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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% | 43.00 | 40.00 | 46.00 | 43.00 | 43.00 | 43.00 | 168 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Mng Machy, Eq, Ex Oil Field | 156.93M | 7.47M | 0.0352 | 12.22 | 91.36M |
TIDMMCON
RNS Number : 9353S
Mincon Group Plc
22 March 2021
Mincon Group plc
("Mincon" or the "Group")
2020 Full Year Financial Results
Mincon Group plc (Euronext: MIO AIM:MCON), the Irish engineering group specialising in the design, manufacture, sale and servicing of rock drilling tools and associated products, announces its results for the year ended 31 December 2020.
Percentage change in 2020 2019(1) period ---------------------------- -------- ------- ----------- Product revenue: EUR'000 EUR'000 Sale of Mincon product 108,556 100,731 +7.8% Sale of third-party product 21,347 19,940 +7.1% Total revenue 129,903 120,671 +7.7% ------- Gross profit 45,717 40,513 +12.8% ---------------------------- -------- ------- ----------- Operating profit 18,249 11,810 +54.5% ---------------------------- -------- ------- ----------- Profit for the period 14,386 9,549 +50.7% ---------------------------- -------- ------- -----------
(1) Before exceptional items
Joe Purcell, Chief Executive Officer, commenting on the results, said:
2020: LOCAL CHALLENGES, GLOBAL RESILIENCE
During 2020 the world faced a pandemic that was unprecedented in modern times. Almost nobody went untouched by this global health crisis: whether it was illness, or lockdowns imposed as authorities responded to contain the spread of Covid-19.
These measures also affected businesses to varying degrees, however I am pleased to say that Mincon was able to remain operational throughout 2020. Mincon equipment is widely used for essential projects and services, so in many markets our manufacturing facilities were able to continue operating. Similarly, Mincon's direct-to-market approach meant that our service centres remained productive and continued to deliver excellent, customer service, safely and responsibly.
Our involvement in full-service mining and large geotechnical contracts has led to an increase in direct end user revenue, the direct approach now accounts for 77% of total turnover. In addition to our direct sales model, we will continue to work through distributors to serve the market in areas where the direct model is unviable, or where we already have strong distributor partnerships in place.
In 2019, Mincon implemented a regional management structure to reflect the Group's vision, culture, and ambition. As the pandemic unfolded, this Group structure enabled us to be proactive rather than reactive. As a result, the pandemic had a more muted impact on the Group's bottom line, and we ended 2020 with a positive profit growth.
This growth took place on the backdrop of challenging trading conditions across the world. Global restrictions prevented us from being on-site at customer operations, impacting both product development and sales. Additionally, pandemic-related lockdowns in certain markets saw the temporary closure of our manufacturing facilities in those countries.
When local governments imposed restrictions to contain the Covid-19 pandemic, our businesses in those markets reacted with the health and safety of the workforce as the primary concern. Where necessary, operations were temporarily suspended until health authorities felt it was safe for work to continue. Due to our global footprint and our cohesive regional management structure, Mincon was able to shift manufacturing to our other factories where restrictions were less severe, as required - a successful example of the Group operating together to benefit the overall business.
The Covid-19 pandemic was a pressure test of our resilience, business systems, preparedness, and management. Although the global mass vaccination programme is a positive development, we believe that travel restrictions and social distancing will be a part of life for at least the rest of the year.
During 2020 our revenue grew by 8% compared with our 2019 continuing operations. This was due, in part, to the expansion of the Group's core operations, with organic growth of 3%, or 6% on a constant currency basis. Our acquisitions of Lehti and RocDrill contributed to 5% of the Group's revenue growth for year. We continued our expansion into the construction industry with significant year-on-year revenue growth of 33% in the industry, which accounted for 30% of the Group's revenue in 2020 (2019: 25%). Mining also experienced growth of 2%, however Covid-19 restrictions prevented us from fully pursuing new opportunities in this industry.
Our operating margin increased to 14.0% of revenue in 2020 (2019: 9.8%), as we experienced stronger gross margins from large construction projects in the Americas. We implemented a Group-wide international travel ban early in 2020 that contributed to a significant savings on travel for the year. We also availed of employee related government grants in Australia, Sweden and the UK, totalling EUR1.3 million in the year. These grants compensated for the Group being affected by the impact of the pandemic in those countries.
Efficiency in innovation
Mincon has a strong background in design, manufacture, delivery, and service of high-quality surface drilling solutions. We have strategically grown our product line-up to offer a comprehensive range of products for the whole drill string and for use in multiple industries. We pride ourselves on innovative engineering and superior manufacturing and service, something that has always been at the core of what we do.
Although the past year had its challenges for our engineering teams, due to limited testing opportunities, we were able to use this to our advantage. We are now even more ambitious when it comes to helping our customers improve safety and reduce the effect of their operations on the environment, which includes using less energy. Our engineers are focused on developing the next generation of drilling tools aimed at energy-efficient drilling, with a reduced impact on the environment and, in some cases, a transformational effect on Mincon and our customers.
Our primary engineering objectives continue to be driven by our Technology Steering Group, comprising senior engineers who each have many decades of experience in the rock-drilling industry. The experience in the Group is broad and includes expertise in mechanical design and simulation; metallurgy and heat-treatment, market and application knowledge; and hands-on drilling.
Product development
Mincon's product development takes place in the following areas:
1. Product maintenance
Ongoing product development and continuous improvement of existing product lines, ensuring that we remain the industry benchmark. We also focus on identifying areas for optimisation at customer operations by closely working with them on site.
2. New product design and development
New designs and iterations of existing technologies. Over the coming years, this development will include work on:
-- New DTH hammer and bit developments with a focus on speed and efficiency;
-- Continuous improvement for our range of open, and sealed-bearing, rotary drill bits, to deliver market-leading performance in terms of life and penetration rates;
-- Optimising drill-rod performance and durability; -- Further development to the performance and range of cushion subs; and, -- Carbide grade developments. 3. New technology development
Spearheaded by Mincon's Technology Steering Group, which is exploring several new technologies and concepts for development, including:
-- Greenhammer (working name) - Mincon's flagship technology for single-pass, hard-rock blasthole drilling, using a high-performance DTH hydraulic percussion system;
-- Drilled foundation product developments particularly for sensitive ground conditions;
-- Plans for advancing hammer technology to encompass larger hole size capabilities than ever, while maintaining the focus on efficiency and productivity; and,
-- All-new drilling technologies and approaches for new industries
Direction of these new products and technologies is spearheaded by the Technology Steering Group. Development takes place at the Group's R&D facility near our headquarters in Shannon, Ireland, where we have dedicated manufacturing capabilities and capacity to ensure our engineers' designs are machined into reality in a timely fashion. Results from field testing are then incorporated into improved design so that new revisions can be rapidly manufactured and sent back for field testing, without interrupting day-to-day production.
The hydraulic systems
The pandemic affected product development of our Greenhammer technology in Australia. Site access was - and continues to be - limited to essential personnel only, primarily due to strict lockdowns imposed by the Australian government. While waiting to get on site, we have developed a smaller, 10" system that is fitted to our own drill rig. This is ready to go on site when restrictions are eased. We have also sourced our own rig for the larger, 12" system, which has already been developed. This will be commissioned after we get the 10" system running.
Mincon remains committed to the commercialisation of this exciting technology that we believe will transform the hard-rock surface mining market. It is notable that our involvement in this project has had an enormously positive impact on the Group, increasing our engineering capacity and advancing our technical understanding of rock drilling. The skillsets that have been honed in the development of the Greenhammer project are being deployed in other projects and areas of the business, which will be of significant benefit to the Group's business as a whole.
New products to market
As with the Greenhammer project in Australia, development of Mincon's other technologies and products faced some setbacks in 2020 - mainly due to travel restrictions limiting testing opportunities. However, where it was safe to do so, successful tests were conducted for new drill bit designs, evolutions of our next-generation MP-series DTH hammers, and new material technologies that promise improved wear resistance.
In addition to using customer feedback for the continuous improvement of existing products, we are always working on developing new technologies that will lower drilling costs for customers by focusing on products that deliver better efficiency, faster penetration rates, and improved longevity.
Mincon also has an ambition to push the limits of drilling technology. We want to innovate and disrupt the market with unique uses of our existing technologies in new applications, or by partnering with service providers to develop all-new solutions that draw on our extensive expertise.
Strategic acquisitions
Growth through strategic acquisitions remains part of the Group's strategy. This approach allows for organic growth as well as procuring the correct skills, products, and manufacturing capacity in line with market demand and management's ambitions.
Our acquisitions in 2020 brought more value to our construction and geotechnical offering. Through the acquisition of Lehti Group, we now own the entire value chain associated with the manufacturing and sales of all our geotechnical products. The talented and committed team in the Lehti factory has fully integrated with the proven team at Mincon Finland. Both businesses have been physically consolidated, by moving our business and service team to the factory in Ylöjärvi, Finland. This consolidation has created a dynamic, cohesive and talented team with engineering and manufacturing excellence, as well as an excellent customer service capability that will ensure the business thrives both locally and globally.
Whilst having a market leading product and manufacturing capacity for the Geotech industry, of equal importance is the ability to provide on-site support and training to ensure product performance is maintained at or above customer expectations. With that in mind, the acquisition of RocDrill in France adds significantly to this skillset as well as expanding our customer base through the additional clients and potential projects list that Rocdrill brought. Since joining the group in May 2020, the team at Rocdrill has integrated well and has been instrumental in helping to advance our geotechnical ambitions.
Post the financial year end, in January 2021 the Group completed the acquisition of Hammer Drilling Rigs (HDR), a specialist in supply of hard rock drilling attachments based in the USA. HDR specialises in drill mast attachments to heavy equipment that is used in a variety of applications, including the installation of anchor points for solar field projects. This was a strategic acquisition to support Mincon's offering of a complete solution to customers within this sector of the renewable energy industry.
We will continue to explore the market for acquisitions that fit our strategic goals, and which help us take opportunities that we believe are present in our industries and in new industries.
Dividend
In response to the initial emergence of the Covid-19 pandemic last year, the Board decided to adopt a prudent approach by suspending the interim dividend for 2020. However, following a review of the Group's performance in the interim period and an assessment of its ongoing capital requirements, the Board stated its intention in the interim trading announcement released on 9 November 2020 to increase the final dividend declared in respect of the financial year 2020 so that the final dividend will be in line with the total dividend paid for 2019. The Board is therefore recommending the payment of a full year dividend of 2.10 cent per ordinary share. Subject to Shareholder approval at the annual general meeting, the final dividend will be paid on 18 June 2021 to Shareholders on the register at the close of business on 28 May 2021.
Concluding comments
2020 was a challenging year for Mincon but we successfully tested the resilience and cohesiveness of our regional management structure. Throughout the year this shone through, and I would like to thank all who stepped up to the tasks that a very unusual year threw their way.
The capacity of our engineering teams grew, through guidance from the Technology Steering Group. We will continue to nurture that talent through our ambitious goals to develop and commercialise innovative and transformative solutions for the industries we target. We will also continue to look at diversifying our revenue streams, while growing core business activities in the mining, construction, and waterwell/geothermal industries.
To support and manufacture our expanding product range, we will continue to review and update our well-invested factories, ensuring that quality, throughput, and energy efficiency is at the core of any investment decision.
The upcoming vaccination programmes do not mean that we will be less vigilant or relax our fight against the transmission of Covid-19. The health and safety of all our people continues to be my primary concern and I would urge everyone to take all the necessary precautions to best ensure that we emerge safely from this crisis and get back to some semblance of normality. To that end I would like to thank all for perseverance in this and I look forward to better days ahead.
Ends
22 March 2021
For further information please contact:
Mincon Group plc Tel: +353 (61) 361 099 Joe Purcell - Chief Executive Officer Mark McNamara - Chief Financial Officer Davy Corporate Finance (Nominated Adviser and Euronext Tel: +353 (1) Growth Advisor) 679 6363 Anthony Farrell Daragh O' Reilly
Consolidated Income Statement for the year ended 31 December 2020
2019 Excluding Exceptional Including 2020 exceptional items exceptional EUR'000 items (Note items Notes EUR'000 8) EUR'000 EUR'000 -------------------------------------- ------- ---------- ------------- ------------ ------------- Continuing operations Revenue 4 129,903 120,671 3,074 123,745 Cost of sales 6 (84,186) (80,158) (2,489) (82,647) Gross profit 45,717 40,513 585 41,098 Operating costs 6 (27,468) (28,703) (5,113) (33,816) Operating profit 18,249 11,810 (4,528) 7,282 Finance costs (857) (582) - (582) Finance income 42 107 - 107 Foreign exchange loss (376) (130) - (130) FV movement on deferred consideration 23 11 10 - 10 Profit on disposal of operations - - 7,489 7,489 Profit before tax 17,069 11,215 2,961 14,176 -------------------------------------- ------------- ------------ Income tax expense 11 (2,683) (1,666) (127) (1,793) -------------------------------------- ------- ---------- ------------- ------------ ------------- Profit for the period 14,386 9,549 2,834 12,383 -------------------------------------- ------- ---------- ------------- ------------ ------------- Profit attributable to: - owners of the Parent 14,221 12,329 - non-controlling interests 19 165 54 -------------------------------------- ------- ---------- ------------- Earnings per Ordinary Share Basic earnings per share, 21 6.72 5.84c Diluted earnings per share, 21 6.57 5.80c -------------------------------------- ------- ---------- -------------
The accompanying notes are an integral part of these financial statements.
Consolidated Statement of Comprehensive Income for the year ended 31 December 2020
2020 2019 EUR'000 EUR'000 --------------------------------------------------- -------- -------- Profit for the year 14,386 12,383 Other comprehensive loss: Items that are or may be reclassified subsequently to profit or loss: Foreign currency translation - foreign operations (4,165) 2,153 Other 156 (1,092) Other comprehensive (expense)/income for the year (4,009) 1,061 --------------------------------------------------- -------- -------- Total comprehensive income for the year 10,377 13,444 --------------------------------------------------- -------- -------- Total comprehensive income attributable to: - owners of the Parent 10,212 13,390 - non-controlling interests 165 54 --------------------------------------------------- -------- --------
The accompanying notes are an integral part of these financial statements.
Consolidated Statement of Financial Position as at 31 December 2020
2020 2019 Notes EUR'000 EUR'000 ---------------------------------------- ----- ------------------ -------- Non-Current Assets Intangible assets and goodwill 12 36,987 31,937 Property, plant and equipment 13 45,820 41,172 Deferred tax asset 11 1,093 616 Total Non-Current Assets 83,900 73,725 ----------------------------------------- ----- ------------------ -------- Current Assets Inventory and capital equipment 14 53,017 48,590 Trade and other receivables 15a 20,640 20,346 Prepayments and other current assets 15b 4,186 6,098 Current tax asset 311 589 Cash and cash equivalents 23 17,045 16,368 Total Current Assets 95,199 91,991 ----------------------------------------- ----- ------------------ -------- Total Assets 179,099 165,716 ----------------------------------------- ----- ------------------ -------- Equity Ordinary share capital 20 2,117 2,110 Share premium 20 67,647 67,647 Undenominated capital 39 39 Merger reserve 20 (17,393) (17,393) Share based payment reserve 22 2,259 1,629 Foreign currency translation reserve (8,033) (3,868) Retained earnings 86,300 74,865 ----------------------------------------- ----- ------------------ -------- Equity attributable to owners of Mincon Group plc 132,936 125,029 ----------------------------------------- ----- ------------------ -------- Non-controlling interests - 1,115 Total Equity 132,936 126,144 Non-Current Liabilities Loans and borrowings 18 14,789 10,879 Deferred tax liability 11 1,832 1,794 Deferred contingent consideration 23 4,723 4,962 Other liabilities 503 153 Total Non-Current Liabilities 21,847 17,788 ----------------------------------------- ----- ------------------ -------- Current Liabilities Loans and borrowings 18 6,822 4,043 Trade and other payables 16 10,457 10,853 Accrued and other liabilities 16 5,529 5,827 Current tax liability 1,508 1,061 Total Current Liabilities 24,316 21,784 ----------------------------------------- ----- ------------------ -------- Total Liabilities 46,163 39,572 ----------------------------------------- ----- ------------------ -------- Total Equity and Liabilities 179,099 165,716 ----------------------------------------- ----- ------------------ --------
The accompanying notes are an integral part of these financial statements.
On behalf of the Board:
Hugh McCullough Joseph Purcell
Chairman Chief Executive Officer
Consolidated Statement of Cash Flows for the year ended 31 December 2020
2020 2019 Notes EUR'000 EUR'000 ------------------------------------------------- ------ --------- -------- Operating activities: Profit for the period 14,386 12,383 Adjustments to reconcile profit to net cash provided by operating activities: Depreciation 13 6,482 5,242 Fair value movement on deferred contingent consideration (11) (10) Gain on sale of operations, net of tax - (7,489) Finance cost 857 582 Finance income (42) (107) Loss on sale of property, plant and equipment 18 Income tax expense 2,683 1,793 NCI movement in equity 720 Other non-cash movements 372 209 ------------------------------------------------- ------ --------- -------- 25,465 12,603 Changes in trade and other receivables 919 1,037 Changes in prepayments and other assets 1,209 1,873 Changes in inventory (3,228) 1,050 Changes in trade and other payables (1,812) (1,865) Cash provided by operations 22,553 14,698 Interest received 42 107 Interest paid (857) (582) Income taxes paid (2,389) (1,713) ------------------------------------------------- ------ --------- -------- Net cash provided by operating activities 19,349 12,510 ------------------------------------------------- ------ --------- -------- Investing activities Purchase of property, plant and equipment (7,222) (7,930) Proceeds from the sale of property, plant 331 - and equipment Investment in intangible assets (1,065) (1,405) Proceeds from the issuance of share capital 7 5 Acquisitions of subsidiary, net of cash acquired (7,156) (770) Purchase of NCI (1,000) Payment of deferred contingent consideration (2,460) (1,600) Proceeds from the sale of subsidiaries 706 8,517 Proceeds from former joint venture investments - - Net cash used in investing activities (17,859) (3,183) ------------------------------------------------- ------ --------- -------- Financing activities Dividends paid (2,222) (4,426) Repayment of loans and finance leases 18 (4,991) (2,778) Drawdown of loans 18 6,622 6,182 Net cash used in financing activities (591) (1,022) ------------------------------------------------- ------ --------- -------- Effect of foreign exchange rate changes on cash (222) 21 ------------------------------------------------- ------ --------- -------- Net increase in cash and cash equivalents 677 8,326 ------------------------------------------------- ------ --------- -------- Cash and cash equivalents at the beginning of the year 16,368 8,042 ------------------------------------------------- ------ --------- -------- Cash and cash equivalents at the end of the year 17,045 16,368 ------------------------------------------------- ------ --------- --------
The accompanying notes are an integral part of these financial statemen
Consolidated Statement of Changes in Equity for the year ended 31 December 2020
Share Foreign based currency Share Share Merger Un-denominated payment translation Retained Non-controlling Total capital premium reserve capital reserve reserve earnings Total interests equity EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 ---------------- -------- ------- -------- -------------- ------- ------------- -------- ------- --------------- ------- Balances at 1 January 2019 2,105 67,647 (17,393) 39 1,274 (6,021) 68,054 115,705 1,061 116,766 -------- ------- -------- -------------- ------- ------------- -------- ------- --------------- ------- Comprehensive income: Profit for the year - - - - - - 12,329 12,329 54 12,383 Other comprehensive income/(loss): Foreign currency translation - - - - - 2,153 - 2,153 - 2,153 Other - - - - - - (1,092) (1,092) - (1,092) ------------- -------- ------- --------------- ------- Total comprehensive income 2,153 11,237 13,390 54 13,444 ------------- -------- ------- --------------- ------- Transactions with Shareholders: Equity-settled share-based payments 5 - - - - - - 5 - 5 Share based payments - - - - 355 - - 355 - 355 Dividends - - - - - - (4,426) (4,426) - (4,426) Balances at 31 December 2019 2,110 67,647 (17,393) 39 1,629 (3,868) 74,865 125,029 1,115 126,144 ---------------- -------- ------- -------- -------------- ------- ------------- -------- ------- --------------- ------- Comprehensive income: Profit for the year - - - - - - 14,221 14,221 165 14,386 Other comprehensive income/(loss): Foreign currency translation - - - - - (4,165) - (4,165) - (4,165) Other - 156 156 - 156 ------------- -------- ------- --------------- ------- Total comprehensive income (4,165) 14,377 10,212 165 10,377 ------------- -------- ------- --------------- ------- Transactions with Shareholders: Equity-settled share-based payments 7 - - - - - - 7 - 7 Share-based payments - - - - 630 - - 630 - 630 Dividends - - - - - - (2,222) (2,222) - (2,222) Acquisition of non-Controlling Interest without a change in control (note 19) - - - - - - (720) (720) (1,280) (2,000) Balances at 31 December 2020 2,117 67,647 (17,393) 39 2,259 (8,033) 86,300 132,936 - 132,936 ---------------- -------- ------- -------- -------------- ------- ------------- -------- ------- --------------- -------
The accompanying notes are an integral part of these financial statements. See note 20 for explanation of movements in reserve balances.
1. Description of business
The consolidated financial statements of Mincon Group Plc (also referred to as "Mincon" or "the Group") comprises the Company and its subsidiaries (together referred to as "the Group"). The companies registered address is Smithstown Industrial Estate, Smithstown, Shannon, Co. Clare, Ireland.
The Group is an Irish engineering Group, specialising in the design, manufacturing, sale and servicing of rock drilling tools and associated products. Mincon Group Plc is domiciled in Shannon, Ireland.
On 26 November 2013, Mincon Group plc was admitted to trading on the Enterprise Securities Market (ESM) of the Euronext Dublin and the Alternative Investment Market (AIM) of the London Stock Exchange.
2. Basis of preparation
These consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards as adopted by the European Union (EU IFRS), which comprise standards and interpretations approved by the International Accounting Standards Board (IASB), and endorsed by the EU.
The individual financial statements of the Company have been prepared in accordance with IFRSs as adopted by the EU and as applied in accordance with the Companies Act 2014 which permit a company that publishes its Group and Company financial statements together to take advantage of the exemption in Section 304 of the Companies Act 2014 from presenting to its members its Company income statement, statement of comprehensive income and related notes that form part of the approved Company financial statements.
The accounting policies set out in note 3 have been applied consistently in preparing the Group and Company financial statements for the years ended 31 December 2020 and 31 December 2019.
The Group and Company financial statements are presented in euro, which is the functional currency of the Company and also the presentation currency for the Group's financial reporting. Unless otherwise indicated, the amounts are presented in thousands of euro. These financial statements are prepared on the historical cost basis.
The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The judgements, estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results could differ materially from these estimates. The areas involving a high degree of judgement and the areas where estimates and assumptions are critical to the consolidated financial statements are discussed in note 3.
The directors believe that the Group has adequate resources to continue in operational existence for the foreseeable future and that it is appropriate to continue to prepare our consolidated financial statements on a going concern basis.
3. Significant accounting principles, accounting estimates and judgements
The accounting principles as set out in the following paragraphs have, unless otherwise stated, been consistently applied to all periods presented in the consolidated financial statements and for all entities included in the consolidated financial statements. The Group has initially adopted Definition of a Business (Amendments to IFRS 3) and it has not had a significant impact on the Groups financial statements. The Group applied Definitions of a Business (Amendments to IFRS 3) to business combinations whose acquisition dates are on or after 1 January 2020 in assessing whether it had acquired a business or a group of assets. See Note 9 for the details of the Groups acquisitions of subsidiary during the year. 3. Significant accounting principles, accounting estimates and judgements (continued) Revenue Recognition The Group is involved in the sale and servicing of rock drilling tools and associated products. Revenue from the sale of these goods and services to customers is measured at the fair value of the consideration received or receivable (excluding sales taxes). The Group recognises revenue when it transfers control of goods to a customer. The following provides information about the nature and timing of the satisfaction of performance obligations in contracts with customers, including significant payment terms, and the related revenue recognition policies. Customers obtain control of products when one of the following conditions are satisfied: 1. The goods have been picked up by the customer from Mincon's premises. 2. When goods have been shipped by Mincon, the goods are delivered to the customer and have been accepted at their premises. Invoices are generated when the above conditions are satisfied. Invoices are payable within the timeframe as set in agreement with the customer at the point of placing the order of the product. Discounts are provided from time-to-time to customers. Customers may be permitted to return goods where issues are identified
with regard to quality of the product. Returned goods are exchanged only for new goods or a credit note. No cash refunds are offered. Where the customer is permitted to return an item, revenue is recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur. Therefore, the amount of revenue recognised is adjusted for expected returns, which are estimated based on the historical data for specific types of product. In these circumstances, a refund liability and a right to recover returned goods asset are recognised. Government Grants Amounts recognised in the profit and loss account are presented under the heading Operating Costs on a systematic basis in the periods in which the expenses are recognised, unless the conditions for receiving the grant are met after the related expenses have been recognised. In this case, the grant is recognised when it is receivable.
Earnings per share
Basic earnings per share is calculated based on the profit for the year attributable to owners of the Company and the basic weighted average number of shares outstanding. Diluted earnings per share is calcu-lated based on the profit for the year attributable to owners of the Company and the diluted weighted average number of shares outstanding.
Taxation
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date. Current tax also includes any tax arising from dividends.
Current tax assets and liabilities are offset only if certain criteria are met.
Deferred tax
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:
-- temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;
-- temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and
-- taxable temporary differences arising on the initial recognition of goodwill.
3. Significant accounting principles, accounting estimates and judgements (continued)
Taxation (continued)
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Future taxable profits are determined based on the reversal of relevant taxable temporary differences. If the amount of taxable temporary differences is insufficient to recognise a deferred tax asset in full, then future taxable profits, adjusted for reversals of existing temporary differences, are considered, based on the business plans for individual subsidiaries in the Group. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised; such reductions are reversed when the probability of future taxable profits improves.
Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.
The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only if certain criteria are met.
Leases
At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group uses the definition of a lease in IFRS 16.
(i) As a lessee
At commencement or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of its relative stand-alone prices.
The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or the cost of the right-of-use asset reflects that the Group will exercise a purchase option. In that case the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate.
The Group determines its incremental borrowing rate by obtaining interest rates from various external financing sources.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group's estimate of the amount expected to be payable under a residual value guarantee, if the Group changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised in-substance fixed lease payment.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
3. Significant accounting principles, accounting estimates and judgements (continued)
Leases (continued)
(ii) As a lessor
At inception or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices.
When the Group acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease.
When the Group is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease separately. It assesses the lease classification of a sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset.
Short term leases and leases of low-value assets
The Group has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets and short-term leases, including IT equipment. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.
Inventories and capital equipment
Inventories and capital equipment are valued at the lower of cost or net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and selling expenses. The cost of inventories is based on the first-in, first-out principle and includes the costs of acquiring inventories and bringing them to their existing location and condition. Inventories manufactured by the Group and work in progress include an appropriate share of production overheads based on normal operating capacity. Inventories are reported net of deductions for obsolescence.
Intangible Assets and Goodwill
Goodwill
The Group accounts for acquisitions using the purchase accounting method as outlined in IFRS 3 Business Combinations. Group management has determined that the Group has one operating segment and therefore all goodwill is tested for impairment at Group level and this is tested for impairment annually.
Intangible assets
Expenditure on research activities is recognised in profit or loss as incurred.
Development expenditure is capitalised only if the expenditure can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable and the Group intends to and has sufficient resources to complete development and to use or sell the asset. Otherwise, it is recognised in the profit or loss as incurred. Subsequent to initial recognition, development expenditure is measured at cost less accumulated amortisation and any accumulated impairment losses.
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in profit or loss as incurred.
Foreign Currency
Foreign currency transactions
Transactions in foreign currencies (those which are denominated in a currency other than the functional currency) are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the foreign exchange rate at the statement of financial position date. Exchange gains and losses related to trade receivables and payables, other financial assets and payables, and other operating receiv-ables and payables are separately presented on the face of the income statement.
Exchange rate differences on translation to functional currency are reported in profit or loss, except when reported in other compre-hensive income for the translation of intra-group receivables from, or liabilities to, a for-eign operation that in substance is part of the net investment in the foreign operation.
Exchange rates for major currencies used in the various reporting periods are shown in note 23.
3. Significant accounting principles, accounting estimates and judgements (continued)
Foreign Currency (continued)
Translation of accounts of foreign entities
The assets and liabilities of foreign entities, including goodwill and fair value adjustments arising on consolidation, are translated to euro at the exchange rates ruling at the reporting date. Revenues, expenses, gains, and losses are translated at average exchange rates, when these approximate the exchange rate for the respective transaction. Foreign exchange differences arising on translation of foreign entities are recognised in other comprehensive income and are accumulated in a separate component of equity as a translation reserve. On divestment of foreign entities, the accumulated exchange differences, are recycled through profit or loss, increasing or decreasing the profit or loss on divestments.
Business combinations and consolidation
The consolidated financial statements include the financial statements of the Group and all companies in which Mincon Group plc, directly or indirectly, has control. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.
The consolidated financial statements have been prepared in accordance with the acquisition method. According to this method, business combinations are seen as if the Group directly acquires the assets and assumes the liabilities of the entity acquired. At the acquisition date, i.e. the date on which control is obtained, each identifiable asset acquired and liability assumed is recognised at its acquisition-date fair value.
Consideration transferred is measured at its fair value. It includes the sum of the acquisition date fair values of the assets transferred, liabilities incurred to the previous owners of the acquiree, and equity interests issued by the Group. Deferred contingent consideration is initially measured at its acquisition-date fair value. Any subsequent change in such fair value is recognised in profit or loss, unless the deferred contingent consideration is classified as equity. In that case, there is no remeasurement and the subsequent settlement is accounted for within equity. Deferred contingent consideration arises in the current year where part payment for an acquisition is deferred to the following year or years.
Transaction costs that the Group incurs in connection with a business combination, such as legal fees, due diligence fees, and other professional and consulting fees are expensed as incurred.
Goodwill is measured as the excess of the fair value of the consideration transferred, the amount of any non-controlling interest in the acquiree, and the fair value of the Group's previously held equity interest in the acquiree (if any) over the net of acquisition-date fair values of the identifiable assets acquired and liabilities assumed. Goodwill is not amortised but tested for impairment at least annually.
Non-controlling interest is initially measured either at fair value or at the non-controlling interest's proportionate share of the fair value of the acquiree's identifiable net assets. This means that goodwill is either recorded in "full" (on the total acquired net assets) or in "part" (only on the Group's share of net assets). The choice of measurement basis is made on an acquisition-by-acquisition basis.
Earnings from the acquirees are reported in the consolidated income statement from the date of control.
Intra-group balances and transactions such as income, expenses and dividends are eliminated in preparing the consolidated financial statements. Profits and losses resulting from intra-group transactions that are recognised in assets, such as inventory, are eliminated in full, but losses are only eliminated to the extent that there is no evidence of impairment.
Property, plant and equipment
Items of property, plant and equipment are carried at cost less accumulated depreciation and impairment losses. Cost of an item of property, plant and equipment comprises the purchase price, import duties, and any cost directly attributable to bringing the asset to its location and condition for use. The Group capitalises costs on initial recognition and on replacement of significant parts of property, plant and equipment, if it is probable that the future economic benefits embodied will flow to the Group and the cost can be measured reliably. All other costs are recognised as an expense in profit or loss when incurred.
3. Significant accounting principles, accounting estimates and judgements (continued)
Property, plant and equipment (continued)
Depreciation
Depreciation is calculated based on cost using the straight-line method over the estimated useful life of the asset. The following useful lives are used for depreciation:
Years
Buildings 20-30 Plant and equipment 3-10
The depreciation methods, useful lives and residual values are reassessed annually. Land is not depreciated.
Right of use assets are depreciated using the straight-line method over the estimated useful life of the asset being the remaining duration of the lease from inception date of the asset. The depreciation methods, useful lives and residual values are reassessed annually.
Financial Assets and Liabilities
Recognition and derecognition
Financial assets and liabilities are recognised at fair value when the Group becomes a party to the contractual provisions of the instrument. Purchases and sales of financial assets are accounted for at trade date, which is the day when the Group contractually commits to acquire or dispose of the assets. Trade receivables are recognised on delivery of product. Liabilities are recognised when the other party has performed and there is a contractual obligation to pay. Derecognition (fully or partially) of a financial asset occurs when the rights to receive cash flows from the financial instruments expire or are transferred and substantially all of the risks and rewards of ownership have been removed from the Group. The Group derecognises (fully or partially) a financial liability when the obligation specified in the contract is discharged or otherwise expires. A financial asset and a financial liability are offset and the net amount presented in the statement of financial position when there is a legally enforceable right to set off the recognised amounts and there is an intention to either settle on a net basis or to realise the asset and settle the liability simultaneously.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest income or interest expense over the relevant periods. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument, or when appropriate a shorter period, to the net carrying amount of the financial asset or financial liability. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs, and all other premiums or discounts.
Borrowing costs
All borrowing costs are expensed in accordance with the effective interest rate method.
Investments in subsidiaries - Company
Investments in subsidiary undertakings are stated at cost less provision for impairment in the Company's statement of financial position. Loans to subsidiary undertakings are initially recorded at fair value in the Company statement of financial position and subsequently at amortised cost using an effective interest rate methodology.
Impairment of financial assets
Financial assets are assessed at each reporting date to determine whether there is any objective evidence that they are impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.
Equity
Shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effect.
Contingent liabilities
A contingent liability is a possible obligation or a present obligation that arises from past events that is not reported as a liability or provision, as it is not probable that an outflow of resources will be required to settle the obligation or that a sufficiently reliable calculation of the amount cannot be made.
3. Significant accounting principles, accounting estimates and judgements (continued)
Financial Assets and Liabilities ( continued)
Financial instruments carried at fair value: Non-derivative financial liabilities
Fair value is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date.
Finance income and expenses
Finance income and expense are included in profit or loss using the effective interest method.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with maturities of three months or less.
Provisions
A provision is recognised in the statement of financial position when the Group has a legal or constructive obligation as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation, and the outflow can be estimated reliably. The amount recognised as a provision is the best estimate of the expenditure required to settle the present obligation at the reporting date. If the effect of the time value of money is material, the provision is determined by discounting the expected future cash flows at a pre-tax rate that reflects the current market assessments of the time value of money and, where appropriate, the risks specific to the liability.
A provision for restructuring is recognised when the Group has approved a detailed and formal restructuring plan and the restructuring has either commenced or been announced publicly. Future operating losses are not provided for.
Exceptional Items
The Group has adopted an Income Statement format which seeks to highlight significant items within the Group results for the year. Exceptional items may include restructuring, profit or loss on disposal or termination of operations, litigation costs and settlements, profit or loss on disposal of investments, profit or loss on disposal of property, plant and equipment, acquisition costs, adjustment to contingent consideration and impairment of assets relating to significant transactions. Judgement is used by the Group in assessing particular items, which by virtue of their scale and nature, should be presented in the Income Statements and disclosed in the related notes as exceptional items.
Defined contribution plans
A defined contribution retirement benefit plan is a post-employment benefit plan under which the Group pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution retirement benefit plans are recognised as an employee benefit expense in profit or loss when employees provide services entitling them to the contributions.
Share-based payment transactions
The Group operates a long term incentive plan which allows the Company to grant Restricted Share Awards ("RSAs") to executive directors and senior management. All schemes are equity settled arrangements under IFRS 2 Share-based Payment.
The grant-date fair value of share-based payment awards granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.
3. Significant accounting principles, accounting estimates and judgements (continued)
Critical accounting estimates and judgements
The preparation of financial statements requires management's judgement and the use of estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the prevailing circumstances. Actual results may differ from those estimates. The estimates and assumptions are reviewed on an ongoing basis. Revisions to the accounting estimates are recognised in the period in which they are revised and in any future periods affected.
Following are the estimates and judgements which, in the opinion of management, are significant to the underlying amounts included in the financial reports and for which there is a significant risk that future events or new information could entail a change in those estimates or judgements.
Deferred contingent consideration
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.
Goodwill
The initial recognition of goodwill represents management' best estimate of the fair value of the acquired entities value less the identified assets acquired.
During the annual impairment assessment over goodwill, management calculate the recoverable value of the group using their best estimate of the discounted future cash flows of the group. The fair values were estimated using management's current and future projections of the Mincon Group's performance as well as appropriate data inputs and assumptions
Trade and other receivables
Trade and other receivables are included in current assets, except for those with maturities more than 12 months after the reporting date, which are classified as non-current assets. The Group estimates the risk that receivables will not be paid and provides for doubtful debts in line with IFRS 9.
4. Revenue
In the following table, revenue is disaggregated between Mincon manufactured product and product that is purchased outside the Group and resold through Mincon distribution channels.
2020 2019 EUR'000 EUR'000 ---------------------------- ------- ------- Product revenue: Sale of Mincon product 108,556 103,797 Sale of third party product 21,347 19,948 Total revenue 129,903 123,745 ---------------------------- ------- -------
5. Operating Segment
An operating segment is a component of the Group that engages in busi-ness activities from which it may earn revenue and incur expenses, and for which discrete financial information is available. The operating results of the operating segment is reviewed regularly by the Board of Directors, the chief operating decision maker, to make deci-sions about allocation of resources and also to assess performance.
Results 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.
The Group has determined that it has one reportable segment. The Group is managed as a single business unit that sells drilling equipment, primarily manufactured by Mincon manufacturing sites.
The CODM assesses operating segment performance based on a measure of operating profit. Segment revenue for the year ended 31 December 2020 of EUR129.9million (2019: EUR123.7 million) is wholly derived from sales to external customers.
Entity-wide disclosures
The business is managed on a worldwide basis but operates manufacturing facilities and sales offices in Ireland, UK, Sweden, Finland, South Africa, Western Australia, the United States and Canada and sales offices in nine other locations including Eastern Australia, South Africa, France, Spain, Namibia, Sweden, 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):
2020 2019 EUR'000 EUR'000 ----------------------------------------- ------- ------- Region: Ireland 1,487 772 Americas 43,640 39,410 Australasia 24,754 27,351 Europe, Middle East, Africa 60,022 56,212 Total revenue from continuing operations 129,903 123,745 ----------------------------------------- ------- -------
During 2020 Mincon had sales in the USA of EUR24.7 million (2019: EUR20.8 million), Australia of EUR14.6 million (2019: EUR18.5 million) and Sweden of EUR13.5 million (2019: EUR12.8 million), these separately contributed to more than 10% of the entire Group's sales for 2020.
Non-current assets by region (location of assets): 2020 2019 EUR'000 EUR'000 Region: Ireland 18,315 17,064 Americas 11,310 21,846 Australasia 11,338 11,144 Europe, Middle East, Africa 41,844 23,055 Total non-current assets(1) 82,807 73,109 ---------------------------------------------------- ------- ------- (1) Non-current assets exclude deferred tax assets.
During 2020 Mincon held non-current assets (excluding deferred tax assets) in the USA of EUR9.4 million, these separately contributed to more than 10% of the entire Group's non-current assets (excluding deferred tax assets) for 2020.
6. Cost of Sales and operating expenses
Included within cost of sales and operating costs were the following major components:
Cost of sales 2020 2019 EUR'000 EUR'000 --------------------------------------------- ------- ------- Raw materials 33,913 39,190 Third party product purchases 16,098 14,204 Employee costs 17,504 14,045 Depreciation (note 13) 4,216 3,312 Distribution costs 3,106 2,380 Energy costs 1,623 1,450 Maintenance of machinery 1,392 1,363 Impairment of finished goods inventory - 1,692 Cost of sales of disposed operations(note 8) - 2,489 Subcontracting 4,311 2,102 Other 2,023 420 Total cost of sales 84,186 82,647 --------------------------------------------- ------- -------
Operating costs
2020 2019 EUR'000 EUR'000 -------------------------------------------------------- ------- ------- Employee costs (including director emoluments) 17,438 15,899 Depreciation (note 13) 2,266 1,930 Rent 793 865 Travel 775 2,375 Professional costs 1,814 1,938 Administration 2,007 2,247 Marketing 542 886 Salary and termination payments for redundant employees (note 8) - 2,754 Impairment of trade receivable - 799 Operating costs of disposed operations (note 8) - 2,359 Other 1,833 1,764 Total other operating costs 27,468 33,816 -------------------------------------------------------- ------- -------
The Group invested approximately EUR3.7 million on research and development projects in 2020 (2019: EUR3.2 million). EUR2.6 million of this has been expensed in the period (2019: EUR1.8 million), with the balance of EUR1.1 million capitalised (2019: EUR1.4 million) (note 12).
The Group recognised EUR1.3 million in Government Grants in 2020 (2019:NIL). These grants differ in structure from country to country, they primarily relate to personnel costs.
7. Employee information 2020 2019 EUR'000 EUR'000 --------------------------------------------------------- -------- ------- Wages and salaries - excluding directors 28,753 25,088 Wages, salaries, fees and retirement benefit - directors (note 10) 795 760 Salary and termination payments for redundant employees - 2,754 Social security costs 3,029 2,677 Retirement benefit costs of defined contribution plans 1,735 1,064 Share based payment expense (note 22) 630 355 Total employee costs 34,942 32,698 --------------------------------------------------------- -------- ------- The Group capitalised payroll costs of EUR0.5 million in 2020 (2019: EUR0.5 million) in relation to research and development. The average number of employees was as follows: 2020 2019 Number Number ------------------------------------------------------- -------- ------ Sales and distribution 126 124 General and administration 66 56 Manufacturing, service and development 360 290 ------------------------------------------------------- -------- ------ Average number of persons employed 552 470 ------------------------------------------------------- -------- ------
Retirement benefit and Other Employee Benefit Plans
The Group operates various defined contribution retirement benefit plans. During the year ended 31 December 2020, the Group recorded EUR1.7 million (2019: EUR1.1 million) of expense in connection with these plans.
8. Exceptional Items
2020 2019 EUR'000 EUR'000 -------------------------------------------------------- ------- -------- Revenue Revenue from disposed operations - 3,074 -------------------------------------------------------- ------- -------- Total Revenue - 3,074 -------------------------------------------------------- ------- -------- Cost of sales Impairment of capital equipment inventory - Cost of sales of disposed operations - (2,489) Total cost of sales - (2,489) -------------------------------------------------------- ------- -------- Operating costs Salary and termination payments for redundant employees - (2,754) Acquisition related costs - - Operating costs of disposed operations - (2,359) -------------------------------------------------------- ------- -------- Total operating costs - (5,113) -------------------------------------------------------- ------- -------- Tax on disposals and discontinued operations - (127) -------------------------------------------------------- ------- -------- Profit on Disposal (note 9) - 7,489 -------------------------------------------------------- ------- -------- Total exceptional profit after tax - 2,834 -------------------------------------------------------- ------- --------
8. Exceptional Items (continued)
The Group had undertaken a reorganisation of its activities across all regions during 2019, including relocation of activities, closing of regional offices and redundancies where necessary.
The Group had also disposed of operations in two distribution centres, Mincon Tanzania and Mincon Russia, following a strategic decision to place greater focus and emphasis on the Groups key competencies while focusing on the profitability of the core business activities and growth areas where there are synergies and tangible growth opportunities.
The Group has chosen to present exceptional items separately from the reorganisation.
9. Acquisitions & Disposals
In January 2020, Mincon acquired 100% shareholding in Lehti Group, a Finnish based product manufacturing and distributing company, for a consideration of EUR7.7 million. The transaction included a cash consideration of EUR7 million and deferred consideration of EUR706,000.
In May 2020, Mincon acquired 100% shareholding in Rocdrill, a French-based construction product distributor
and drilling specialist, for a consideration of EUR1 million. The transaction included a cash consideration of EUR450,000 and deferred consideration of EUR550,000.
A. Consideration transferred
The following table summarises the acquisition date fair value of each major class of consideration transferred.
EURL Rocdrill Lehti Total Group EUR'000 EUR'000 EUR'000 ----------------------------------- -------------- -------- -------- Cash 450 7,000 7,450 Deferred contingent consideration 550 706 1,256 Total consideration transferred 1,000 7,706 8,706 ------------------------------------- -------------- -------- -------- B. Identifiable assets acquired and liabilities assumed
The following table summarises the recognised amounts of assets and liabilities assumed at the date of acquisition.
Total EUR'000 ----------------------------------------------- --------------- Property, plant and equipment 2,637 Right of use assets 3,385 Inventories 3,582 Trade receivables 4,704 Other assets 322 Trade and other payables (2,022) Right of use liabilities (3,385) Other accruals and liabilities (5,050) Fair value of identifiable net assets acquired 4,173 ----------------------------------------------- ---------------
9. Acquisitions & Disposals (continued)
Measurement of fair values
The valuation techniques used for measuring the fair value of material assets acquired were as follows.
Assets acquired Valuation Technique Property, plant Market comparison technique and cost technique: The valuation and equipment model considers quoted market prices for similar items when they are available, and depreciated replacement cost when appropriate. Depreciated replacement cost reflects adjustments for physical deterioration as well as functional and economic obsolescence. Inventories Market comparison technique: The fair value is determined based on the estimated selling price in the ordinary course of business less the estimated costs of completion and sale, and a reasonable profit margin based on the effort required to complete and sell the inventories. ----------- ------------------------------------------------------------
Goodwill
Goodwill arising from the acquisition has been recognised as follows.
Total Total 2020 2019 EUR'000 EUR'000 --------------------------------------- --------- --------- Consideration transferred 8,706 1,802 Fair value of identifiable net assets (4,173) (916) --------------------------------------- --------- --------- Goodwill 4,533 886 --------------------------------------- --------- --------- C. Profit on Disposal
During 2019 the Group disposed of two subsidiaries in Sweden (Hardtekno and Cebeko) and a distribution subsidiary in South Africa (Premier Drilling Solutions).
Total Total 2020 2019 EUR'000 EUR'000 ------------------------------------------------- ---------- --------- Consideration received - 8,997 Cash and cash equivalents disposed of - (480) Net assets - (1,028) Profit on Disposal - 7,489 ------------------------------------------------- ---------- --------- Total ------------------------------------------------- ---------- --------- Profit on disposal of Hardtekno - 7,551 Profit on disposal of Cebeko - 106 Profit on disposal of Premier Drilling Solutions - 98 Cost on disposal - (266) Profit on Disposal - 7,489 ------------------------------------------------- ---------- ---------
10. Statutory and other required disclosures
Operating profit is stated after charging the following 2020 2019 amounts: EUR'000 EUR'000 -------------------------------------------------------- --------------- --------------- Directors' remuneration Fees 165 192 Wages and salaries 574 511 Other emoluments - - Retirement benefit contributions 56 57 -------------------------------------------------------- --------------- --------------- Total directors' remuneration 795 760 -------------------------------------------------------- --------------- --------------- Auditor's remuneration 2020 2019 EUR'000 EUR'000 ----------------------------------------------------- -------- -------- Auditor's remuneration - Fees payable to lead audit firm Audit of the Group financial statements 205 195 Audit of the Company financial statements 15 15 Other assurance services 20 20 Tax advisory services (a) - - Other non-audit services - 2 ----------------------------------------------------- -------- -------- 240 232 ----------------------------------------------------- -------- -------- Auditor's remuneration - Fees payable to other firms in lead audit firm's network Audit services 112 158 Other assurance services 2 2 Tax advisory services 9 63 Total auditor's remuneration 123 223 ----------------------------------------------------- -------- --------
(a) Includes tax compliance work on behalf of Group companies.
11. Income tax
Tax recognised in income statement:
2020 2019 Current tax expense EUR'000 EUR'000 -------------------------------------------------- ------- -------- Current year 3,224 1,648 Adjustment for prior years (103) (89) -------------------------------------------------- ------- -------- Total current tax expense 3,121 1,559 -------------------------------------------------- ------- -------- Deferred tax expense Origination and reversal of temporary differences (438) 231 Adjustment for prior years - 3 Total deferred tax (credit)/expense (438) 234 -------------------------------------------------- ------- -------- Total income tax expense 2,683 1,793 -------------------------------------------------- ------- --------
A reconciliation of the expected income tax expense for continuing operations is computed by applying the standard Irish tax rate to the profit before tax and the reconciliation to the actual income tax expense is as follows:
2020 2019 EUR'000 EUR'000 ------------------------------------------------------ ------- ------- Profit before tax from continuing operations 17,069 14,176 Irish standard tax rate (12.5%) 12.5% 12.5% Taxes at the Irish standard rate 2,134 1,772 Foreign income at rates other than the Irish standard rate 849 957 Losses creating no income tax benefit (843) 288 Other 543 (1,224) ------------------------------------------------------ ------- ------- Total income tax expense 2,683 1,793 ------------------------------------------------------ ------- -------
11. Income tax (continued)
The Group's net deferred taxation liability was as follows:
2020 2019 EUR'000 EUR'000 ------------------------------------- ------- -------- Deferred taxation assets: Reserves, provisions and tax credits 585 610 Accrued income 31 - Tax losses and unrealised FX gains 477 6 Total deferred taxation asset 1,093 616 ------------------------------------- ------- -------- Deferred taxation liabilities: Property, plant and equipment (1,780) (1,742) Profit not yet taxable (52) (52) Total deferred taxation liabilities (1,832) (1,794) ------------------------------------- ------- -------- Net deferred taxation liability (739) (1,178) ------------------------------------- ------- -------- The movement in temporary differences during the year were as follows: Balance Recognised Acquired in Balance in a 1 January Profit or Business combination 31 December Loss 1 January 2019 - 31 December 2019 EUR'000 EUR'000 EUR'000 EUR'000 ------------------------------------ --------- ---------- -------------------- ------------ Deferred taxation assets: Reserves, provisions and tax credits 278 332 - 610 Tax losses - 6 - 6 ------------------------------------ --------- ---------- -------------------- ------------ Total deferred taxation asset 278 338 - 616 ------------------------------------ --------- ---------- -------------------- ------------ Deferred taxation liabilities: Property, plant and equipment (1,154) (588) - (1,742) Accrued income - - - - Profit not yet taxable (68) 16 - (52) ------------------------------------ --------- ---------- -------------------- ------------ Total deferred taxation liabilities (1,222) (572) - (1,794) ------------------------------------ --------- ---------- -------------------- ------------ Net deferred taxation liability (944) (234) - (1,178) ------------------------------------ --------- ---------- -------------------- ------------ Balance Recognised Acquired in Balance in a 1 January Profit or Business combination 31 December Loss 1 January 2020 - 31 December 2020 EUR'000 EUR'000 EUR'000 EUR'000 ------------------------------------ --------- ---------- -------------------- ------------ Deferred taxation assets: Reserves, provisions and tax credits 610 (25) - 585 Accrued income - 31 - 31 Tax losses 6 471 - 477 ------------------------------------ --------- ---------- -------------------- ------------ Total deferred taxation asset 616 477 - 1,093 ------------------------------------ --------- ---------- -------------------- ------------ Deferred taxation liabilities: Property, plant and equipment (1,742) (38) - (1,780) Profit not yet taxable (52) - - (52) ------------------------------------ --------- ---------- -------------------- ------------ Total deferred taxation liabilities (1,794) (38) - (1,832) ------------------------------------ --------- ---------- -------------------- ------------ Net deferred taxation liability (1,178) 439 - (739) ------------------------------------ --------- ---------- -------------------- ------------
Deferred taxation assets have not been recognised in respect of the following items:
2020 2019 EUR'000 EUR'000 ----------- ------- -------- Tax losses 3,269 4,112 Total 3,269 4,112 ----------- ------- --------
12. Intangible assets and goodwill
Product development Goodwill Total EUR'000 EUR'000 EUR'000 ---------------------------- ------------ --------- -------- Balance at 1 January 2019 3,377 27,376 30,753 ---------------------------- ------------ --------- -------- Internally developed 1,405 - 1,405 ---------------------------- ------------ --------- -------- Acquisitions - 886 886 ---------------------------- ------------ --------- -------- Disposal (note 9) - (1,529) (1,529) ---------------------------- ------------ --------- -------- Translation differences - 422 422 ---------------------------- ------------ --------- -------- Balance at 31 December 2019 4,782 27,155 31,937 ---------------------------- ------------ --------- -------- Internally developed 1,065 - 1,065 ---------------------------- ------------ --------- -------- Acquisitions (note 9) - 4,533 4,533 ---------------------------- ------------ --------- -------- Disposal (note 9) - - - ---------------------------- ------------ --------- -------- Translation differences - (548) (548) ---------------------------- ------------ --------- -------- Balance at 31 December 2020 5,847 31,140 36,987 ---------------------------- ------------ --------- --------
Goodwill relates to the acquisition of the below companies, being the dates that the Group obtained control of these business:
--..... The remaining 60% of DDS-SA Pty Limited in November 2009.
--..... The 60% acquisition of Omina Supplies in August 2014.
--..... The 65% acquisition of Rotacan in August 2014.
--..... The acquisition of ABC products in August 2014.
--..... The acquisition of Ozmine in January 2015.
--..... The acquisition of Mincon Chile in March 2015.
--..... The acquisition of and Mincon Tanzania in March 2015.
--..... The acquisition of Premier in November 2016.
--..... The acquisition of Rockdrill Engineering in November 2016.
--..... The acquisition of PPV in April 2017.
--..... The acquisition of Viqing July 2017.
--..... The acquisition of Driconeq in March 2018.
--..... The acquisition of Pacific Bit of Canada in January 2019
--..... The acquisition of Lehti Group in January 2020
--..... The acquisition of Rocdrill in May 2020
The Group accounts for acquisitions using the purchase accounting method as outlined in IFRS 3 Business Combinations.
The businesses acquired were integrated with other Group operations soon after acquisition. Impairment testing (including sensitivity analysis) is performed at each period end. Group management has determined that the Group has one cash generating unit and one operating segment and therefore all goodwill is tested for impairment at Group level.
The recoverable amount of goodwill has been assessed based on estimates of fair value less costs to sell (FVLCS). The FVLCS valuation is calculated on the basis of a discounted cash flow ("DCF") model. The most significant assumptions within the DCF are weighted average cost of capital ("WACC"), tax rates and terminal value assumptions. Goodwill impairment testing did not indicate any impairment during any of the periods being reported. Four sensitivities are applied as part of the analysis considering the effects of changes in 1) the WACC, 2) the EBITDA margin, 3) the long term growth rate and 4) the level of terminal value capital expenditure. The sensitivities calculate downside scenarios to assess potential indications of impairments due to changes in key assumptions. The results from the sensitivity analysis did not suggest that goodwill would be impaired when those sensitivities were applied.
The carrying amount of the CGU was determined to be lower than its fair value less cost to sell by EUR68.4 million, giving management substantial headroom and comfort in the above stated impairment assessment.
The key assumptions used in the estimation of the fair value less cost calculation were as follows:
12. Intangible assets and goodwill(continued)
2020 ----------------------------------- -------- WACC 10.5% EBIDTA margin 17.8% Long term growth rate 2.25% EUR7.1 Terminal value capital expenditure million ----------------------------------- --------
The WACC calculation considers market data and data from comparable public companies. Peer group data was especially considered for the beta factor and assumed financing structure (gearing level). The analysis resulted in a discount rate range of 9.60% to 11.35%. This results in a midpoint WACC being used of 10.5%.
The Long term growth rate of 2.25% applied is based on a weighted average of the long term inflation rates of the countries in which Mincon generates revenues and earnings.
The budgeted EBITDA was based on expectations of future outcomes, taking account for past experience, adjusted for anticipated revenue growth as detailed in managements approved Budget. No EBITDA margin effect is assumed in the terminal value i.e. the budgeted EBITDA margin of 17.8% for 2023 is assumed in the Terminal Value calculation used to arrive at the FVLCS.
Terminal value Capital expenditure assumes no balance sheet growth is assumed in the terminal value, CAPEX is assumed to equal depreciation of EUR7.1 million.
Investment expenditure of EUR1.1 million, which has been capitalised, is in relation to ongoing product development within the Group. Amortisation will begin at the stage of commercialisation and charged to the income statement over a period of three to five years, or the capitalised amount will be written off if the project is deemed no longer viable by management.
Change in estimates
During 2020, the Group performed a review of their goodwill impairment assessment method and concluded that the fair value less costs of disposal was greater than the value in use. As a result, the recoverable amount has been calculated using the fair value less costs of disposal model in the current year. There was no impact on the financial statements of this change in estimate.
.
13. Property, plant and equipment
Land & Plant & ROU Buildings Equipment Assets Total EUR'000 EUR'000 EUR'000 EUR'000 ------------------------------------------- --------- --------- -------- -------- Cost: At 1 January 2019 15,650 40,347 - 55,997 ------------------------------------------- --------- --------- -------- -------- Acquisitions through business combinations - 75 - 75 Right of use asset on inception - - 4,683 4,683 Additions 1,223 6,707 490 8,420 Disposals (482) (2,913) (455) (3,850) Foreign exchange differences (163) 1,613 114 1,564 At 31 December 2019 16,228 45,829 4,832 66,889 ------------------------------------------- --------- --------- -------- -------- Acquisitions through business combinations 95 2,542 3,385 6,022 Additions 387 6,835 102 7,324 Disposals and derecognition of ROU assets - (2,282) (1,199) (3,481) Foreign exchange differences (419) (1,384) (233) (2,036) At 31 December 2020 16,291 51,540 6,887 74,718 ------------------------------------------- --------- --------- -------- -------- Accumulated depreciation: At 1 January 2019 (2,855) (18,212) - (21,067) ------------------------------------------- --------- --------- -------- -------- Charged in year (442) (3,456) (1,344) (5,242) Disposals 279 1,582 - 1,861 Foreign exchange differences (9) (1,260) - (1,269) --------- --------- -------- -------- At 31 December 2019 (3,027) (21,346) (1,344) (25,717) ------------------------------------------- --------- --------- -------- -------- Charged in year (461) (4,205) (1,816) (6,482) Disposals - 1,969 432 2,401 Foreign exchange differences 68 750 82 900 ------------------------------------------- --------- --------- -------- -------- At 31 December 2020 (3,420) (22,832) (2,646) (28,898) ------------------------------------------- --------- --------- -------- -------- Carrying amount: 31 December 2020 12,871 28,708 4,241 45,820 ------------------------------------------- --------- --------- -------- -------- Carrying amount: 31 December 2019 13,201 24,483 3,488 41,172 ------------------------------------------- --------- --------- -------- -------- Carrying amount: 1 January 2019 12,795 22,135 - 34,930 ------------------------------------------- --------- --------- -------- --------
Right of use assets
The depreciation charge for property, plant and equipment is recognised in the following line items in the income statement:
2020 2019 EUR'000 EUR'000 ----------------------------------------------------- ------- -------- Cost of sales 4,216 3,312 General, selling and distribution expenses 922 586 General, selling and distribution expenses ROU asset 1,344 1,344 Total depreciation charge for property, plant and equipment 6,482 5,242 ----------------------------------------------------- ------- --------
14. Inventory and capital equipment
2020 2019 EUR'000 EUR'000 ------------------------------------ ------- -------- Finished goods and work-in-progress 42,326 38,212 Capital equipment 504 962 Raw materials 10,187 9,416 ------------------------------------ ------- -------- Total inventory 53,017 48,590 ------------------------------------ ------- --------
The Group recorded an impairment of EUR80,000 against inventory to take account of net realisable value during the year ended 31 December 2020 (2019: EUR1.7 million). Write-downs are included in cost of sales.
At 31 December 2020 and 31 December 2019, capital equipment are rigs held in South Africa for resale.
15. Trade and other receivables and other current assets
a) Trade and other receivables
2020 2019 EUR'000 EUR'000 -------------------------------- ------- -------- Gross receivable 21,830 21,424 Provision for impairment (1,190) (1,078) Net trade and other receivables 20,640 20,346 -------------------------------- ------- -------- Provision for impairment EUR'000 ---------------------------- ---------------- Balance at 1 January 2020 (1,078) Additions (112) Balance at 31 December 2020 (1,190) ---------------------------- ---------------- 2020 2019 EUR'000 EUR'000 Less than 60 days 17,878 17,112 61 to 90 days 1,350 1,659 Greater than 90 days 1,412 1,575 -------------------------------- ------- -------- Net trade and other receivables 20,640 20,346 -------------------------------- ------- --------
At 31 December 2020, EUR2.8 million of trade receivables balances (13%) were past due but not impaired (2019: EUR3.2 million (16%).
b) Prepayments and other current assets
2020 2019 EUR'000 EUR'000 ------------------------------------- -------- --------- Plant and machinery prepaid 1,597 3,332 Prepayments and other current assets 2,589 2,766 Prepayments and other current assets 4,186 6,098 ------------------------------------- -------- ---------
16. Trade creditors, accruals and other liabilities
2020 2019 EUR'000 EUR'000 ----------------------------------- -------- ------- Trade creditors 10,457 10,853 Total creditors and other payables 10,457 10,853 ----------------------------------- -------- ------- 2020 2019 EUR'000 EUR'000 ------------------------------------- -------- ------- VAT 390 207 Social security costs 1,088 674 Other accruals and liabilities 4,051 4,946 Total accruals and other liabilities 5,529 5,827 ------------------------------------- -------- -------
17. Capital management
The Group's policy is to have a strong capital base in order to maintain investor, creditor and market confidence and to sustain future development of the business. Management monitors the return on capital, as well as the level of dividends to ordinary shareholders.
The Board of Directors seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowing and the advantages and security afforded by a sound capital position.
The Group monitors capital using a ratio of 'net debt' to equity. Net debt is calculated as total liabilities less cash and cash equivalents (as shown in the statement of financial position).
2020 2019 EUR'000 EUR'000 -------------------------------- --------- -------- Total liabilities (46,163) (39,784) Less: cash and cash equivalents 17,045 16,368 Net debt (29,118) (23,416) -------------------------------- --------- -------- Total equity 132,936 126,144 -------------------------------- --------- -------- Net debt to equity ratio 0.22 0.18 -------------------------------- --------- --------
18. Loans and borrowings
2020 2020 Maturity EUR'000 EUR'000 -------------------------------------- ------- -------- Bank loans 2021-2034 11,090 4,879 Finance leases 2021-2026 5,494 5,903 Right of Use leases 2020-2029 5,027 4,140 --------------------------- ---------- Total loans and borrowings 21,611 14,922 ------- -------- Current 6,822 4,043 ------- -------- Non-current 14,789 10,879 ------- --------
The Group has a number of bank loans and finance leases with a mixture of variable and fixed interest rates. The Group has not been in default on any of these debt agreements during any of the periods presented. The Group has been in compliance with all debt agreements during the periods presented. The loan agreements in Ireland carry restrictive financial covenants. Interest rates on current borrowings are at an average rate of 4.56%
During 2020 the Group availed of the option to enter into overdraft facilities and to draw down loans of EUR6.6 million with interest rate between 1% and 10.5%.
18. Loans and borrowings (continued)
Reconciliation of movements of liabilities to cash flows arising from financing activities
Balance Arising Cash movements Non-cash Foreign Balance at 1 January from acquisition movements exchange at 31 2020 differences December 2020 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 --------------------- ------------- ----------------- -------------- ---------- ------------ --------- Loans and borrowings 4,879 3,144 3,210 - (143) 11,090 Finance leases 5,903 - (1,579) 1,276 (106) 5,494 Right of use leases 4,140 3,385 - (2,331) (167) 5,027 Retained earnings - - (2,222) - - (2,222) Total 14,922 6,529 (591) (1,055) (416) 19,389 --------------------- ------------- ----------------- -------------- ---------- ------------ ---------
19. Non-controlling interest
(a) Non-controlling interest
The following table summarises the information relating to the Group's subsidiary, Mincon West Africa SL, that has material non-controlling interests, before any intra-group eliminations. The non-controlling interest was 20% of this subsidiary until the date of the transaction described in note 19b.
2020 2019 Non-controlling Interest 20% EUR'000 EUR'000 ------------------------------- -------- ------- Non-current assets - 97 Current assets - 4,253 Non-current liabilities - - Current liabilities - (874) ------------------------------- -------- ------- Net assets - 3,476 ------------------------------- -------- ------- Net assets attributable to NCI - 695 ------------------------------- -------- ------- Revenue 6,919 6,176 ------------------------------- -------- ------- Profit 826 272 ------------------------------- -------- ------- OCI - - ------------------------------- -------- ------- Total comprehensive income 826 272 ------------------------------- -------- ------- Profit allocated to NCI 165 54 ------------------------------- -------- -------
(b) Acquisition of non-controlling interest
Mincon Group plc acquired the additional 20% interest in the voting shares of Mincon West Africa on 1 October 2020, increasing its ownership interest to 100%. The carrying amount of Mincon West Africa's NCI portion in the Group's consolidated financial statements on the date of acquisition was EUR1.28 million.
EUR'000 --------------------------------------------------------- -------- Cash consideration paid to NCI 1,000 Deferred consideration due to NCI 1,000 Carrying amount of NCI acquired (1,280) Decrease in equity attributable to owners of the company 720 --------------------------------------------------------- --------
20. Share capital and reserves
At 31 December 2020 Authorised Share Capital Number EUR000 -------------------------------- ----------- ------ Ordinary Shares of EUR0.01 each 500,000,000 5,000 Allotted, called-up and fully paid up shares Number EUR000 --------------------------------------------- ----------- ------ Ordinary Shares of EUR0.01 each 211,675,024 2,117
Share issuances
On 26 November 2013, Mincon Group plc was admitted to trading on the Enterprise Securities Market (ESM) of the Euronext Dublin and the Alternative Investment Market (AIM) of the London Stock Exchange.
Voting rights
The holders of Ordinary Shares have the right to receive notice of and attend and vote at all general meetings of the Company and they are entitled, on a poll or a show of hands, to one vote for every Ordinary Share they hold. Votes at general meetings may be given either personally or by proxy. Subject to the Companies Act and any special rights or restrictions as to voting attached to any shares, on a show of hands every member who (being an individual) is present in person and every proxy and every member (being a corporation) who is present by a representative duly authorised, shall have one vote, so, however, that no individual shall have more than one vote for every share carrying voting rights and on a poll every member present in person or by proxy shall have one vote for every share of which he is the holder.
Dividends
In September 2020, Mincon Group plc paid a final dividend for 2019 of EUR0.0105 (1.05 cent) per ordinary share. In September 2019, Mincon Group plc paid an interim dividend for 2019 of EUR0.0105 (1.05 cent) per ordinary share. In June 2019, Mincon Group plc paid a final dividend for 2018 of EUR0.0105 (1.05 cent) per ordinary share.
The Board of Mincon Group plc is recommending the payment of a full year dividend for the year ended 31 December 2020 in the amount of EUR0.021 (2.10 cent) per ordinary share, which will be subject to approval at the Annual General Meeting of the Company in May 2021. This dividend, is in respect to an interim dividend of 1.05 cent and final dividend of 1.05 cent. Subject to Shareholder approval at the Company's annual general meeting on 28 May 2021.
Share premium and other reserves
As part of a Group reorganisation of the Company, Mincon Group plc, became the ultimate parent entity of the Group. On 30 August 2013, the Company acquired 100% of the issued share capital in Smithstown Holdings and acquired (directly or indirectly) the shareholdings previously held by Smithstown Holdings in each of its subsidiaries, thereby creating a merger reserve.
21. Earnings per share
Basic earnings per share (EPS) is computed by dividing the profit for the period available to ordinary shareholders by the weighted average number of Ordinary Shares outstanding during the period. Diluted earnings per share is computed by dividing the profit for the period by the weighted average number of Ordinary Shares outstanding and, when dilutive, adjusted for the effect of all potentially dilutive shares. The following table sets forth the computation for basic and diluted net profit per share for the years ended 31 December:
2020 2019 Numerator (amounts in EUR'000): Profit attributable to owners of the Parent 14,221 12,329 Denominator (Number):Basic shares outstanding Restricted share awards Diluted weighted average shares outstanding 211,675,024 210,973,102 ---------------------------------------------- 4,825,517 1,546,189 216,500,544 212,519,291 ---------------------------------------------- ----------- ----------- Earnings per Ordinary Share
Basic earnings per share, EUR 6.72 5.84 Diluted earnings per share, EUR 6.57 5.80 -----------
22. Share based payment
During the year ended 31 December 2020, the Remuneration Committee made a grant of approximately 3,981,250 Restricted Share Options (RSAs) to members of the senior management team.
The vesting conditions of the scheme state that the minimum growth in EPS shall be CPI plus 5% per annum, compounded annually, over the relevant three accounting years up to the share award of 100% of the participants
basic salary. Where awards have been granted to a participant in excess of 100% of their basic salary, the performance condition for the element that is in excess of 100% of basic salary is that the minimum growth in EPS shall be CPI plus 10% per annum, compounded annually, over the three accounting years.
Number of Awards Reconciliation of outstanding share awards in thousand -------------------------------------------- ------------ Outstanding on 1 January 2020 1,546 Forfeited during the year - Exercised during the year (702) Granted during the year - Outstanding at 31 December 2020 844 -------------------------------------------- ------------ Number of Options Reconciliation of outstanding share options in thousands --------------------------------------------- ------------- Outstanding on 1 January 2020 - Forfeited during the year - Exercised during the year - Granted during the year 3,981 Outstanding at 31 December 2020 3,981 --------------------------------------------- -------------
23. Financial risk management
The Group is exposed to various financial risks arising in the normal course of business. Its financial risk exposures are predominantly related to changes in foreign currency exchange rates and interest rates, as well as the creditworthiness of our counterparties.
The Company's Board of Directors has overall responsibility for the establishment and oversight of the Group's risk management framework. The Board of directors has established the risk management committee, which is responsible for developing and monitoring the Group's risk management policies. The committee reports regularly to the Board of Directors on its activities.
The Group's risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group's activities. The Group, through its training and management standards and procedures, aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations.
The Group audit committee oversees how management monitors compliance with the Group's risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Group.
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 31 December 2020 and 31 December 2019 were as follows:
2020 2019 EUR'000 EUR'000 -------------------------- ------- ------- Cash and cash equivalents 17,045 16,368 Loans and borrowings 21,611 14,922 Shareholders' equity 132,936 125,029 -------------------------- ------- -------
The Group frequently assess its liquidity requirements, together with this requirement and the rate return of long term euro deposits, the Group has decided to keep all cash readily available that is accessible within a month or less. Cash at bank earns interest at floating rates based on daily bank deposits. The fair value of cash and cash equivalents equals the carrying amount.
Cash and cash equivalents are held by major Irish, European, United States and Australian institutions with credit rating of A3 or better. The Company deposits cash with individual institutions to avoid concentration of risk with any one counterparty. The Group has also engaged the services of a depository to ensure the security of the cash assets.
Risk of counterparty default arising on cash and cash equivalents and derivative financial instruments is controlled by dealing with high-quality institutions and by policy, limiting the amount of credit exposure to any one bank or institution.
The Group is also exposed to credit risk on its liquid resources (cash), of which the euro equivalent of EUR2.8 million was held in US dollar (USD 3.5 million), EUR2.4 million was held in Swedish krona (SEK 24.7 million) and the euro equivalent of EUR1.7 million was held Australian dollar (AUD 2.7 million). The Directors actively monitor the credit risk associated with this exposure.
23. Financial risk management (continued)
a) Liquidity and capital (continued)
At year-end, the Group's total cash and cash equivalents were held in the following jurisdictions:
31 December 31 December 2020 2019 EUR'000 EUR'000 Ireland 1,870 5,759 Americas 2,989 2,339 Australasia 1,723 1,625 Europe, Middle East, Africa 10,463 6,645 ----------------------------------------------------- ----------- ----------- Total cash, cash equivalents and short term deposits 17,045 16,368 ----------------------------------------------------- ----------- -----------
There are currently no restrictions that would have a material adverse impact on the Group in relation to the intercompany transfer of cash held by its foreign subsidiaries. The Group continually evaluates its liquidity requirements, capital needs and availability of resources in view of, among other things, alternative uses of capital, the cost of debt and equity capital and estimated future operating cash flow.
In the normal course of business, the Group may investigate, evaluate, discuss and engage in future company or product acquisitions, capital expenditures, investments and other business opportunities. In the event of any future acquisitions, capital expenditures, investments or other business opportunities, the Group may consider using available cash or raising additional capital, including the issuance of additional debt. The maturity of the contractual undiscounted cash flows (including estimated future interest payments on debt) of the Group's financial liabilities at 31 December were as follows:
Total Fair Value Less than More than of Cash Flows 1 Year 1-3 Years 3-5 Years 5 Years EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 ---------------------------------- ---------- --------- --------- --------- --------- At 31 December 2019: Deferred contingent consideration 4,962 2,452 2,510 - - Loans and borrowings 4,879 1,441 847 782 1,809 Finance leases 5,903 1,244 2,895 1,764 - Right of use leases 4,140 1,360 1,807 735 238 Trade and other payables 10,853 10,853 - - - Accrued and other financial liabilities 5,827 5,827 - - - ---------------------------------- ---------- --------- --------- --------- --------- Total at 31 December 2019 36,564 23,177 8,059 3,281 2,047 ---------------------------------- ---------- --------- --------- --------- --------- At 31 December 2020: Deferred contingent consideration 4,723 2,068 2,186 359 110 Loans and borrowings 11,090 3,666 3,875 1,881 1,668 Finance leases 5,494 1,448 2,924 1,030 92 Right of use leases 5,027 1,707 2,449 850 21
Trade and other payables 10,457 10,457 - - - Accrued and other financial liabilities 5,529 5,529 - - - ---------------------------------- ---------- --------- --------- --------- --------- Total at 31 December 2020 42,320 24,875 11,434 4,120 1,891 ---------------------------------- ---------- --------- --------- --------- ---------
b) Foreign currency risk
The Group is a multinational business operating in a number of countries and the euro is the presentation currency. The Group, however, does have revenues, costs, assets and liabilities denominated in currencies other than euro.
Transactions in foreign currencies are recorded at the exchange rate prevailing at the date of the transaction. The resulting monetary assets and liabilities are translated into the appropriate functional currency at exchange rates prevailing at the reporting date and the resulting gains and losses are recognised in the income statement. The Group manages some of its transaction exposure by matching cash inflows and outflows of the same currencies. The Group does not engage in hedging transactions and therefore any movements in the primary transactional currencies will impact profitability. The Group continues to monitor appropriateness of this policy
23. Financial risk management (continued)
b) Foreign currency risk (continued)
The Group's global operations create a translation exposure on the Group's net assets since the financial statements of entities with non-euro functional currencies are translated to euro when preparing the consolidated financial statements. The Group does not use derivative instruments to hedge these net investments.
The principal foreign currency risks to which the Group is exposed relate to movements in the exchange rate of the euro against US dollar, South African rand, Australian dollar, Swedish krona and Canadian dollar.
The Group has material subsidiaries with a functional currency other than the euro, such as US dollar, Australian dollar, South African rand, Canadian dollar, British pound and Swedish krona.
The Group's worldwide presence creates currency volatility when compared year on year. During 2020, currencies were extremely volatile due to the Covid-19 Global pandemic, however the euro remained relatively steady against all major currencies the Group trades in.
The US dollar, the largest currency the Group trades in outside the euro began to weaken at the beginning of H2 2020, and steadily declined during that period and ended the year 9% weaker compared with 2019 year end. This weakening was directly linked with economic uncertainty, with the US presidential elections tension that continued in 2021 while in the midst of the Covid-19 Global pandemic.
In South Africa, where Mincon has a large presence in relative terms to the Group, the South Africa rand weakened at the beginning of the Covid-19 Global pandemic as South Africa temporarily closed a large portion of its economy and more specifically most of its mining sector. However, the South African rand did recover towards the latter stages of 2020 and finished 14% behind the year end 2019.
The Australian dollar weakened in 2019, and the beginning of the Covid-19 Global pandemic compounded this in Q1 2020, as the Australian economy is very much dependent on the mining sector. As mining proved to be resilient during this pandemic the Australian dollar began to recover through the remainder of the year and finished 2020 flat against the euro.
-- The US dollar decreased by 9% against the closing 2019 euro rate (2019 increase of 2% against 2018).
-- The Australian dollar remained flat against the closing 2019 euro rated (2019 increase of 2% against 2018).
-- The South African rand has decreased 14% against the closing 2019 euro rated (2019 increase of 4% against 2018).
-- The Swedish Krona has increased 4% against the closing 2019 euro rated (2019 decrease of 3% against 2018).
In 2020, 57% (2019: 60%) of Mincon's revenue EUR130 million (2019: EUR124 million) was generated in AUD, SEK and USD. The majority of the Group's manufacturing base has a euro, US dollar or Swedish Krona cost base. While Group management makes every effort to reduce the impact of this currency volatility, it is impossible to eliminate or significantly reduce given the fact that the highest grades of our key raw materials are either not available or not denominated in these markets and currencies. Additionally, the ability to increase prices for our products in these jurisdictions is limited by the current market factors.
2020 2019 Euro exchange rates Closing Average Closing Average US Dollar 1.22 1.14 1.12 1.11 Australian Dollar 1.59 1.66 1.59 1.61 South African Rand 17.91 18.76 15.72 15.93 Swedish Krona 10.06 10.48 10.51 10.53 -------------------- ------- -------- -------- --------
23. Financial risk management (continued)
c) Credit risk
Credit risk is the risk that the possibility that the Group's customers may experience financial difficulty and be unable to meet their obligations. The Group monitors its collection experience on a monthly basis and ensures that a stringent policy is adopted to provide for all past due amounts. The majority of the Group's customers are third party distributors and end users of drilling tools and equipment.
Expected credit loss assessment
The Group allocates each exposure to a credit risk grade based on data that is determined to be predictive of the risk of loss and applying experienced credit judgement. Credit risk grades are defined using quantitative factors that are indicative of the risk of default and are aligned to past experiences. Loss rates are based on accrual credit loss experience over the past five years.
The maximum exposure to credit risk for trade and other receivables at 31 December 2020 and 31 December 2019 by geographic region was as follows:
2020 2019 EUR'000 EUR'000 ---------------------------- ------- ------- Ireland 121 88 Americas 7,298 6,141 Australasia 2,540 4,495 Europe, Middle East, Africa 10,681 9,622 Total amounts owed 20,640 20,346 ---------------------------- ------- -------
The Group is also exposed to credit risk on its liquid resources (cash), of which the euro equivalent of EUR2.8 million was held in US dollar (USD 3.5 million), EUR2.4 million was held in Swedish krona (SEK 24.7 million) and the euro equivalent of EUR1.7 million was held Australian dollar (AUD 2.7 million). The Directors actively monitor the credit risk associated with this exposure, cash and cash equivalents are held by major Irish, European, United States and Australian institutions with credit rating of A3 or better.
d) Interest rate risk
Interest Rate Risk on financial liabilities Movements in interest rates had no significant impact on our financial liabilities or finance cost recognised in either 2019 or 2020. Interest Rate Risk on cash and cash equivalents Our exposure to interest rate risk on cash and cash equivalents is actively monitored and managed, the rate risk on cash and cash equivalents is not considered material to the Group.
e) 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 2019 or 2020.
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.
23. Financial risk management (continued)
e) Fair values (continued)
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 31 December 2020 are as follows:
Deferred contingent consideration EUR'000 --------------------------------------------------------- -------------- Balance at 1 January 2020 4,962 Arising on acquisition 1,257 Purchase of NCI 1,000 Cash payment (2,460) Foreign currency translation adjustment (25) Fair value movement on deferred contingent consideration (11) Balance at 31 December 2020 4,723 --------------------------------------------------------- --------------
24. Subsidiary undertakings
At 31 December 2020 the Group had the following subsidiary undertakings:
Group Registered Office & Company Share % Country of Incorporation ------------------------------------------- -------- --------------------------------------------------------------- Mincon International Limited 100% Smithstown, Shannon, Co. Clare, Ireland Manufacturer of rock drilling equipment ------------------------------------------- -------- --------------------------------------------------------------- Mincon Rockdrills PTY Ltd 100% 8 Fargo Way, Welshpool, WA 6106, Australia Manufacturer of rock drilling equipment ------------------------------------------- -------- --------------------------------------------------------------- 1676427 Ontario Inc. (Operating as Rotacan) 100% 400B Kirkpatrick Street, North Bay, Ontario, P1B 8G5, Canada --------------------------------------------------------------- Manufacturer of rock drilling equipment ------------------------------------------- -------- --------------------------------------------------------------- Mincon Carbide Ltd 100% Windsor St, Sheffield S4 7WB, United Kingdom Manufacturer of tungsten carbide ------------------------------------------- -------- --------------------------------------------------------------- Viqing Drilling Equipment AB 100%* Svarvarevagen 1, SE-686 33 Sunne, Sweden Manufacturer of drill pipe equipment ------------------------------------------- -------- --------------------------------------------------------------- Mincon Inc. 100% 603 Centre Avenue, N.W. Roanoke, VA 24016, USA --------------------------------------------------------------- Sales company ------------------------------------------- -------- --------------------------------------------------------------- Mincon Sweden AB 100% Industrivagen 2-4, 61202 Finspang, Sweden Sales company ------------------------------------------- -------- --------------------------------------------------------------- Mincon Nordic OY 100% Hulikanmutka 6, 37570 Lempäälä, Finland Sales company ------------------------------------------- -------- --------------------------------------------------------------- Mincon Holdings Southern Africa (Pty) 100% 1 Northlake, Jetpark 1469, Gauteng, South Africa Sales company ------------------------------------------- -------- --------------------------------------------------------------- ABC Products (Rocky) Pty Ltd 100% 2/57 Alexandra Street, North Rockhampton, Queensland, 4701 Australia --------------------------------------------------------------- Sales company ------------------------------------------- -------- --------------------------------------------------------------- Mincon West Africa SARL 80% Villa TF 4635 GRD, Almadies, Dakar B.P. 45534, Senegal --------------------------------------------------------------- Dormant company ------------------------------------------- -------- --------------------------------------------------------------- Mincon West Africa SL 100% Calle Adolfo Alonso Fernández, s/n, Parcela P-16, Planta 2, Oficina 23, Zona Franca de Gran Canaria, Puerto de la Luz, Código Postal 35008, Las Palmas de Gran Canari --------------------------------------------------------------- Sales company ------------------------------------------- -------- --------------------------------------------------------------- Mincon Poland 100% ul.Mickiewicza 32, 32-050 Skawina, Poland Dormant company ------------------------------------------- -------- --------------------------------------------------------------- Pacific Bit of Canada 100% 9485 189 Unit204, Surrey, BC V4N 5L8, Canada Sales company ------------------------------------------- -------- --------------------------------------------------------------- 24. Subsidiary undertakings (continued) Group Registered Office & Company Share % Country of Incorporation ------------------------------------------ -------- --------------------------------------------------------------- Mincon Rockdrills Ghana Limited 100% P.O. Box CT5105, Accra, Ghana --------------------------------------------------------------- Dormant company ------------------------------------------ -------- --------------------------------------------------------------- Mincon S.A.C. 100% Calle La Arboleda 151, Dpto 201, La Planicie, La Molina, Peru --------------------------------------------------------------- Sales company ------------------------------------------ -------- --------------------------------------------------------------- Ozmine International Pty Limited 100% Gidgegannup, WA 6083, Australia --------------------------------------------------------------- Sales company ------------------------------------------ -------- --------------------------------------------------------------- Mincon Chile 100% Av. La Dehesa #1201, Torre Norte, Lo Barnechea, Santiago, Chile --------------------------------------------------------------- Sales company ------------------------------------------ -------- --------------------------------------------------------------- Mincon Tanzania 100% Plot 1/3 Nyakato Road, Mwanza, Tanzania --------------------------------------------------------------- Dormant company ------------------------------------------ -------- --------------------------------------------------------------- Mincon Namibia Pty Ltd 100% Ausspannplatz, Windhoek, Namibia Sales company ------------------------------------------ -------- --------------------------------------------------------------- Mincon Russia 100% 4,4 Lesnoy In,125047 Moscow, Russia Dormant Company ------------------------------------------ -------- --------------------------------------------------------------- Mincon Mining Equipment Inc 100%* 19789-92a Avenue, Langley, British Columbia V1M3B3, Canada --------------------------------------------------------------- Sales company ------------------------------------------ -------- --------------------------------------------------------------- Pirkanmaan Poraveikot OY PPV 100%* Hulikanmutka 6, 37570 Lempäälä, Finland Engineering company ------------------------------------------ -------- --------------------------------------------------------------- Mincon Exports USA Inc. 100% 603 Centre Ave, Roanoke VA 24016, USA --------------------------------------------------------------- Group finance company ------------------------------------------ -------- --------------------------------------------------------------- Mincon International Shannon 100%* Smithstown, Shannon, Co. Clare, Ireland Dormant company ------------------------------------------ -------- --------------------------------------------------------------- Smithstown Holdings 100% Smithstown, Shannon, Co. Clare, Ireland Holding company ------------------------------------------ -------- --------------------------------------------------------------- Mincon Canada Drilling Products Inc. 100% --------------------------------------------------------------- Holding company Suite 1800-355 Burrard Street, Vancouver, BC V6C 268, Canada ------------------------------------------ -------- --------------------------------------------------------------- Lotusglade Limited 100%* Smithstown, Shannon, Co. Clare, Ireland Holding company ------------------------------------------ -------- --------------------------------------------------------------- Floralglade Company 100% Smithstown, Shannon, Co. Clare, Ireland Holding company ------------------------------------------ -------- --------------------------------------------------------------- 24. Subsidiary undertakings (continued) Group Registered Office &
Company Share % Country of Incorporation ----------------------------------- -------- ---------------------------------------------------------------- Castle Heat Treatment Limited 100%* Smithstown, Shannon, Co. Clare, Ireland Holding company ----------------------------------- -------- ---------------------------------------------------------------- Mincon Microcare Limited 100%* Smithstown, Shannon, Co. Clare, Ireland ----------------------------------- -------- ---------------------------------------------------------------- Holding company ----------------------------------- -------- ---------------------------------------------------------------- Cebeko Elast AB 100%* Svarvarevagen 1, SE-686 33 Sunne, Sweden Holding company ----------------------------------- -------- ---------------------------------------------------------------- Driconeq AB 100% Svetsarevägen 4, 686 33, Sunne, Sweden Holding company ----------------------------------- -------- ---------------------------------------------------------------- Driconeq Production AB 100% Svetsarevägen 4, 686 33, Sunne, Sweden ----------------------------------- -------- ---------------------------------------------------------------- Manufacturing facility Driconeq Fastighet AB 100% Svetsarevägen 4, 686 33, Sunne, Sweden ----------------------------------- -------- ---------------------------------------------------------------- Property holding company Driconeq Do Brasil 100% Rua Dr. Ramiro De Araujo Filho, 348, Jundai, SP, Brasil ----------------------------------- -------- ---------------------------------------------------------------- Sales company Driconeq Africa Ltd 100% Cnr of Harriet and James Bright Avenue, Driehoek. Germiston 1400 ----------------------------------- -------- ---------------------------------------------------------------- Manufacturing facility Driconeq Australia Holdings Pty Ltd 100% 47 Greenwich Parade, AU-6031 Neerabup, WA, Australia ----------------------------------- -------- ---------------------------------------------------------------- Holding company Driconeq Australia Pty Ltd 100% 47 Greenwich Parade, AU-6031 Neerabup, WA, Australia ----------------------------------- -------- ---------------------------------------------------------------- Manufacturing facility Mincon Drill String AB 100% Svetsarevägen 4, 686 33, Sunne, Sweden Holding company EURL Roc Drill 100% Rue Charles Rolland, 29650 Guerlesquin, France
25. Leases
A. Leases as Lessees (IFRS 16)
The group leases property, plant and equipment across its global operations.
During 2020, one of the leased properties in Finland was sublet. The lease and sublease expire in 2023
During 2019, one of the leased properties in Australia was sublet. The lease and sublease expire in 2024.
The Group leases IT and other equipment with contract terms of less than 12 months and also for low value items.
The Group has elected not to recognise right-of -use assets and lease liabilities for these leases in line with availing of the exemptions for such leases allowable under IFRS16.
Information about leases for which the Group is a lessee is presented below.
i) Right-of-use assets 31 December 2019 EUR'000 Balance at 1 January 4,683 Depreciation charge for the year (1,344) Additions to right of use assets 490 Derecognition of right of use asset* (455) Foreign exchange difference 114 ------------------------------------- --------------- Balance at 31 December 2019 3,488 ------------------------------------- --------------- 31 December 2020 EUR'000 Balance at 1 January 3,488 Depreciation charge for the year (1,816) Additions to right of use assets 3,487 Disposal of right of use asset (536) Derecognition of right of use asset* (231) Foreign exchange difference (151) ------------------------------------- ------------- Balance at 31 December 2020 4,241 ------------------------------------- -------------
*Derecognition of the right of use asset during 2020 is as a result of entering into a finance sub-lease.
.
ii) Amounts recognised in income statement. 2020 2019 EUR'000 EUR'000 ----------------------------------------------- ------- ----------------- Interest on lease liabilities 332 247 Expenses related to short term leases 314 363 Expenses related to leases of low value assets 95 28 ----------------------------------------------- ------- ----------------- -Leases under IFRS 16 741 638 ----------------------------------------------- ------- ----------------- iii) Amounts recognised in statement of cash flows 2020 2019 EUR'000 EUR'000 ------------------------------ ---------------- ------- Total cash outflow for leases 1,579 2,121 ------------------------------ ---------------- ------- Total cash outflow of leases 1,579 2,121 ------------------------------ ---------------- -------
25. Leases (continued)
iv) Extension options
Some property leases contain extension options exercisable by the Group. The Group assesses at lease commencement date whether it is reasonably certain to exercise the extension options. The Group is reasonably certain it will not incur future lease liabilities beyond what is currently calculated.
B. Leases as Lessor (IFRS 16) i) Financing Lease
The group subleased a properties that had been recognised as a right of use asset in Finland and Australia. The group recognised income interest in the year in relation to this totalling EUR143,000.
The following table sets out a maturity analysis of lease receivable, showing the undiscounted lease payments to be received after the reporting date.
31 December 31 December 2020 2019 EUR'000 EUR'000 Less than one year 188 138 One to two years 185 138 Two to three years 140 135 Three to four years - 135 More than five years - - ------------------------------------ --------------- --------------- Balance at 31 December 2020 513 546 ------------------------------------ --------------- --------------- Unearned finance income (43) (62) ------------------------------------ --------------- --------------- Total undiscounted lease receivable 470 484 ------------------------------------ --------------- --------------- ii) Operating leases
The group leases company owned property out to tenants in the USA under various agreements. The group recognises these leases as operating leases from a lessor perspective due to the fact they do not transfer substantially all of the risks and rewards incidental to the ownership of the assets.
Rental income recognised by the Group during 2020 was EUR213,000 (2019: EUR125,000).
The following table sets out a maturity analysis of lease receivable, showing the undiscounted lease payments to be received after the reporting date.
31 December 2020 EUR'000 Less than one year 107 One to two years 67 Two to three years 21 Three to four years - More than five years - --------------------- ----------- Total 195 ---------------------- -----------
26. Commitments
The following capital commitments for the purchase of property, plant and equipment had been authorised by the directors at 31 December 2020:
31 December 31 December 2020 2019 EUR'000 EUR'000 Contracted for 3,044 358 Not-contracted for 521 - ------------------- ----------- ------------ Total 3,565 358 ------------------- ----------- ------------
27. Litigation
The Group is not involved in legal proceedings that could have a material adverse effect on its results or financial position.
28. Related parties
As at 31 December 2020, the share capital of Mincon Group plc was 56.54% 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.
In September 2020, the Group paid a final dividend for 2019 of EUR0.0105 to all shareholders. The total dividend paid to Kingbell Company was EUR1,256,551 (September 2019: EUR1,256,551).
The Group has a related party relationship with its subsidiary and its joint venture undertakings (see note 24) for a list of these undertakings), directors and officers. All transactions with subsidiaries eliminate on consolidation and are not disclosed.
Transactions with Directors
The Group is owed EURNil from directors and shareholders at 31 December 2020 and 2019. The Group has amounts owing to directors of EURNil as at 31 December 2020 and 2019.
Key management compensation
The profit before tax from continuing operations has been arrived at after charging the following key management compensation:
2020 2019 EUR'000 EUR'000 Short term employee benefits 1,441 1,369 Share based payment charged in the year - 67 Bonus and other emoluments 347 10 Post-employment contributions 126 68 Social security costs 86 133 ---------------------------------------- ------- ------- Total 2,000 1,647 ---------------------------------------- ------- -------
The key management compensation amounts disclosed above represent compensation to those people having the authority and responsibility for planning, directing and controlling the activities of the Group, which comprises the Board of Directors and executive management (ten in total at year end). Amounts included above are time weighted for the period of the individuals employment.
29. Events after the reporting date
The Board of Mincon Group plc is recommending the payment of a full year dividend for the year ended 31 December 2020 in the amount of EUR0.021 (2.10 cent) per ordinary share, which will be subject to approval at the Annual General Meeting of the Company in May 202 1 . This dividend, is in respect to an interim dividend of 1.05 cent and final dividend of 1.05 cent. Subject to Shareholder approval at the Company's annual general meeting, the final dividend will be paid on 18 June 2021 to Shareholders on the register at the close of business on 28 May 2021.
Acquisition of the Hammer Drilling Rigs
On 1 January 2021, the Group completed the acquisition of the Hammer Drilling Rigs (HDR), a specialist in supply of hard rock drilling attachments based in the USA, for a consideration of EUR2.1 million. There is zero goodwill arising on acquisition as the Group acquired the IP of the business, the full consideration will be amortised over the next five years.
30. Approval of financial statements
The Board of Directors approved the consolidated financial statements on 19 March 2021.
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