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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 : 6410S
Mincon Group Plc
13 March 2023
Mincon Group plc
("Mincon" or the "Group")
2022 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 2022.
Change 2022 2021 in period ---------------------------- -------- ------- ----------- Product revenue: EUR'000 EUR'000 Sale of Mincon product 141,830 118,802 +19% Sale of third-party product 28,178 25,560 +10% Total revenue 170,008 144,362 +18% ----------- Gross profit 54,070 48,763 +11% ---------------------------- -------- ------- ----------- EBITDA 27,531 25,212 +9% ---------------------------- -------- ------- ----------- Operating profit 19,749 18,107 +9% ---------------------------- -------- ------- ----------- Profit for the period 14,704 14,600 +1% ---------------------------- -------- ------- -----------
Financial Highlights
-- 2022 Group revenue of EUR170 million, representing 18% growth over 2021:
o Revenue across each of our three industries grew in 2022:
-- The stand out performance was in construction with revenue growth of 45%
-- Mining, our largest industry, had revenue growth of 6%
-- Waterwell/geothermal revenue grew by 7%
o The vast majority of growth was organic, with the 2022 acquisition in the USA contributing 0.5% to our revenue growth for the year
-- Gross profit grew by 11% in 2022 to EUR54.1 million, with gross margin for the year of 31.8% (2021:33.8%):
-- Price increases implemented in H2 2022 offset the well-reported manufacturing cost inflation experienced in H1 2022
-- 2022 gross margin is inclusive of significant Greenhammer and Subsea project costs absorbed during H2 2022
-- EBITDA of EUR27.5 million in 2022, an increase of 9% over 2021
-- Final dividend of 1.05c per ordinary share recommended, taking the total dividend for 2022 to 2.10c per ordinary share (2021: 2.10c per ordinary share)
Operational and Business Development Highlights
-- Navigated the difficult environment in H1 2022 arising from raw materials and freight availability pressures and maintained our excellent customer service levels, conserving or growing market share in our key markets. These pressures started to ease in H2 2022 and as a result we have started to normalise our shipping arrangements and working capital position
-- Signing of the first commercial contract for the Greenhammer system with a blue-chip mining contractor operating on a major gold mine in Western Australia
-- Significant milestones achieved with our Subsea project and the large diameter drilling system in Malaysia
-- The Group's order books are strong, and the opportunity for our large R&D projects is ever more evident with critical work continuing in 2023
Chief Executive's Review:
"Despite what was another challenging year characterised by volatility and uncertainty in the global markets in which we operate, I am pleased to report that Mincon delivered further growth in revenue and profitability in 2022.
Revenues
We achieved revenue growth across all our industries and finished the year ahead of 2021 by approximately 18%, driven by continued organic growth.
Our construction segment delivered strong growth levels with revenues up 45% on 2021 to EUR61.8 million as a result of a particularly strong performance in North America where our direct to market approach for mid-to-large projects delivered some excellent contract wins.
Revenue in our mining business was up 6% in the year to EUR81.4 million, mostly through organic growth. Again, North America was the standout here, while we also managed to grow our revenues in Africa as COVID-19 restrictions eased there at the beginning of 2022. Conversely, our mining business in the EME and APAC regions was more challenged during the period reflecting suspension of trading with Russian customers, decisions by some customers to reduce carried inventory and the effects of site access restrictions in Australia.
Finally, our Waterwell / Geothermal segment achieved 7% revenue growth in 2022 to EUR26.7 million, again primarily due to strong performance in North America where our direct sales approach to smaller contractors proved effective. Revenue in the EME region was broadly flat in the year but we managed to protect our market share in Geothermal consumables.
Profitability
2022 was characterised by heavy cost inflation globally, with the biggest effect being felt in Europe, largely due to the war in Ukraine. We continued to navigate poor freight conditions which hampered our ability to provide the excellent service-levels our customers expect, as well as requiring working capital investment due to the higher levels of inventory required to manage extended shipping transit times.
We introduced price increases in Q2 2022, and those were implemented in Q3 2022. These largely offset the cost increases in our manufacturing during the second half of 2022, however during that period we significantly increased our development spend through our Greenhammer and Subsea projects, as we continue to invest strategically in long-term growth projects.
Freight conditions did start to improve toward the end of the year, and this has encouraged us to look critically at our inventory levels across the group. This will be a strong focus for the year ahead and we have started a group wide project to unwind our working capital position by reducing our inventory to better match prevailing conditions.
As well as this we have largely succeeded in reducing our lead times from key factories such as Shannon which has given the breathing space to carefully plan our production based on forecasts and to reduce our reliance on more expensive air freight requirements which arose from time to time during 2022 to ensure product delivery to key customers.
Our strong regional management structure continued to work well throughout the year as it had previously demonstrated during the COVID crisis. The last business area to open for travel was Western Australia in March 2022. This opening up has meant that we have been able to return to on-the-ground business development to rebuild our revenues in the region.
Product Development
A significant part of rebuilding our revenues in the Australian market will be through our Greenhammer project. As previously announced in September 2022, we were pleased to announce the signing of the first commercial contract for the Greenhammer system with a blue-chip mining contractor operating on a major gold mine in Western Australia, an important milestone after many years of development work and a step toward revenue generation from this project.
We have been on site with the system drilling blastholes with our Mincon owned test rig. The Greenhammer system has performed to expectations when operating. However, it has been challenging to consistently deliver drilled metres due to reliability issues encountered with the drill rig. As a result, we had to carry out an extensive rebuild on the rig which we are confident will reliably support the system. While this delay has been frustrating in the short term, we remain confident in the long-term success of this project and believe that the system will be transformational for Mincon and the hard rock surface mining industry.
We believe that the successful roll out of this innovative drilling system will require that we closely collaborate with rig manufacturers to ensure the system is properly supported on a reliable drill rig platform. With that in mind we have engaged in discussions with rig manufacturers with a view to developing mutually beneficial working relationships.
We have made significant progress on our subsea project with a number of significant milestones achieved on the road to completing our project objectives for the Disruptive Technology Innovation Funded (DTIF) collaboration. The objective of the project is to deliver a load tested anchor solution for the offshore wind turbine industry. We remain confident that we will achieve the project objectives and in so doing, we can commence the commercialisation of this exciting opportunity in collaboration with our project partner, Subsea Micropiles Limited.
We have successfully drilled test holes with our full-size prototype water powered hammer system. This was test drilled in a quarry close to our manufacturing plant in Shannon using an excavator mounted drilling rig which was designed and manufactured in our plant in Benton. This drill rig is one of three units that will ultimately be assembled in our Shannon plant, to complete the subsea drilling rig. The assembly work will commence in the first half of 2023 with a view to being offshore for testing toward the end of this year. There is a significant interest in our solution from offshore developers and we have engaged with a top-class multifunctional team to develop the full commercial solution which will include expertise and delivery in areas such as large-scale fabrication, subsea electronics, grouting, mooring lines and vessel services including subsea remote operating vehicles.
Our engineering focus continues to be on more efficient drilling systems, and we have made progress in 2022 on continuous improvement initiatives for some of our current products which will serve us well for the year ahead. We also finally got onsite in Malaysia, after COVID-19 restrictions were lifted, to see our large diameter drilling system drilling 1750 mm diameter holes. We were very happy with the performance of the system and believe that there is a great future for this concept within our product offering for the large diameter construction piling industry.
Sustainability
In August 2022 we published our first sustainability report which outlined our commitment to report on carbon emissions across the group as well as targets to reduce them. Within the report, we outlined the measures and initiatives to meet the company's sustainability goals by 2040 and our intermediate goals by 2030. An Environment and Sustainability sub-committee of the Board, led by Dr. Pirita Mikkanen who joined the Board as a non-executive director in 2022, was formed to ensure that our sustainability goals are met, and appropriate new targets set. Key initial targets for Mincon include a 50% reduction in manufacturing CO2 emissions by 2030, to achieve net zero carbon emissions by 2040 and to have 100% of Mincon manufacturing sites using a mix of fossil-fuel free energy sources by 2040. We look forward to reporting on the progress we are making on meeting our targets during our ongoing sustainability journey. Our next sustainability report is due to be published in line with our interim results in August 2023.
Concluding comments
It is pleasing to be able to report on a further year of revenue and profit growth for Mincon in 2022, during what proved to be a challenging environment and, I am particularly encouraged with the resilience displayed by the Company in meeting and overcoming the challenges presented by inflation, the global supply chain and residual market access restrictions due to COVID. Whilst these challenges delayed our ambitions to fully realise the opportunities and deliver on the growth platform we have created, we remain confident that we will deliver in the year ahead as well as make significant progress on our ambitious product development projects.
These ambitious projects challenge us, but they are essential to underpin our future, maintain our competitive advantages and to drive our profitability and return on capital employed. It also ensures our sustainability as we develop and attract future engineering leaders within the Group.
I am very pleased and appreciative of the efforts and perseverance of our global teams across engineering, manufacturing, and customer service, in delivering these results for last year. I would also like to acknowledge the continued support of our board and investors and look forward to the challenges and opportunities in the year ahead."
13 March 2023
For further information, please contact:
Mincon Group plc Tel: +353 (61) 361 099
Joe Purcell CEO
Mark McNamara CFO
Davy Corporate Finance
(Nominated Adviser, Euronext Growth Listing Sponsor and Joint Broker) Tel: +353 (1) 679 6363
Anthony Farrell
Daragh O'Reilly
Shore Capital (Joint Broker) Tel: +44 (0) 20 7408 4090
Malachy McEntyre
Mark Percy
Daniel Bush .
Consolidated Income Statement for the year ended 31 December 2022
2022 2021 Notes EUR'000 EUR'000 ----------------------------------- ------- ---------- ---------- Continuing operations Revenue 4 170,008 144,362 Cost of sales 6 (115,938) (95,599) ---------- ---------- Gross profit 54,070 48,763 Operating costs 6 (34,321) (30,656) ---------- ---------- Operating profit 19,749 18,107 Finance costs 7 (1,479) (927) Finance income 26 20 Foreign exchange gain 469 630 Movement on deferred consideration 22 (31) (2) Profit before tax 18,734 17,828 ----------------------------------- Income tax expense 11 (4,030) (3,228) ----------------------------------- ------- ---------- ---------- Profit for the period 14,704 14,600 ----------------------------------- ------- ---------- ---------- Earnings per Ordinary Share Basic earnings per share, 20 6.92 6.87 Diluted earnings per share, 20 6.85 6.69 ----------------------------------- ------- ---------- ----------
The accompanying notes are an integral part of these financial statements.
Consolidated Statement of Comprehensive Income for the year ended 31 December 2022
2022 2021 EUR'000 EUR'000 --------------------------------------------------- -------- -------- Profit for the year 14,704 14,600 Other comprehensive loss: Items that are or may be reclassified subsequently to profit or loss: Foreign currency translation - foreign operations (418) 2,865 Other comprehensive (loss)/income for the year (418) 2,865 --------------------------------------------------- -------- -------- Total comprehensive income for the year 14,286 17,465 --------------------------------------------------- -------- --------
The accompanying notes are an integral part of these financial statements.
Consolidated Statement of Financial Position as at 31 December 2022
2022 2021 Notes EUR'000 EUR'000 ------------------------------------- ----- ------------------ ----------------- Non-Current Assets Intangible assets and goodwill 12 40,109 40,157 Property, plant and equipment 13 53,004 50,660 Deferred tax asset 11 1,994 1,075 Total Non-Current Assets 95,107 91,892 -------------------------------------- ----- ------------------ ----------------- Current Assets Inventory and capital equipment 14 76,911 63,050 Trade and other receivables 15a 23,872 25,110 Prepayments and other current assets 15b 12,727 8,822 Current tax asset 361 521 Cash and cash equivalents 22 15,939 19,049 Total Current Assets 129,810 116,552 -------------------------------------- ----- ------------------ ----------------- Total Assets 224,917 208,444 -------------------------------------- ----- ------------------ ----------------- Equity Ordinary share capital 19 2,125 2,125 Share premium 67,647 67,647 Undenominated capital 39 39 Merger reserve (17,393) (17,393) Share based payment reserve 2,505 2,695 Foreign currency translation reserve (5,586) (5,168) Retained earnings 104,449 94,207 -------------------------------------- ----- ------------------ ----------------- Total Equity 153,786 144,152 -------------------------------------- ----- ------------------ ----------------- Non-Current Liabilities Loans and borrowings 18 26,971 23,265 Deferred tax liability 11 2,046 1,622 Deferred consideration 22 1,705 4,224 Other liabilities 833 852 Total Non-Current Liabilities 31,555 29,963 -------------------------------------- ----- ------------------ ----------------- Current Liabilities Loans and borrowings 18 14,973 11,205 Trade and other payables 16 14,420 15,683 Accrued and other liabilities 16 8,699 6,027 Current tax liability 1,484 1,414 Total Current Liabilities 39,576 34,329 -------------------------------------- ----- ------------------ ----------------- Total Liabilities 71,131 64,292 -------------------------------------- ----- ------------------ ----------------- Total Equity and Liabilities 224,917 208,444 -------------------------------------- ----- ------------------ -----------------
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 2022
2022 2021 Notes EUR'000 EUR'000 ------------------------------------------------- ------ ------------------- ----------------- Operating activities: Profit for the period 14,704 14,600 Adjustments to reconcile profit to net cash provided by operating activities: Depreciation 13 7,782 7,105 Amortisation of intellectual property 12 190 105 Amortisation of product development 12 121 - Movement on deferred consideration 31 2 Finance cost 1,479 927 Finance income (26) (20) Loss/(Gain) on sale of property, plant and equipment 32 (177) Income tax expense 4,030 3,228 Other non-cash movements (458) (633) ------------------------------------------------- ------ ------------------- ----------------- 27,885 25,137 Changes in trade and other receivables 1,354 (2,695) Changes in prepayments and other assets (3,848) (4,502) Changes in inventory (13,463) (7,468) Changes in trade and other payables 1,632 5,240 Cash provided by operations 13,560 15,712 Interest received 26 20 Interest paid (1,479) (927) Income taxes paid (4,042) (3,627) ------------------------------------------------- ------ ------------------- ----------------- Net cash provided by operating activities 8,065 11,178 ------------------------------------------------- ------ ------------------- ----------------- Investing activities Purchase of property, plant and equipment (7,309) (7,567) Proceeds from the sale of property, plant and equipment 996 543 Investment in intangible assets (286) (1,139) Proceeds from the issuance of share capital - 8 Acquisitions of subsidiary, net of cash acquired (1,014) (681) Investment in acquired intangible assets (147) (275) Payment of deferred consideration (2,628) (2,082) Proceeds from the sale of subsidiaries - 111 Net cash used in investing activities (10,388) (11,082) ------------------------------------------------- ------ ------------------- ----------------- Financing activities Dividends paid (4,462) (6,693) Repayment of borrowings 18 (4,107) (3,262) Repayment of lease liabilities 18 (3,993) (3,590) Drawdown of loans 18 11,478 15,236 Purchase of NCI - - Net cash provided by/(used in) financing activities (1,084) 1,691 ------------------------------------------------- ------ ------------------- ----------------- Effect of foreign exchange rate changes on cash 297 217 ------------------------------------------------- ------ ------------------- ----------------- Net increase in cash and cash equivalents (3,110) 2,004 ------------------------------------------------- ------ ------------------- ----------------- Cash and cash equivalents at the beginning of the year 19,049 17,045 ------------------------------------------------- ------ ------------------- ----------------- Cash and cash equivalents at the end of the year 15,939 19,049 ------------------------------------------------- ------ ------------------- -----------------
The accompanying notes are an integral part of these financial statements
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 Euronext Growth 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 Group's financial statements consolidate those of the parent company and all of its subsidiaries as of 31 December 2022. All subsidiaries have a reporting date of 31 December.
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 2022 and 31 December 2021.
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 following new and amended standards are not expected to have a significant impact on the Group's consolidated financial statements: New Standards adopted as at 1 January 2022 -- IFRS 3 References to the Conceptual Framework -- IAS 16 Proceeds before Intended Use -- IAS 37 Onerous Contracts - Cost of Fulfilling a Contract -- IFRS 1, IFRS 9, IFRS 16, IAS 41 Annual Improvements to IFRS Standards 2018-2020 Cycle Standards, amendments and Interpretations to existing Standards that are not yet effective -- IIAS 1 Classification of Liabilities as Current or Non-current -- IAS 1 Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) -- IAS 12 Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12) -- IAS 1 Disclosure of Accounting Policies -- IAS 8 Definition of Accounting Estimates 3. Significant accounting principles, accounting estimates and judgements (continued) Segment Reporting 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
result 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 (see Note 5). The Group is managed as a single business unit that sells drilling equipment, primarily manufactured by Mincon manufacturing sites. 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 or has completed a service over a set period (typically one month) for 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, or; 3. The customer accepts responsibility of the goods during transit that is in line with international commercial terms. Where the Group provides a service to a customer, who also purchases Mincon manufactured product from the Group, the revenue associated with this service is separately identified in a set period (typically one month) and is recognised in the Groups revenue as it occurs. 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 or service. 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 products. In these circumstances, a refund liability and a right to recover returned goods asset are recognised. The Group has elected to apply IFRS 15 Practical expedient, the Group need not adjust the promised amount of consideration for the effects of a significant financing component if the entity expects, at contract inception, that the period between when the Group transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less. 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. Current government grants have no conditions attached.
3. Significant accounting principles, accounting estimates and judgements (continued)
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 calculated 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:
-- 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.
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
3. Significant accounting principles, accounting estimates and judgements (continued)
Leases (continued)
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.
(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 (rigs) 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. Goodwill is not amortised and is tested annually.
Intangible assets
Expenditure on research activities is recognised in profit or loss as incurred.
3. Significant accounting principles, accounting estimates and judgements (continued)
Intangible Assets and Goodwill (continued)
Development expenditure is capitalised only if the Group can demonstrate 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.
Acquired IP which has been obtained at a cost that can be measured reliably, and that meets the definition and recognition criteria of IAS38, will be accounted for as an intangible asset.
Recognising an internally developed intangible assets post the development phase once the company has assessed the development phase is complete and the asset is ready for use. Internally generated assets have an infinite life. They will be amortised over a fifteen-year period on a straight line basis. Currently there is fourteen years and nine months remaining on the amortisation.
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 receivables 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 comprehensive income for the translation of intra-group receivables from, or liabilities to, a foreign 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 22.
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 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 consideration is classified as equity. In that case, there is no remeasurement and the subsequent settlement is accounted for within equity. Deferred consideration arises in the current year where part payment for an acquisition is deferred to the following year or years.
3. Significant accounting principles, accounting estimates and judgements (continued)
Business combinations and consolidation (continued)
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.
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
Classification and initial measurement of financial assets financial liabilities.
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 once the responsibility associated with control of the product has transferred to the customer. Liabilities are recognised when the other party has performed and there is a contractual obligation to pay. 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.
The classification is determined by both:
-- the entity's business model for managing the financial asset, and
-- the contractual cash flow characteristics of the financial asset.
3. Significant accounting principles, accounting estimates and judgements (continued)
Financial Assets and Liabilities ( continued)
Subsequent measurement of financial assets and financial liabilities
Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as FVTPL):
-- they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows, and
-- the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding.
After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial.
Financial liabilities at amortised cost
Subsequently, financial liabilities are measured at amortised cost using the effective interest method.
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. Financial assets are assessed at each reporting date. The Group derecognises (fully or partially) a financial liability when the obligation specified in the contract is discharged or otherwise expires.
Impairment of financial assets
Financial assets are assessed from initial recognition and at each reporting date to determine whether there is a requirement for impairment. Financial assets require there expected lifetime losses to be recognised from initial recognition.
IFRS 9's impairment requirements use forward-looking information to recognise expected credit losses - the 'expected credit loss (ECL) model'. Instruments within the scope of the requirements included loans and other debt-type financial assets measured at amortised cost, trade and other receivables.
The Group considers a broader range of information when assessing credit risk and measuring expected credit losses, including past events, current conditions, reasonable and supportable forecasts that affect the expected collectability of the future cash flows of the instrument.
In applying this forward-looking approach, a distinction is made between:
-- financial instruments that have not deteriorated significantly in credit quality since initial recognition or that have low credit risk ('Stage 1') and
-- financial instruments that have deteriorated significantly in credit quality since initial recognition and whose credit risk is not low ('Stage 2').
'Stage 3' would cover financial assets that have objective evidence of impairment at the reporting date.
'12-month expected credit losses' are recognised for the first category (ie Stage 1) while 'lifetime expected credit losses' are recognised for the second category (ie Stage 2).
Measurement of the expected credit losses is determined by a probability-weighted estimate of credit losses over the expected life of the financial instrument.
Trade and other receivables
The Group makes use of a simplified approach in accounting for trade and other receivables and records the loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash flows, considering the potential for default at any point during the life of the financial instrument. In calculating, the Group uses its historical experience, external indicators and forward-looking information to calculate the expected credit losses using a provision matrix.
The Group assesses impairment of trade and other receivables on a collective basis as they possess shared credit risk characteristics they have been grouped based on the days past due.
3. Significant accounting principles, accounting estimates and judgements (continued)
Financial Assets and Liabilities ( continued)
Borrowing costs
All borrowing costs are expensed in accordance with the effective interest rate method.
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.
Financial instruments carried at fair value: Deferred consideration
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. These are set amounts detailed in each contract.
Finance income and expenses
Finance income and expense are included in profit or loss using the effective interest method.
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.
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.
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. It is reversed only where entitlements do not vest because all
non-market performance conditions have not been met or where an employee in receipt of share entitlements leaves the Group before the end of the vesting period and forfeits those options in consequence.
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 consideration
The deferred consideration payable represents management's best estimate of the fair value of the amounts that will be payable, discounted as appropriate using a market interest rate. The fair value was estimated by assigning probabilities, based on management's current expectations, to the potential pay-out scenarios. The fair value of deferred consideration is primarily dependent on the future performance of the acquired businesses against predetermined targets and on management's current expectations thereof.
Climate-related matters
Consistent with the prior year, as at 31 December 2022, the Group has not identified significant risks induced by climate changes that could negatively and materially affect the estimates and judgements currently used in the Group's financial statements. Management continuously assesses the impact of climate-related matters.
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.
Useful life and residual values of Intangible Assets
Distinguishing the research and development phase, determining the useful life, and deciding whether the recognition requirements for the capitalisation of development costs of new projects are met all require judgement. These judgements are based on historical experience and various other factors that are believed to be reasonable under the prevailing circumstances.
After capitalisation, management monitors whether the recognition requirements continue to be met and whether there are any indicators that capitalised costs may be impaired.
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.
The Group applies the simplified approach to providing for expected credit losses (ECL) permitted by IFRS 9 Financial Instruments, which requires expected lifetime losses to be recognised from initial recognition of the receivables and considered at each reporting date. Loss rates are calculated using a "roll rate" method based on the probability of a receivable progressing through successive chains of non-payment to write-off.
Trade receivables are written off when there is no reasonable expectation of recovery, such as a debtor failing to engage in a repayment plan with the company. Where recoveries are made, these are recognised in the Consolidated Income Statement.
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.
2022 2021 EUR'000 EUR'000 ---------------------------- ------- ------- Product revenue: Sale of Mincon product 141,830 118,802 Sale of third party product 28,178 25,560 Total revenue 170,008 144,362 ---------------------------- ------- -------
The Group's revenue disaggregated by primary geographical markets are disclosed in Note 5.
5. Operating Segment
The CODM assesses operating segment performance based on operating profit. Segment revenue for the year ended 31 December 2021 of EUR170 million (2020: EUR144.4 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 ten 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):
2022 2021 EUR'000 EUR'000 ----------------------------------------- ------- ------- Region: I reland 2,974 1,859 Americas 69,752 45,908 Australasia 16,882 17,327 Europe, Middle East, Africa 80,400 79,268 Total revenue from continuing operations 170,008 144,362 ----------------------------------------- ------- -------
During 2022, Mincon had sales in the USA of EUR42.4 million (2020: EUR24.4 million), this contributed to more than 10% of the entire Group's sales for 2022.
2022 2021 EUR'000 EUR'000 Region: Americas 17,752 14,682 Australasia 12,252 11,838 Europe, Middle East, Africa 63,109 64,297 Total non-current assets(1) 93,113 90,817 ------------------------------------------------------ ------- ------- (1) Non-current assets exclude deferred tax assets.
During 2022, Mincon held non-current assets (excluding deferred tax assets) in Ireland of EUR17.6 million (2021: EUR18.3 million), in the USA of EUR12.5 million (2021: EUR10.7 million) these separately contributed to more than 10% of the entire Group's non-current assets (excluding deferred tax assets) for 2022.
5. Operating Segment (continued)
2022 2021 EUR'000 EUR'000 Region: Americas 6,839 4,577 Australasia 2,555 2,290 Europe, Middle East, Africa 20,115 21,474 Total non-current liabilities(1) 29,509 28,341 --------------------------------------------------- ------- ------- (1) Non-current liabilities exclude deferred tax liabilities.
During 2022, Mincon held non-current liabilities (excluding deferred tax liabilities) in Ireland of EUR13.5 million (2021: EUR11.6 million), this contributed to more than 10% of the entire Group's non-current liabilities (excluding deferred tax liabilities) for 2022.
6. Cost of Sales and operating expenses
Included within cost of sales and operating costs were the following major components:
Cost of sales 2022 2021 EUR'000 EUR'000 ------------------------------------ ------- ------- Raw materials 45,523 37,081 Third party product purchases 21,838 19,275 Employee costs 23,093 19,764 Depreciation (note 13) 5,194 4,801 In bound costs on purchases 4,759 3,772 Energy costs 3,116 2,188 Maintenance of machinery 2,120 1,711 Subcontracting 7,139 5,463 Amortisation of product development 121 - Other 3,035 1,544 Total cost of sales 115,938 95,599 ------------------------------------ ------- -------
The Group invested approximately EUR4.4 million on research and development projects in 2022 (2021: EUR3.9 million). EUR4.1 million of this has been expensed in the period (2021: EUR2.8 million), with the balance of EUR285,000 of development costs capitalised (2021: EUR1.1 million) (note 12).
Operating costs
2022 2021 EUR'000 EUR'000 ----------------------------------------------- ------- ------- Employee costs (including director emoluments) 20,370 18,615 Depreciation (note 13) 2,588 2,304 Amortisation of acquired IP 190 105 Travel 1,927 1,238 Professional costs 2,637 2,589 Administration 2,997 2,841 Marketing 706 694 Legal cost 846 629 Other 2,060 1,641 Total other operating costs 34,321 30,656 ----------------------------------------------- ------- -------
The Group recognised EUR119,000 in Government Grants in 2021 (2021: EUR450,000). These grants differ in structure from country to country, they primarily relate to personnel costs.
7. Finance costs 2022 2021 EUR'000 EUR'000 --------------------------------- ------- ------- Interest on lease liabilities 609 684 Interest on loans and borrowings 870 243 --------------------------------- ------- ------- Finance costs 1,479 927 --------------------------------- ------- ------- 8. Employee information 2022 2021 EUR'000 EUR'000 --------------------------------------------------------- -------- ------- Wages and salaries - excluding directors 36,085 31,830 Wages, salaries, fees and retirement benefit - directors (note 10) 868 797 Social security costs 4,428 3,357 Retirement benefit costs of defined contribution plans 2,272 1,959 Share based payment expense (note 21) (190) 436 Total employee costs 43,463 38,379 --------------------------------------------------------- -------- ------- In addition to the above employee costs, the Group capitalised payroll costs of EUR151,000 in 2022 (2021: EUR700,000) in relation to development. At 31 December 2022, there was EUR234,000 (2020: EUR256,000) accrued for and not in paid pension contributions. The average number of employees was as follows: 2022 2021 Number Number ------------------------------------------------------------ --------- ------- Sales and distribution 133 136 General and administration 75 75 Manufacturing, service and development 417 383 ------------------------------------------------------------ --------- ------- Average number of persons employed 625 594 ------------------------------------------------------------ --------- -------
Retirement benefit and Other Employee Benefit Plans
The Group operates various defined contribution retirement benefit plans. During the year ended 31 December 2022, the Group recorded EUR2.3 million (2021: EUR2 million) of expense in connection with these plans.
9. Acquisitions & Disposals
2022 Acquisition
In January 2022, Mincon acquired 100% shareholding in Spartan Drilling Tools, a manufacturer of drill pipe and related products based in the USA for a consideration of EUR1,014,000. Spartan Drilling Tools was acquired to manufacture drill pipe closer to the end user in the America's region.
A. Consideration transferred
The following table summarises the acquisition date fair value of each major class of consideration transferred.
Spartan Total Drilling Tools EUR'000 EUR'000 --------------------------------- ---------- -------- Deferred consideration 1,014 1,014 Total consideration transferred 1,014 1,014 ----------------------------------- ---------- --------
9. Acquisitions & Disposals (continued)
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 480 Right of use assets 455 Inventories 369 Trade receivables 133 Other assets 63 Trade and other payables (83) Right of use liabilities (455) Other accruals and liabilities (109) Fair value of identifiable net assets acquired 853 ----------------------------------------------- -------------
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. ----------- ------------------------------------------------------------ Assets acquired Valuation Technique ----------------- -------------------------------------------------------------- Trade receivables All receivable balances were assessed and all are collectable. Trade and other All were accessed and deemed payable to credible suppliers payables --------------- ----------------------------------------------------------- Other current All were accessed for recoverability and all is recoverable assets Other accruals All were assessed for credibility and deemed payable and liabilities ---------------- ----------------------------------------------------
The loss from the acquisition of Spartan Drilling Tools has been consolidated into the Mincon Group 2022 profit for the reporting period.
Goodwill
Goodwill of EUR 161,000 is primarily due to growth expectations, expected future profitability and expected cost synergies.
Goodwill arising from the acquisition has been recognised as follows.
Spartan Total Drilling 2022 Tools EUR'000 EUR'000 --------------------------------------- ---------- --------- Consideration transferred 1,014 1,014 Fair value of identifiable net assets (853) (853) --------------------------------------- ---------- --------- Goodwill 161 161 --------------------------------------- ---------- ---------
2021 Acquisition
In June 2021, Mincon acquired the business of Campbell's Welding & Fabrication, for a consideration of EUR421,000. This was made up of a cash consideration of EUR84,000 and deferred consideration of EUR337,000. Mincon acquired Campbell's Welding & Fabrication to bring in-house their knowhow and processes.
9. Acquisitions & Disposals (continued)
2021 Acquisition
In June 2021, Mincon acquired 100% shareholding in Attakroc, a Canadian-based mining and construction product distributor, for a consideration of EUR1.8 million. The Group acquired Attakroc to bring in-house their vast experience in selling and servicing the mining and construction industries in western Canada. Attakroc brings their knowledge of the local market conditions and give Mincon a distinctive advantage in this region. The transaction included a cash consideration of EUR600,000 and deferred consideration of EUR1.2 million.
A. Consideration transferred
The following table summarises the acquisition date fair value of each major class of consideration transferred.
Campbell Welding & Fabrication Attakroc Total EUR'000 EUR'000 EUR'000 --------------------------------- --------------- --------- -------- Cash 84 597 681 Deferred consideration 337 1,227 1,564 Total consideration transferred 421 1,824 2,245 ----------------------------------- --------------- --------- -------- 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 176 Right of use assets 39 Inventories 958 Trade receivables 1,174 Other assets 15 Trade and other payables (699) Right of use liabilities (39) Other accruals and liabilities (615) Fair value of identifiable net assets acquired 1,009 ----------------------------------------------- ---------------
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.
Attakroc Total EUR'000 2022 EUR'000 --------------------------------------- --------- --------- Consideration transferred 1,824 1,824 Fair value of identifiable net assets (1,009) (1,009) --------------------------------------- --------- --------- Goodwill 815 815 --------------------------------------- --------- ---------
10. Statutory and other required disclosures
Operating profit is stated after charging the following amounts: 2022 2021 EUR'000 EUR'000 -------------------------------------------------------- ---------------- --------------- Directors' remuneration Fees 210 220 Wages and salaries 599 522 Retirement benefit contributions 59 55 -------------------------------------------------------- ---------------- --------------- Total directors' remuneration 868 797 -------------------------------------------------------- ---------------- --------------- 2022 2021 Auditor's remuneration EUR'000 EUR'000 ----------------------------------------------------- -------- -------- Auditor's remuneration - Fees payable to lead audit firm Audit of the Group financial statements 180 205 Audit of the Company financial statements 10 15 Other assurance services 13 20 203 240 ----------------------------------------------------- -------- -------- Auditor's remuneration - Fees payable to other firms in lead audit firm's network Audit services 35 149 Other assurance services - 3 Tax advisory services 2 - Total auditor's remuneration 37 152 ----------------------------------------------------- -------- --------
11. Income tax
Tax recognised in income statement:
2022 2021 Current tax expense EUR'000 EUR'000 -------------------------------------------------- ------- -------- Current year 4,409 3,427 Adjustment for prior years 172 (7) -------------------------------------------------- ------- -------- Total current tax expense 4,581 3,420 -------------------------------------------------- ------- -------- Deferred tax expense Origination and reversal of temporary differences (551) (192) -------------------------------------------------- ------- -------- Total deferred tax expense (551) (192) Total income tax expense 4,030 3,228 -------------------------------------------------- ------- --------
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:
2021 2021 EUR'000 EUR'000 ------------------------------------------------------ ------- ------- Profit before tax from continuing operations 18,734 17,828 Irish standard tax rate (12.5%) 12.5% 12.5% Taxes at the Irish standard rate 2,342 2,229 Foreign income at rates other than the Irish standard rate 662 691 Losses created/utilised 304 277 Other 723 31 ------------------------------------------------------ ------- ------- Total income tax expense 4,030 3,228 ------------------------------------------------------ ------- -------
11. Income tax (continued)
The Group's net deferred taxation liability was as follows:
2022 2021 EUR'000 EUR'000 ---------------------------------------- ------- -------- Deferred taxation assets: Reserves, provisions and tax credits 1,044 741 Tax losses and unrealised FX gains 1,006 334 Total deferred taxation asset 2,050 1,075 ---------------------------------------- ------- -------- Deferred taxation liabilities: Property, plant and equipment (1,808) (1,332) Profit not yet taxable (238) (290) Total deferred taxation liabilities (2,046) (1,622) ---------------------------------------- ------- -------- Net deferred taxation asset/(liability) 4 (547) ---------------------------------------- ------- -------- The movement in temporary differences during the year were as follows: Balance Recognised Acquired in Balance in a 1 January Profit Business combination 31 December or Loss 1 January 2021 - 31 December 2021 EUR'000 EUR'000 EUR'000 EUR'000 ------------------------------------ --------- ---------- -------------------- ------------ Deferred taxation assets: Reserves, provisions and tax credits 585 156 - 741 Accrued income 31 (31) - - Tax losses 477 (143) - 334 ------------------------------------ --------- ---------- -------------------- ------------ Total deferred taxation asset 1,093 (18) - 1,075 ------------------------------------ --------- ---------- -------------------- ------------ Deferred taxation liabilities: Property, plant and equipment (1,780) 448 - (1,332) Profit not yet taxable (52) (238) - (290) ------------------------------------ --------- ---------- -------------------- ------------ Total deferred taxation liabilities (1,832) 210 - (1,622) ------------------------------------ --------- ---------- -------------------- ------------ Net deferred taxation liability (739) 192 - (547) ------------------------------------ --------- ---------- -------------------- ------------ Balance Recognised Acquired in Balance in a 1 January Profit Business combination 31 December
or Loss 1 January 2022 - 31 December 2022 EUR'000 EUR'000 EUR'000 EUR'000 ------------------------------------ --------- ---------- -------------------- ------------ Deferred taxation assets: Reserves, provisions and tax credits 741 303 - 1,044 Accrued income - - - - Tax losses 334 672 - 1,006 ------------------------------------ --------- ---------- -------------------- ------------ Total deferred taxation asset 1,075 975 - 2,050 ------------------------------------ --------- ---------- -------------------- ------------ Deferred taxation liabilities: Property, plant and equipment (1,332) (476) - (1,808) Profit not yet taxable (290) 52 - (238) ------------------------------------ --------- ---------- -------------------- ------------ Total deferred taxation liabilities (1,622) (424) - (2,046) ------------------------------------ --------- ---------- -------------------- ------------ Net deferred taxation liability (547) 551 - 4 ------------------------------------ --------- ---------- -------------------- ------------
Deferred taxation assets have not been recognised in respect of the following items:
2022 2021 EUR'000 EUR'000 ----------- ------- -------- Tax losses 3,850 3,546 Total 3,850 3,546 ----------- ------- --------
12. Intangible assets and goodwill
Internally generated Acquired intangible intellectual Product development asset Goodwill property Total EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 ------------------------------------ ------------------- ------------ --------- -------------- -------- Balance at 1 January 2021 5,847 - 31,140 - 36,987 ------------------------------------ ------------------- ------------ --------- -------------- -------- Internally developed 1,139 - - - 1,139 ------------------------------------ ------------------- ------------ --------- -------------- -------- Acquisitions - - 815 - 815 ------------------------------------ ------------------- ------------ --------- -------------- -------- Acquired intellectual property - - - 696 696 ------------------------------------ ------------------- ------------ --------- -------------- -------- Amortisation of intellectual property - - - (105) (105) ------------------------------------ ------------------- ------------ --------- -------------- -------- Translation differences - - 590 35 625 ------------------------------------ ------------------- ------------ --------- -------------- -------- Balance at 31 December 2021 6,986 - 32,545 626 40,157 ------------------------------------ ------------------- ------------ --------- -------------- -------- Internally developed 285 - - - 285 ------------------------------------ ------------------- ------------ --------- -------------- -------- Acquisitions (note 9) - - 161 - 161 ------------------------------------ ------------------- ------------ --------- -------------- -------- Transfer to internally generated intangible asset (7,271) 7,271 - - - ------------------------------------ ------------------- ------------ --------- -------------- -------- Acquired intellectual property - - - 147 147 ------------------------------------ ------------------- ------------ --------- -------------- -------- Amortisation of intellectual property - - - (190) (190) ------------------------------------ ------------------- ------------ --------- -------------- -------- Amortisation of product development - (121) - - (121) ------------------------------------ ------------------- ------------ --------- -------------- -------- Translation differences - - (378) 48 (330) ------------------------------------ ------------------- ------------ --------- -------------- -------- Balance at 31 December 2022 - 7,150 32,328 631 40,109 ------------------------------------ ------------------- ------------ --------- -------------- --------
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 acquisition of Attakroc in June 2021
--..... The acquisition of Spartan Drilling Tools in January 2022
The Group accounts for acquisitions using the purchase accounting method as outlined in IFRS 3 Business Combinations.
12. Intangible assets and goodwill (continued)
The recoverable amount of goodwill has been assessed based on estimates of fair value less costs of disposal (FVLCD). The FVLCD 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 costs of disposal by EUR52.4 million (2021: EUR42.9 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:
2022 2021 ----------------------------------- --------------- --------- WACC 12.60% 9.60% EBIDTA margin 20.23% 16.69% Long term growth rate 2.20% 2.24% EUR9.3 Terminal value capital expenditure EUR10.6 million 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 11.65% to 13.50%. This results in a midpoint WACC being used of 12.6%.
The Long term growth rate of 2.20% 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 20.23% for 2025 is assumed in the Terminal Value calculation used to arrive at the FVLCD.
Terminal value capital expenditure assumes no balance sheet growth is assumed in the terminal value, capital expenditure is assumed to equal depreciation of EUR10.6 million.
The following table shows the amount by which the two assumptions below would need to change to individually for the estimated recoverable amount to be equal to the carrying amount.
2022 2021 ---------------------- ------ ------- WACC 14.80% 10.60% Long term growth rate 1.35% 1.48% ---------------------- ------ -------
Investment expenditure of EUR285,000, which has been capitalised, is in relation to ongoing product development within the Group. Amortisation began in October 2022 once the project was commercialised. Amortisation is charged into the income statement over fifteen years on a straight line basis.
13. Property, plant and equipment
Plant Land & & ROU Buildings Equipment Assets Total EUR'000 EUR'000 EUR'000 EUR'000 ------------------------------------------- --------- --------- -------- -------- Cost: At 1 January 2021 16,291 51,540 6,887 74,718 ------------------------------------------- --------- --------- -------- -------- Acquisitions through business combinations - 176 39 215 Additions 1,524 6,043 3,419 10,986 Disposals and derecognition of ROU assets (264) (570) (1,022) (1,856) Foreign exchange differences 496 1,586 122 2,204 At 31 December 2021 18,047 58,775 9,445 86,267 ------------------------------------------- --------- --------- -------- -------- Acquisitions through business combinations 9 471 455 935 Additions 1,146 6,164 2,880 10,190 Disposals and derecognition of ROU assets (1,226) (1,176) (1,191) (3,593) Foreign exchange differences 181 274 (58) 397 At 31 December 2022 18,157 64,508 11,531 94,196 ------------------------------------------- --------- --------- -------- -------- Accumulated depreciation: At 1 January 2021 (3,420) (22,832) (2,646) (28,898) ------------------------------------------- --------- --------- -------- -------- Charged in year (524) (4,685) (1,896) (7,105) Disposals 18 450 866 1,334 Foreign exchange differences (79) (786) (73) (938) --------- --------- -------- -------- At 31 December 2021 (4,005) (27,853) (3,749) (35,607) ------------------------------------------- --------- --------- -------- -------- Charged in year (577) (5,046) (2,159) (7,782) Disposals 381 994 1,134 2,509 Foreign exchange differences (41) (282) 11 (312) ------------------------------------------- --------- --------- -------- -------- At 31 December 2022 (4,242) (32,187) (4,763) (41,192) ------------------------------------------- --------- --------- -------- -------- Carrying amount: 31 December 2022 13,915 32,321 6,768 53,004 ------------------------------------------- --------- --------- -------- -------- Carrying amount: 31 December 2021 14,042 30,922 5,696 50,660 ------------------------------------------- --------- --------- -------- -------- Carrying amount: 1 January 2021 12,871 28,708 4,241 45,820 ------------------------------------------- --------- --------- -------- --------
ROU assets includes Property of EUR6 million (2021: EUR5 million) and Plant and Equipment of EUR800,000 (2021: EUR 700,000).
The depreciation charge for property, plant and equipment is recognised in the following line items in the income statement:
2022 2021 EUR'000 EUR'000 -------------------------------------------------- ------- -------- Cost of sales 4,768 4,413 Cost of sales ROU assets 426 388 Operating expenses 852 796 Operating expenses ROU asset 1,736 1,508 Total depreciation charge for property, plant and equipment 7,782 7,105 -------------------------------------------------- ------- --------
14. Inventory and capital equipment
2022 2021 EUR'000 EUR'000 ----------------- ------- -------- Finished goods 47,983 42,396 Work-in-progress 12,943 9,596 Raw materials 15,985 11,058 Total inventory 76,911 63,050 ----------------- ------- --------
The Group recorded an impairment of EUR128,000 against inventory to take account of net realisable value during the year ended 31 December 2022 (2021: EUR22,000). Write-downs are included in cost of sales.
15. Trade and other receivables and other current assets
a) Trade and other receivables
2022 2021 EUR'000 EUR'000 -------------------------------- ------- -------- Gross receivable 24,975 26,047 Provision for impairment (1,103) (937) Net trade and other receivables 23,872 25,110 -------------------------------- ------- -------- Provision for impairment EUR'000 ----------------------------------------------------------- ---------------- Balance at 1 January 2022 (937) Increase in provision arising from prior years receivables impairment (10) Increase in ECL model (156) Balance at 31 December 2022 (1,103) ----------------------------------------------------------- ----------------
The following table provides the information about the exposure to credit risk and ECL's for trade receivables as at 31 December 2022 .
Weighted Gross Loss average carrying allowance loss rate amount EUR'000 % EUR'000 Current (not past due) 1% 17,929 179 1-30 days past due 5% 4,245 211 31-60 days past due 13% 1,459 189 61 to 90 days 21% 1,034 216 More than 90 days past due 100% 308 308 -------------------------------- ---------- ------------------------ Net trade and other receivables 24,975 1,103 -------------------------------- ---------- ------------------------
The following table provides the information about the exposure to credit risk and ECL's for trade receivables as at 31 December 2021 .
Weighted Gross average carrying Loss loss rate amount allowance % EUR'000 EUR'000 Current (not past due) 1% 19,804 198 1-30 days past due 5% 3,749 187 31-60 days past due 14% 1,649 230 61 to 90 days 17% 628 106 More than 90 days past due 100% 216 216 -------------------------------- ---------- ------------ Net trade and other receivables 26,047 937 -------------------------------- ---------- ------------
15. Trade and other receivables and other current assets (continued)
b) Prepayments and other current assets
2022 2021 EUR'000 EUR'000 ------------------------------------------------- -------- ------- Plant and machinery prepaid and under commission 9,852 5,781 Prepayments and other current assets 2,875 3,041 Prepayments and other current assets 12,727 8,822 ------------------------------------------------- -------- -------
16. Trade creditors, accruals and other liabilities
2022 2021 EUR'000 EUR'000 ----------------------------------- -------- ------- Trade creditors 14,420 15,683 Total creditors and other payables 14,420 15,683 ----------------------------------- -------- ------- 2022 2021 EUR'000 EUR'000 ------------------------------------- -------- ------- VAT 104 31 Social security costs 1,929 768 Other accruals and liabilities 6,666 5,228 Total accruals and other liabilities 8,699 6,027 ------------------------------------- -------- -------
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).
2022 2021 EUR'000 EUR'000 -------------------------------- --------- -------- Total liabilities (71,131) (64,292) Less: cash and cash equivalents 15,939 19,049 Net debt (55,192) (45,243) -------------------------------- --------- -------- Total equity 153,786 144,152 -------------------------------- --------- -------- Net debt to equity ratio 0.36 0.31 -------------------------------- --------- --------
18. Loans and borrowings
2022 2021 Maturity EUR'000 EUR'000 -------------------------------------- ------- -------- Bank loans 2023-2036 30,848 23,391 Lease Liabilities 2023-2032 11,096 11,079 Total loans and borrowings 41,944 34,470 ------- -------- Current 14,973 11,205 ------- -------- Non-current 26,971 23,265 ------- --------
The Group has a number of bank loans and lease liabilities with a mixture of variable and fixed interest rates. The Group has not been in default on any of these debt agreements during any of the periods presented. The loans are secured against the assets for which they have been drawn down for.
The Group has been in compliance with all debt agreements during the periods presented. The loan agreements in Ireland of EUR13.5 million (2020: EUR10.5 million) carry restrictive financial covenants including, EBITA to be no less than EUR18 million at end of each reporting period, interest cover to be 3:1 and to maintain a minimum cash balance of EUR5 million.
Interest rates on current borrowings are at an average rate of 4.89%
During 2022, the Group availed of the option to enter into overdraft facilities and to draw down loans of EUR11.5 million, EUR8.8 million in loans and EUR2.7 million in overdraft facilities.
Loans are repayable in line with their specific terms, the Group has one bullet repayment due in 2026 of EUR5 million.
Reconciliation of movements of liabilities to cash flows arising from financing activities
Balance Arising Cash Non-cash Foreign Balance at 1 January from acquisition movements movements exchange at 31 2021 differences December 2021 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 --------------------- ------------- ----------------- ---------- ---------- ------------ --------- Loans and borrowings 11,090 83 11,974 - 244 23,391 Lease liabilities 10,521 39 (3,590) 3,943 166 11,079 Total 21,611 122 8,384 3,943 410 34,470 --------------------- ------------- ----------------- ---------- ---------- ------------ --------- Balance Arising Cash Non-cash Foreign Balance at 1 January from acquisition movements movements exchange at 31 2022 differences December 2022 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 --------------------- ------------- ----------------- ---------- ---------- ------------ --------- Loans and borrowings 23,391 109 7,372 - (24) 30,848 Lease liabilities 11,079 455 (3,994) 3,604 (48) 11,096 Total 34,470 564 3,378 3,604 (72) 41,944 --------------------- ------------- ----------------- ---------- ---------- ------------ --------- Interest Effective rate range interest rate ------------------ ----------- --------- Bank loans 1% - 9% 4.5% Lease Liabilities 3% - 15% 5.2% ------------------ ----------- ---------
19. Share capital and reserves
At 31 December 2022 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 212,472,413 2,125 2022 2021 -------------------------------- ------------ ----------- Opening Share Capital 212,472,413 211,675,024 Share Awards vested during year - 797,389 Authorised Share Capital 212,472,413 212,472,413 -------------------------------- ------------ -----------
Share issuances
On 26 November 2013, Mincon Group plc was admitted to trading on the Euronext Growth 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 June 2022, Mincon Group plc paid a final dividend for 2021 of EUR0.0105 (1.05 cent) per ordinary share (EUR2.2 million).
In September 2022, Mincon Group plc paid an interim dividend in the amount of EUR0.0105 (1.05 cent) per ordinary share (EUR2.2 million total payment), which was paid to shareholders on the register at the close of business on 19 August 2022.
The Directors recommend the payment of a final dividend of EUR0.0105 (1.05 cent) per share for the year ended 31 December 2022 (31 December 2021: 1.05 cent per share).
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.
20. 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:
20. Earnings per share (continued)
2022 2021 Numerator (amounts in EUR'000): Profit attributable to owners of the Parent 14,704 14,600 Denominator (Number):Basic shares outstanding Restricted share awards Diluted weighted average shares outstanding 212,472,413 212,472,413 ---------------------------------------------- 2,030,000 5,820,000 214,502,413 218,292,413 ---------------------------------------------- ----------- ----------- Earnings per Ordinary Share Basic earnings per share, EUR 6.92 6.87 Diluted earnings per share, EUR 6.85 6.69 -----------
21. Share based payment
The vesting conditions of the scheme state that the minimum growth in EPS shall be CPI plus 5% per annum, compounded annually, over the relevant three accounting years up to the share award of 100% of the participants
basic salary. Where awards have been granted to a participant in excess of 100% of their basic salary, the performance condition for the element that is in excess of 100% of basic salary is that the minimum growth in EPS shall be CPI plus 10% per annum, compounded annually, over the three accounting years.
Number of Options Reconciliation of outstanding share options in thousands --------------------------------------------- -------------- Outstanding on 1 January 2022 5,820 *Forfeited during the year (3,790) Exercised during the year - Granted during the year - Outstanding at 31 December 2022 2,030 --------------------------------------------- --------------
*Based on the conditions set out in the 2022 conditional awards agreement, all shares were forfeited as conditions were not met.
2021 Conditional 2020 Conditional LTIP Scheme Award at Grant Date Award at Grant Date ---------------------------------- --------------------- ---------------------- Conditional Award Invitation date April 2021 April 2020 Year of Potential vesting 2024/2028 2023/2027 Share price at grant date EUR1.35 EUR0.80 Exercise price per share/share options EUR1.35 EUR0.80 Expected Volatility 36.57% 36.81% Expected life 7 years 7 years Risk free rate (0.53%) (0.50%) Expected dividend yield 1.58% 2.53% Fair value at grant date EUR0.39 EUR0.21 Valuation model Black & Scholes Model Black & Scholes Model
22. 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 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 2022 and 31 December 2021 were as follows:
a) Liquidity and capital
2022 2021 EUR'000 EUR'000 -------------------------- ------- ------- Cash and cash equivalents 15,939 19,049 Loans and borrowings 41,944 34,470 Shareholders' equity 153,786 144,152 -------------------------- ------- -------
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.
22. 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 2022 2021 EUR'000 EUR'000 ----------------------------------------------------- ----------- ----------- Ireland 3,668 4,760 Americas 3,039 3,136 Australasia 347 1,108 Europe, Middle East, Africa 8,885 10,045 ----------------------------------------------------- ----------- ----------- Total cash, cash equivalents and short term deposits 15,939 19,049 ----------------------------------------------------- ----------- -----------
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 Current Total Less More Value of Undiscounted than than contractual Cash Flows Cash Flows 1 Year 1-3 Years 3-5 Years 5 Years EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 ----------------------- ---------- ------------- --------------------- --------- --------- ------------------- At 31 December 2021: Deferred consideration 4,224 4,281 2,319 1,759 203 - Loans and borrowings 23,391 23,866 7,565 7,163 4,409 4,729 Lease liabilities 11,079 11,302 3,640 5,249 1,699 714 Trade and other
payables 15,683 15,683 15,683 - - - Accrued and other financial liabilities........... ...................... ...................... ...................... ............. 6,027 6,027 6,027 - - - ----------------------- ---------- ------------- --------------------- --------- --------- ------------------- Total at 31 December 2021 60,404 61,159 35,234 14,171 6,311 5,443 ----------------------- ---------- ------------- --------------------- --------- --------- ------------------- At 31 December 2022: Deferred consideration 1,705 1,725 1,054 671 - - Loans and borrowings 30,848 31,443 11,024 6,805 13,306 308 Lease liabilities 11,096 11,309 3,949 4,695 2,082 584 Trade and other payables 14,420 14,420 14,420 - - - Accrued and other financial liabilities 8,699 8,699 8,699 - - - ----------------------- ---------- ------------- --------------------- --------- --------- ------------------- Total at 31 December 2022 66,769 67,596 39,146 12,170 15,387 892 ----------------------- ---------- ------------- --------------------- --------- --------- -------------------
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.
22. Financial risk management (continued)
b) Foreign currency risk (continued)
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 the appropriateness of this policy.
Foreign currency denominated financial assets and liabilities which expose the Group to currency risk are disclosed below. The amounts shown are those reported to key management translated into EURO at the closing rate:
Short-term exposure Long-term debt USD SEK ZAR USD SEK ZAR EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 ---------------------- ---------- --------- ------- ------- ------- ------- At 31 December 2022: Financial assets 31,075 12,476 10,790 - - - Financial liabilities (4,483) (2,613) (1,608) (3,284) (1,136) (1,372) Total Exposure 26,592 9,864 9,182 (3,284) (1,136) (1,372) ---------------------- ---------- --------- ------- ------- ------- ------- At 31 December 2021: Financial assets 25,316 11,655 10,119 - - - Financial liabilities (4,071) (2,959) (1,533) (2,317) (1,094) (1,232) Total Exposure 21,245 8,695 8,586 (2,317) (1,094) (1,232) ---------------------- ---------- --------- ------- ------- ------- -------
The following table illustrates the sensitivity of profit and equity in relating to the Group's financial assets and financial liabilities and the USD/EUR exchange rate, SEK/EUR exchange rate and ZAR/EUR exchange rate 'all other things being equal'. It assumes a +/- 4% change of the EUR/USD exchange rate for the year ended at 31 December 2022 (2021: 4%). A +/- 4% change is considered for the EUR/SEK exchange rate (2021: 4%). It assumes a +/- 4% change of the EUR/ZAR exchange rate for the year ended at 31 December 2022 (2021: 4%). Both of these percentages have been determined based on the average market volatility in exchange rates in the previous twelve months.
Profit for the Equity year USD SEK ZAR ZAR ZAR ZAR EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 ----------------- ------- ------- ------- ------- ------- ------- 31 December 2022 (3) 35 14 218 244 98 31 December 2021 211 155 (9) (1,016) 2,166 141 ----------------- ------- ------- ------- ------- ------- ------- Profit for the Equity year USD SEK ZAR ZAR ZAR ZAR EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 ----------------- ------- ------- ------- ------- ------- ------- 31 December 2022 12 (147) (58) (917) (1,026) (412) 31 December 2021 320 16 (84) (2,135) 1,010 (292) ----------------- ------- ------- ------- ------- ------- -------
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. Changes in the exchange rate year on year between the reporting currencies of these operations and the Euro, have an impact on the Group's consolidated reported result.
22. Financial risk management (continued)
b) Foreign currency risk
The Group's worldwide presence creates currency volatility when compared year on year. During 2022, currencies were volatile due to ongoing war in the Ukraine, however the euro remained relatively steady against all major currencies the Group trades in.
In 2022, 56% (2021: 54%) of Mincon's revenue EUR170 million (2020: EUR144 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.
The Group is also exposed to foreign currency risk on its liquid resources (cash), of which the euro equivalent of EUR4.2 million was held in US dollar (USD 4.5 million), EUR3 million was held in Swedish krona (SEK 33.3 million), EUR1.5 million was held in South Africa rand (ZAR 27 million), and the euro equivalent of EUR1.2 million was held in Canadian dollar (CAD 1.8 million).
2022 2021 Euro exchange rates Closing Average Closing Average US Dollar 1.07 1.05 1.13 1.18 Australian Dollar 1.57 1.52 1.56 1.57 South African Rand 18.18 17.19 18.06 17.47 Swedish Krona 11.15 10.63 10.26 10.14 -------------------- ------- -------- -------- --------
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.
Credit risk management
The credit risk is managed on a group basis based on the Group's credit risk management policies and procedures.
The credit risk in respect of cash balances held with banks and deposits with banks are managed via diversification of bank deposits, and are only with major reputable financial institutions.
The Group continuously monitors the credit quality of customers. Where available, external credit ratings and/or reports on customers are obtained and used. The credit terms range between 30 and 90 days. The credit terms for customers as negotiated with customers are subject to an internal approval. The ongoing credit risk is managed through regular review of ageing analysis.
Trade receivables consist of a large number of customers in various industries and geographical areas.
Trade receivables and contract assets
The Group applies the IFRS 9 simplified model of recognising lifetime expected credit losses for all trade receivables as these items do not have a significant financing component.
In measuring the expected credit losses, the trade receivables have been assessed on a collective basis as they possess shared credit risk characteristics. They have been grouped based on the days past due and also according to the geographical location of customers.
22. Financial risk management (continued)
c) Credit risk (continued)
Trade receivables are written off (i.e. derecognised) when there is no reasonable expectation of recovery. Failure to make payments within 180 days from the invoice date and failure to engage with the Group on alternative payment arrangement amongst other is considered indicators of no reasonable expectation of recovery.
The closing balance of the trade receivables loss allowance as at 31 December 2022 reconciles with the trade receivables loss allowance opening balance as follows:
Trade receivables EUR'000 -------------------------------------------- ----------------- Opening loss allowance as at 1 January 2021 1,190 Loss allowance recognised during the year (253) Loss allowance as at 31 December 2021 937 -------------------------------------------- ----------------- Loss allowance recognised during the year 166 Loss allowance as at 31 December 2022 1,103 -------------------------------------------- -----------------
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.(Note 15)
The maximum exposure to credit risk for trade and other receivables at 31 December 2022 and 31 December 2021 by geographic region was as follows:
2022 2021 EUR'000 EUR'000 ---------------------------- ------- ------- Americas 8,173 7,969 Australasia 3,300 3,330 Europe, Middle East, Africa 12,399 13,811 Total amounts owed 23,872 25,110 ---------------------------- ------- -------
d) Interest rate risk
Interest Rate Risk on financial liabilities There were no significant changes in interest rates during 2022 and therefore there was no significant impact. Movements in interest rates had no significant impact on our financial liabilities or finance cost recognised in either 2021 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.
22. Financial risk management (continued)
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.
Financial assets and financial liabilities measured at fair value in the consolidated statement of financial position are grouped into three levels of a fair value hierarchy. The three levels are defined based on the observability of significant inputs to the measurement, as follows:
-- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
-- Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset
or liability, either directly or indirectly
-- Level 3: unobservable inputs for the asset or liability.
Mincon Group plc only apply level 3 for fair value, using the detail displayed above.
Deferred consideration
The movements in respect of the deferred consideration value in the year to 31 December 2022 are as follows:
Level 3 EUR'000 ------------------------------------------------ ------- Balance at 1 January 2022 4,224 Arising on acquisition - Cash payment (2,629) Foreign currency translation adjustment 79 Unwinding of discount on deferred consideration 31 Balance at 31 December 2022 1,705 ------------------------------------------------ -------
Deferred consideration includes multiple deferred payments for prior acquisitions over a fixed period of time. These carry no significant observational inputs.
23. Subsidiary undertakings
At 31 December 2022, 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 Mincon Canada) 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 ----------------------------------------------------- --------- ---------------------------------------------------- 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 100% 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 ----------------------------------------------------- --------- ---------------------------------------------------- Mincon Canada - Western Service Centre (previously 100% 3568-191 Street, Unit 101, Surrey BC, V3Z 0P6, Pacific Bit of Canada) Canada Sales company ----------------------------------------------------- --------- ---------------------------------------------------- 23. 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 ---------------------------------------------------------------- Dormant 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 ----------------------------------------- --------- ---------------------------------------------------------------- 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 ----------------------------------------- --------- ---------------------------------------------------------------- Spartan Drilling Tools 100% 1882 US HWY 6 & 50 Fruita, CO 81507, USA Manufacturing facility 23. 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 ----------------------------------------- --------- ---------------------------------------------------------------- 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 Sales company Attakroc Inc 100% 601, rue Adanac, Quebec, G1C 7G6, Canada Sales company Mincon Quebec 100% 601, rue Adanac, Quebec, G1C 7G6, Canada Holding company *All shares held are ordinary shares.
24. Leases
A. Leases as Lessees (IFRS 16)
The Group leases property, plant and equipment across its global operations.
Mincon Group PLC has elected to apply the practical expedient allowed under IFRS 16 for short-term leases by class of underlying asset to which the right of use relates. A class of underlying asset is a grouping of underlying assets of a similar nature and use in an entity's operations. The class of underlying assets this applies to short term leases of office equipment.
Information about leases for which the Group is a lessee is presented below.
i) Right-of-use assets 31 December 2021 EUR'000 Balance at 1 January 4,241 Depreciation charge for the year (1,896) Additions to right of use assets 3,458 Disposal of right of use asset (156) Foreign exchange difference 49 --------------------------------- --------------- Balance at 31 December 2021 5,696 --------------------------------- --------------- 31 December 2022 EUR'000 Balance at 1 January 5,696 Depreciation charge for the year (2,159) Additions to right of use assets 3,334 Disposal of right of use asset (57) Foreign exchange difference (46) --------------------------------- ------------- Balance at 31 December 2022 6,768 --------------------------------- ------------- ii) Amounts recognised in income statement. 2022 2021 EUR'000 EUR'000 ----------------------------------------------- ------- ------- Interest on lease liabilities 354 308 Expenses related to short term leases 245 311 Expenses related to leases of low value assets 10 65 ----------------------------------------------- ------- ------- -Leases under IFRS 16 609 684 ----------------------------------------------- ------- ------- iii) Amounts recognised in statement of cash flows 2022 2021 EUR'000 EUR'000
------------------------------ ---------------- ---------------- Total cash outflow for leases 3,994 3,590 ------------------------------ ---------------- ---------------- Total cash outflow of leases 3,994 3,590 ------------------------------ ---------------- ----------------
24. 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.
The following table sets out a maturity analysis of lease liabilities, showing the undiscounted lease payments to be paid after the reporting date.
31 December 2022 EUR'000 ------------------- ----------- Less than one year 2,129 -------------------- ----------- One to two years 3,068 -------------------- ----------- Two to five years 1,525 -------------------- ----------- More than 5 years 568 Total 7,290 -------------------- ----------- 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 EUR193,000.
The Group manages the risk to retain the right to the assets as they have a right to inspect the property, the right to enforce the contractual arrangement with the lessee and the right to perform maintenance.
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 2022 2021 EUR'000 EUR'000 Less than one year 147 192 One to two years - 146 Balance at 31 December 147 338 ------------------------------------ ----------- ----------- Unearned finance income (10) (22) ------------------------------------ ----------- ----------- Total undiscounted lease receivable 137 316 ------------------------------------ ----------- ----------- 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 2022 was EUR180,000 (2021: EUR214,000).
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 2022 EUR'000 Less than one year 22 Total 22 -------------------- -----------
25. Commitments
The following capital commitments for the purchase of property, plant and equipment had been authorised by the directors at 31 December 2022:
31 December 31 December 2022 2021 EUR'000 EUR'000 Contracted for 3,360 2,837 Not-contracted for 229 772 ------------------- ----------- ------------ Total 3,589 3,609 ------------------- ----------- ------------
26. Litigation
The Group is not involved in legal proceedings that could have a material adverse effect on its results or financial position.
27. Related parties
As at 31 December 2022, the share capital of Mincon Group plc was 56.32% 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 June 2022, the Group paid a final dividend for 2021 of EUR0.0105 to all shareholders. The total dividend paid to Kingbell Company was EUR1,256,477.
In September 2022, the Group paid an interim dividend for 2022 of EUR0.0105 to all shareholders. The total dividend paid to Kingbell Company was EUR1,256,477 (September 2020: EUR1,261,385).
The Group has a related party relationship with its subsidiary undertakings (see note 23) 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 2022 and 2021. The Group has amounts owing to directors of EURNil as at 31 December 2022 and 2021.
Key management compensation
The profit before tax from continuing operations has been arrived at after charging the following key management compensation:
2022 2021 EUR'000 EUR'000 Short term employee benefits 1,561 1,514 Bonus and other emoluments 348 320 Post-employment contributions 149 145 Social security costs 110 109 Share based payment charged in the year (153) 221 ---------------------------------------- ------- ------- Total 2,015 2,309 ---------------------------------------- ------- -------
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.
28. Events after the reporting date
The Board of Mincon Group plc is recommending the payment of a final dividend for the year ended 31 December 2022 in the amount of EUR0.0105 (1.05 cent) per ordinary share, which will be subject to approval at the Annual General Meeting of the Company in May 2023. Subject to Shareholder approval at the Company's annual general meeting, the final dividend will be paid on 16 June 2023 to Shareholders on the register at the close of business on 26 May 2023.
29. Approval of financial statements
The Board of Directors approved the consolidated financial statements on 10 March 2023.
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FR EAKDEFLSDEFA
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March 13, 2023 03:00 ET (07:00 GMT)
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