders:
Share-based
payments - - - - - - 63 - - 63 - 63
Dividend
payment - - - - - - - - (2,105) (2,105) - (2,105)
Balances at 31
December
2016 2,105 67,647 (17,393) - 39 - 89 1,035 51,509 105,031 484 105,515
--------------- -------- ------- -------- ------- ---------- ------------ ------- ----------- -------- ------- --------------- -------
Comprehensive
income:
Profit for the
period - - - - - - - - 5,072 5,072 154 5,226
Other
comprehensive
income/(loss):
Foreign
currency
translation - - - - - - - (2,609) - (2,609) - (2,609)
----------- -------- ------- --------------- -------
Total
comprehensive
income (2,609) 5,072 2,463 154 2,617
----------- -------- ------- --------------- -------
Transactions
with
Shareholders:
Share-based
payments - - - - - - 162 - - 162 - 162
Dividend
payment - - - - - - - - (2,105) (2,105) - (2,105)
Balances at 30
June
2017 2,105 67,647 (17,393) - 39 - 251 (1,574) 54,476 105,551 638 106,189
--------------- -------- ------- -------- ------- ---------- ------------ ------- ----------- -------- ------- --------------- -------
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 2017 (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 17 August 2017.
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 2016 as set out in the 2016 Annual Report (the "2016 Accounts").
The Interim Financial Statements do not constitute statutory financial statements. The statutory financial statements for the year ended 31 December 2016, 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 2016 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 2016 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 2016 Accounts.
2. Revenue
H1 H1
2017 2016
EUR'000 EUR'000
---------------------------- ------- --------
Product revenue:
Sale of Mincon product 35,211 27,877
Sale of third party product 11,745 8,436
Total revenue 46,956 36,313
---------------------------- ------- --------
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, the United Kingdom, South Africa and Canada and sales offices in seven other locations including Finland, Spain, Sweden, Namibia, Tanzania, 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
2017 2016
EUR'000 EUR'000
----------------------------------------- ------- --------
Region:
Ireland 330 390
Americas 13,598 12,539
Australasia 11,926 8,521
Europe, Middle East, Africa 21,102 14,863
Total revenue from continuing operations 46,956 36,313
----------------------------------------- ------- --------
Non-current assets by region (location of assets):
30 June 31 December
2017 2016
EUR'000 EUR'000
Region:
Ireland 8,496 6,752
Americas 13,771 14,423
Australasia 6,715 7,237
Europe, Middle East, Africa 8,950 4,998
Total non-current assets(1) 37,932 33,410
---------------------------------------------------- ------- -----------
(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
2017 2016
EUR'000 EUR'000
------------------------------------------ ------- -------
Raw materials 9,125 7,939
Third party product purchases 10,146 6,369
Employee costs 4,449 3,645
Depreciation 1,058 847
Impairment of capital equipment inventory
(note 6) 1,081 -
Impairment of finished goods inventory
(note 6) 768 -
Other 3,811 2,581
Total cost of sales 30,438 21,381
------------------------------------------ ------- -------
Other operating expenses
H1 H1
2017 2016
EUR'000 EUR'000
------------------------------------------------- -------------- --------------
Employee costs (including director emoluments) 6,774 5,914
Depreciation 303 268
Impairment of trade receivable (note 1,198 -
6) .
Other 4,501 3,847
Total other operating costs 12,776 10,029
-------------------------------------------------- -------------- --------------
5. Employee information
H1 H1
2017 2016
EUR'000 EUR'000
----------------------------------------- ------- --------
Wages and salaries - including directors 10,006 8,175
Severance payments - 400
Social security costs 618 601
Pension costs of defined contribution
plans 437 373
Share based payments (note 10) 162 10
Total employee costs 11,223 9,559
----------------------------------------- ------- --------
The Group capitalised payroll costs of EUR134,000 in H1 2017 in relation to research and development.
The average number of employees was as
follows:
H1 H1
2017 2016
Number Number
----------------------------------------- ------ -------
Sales and distribution 101 75
General and administration 55 59
Manufacturing, service and development 175 164
----------------------------------------- ------ -------
Average number of persons employed 331 298
----------------------------------------- ------ -------
6. Exceptional Items
H1
2017
EUR'000
------------------------------------------------- -------
Cost of sales
Impairment of capital equipment inventory (1,081)
Impairment of finished goods inventory (768)
------------------------------------------------- -------
Total cost of sales (1,849)
------------------------------------------------- -------
General, selling and distribution expenses
Impairment of trade receivable (1,198)
------------------------------------------------- -------
Total general, selling and distribution expenses (1,198)
------------------------------------------------- -------
Fair value movement on contingent consideration 3,124
------------------------------------------------- -------
Total exceptional items 77
------------------------------------------------- -------
The write down in the period ended 30 June 2017 on the Group's capital equipment inventory is EUR1.1 million.
The level of finished goods inventory write down recognised as an exceptional item within the cost of sales amounted to EUR768,000. This write down in inventory in the period ended 30 June 2017 is due to various non-Mincon manufactured product that has become obsolete due to the availability of more advanced products that have now become available on the market.
The Group provides for all receivables where there is objective evidence, including historical loss experience, that amounts are irrecoverable. The Group now considers that a receivable of EUR1.2 million from a South American distributor is no longer recoverable.
In August 2014 the Group acquired a 65% majority shareholding in Rotacan. In June 2017 the Group acquired the 35% minority interest in this business for cash consideration of EUR2 million which was settled in July 2017. The acquisition of the minority shareholding in Rotacan resulted in a credit to the income statement as the amount paid to settle the contingent consideration was less than the director's estimate of its fair value at 31 December 2016.
7. Acquisitions
Rotacan is a Canadian based business which specialises in the design, manufacture and sales of rotary blast hole drill bits, drill pipe and other ancillary products used primarily in the open pit mining industry. In August 2014 the Group acquired a 65% majority shareholding in Rotacan, in June 2017 the Group acquired the 35% minority interest in this business.
In April, 2017 Mincon acquired 100% shareholding in Pirkanmaan Poraveikot OY, PPV, this is a Finnish based business that specialises in the design and sale of specialised consumable equipment for drilling where ground disruption must be minimised.
A. Consideration transferred
PPV Total
EUR'000 EUR'000
---------------------------------- -------- --------
Cash 2,000 2,000
Deferred contingent consideration 2,000 2,000
---------------------------------- -------- --------
Total consideration transferred 4,000 4,000
---------------------------------- -------- --------
B. Acquisition related costs
Acquisition related costs amounted to approximately EUR98,000 and were included in the "operating expenses" in the income statement for the 6 months to the 30 June 2017.
8. Income Tax
The Group's consolidated effective tax rate in respect of operations for the six months ended 30 June 2017 was 17.3% (30 June 2016: 18.6%). The effective rate of tax is forecast at 17.3% for 2017 which is marginally lower than prior year, this was due to the geographic spread of profits of the Group entities in 2017 compared with 2016. The tax charge for the six months ended 30 June 2017 of EUR1.1 million (30 June 2016: EUR0.9 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
2017 2016
EUR'000 EUR'000
------------------------ ------- ------------
Current tax prepayments 338 954
Current tax payable (702) (719)
------------------------ ------- ------------
Net current tax (364) 235
------------------------ ------- ------------
The net deferred tax liability at period-end was as follows:
30 June 31 December
2017 2016
EUR'000 EUR'000
----------------------- ------- ------------
Deferred tax asset 393 529
Deferred tax liability (383) (714)
----------------------- ------- ------------
Net deferred tax 10 (185)
----------------------- ------- ------------
9. 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
2017 2016
Numerator (amounts in EUR'000):
Profit attributable to owners of the Parent 5,072 4,068
Earnings per Ordinary Share
Basic earnings per share, EUR 0.024 0.019
Diluted earnings per share, EUR 0.024 0.019
Denominator (Number):
Basic weighted-average shares outstanding 210,541,102 210,541,102
Diluted weighted-average shares outstanding 210,817,811 210,554,991
10. Share based payment
During the half year ended 30 June 2017, the Remuneration Committee made a grant of approximately 1,153,846 Restricted Share Awards (RSAs) to members of the Group executive and senior management team. The vesting conditions include both service and performance targets. The performance target condition is an average growth of 5% of EPS plus CPI over three years. The fair value of the RSA's granted is equal to the company's share price on grant date which was EUR1.04c.
11. Intangible Assets
Product
development Goodwill Total
EUR'000 EUR'000 EUR'000
----------------------------------------- ------------- ----------- -------
Balance at 1 January 2017 499 12,621 13,120
----------------------------------------- ------------- ----------- -------
Investments 627 - 627
----------------------------------------- ------------- ----------- -------
Acquisitions (note 7) - 4,000 4,000
----------------------------------------- ------------- ----------- -------
Foreign currency translation differences - (552) (552)
----------------------------------------- ------------- ----------- -------
Balance at 30 June 2017 1,126 16,069 17,195
----------------------------------------- ------------- ----------- -------
12. Property, Plant and Equipment
Capital expenditure in the first half-year amounted to EUR3.1 million (30 June 2016: EUR3 million) of which EUR0.6 million (30 June 2016: EUR0.2 million) was invested in buildings and EUR2.5 million (30 June 2016: EUR2.8 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
2017 2016
EUR'000 EUR'000
--------------------------------------------- ------- --------
Cost of sales 1,058 847
Selling, general and administrative expenses 303 268
Total depreciation charge for property,
plant and equipment 1,361 1,115
--------------------------------------------- ------- --------
13. Inventory
30 June 31 December
2017 2016
EUR'000 EUR'000
------------------------------------ ------- ------------
Finished goods and work-in-progress 22,118 25,603
Capital equipment 3,243 4,473
Raw materials 5,906 5,234
------------------------------------ ------- ------------
Total inventory 31,267 35,310
------------------------------------ ------- ------------
Write-down of inventories during the period ended 30 June 2017 amount to EUR1,8 million and are explained in note 6 (30 June 2016: EURNil).
14. Trade and other receivables
30 June 31 December
2017 2016
EUR'000 EUR'000
-------------------------------- ------- ------------
Gross receivable 18,642 18,068
Provision for impairment (1,304) (1,631)
Net trade and other receivables 17,338 16,437
-------------------------------- ------- ------------
30 June 31 December
2017 2016
EUR'000 EUR'000
Less than 60 days 13,782 11,148
61 to 90 days 1,961 1,844
Greater than 90 days 1,595 3,445
-------------------------------- ------- ------------
Net trade and other receivables 17,338 16,437
-------------------------------- ------- ------------
At 30 June 2017, EUR2.8 million (16%) of trade receivables balance was past due but not impaired (31 December 2016, EUR3.4 million (21%)).
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
2017 2016
EUR'000 EUR'000
------------------------------------- ------- -----------
Ireland 95 27
Americas 4,657 5,340
Australasia 4,754 3,559
Europe, Middle East, Africa 7,832 7,511
Total amounts owed, net of provision
for impairment 17,338 16,437
------------------------------------- ------- -----------
15. Loans and borrowings
30 June 31 December
2017 2016
Maturity EUR'000 EUR'000
-------------------------------------- ------- ------------
Bank loans 2016-2021 1,043 1,183
Finance leases 2016-2020 301 693
--------------------------- ----------
Total Loans and borrowings 1,344 1,876
------- ------------
Current 589 734
------- ------------
Non-current 755 1,142
------- ------------
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$691,000 (circa EUR0.6 million).
16. 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 2016 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 2017 and 31 December 2016 were as follows:
30 June 31 December
2017 2016
EUR'000 EUR'000
-------------------------- -------- -----------
Cash and cash equivalents 34,136 36,836
Loans and borrowings (1,344) (1,876)
Shareholders' equity 105,551 105,031
-------------------------- -------- -----------
16. 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'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 75% 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. There has been no material change in the euro exchange rate since 31 December 2016, with the exception of the US dollar, which has weakened resulting in a foreign exchange loss being recognised in other comprehensive income and the 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
2017 H1 2017 2016 H1 2016
Euro exchange rates Closing Average Closing Average
-------------------- ------- -------- ------------ --------
US Dollar 1.14 1.083 1.05 1.12
Australian Dollar 1.49 1.44 1.46 1.52
Sterling 0.88 0.86 0.85 0.79
South African Rand 14.90 14.284 14.41 17.19
Swedish Krona 9.65 9.59 9.54 9.30
-------------------- ------- -------- ------------ --------
There has been no material change in the Group's currency exposure since 31 December 2016. Such exposure comprises the monetary assets and monetary liabilities that are not denominated in the functional currency of the operating unit involved.
16. 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.
As the 35% minority shareholding in Rotacan was acquired in June 2017 with a cash payment of CA$3 million (circa EUR2 million), the fair value moment resulting from this transaction was a EUR3.1 million credit to the income statement.
There are no material differences between the carrying amounts and fair value of our financial liabilities as at 31 December 2016 or 30 June 2017.
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.
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 2017 are as follows:
Deferred
contingent
consideration
EUR'000
----------------------------------------- --------------
Balance at 1 January 2017 5,669
----------------------------------------- --------------
Arising on acquisition (note 7) 2,000
----------------------------------------- --------------
Other liabilities (note 6) (2,023)
----------------------------------------- --------------
Fair value movement (3,123)
----------------------------------------- --------------
Foreign currency translation differences (267)
----------------------------------------- --------------
Balance at 30 June 2017 2,256
----------------------------------------- --------------
16. Litigation
The Group is not involved in legal proceedings that could have a material adverse effect on its results or financial position.
17. 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 2017 and 31 December 2016, 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. Ballybell Limited, a company controlled by Kevin Barry, held 7.09% of the equity of the Company. In June 2017, the Group paid a final dividend of EUR0.01 to all shareholders on the register at 26 May 2017. The total dividend paid to Kingbell and Ballybell Limited was EUR1,196,712 and EUR116,327 respectively.
There were no other related party transactions in the half year ended 30 June 2017 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 2016 Annual Report that could have a material effect on the financial position or performance of the Company in the same period.
18. Events after the reporting date
Dividend
On 17 August 2017, 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 2017 to shareholders on the register at the close of business on 1 September 2017.
Viqing acquisition
On 6 July, 2017 we acquired Viqing Drilling Equipment AB, through our Mincon Nordic OY subsidiary, for EUR3.2 million in cash, and deferred conditional payments amounting to EUR4.7 million. This drill pipe manufacturer is based in Sunne, Sweden.
19. Approval of financial statements
The Board of Directors approved the interim condensed consolidated financial statements for the six months ended 30 June 2017 on 17 August 2017.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LLFEDTSIRLID
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August 17, 2017 02:00 ET (06:00 GMT)
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