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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% | 44.00 | 40.00 | 48.00 | 44.00 | 43.50 | 43.50 | 0.00 | 08:00:04 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Mng Machy, Eq, Ex Oil Field | 156.93M | 7.47M | 0.0352 | 12.50 | 93.49M |
From Apr 2019 to Apr 2024
TIDMMCON
RNS Number : 6388I
Mincon Group Plc
12 August 2019
Mincon Group plc
2019 Half Year Financial Results
Mincon Group plc (ESM:MIO AIM:MCON), the Irish engineering group specialising in the design, manufacture, sale and servicing of rock drilling tools and associated products, announces its half year results for the six months ended 30 June 2019.
Hot Features
Premium
Percentage
30 June 30 June change
2019 2018 in
EUR'000 EUR'000 Period
-------------------------------------------------------------------------------------- ------- -------- -----------
Product revenue:
Sale of Mincon product
(EUR'000)............................................................................
................................................ 50,464 47,406 6%
Sale of third-party product
(EUR'000)............................................................................
............................................ 9,458 8,315 14%
Total revenue
(EUR'000)............................................................................
................................................................ 59,922 55,721 8%
-------
Sale of Mincon product as a % of total
revenue..............................................................................
........................ 84% 85%
-------------------------------------------------------------------------------------- ------- -------- -----------
Profit for the period
(EUR'000)............................................................................
...................................................... 7,185 6,308 14%
-------------------------------------------------------------------------------------- ------- -------- -----------
Profit attributable to shareholders of the
parent company (EUR'000) ..... 7,144 6,122 17%
-------------------------------------------------------------------------------------- ------- -------- -----------
Earnings per share
.....................................................................................
........................................................ 3.39c 2.91c 16%
-------------------------------------------------------------------------------------- ------- -------- -----------
Joe Purcell, Chief Executive Officer, commenting on the results, said:
"The first half of 2019 marked a period where the production capacity of the Group caught up with the order book of last year, but where the market has softened during the period. This has led to a build-up in inventory, a capacity coming on-stream in excess of current sales levels and an overhead level that requires growth to support it against the backdrop of a softening market.
This has impacted on our gross margin, our operating margin and our momentum. In addition to this, we changed our market access model in the second quarter, moving from one used by the market leaders with customer centres as distribution points and factories as production entities, to the "Challenger" model of building regional management teams responsible for all the business in their region.
As a result of the acquisition of Driconeq, we can deliver the entire suite of consumables for drill strings for the sectors we service, and we can now tender directly to mines for multi-year contracts of scale, and to the primary contractors in large construction projects. We have moved from being excluded from competing for these contracts, to being included, and with the advent of the next generation of mining tools we are developing, we expect in some cases, to be preferred.
In H1 2019 the following has been delivered compared to the H1, 2018;
-- Revenue up 8% to EUR60 million
-- Mincon manufactured product up 6% to EUR50 million -- Gross profit (excluding impairments) down 5% to EUR21 million -- Operating profit (excluding impairments) down 14% to EUR6.9 million
-- Profit for the period up 14% to EUR7.2 million
-- Earnings per share up 16% to 3.39 cent
Our revenue growth moderated after several years of strong organic and acquisition growth, but we still registered growth in the first half of 8%. We see much of the increase arising from the impact of previous acquisitions being held for the full trading period this year.
Excluding the impairments, the gross margin was reduced by the revenue mix changes as lower margin businesses were owned for the full period, some excess production costs were carried as we maintained employment and the capacity for higher volume through the earlier part of the year and some softness in market pricing due to competitor behaviour.
As we recognised the change in market tone we initiated a full-scale review of our business model. This led to setting a EUR3 million targeted reduction in costs above and below the gross margin line, at all levels of employees and cost categories in the company, and a reduction in the complexity of the Group. This work is being funded from our own resources and is now substantially complete but will continue throughout the rest of the year. Further commentary on the programme and the impairments and realisations from it, is provided below.
Development of the operating model
Under the "Challenger" model, we engage directly with mines in a similar way as the market leaders, and with primary contractors in construction activities, and this approach is winning us business. The distribution centre model of the market leaders will be discontinued where this is not adding sufficient value. We have recently won, and have started billing, two multi-million-dollar contracts, where we have replaced the market leaders.
One of the benefits of the acquisition of Driconeq is that we are now in a position to give mines a full consumables offering. As a result of this range improvement and the offering of a full customer service, we are being considered for inclusion among those suppliers who have the resources to handle larger contracts, dealing directly with mines.
With a full consumables offering, we can address the end-customer needs, working with prime contractors or the end customers themselves. We are evolving from being excluded on the grounds of our size, product range or service capability, to being included, and, in some cases, being chosen as the preferred supplier. As a result of our service and engineering offerings, we may be able to bring the best solution for the customers.
This decision on our model has driven a substantial overhaul of our businesses, and a far-reaching reorganisation that has taken considerable time and funding to execute.
The Reorganisation Projects
We looked at our business holistically to see not just where we should reduce costs, but also what businesses and structures would not fit the evolving "Challenger" model.
Disposal of a non-core business, and distribution point closures
As part of streamlining our business, we have disposed of Härdtekno, which, while a fine company, was not a business that we were going to develop. We viewed it as a non-core activity, since most of the customer base lay outside our sector, as did its processes and technology. Härdtekno was acquired as part of the EUR7.8 million acquisition of the Driconeq Group in 2018, and provided heat treatment services in Sweden. Driconeq will continue to be a customer of that business in the coming years.
We made a profit on disposal of EUR7.3 million as we sold Härdtekno for EUR8.6 million, receiving an initial EUR8.1 million cash on completion in June. This has been booked as an exceptional gain on disposal.
We have applied these profits largely to finance the various cost reduction programmes, the absorption of inventory write-downs and the write-offs of uncollectible receivables. We have re-organised our business in Europe and Southern Africa as we returned to a simple regional format, and we continue to review the portfolio of activities, products and businesses to identify which of them is not part of the "Challenger" focus of the Group.
Review of assets and employment
A team of experienced senior executives has been charged with working through the inventories in order to simplify the product range to concentrate on fewer variations of our products. This team will also consider write-offs, the disposal of excess product and work-in-progress and review our ranges and markets to make sure we allocate the production to where we have the best manufacturing advantage. Part of this ongoing process will be to identify the markets where we can make the best, sustainable, margins.
We have reviewed the teams that we had built up and reduced headcount where we were dismantling a structure such as product management, or where throughput did not support headcount. The average staff number for the Group was 492 in this reporting period, but we finished H1 with 441 staff. We have substantially carried out the planned rightsizing for the Group and reduced headcount by some 10% across the Group at all levels and employment categories. This should lead to an improvement in gross margin and a reduction in the "General and selling expense" categories in the coming year.
Impairments
As we worked through the business model we identified some stranded assets where recovery is problematic, for example; debtors as we discontinue some distribution points, inventory where the range is being simplified, or third-party product we don't intend to continue to distribute. We have decided to recognise these assets as impaired.
The treatment of the impairments in the accounts varies depending on their nature, some qualify as exceptional, for example the reorganisation costs, and debtors where businesses are being discontinued and these are viewed as irrecoverable. The total here was EUR2.98 million and this is presented in the income statement in the exceptional column. Most of these charges were actual cash costs.
Other impairments, such as the approximately EUR2 million write down in inventory, and some debtors that have gone into liquidation after struggling to pay, have crystallised losses, and the total here was EUR582,000. Again, these are separately identified in the income statement, but generally incur no further cash cost.
Streamlining the business
With the reduction of headcount, the closure of non-performing businesses and the delayering of our management we have made substantial progress on our EUR3 million annualised cost reduction target. The various programme costs have impacted in the first half, and the benefits will come through in the second half and beyond.
We will continue to overhaul the businesses through 2019 and our three regions; Americas, Australia Pacific (APAC), and EMEA with the subset of Africa are well developed in their planning and consolidation. We are simplifying our distribution structures and delayering the management teams.
We can then continue to focus on margins, cash flows and the return on investment accurately in each of these regions, and, assign local objectives for inventory management and cash generation.
Cash management and cash
We have executed a significant capital investment programme in the last three years in renewal of our productive capacity and in ensuring the same quality of output from our key factories in Perth, Australia, Benton Illinois and in Shannon, Ireland. The internal heat-treatment process has come online in America this US$5 million investment in plant and facilities was commissioned after the half year, and the quality is in line with our expectations and delivering a better outcome for our customers in the improved economic life of our products.
We have absorbed EUR3.75 million in capital expenditure in the first half, for commitments made in previous periods, and depreciation in the period was EUR2.6 million, an increase over the prior year of EUR0.7m. Capital expenditure is held in prepayments as it is incurred, and prior to the plant and facilities being commissioned, so while the capital expenditure for the year will be significantly above depreciation, little of this will be actual cash outflow in the period.
The detailed workings in the attached cash flow show that last year, while making acquisitions, investing in capital equipment and running up the inventory in keeping with the revenue growth, we absorbed nearly EUR17 million in cash in the six-month period. In the first half of 2019, largely through the disposal of a non-core business , we have generated EUR8 million, with a timing difference in tax payment reducing this by EUR2 million. The programme and outlook through the rest of the year is to continue to build this cash reservoir. The nadir in cash has been passed, cash generation is well in hand for the rest of the year, with a particular objective of releasing cash from inventory.
Natural hedging through local debt
We have also drawn bank debt for plant additions as part of a local hedging strategy for the assets in various countries, and while debt has gone up with the capital expenditure programme, the actual cash at centre has begun to accumulate. This supports the very substantial commitments needed to fund large contracts, the working capital, the tranche payments for previous acquisitions and the ability of the Group to continue to make targeted acquisitions from its own cash resources as part of the ongoing growth strategy.
The consequence of these decisions is the higher finance charges in our profit and loss account, but the benefits are the generation of free cash, and the local hedging advantage. These hedging decisions arose as part of a localisation ambition, and the ongoing awareness of the impact of foreign exchange volatility on our results. The impact of foreign exchange movements in H1 was immaterial.
Ongoing review
The growth over the last two years has been significant, and we spent much of that time, and allocated a large amount of cash to building out the capital equipment to support that growth and provide adequate inventory to fill orders. We continued at higher levels of production while sales orders softened until it became clear this was an ongoing issue, and not a temporary phenomenon.
Against this, we have won large contracts recently which should see a return to organic growth as they come on stream. The lead time is substantial for these contracts due to the tendering processes that accompany them, the transition period required by a change in suppliers, and the need for delivery assurance by the end customer. In some cases we need to physically deliver product to the sites, and demonstrate that the support teams are in place.
We are also finding that large contracts can create a substantial cash requirement to support them. This can arise through the provision of cash collateralised performance guarantees, the requirements of inventory reservoirs proximate to the customer, the capital equipment to support service delivery, and the recruitment of local experienced teams to be available to maintain the service. The service requirements of large contracts are very high, the buy side teams tend to be very experienced and professional, and the customers are not fault tolerant since their entire business schedules may rely on our delivery.
The ability of the Group to support these multi-million-dollar trading relationships, provide these performance guarantees, and deliver the required working capital investment enables us to overcome what, for other companies, is a very substantial barrier to entry to this business segment.
The hydraulic hammer systems
We capitalised some EUR0.6m of development expenditure on this project in the first half and carry the investment in the balance sheet at just short of EUR4 million. We are scheduled for a substantial sustained drilling programme in Australia starting in the middle of August and we should be able to report on this in due course. We believe we are in the final stage of commercial development and we continue to refine the hammers, the systems and the service delivery.
The hydraulic hammer systems are designed to deliver a substantial commercial advantage to customers facing hard rock and high-altitude conditions. Some of the contracts that we have and the contracts that we are winning, are suitable for these systems. By establishing the primary relationships through our "Challenger" model and servicing these large customers and contracts directly we have the opportunity to deliver the hydraulic systems where there is value for the end customer.
We are aiming to have the resources in cash terms, the engineering and service levels to deliver the competitive advantage, and the direct customer relationships in order to maximise the opportunity for the Group to the commercial advantage of our customers.
Dividend
The Board of Mincon Group plc has recommended the payment of an interim dividend in the amount of 1.05 cent per ordinary share, which will be paid on the 27 September 2019 to shareholders on the register at the close of business on the 30 August 2019.
Outlook
We are not immune to the increased volatility of world markets as large economies engage in tariff battles, exchange rates fluctuate, and low wage producers aggressively target markets in which we sell as they redirect production away from where they face higher barriers to trade. We have seen softening in the margins, which we have taken steps to mitigate through the wide-ranging, deep review of our businesses, business model, and cost base.
We have established this "Challenger" thinking, and we are tendering for more substantial multi-million-dollar contracts. However, we have to win these from the market leaders, not our former peer group, so it will take time and investment to build that portfolio.
We have substantially finished looking inside our businesses at this point, save for the ongoing inventory and manufacturing advantage review referred to above, and we aim to return to growth as the new contracts come on stream through the second half. Our factories are very well specified and equipped with modern plant, and we have the capacity required for further growth.
Concluding comments
We are well engaged in the process of dismantling the customer centre approach, returning to regional leadership and responsibility, and then driving the cash and asset management in those regions through their owners, our local management. We are confident in our business model and the competence of our teams.
We have managed our way through this fitful market. We have disposed of a non-core business for cash, and we have cut our overheads. We will continue to review our businesses for best fit as our business model evolves, and to engage with potential acquisition opportunities where we see commercial advantage.
I would like to thank the shareholders for their support through the last few years, and the Mincon staff for their commitment to the success of the business.
12 AUGUST 2019
For further information, please contact:
Mincon Group plc Tel: + 353 (61) 361 099 Joe Purcell CEO Mark McNamara CFO Peter E. Lynch COO Davy Corporate Finance (Nominated Tel: +353 (1) 679 6363 Adviser and Euronext Growth Adviser) Anthony Farrell Daragh O'Reilly
Mincon Group plc
2019 Half Year Financial Results
Unaudited condensed consolidated
income statement
For the 6 months ended 30 June
2019
2019 2018
Notes Excluding Exceptional Including Excluding Exceptional Including
exceptional items exceptional exceptional items exceptional
items (note items items (Note items
EUR'000 8) EUR'000 EUR'000 8) EUR'000
EUR'000 EUR'000
------------------ ----- ------------- ------------ --------------- ------------- ------------ -------------
Continuing
operations
Revenue 5 59,922 - 59,922 55,721 - 55,721
Cost of sales 7 (39,106) - (39,106) (33,760) - (33,760)
Impairment of
inventory 7 (1,992) - (1,992) - - -
------------------ ----- ------------- ------------ --------------- ------------- ------------ -------------
Gross profit 18,824 - 18,824 21,961 - 21,961
General and
selling
expenses 7 (13,877) (2,521) (16,398) (13,874) (268) (14,142)
Impairment of
trade
receivables 7 (582) (457) (1,039) - - -
------------------ ----- ------------- ------------ --------------- ------------- ------------ -------------
Operating profit 4,365 (2,978) 1,387 8,087 (268) 7,819
Finance income 72 - 72 59 - 59
Finance cost (303) - (303) (60) - (60)
Foreign exchange
gain/(loss) 41 - 41 35 - 35
Contingent
consideration (50) - (50) (33) - (33)
Profit before tax 4,125 (2,978) 1,147 8,088 (268) 7,820
------------------ ------------ ------------- ------------
Profit from
discontinued
operation, net of
tax - 7,261 7,261 - - -
------------------ ----- ------------- ------------ --------------- ------------- ------------ -------------
Income tax expense (1,223) - (1,223) (1,512) - (1,512)
------------------ ----- ------------- ------------ --------------- ------------- ------------ -------------
Profit for the
period 2,902 4,283 7,185 6,576 (268) 6,308
------------------ ----- ------------- ------------ --------------- ------------- ------------ -------------
Profit
attributable
to:
- owners of the
Parent 7,144 6,122
- non-controlling
interests 41 186
------------------ ----- ------------- ------------ --------------- -------------
Earnings per
Ordinary
Share
Basic earnings per
share, 12 3.39 2.91c
Diluted earnings
per
share, 12 3.35 2.87c
------------------ ----- ------------- ------------ --------------- -------------
Unaudited condensed consolidated statement of comprehensive
income
For the 6 months ended 30 June 2019
2019 2018
H1 H1
EUR'000 EUR'000
------------------------------------------------------------ -------- ----------
Profit for the period 7,185 6,308
Other comprehensive income/(loss):
Items that are or may be reclassified subsequently to
profit or loss:
Foreign currency translation - foreign operations 878 (2,389)
Other comprehensive profit / (loss) for the period 878 (2,389)
------------------------------------------------------------ -------- ----------
Total comprehensive income for the period 8,063 3,919
------------------------------------------------------------ -------- ----------
Total comprehensive income attributable to:
- owners of the Parent 8,022 3,733
- non-controlling interests 41 186
------------------------------------------------------------ -------- ----------
The accompanying notes are an integral part of these financial statements.
Unaudited consolidated statement of financial
position
As at 30 June 2019
30 June 31 December
2019 2018
Notes EUR'000 EUR'000
---------------------------------------------- ----- -------- ------------
Non-Current Assets
Intangible assets and goodwill 14 31,181 30,753
Property, plant and equipment 15 39,840 34,930
Deferred tax asset 10 527 278
Total Non-Current Assets 71,548 65,961
----------------------------------------------- ----- -------- ------------
Current Assets
Inventory and capital equipment 16 49,850 49,357
Trade and other receivables 17 23,609 20,711
Prepayments and other current assets 7,558 6,578
Contingent consideration 450 -
Current tax asset 10 373 252
Cash and cash equivalents 13,762 8,042
Total Current Assets 95,602 84,940
----------------------------------------------- ----- -------- ------------
Total Assets 167,150 150,901
----------------------------------------------- ----- -------- ------------
Equity
Ordinary share capital 11 2,110 2,105
Share premium 67,647 67,647
Undenominated capital 39 39
Merger reserve (17,393) (17,393)
Restricted equity reserve 459 1,511
Share based payment reserve 13 1,706 1,274
Foreign currency translation reserve (5,143) (6,021)
Retained earnings 71,477 66,543
----------------------------------------------- ----- -------- ------------
Equity attributable to owners of Mincon Group
plc 120,902 115,705
----------------------------------------------- ----- -------- ------------
Non-controlling interests 1,102 1,061
Total Equity 122,004 116,766
Non-Current Liabilities
Loans and borrowings 18 9,759 4,461
Deferred tax liability 10 374 1,222
Deferred contingent consideration 9 6,103 5,470
Other liabilities 4,360 151
Total Non-Current Liabilities 20,596 11,304
----------------------------------------------- ----- -------- ------------
Current Liabilities
Loans and borrowings 18 2,019 2,735
Trade and other payables 12,378 12,027
Accrued and other liabilities 8,282 6,996 Current tax liability 10 1,871 1,073 Total Current Liabilities 24,550 22,831 ----------------------------------------------- ----- -------- ------------ Total Liabilities 45,146 34,135 ----------------------------------------------- ----- -------- ------------ Total Equity and Liabilities 167,150 150,901 ----------------------------------------------- ----- -------- ------------
The accompanying notes are an integral part of these financial statements.
Unaudited condensed consolidated statement of cash
flows
For the 6 months ended 30 June 2019
--------------------------------------------------------- ------------------
H1 H1
2019 2018
EUR'000 EUR'000
--------------------------------------------------------- ------- ---------
Operating activities:
Profit for the period 7,185 6,308
Adjustments to reconcile profit to net cash provided
by operating activities:
Depreciation 2,551 1,879
Fair value movement on deferred contingent consideration 50 33
Foreign exchange gain / loss (41) (35)
Finance cost 303 60
Finance income (72) (59)
Gain on the sale of discontinued operations, net (7,261) -
of tax
Income tax expense 1,223 1,512
Reduction in goodwill (532) -
--------------------------------------------------------- ------- ---------
Other non-cash movements (292) (477)
--------------------------------------------------------- ------- ---------
3,114 9,221
Changes in trade and other receivables (2,079) (347)
Changes in prepayments and other assets (948) (2,289)
Changes in inventory 1,071 (9,011)
Changes in trade and other payables 1,587 3,448
--------------------------------------------------------- ------- ---------
Cash provided by operations 2,745 1,022
Interest received 72 59
Interest paid (303) (60)
Income taxes paid (2,027) (317)
--------------------------------------------------------- ------- ---------
Net cash provided by/(used in) operating activities 487 704
--------------------------------------------------------- ------- ---------
Investing activities
Purchase of property, plant and equipment (3,746) (5,280)
Investment in intangibles (589) (711)
Share-based payments 432 333
Payment of deferred contingent consideration (500) (1,439)
Acquisitions, net of cash required (800) (7,603)
Proceeds from sale of discontinued operations 8,075 -
Net cash provided by/(used in) investing activities 2,872 (14,700)
--------------------------------------------------------- ------- ---------
Financing activities
Dividends paid (2,210) (2,210)
Repayment of loans and finance leases (891) (337)
Drawdown of loans 5,472 -
Net cash provided by/(used in) financing activities 2,371 (2,547)
--------------------------------------------------------- ------- ---------
Effect of foreign exchange rate changes on cash (10) (360)
--------------------------------------------------------- ------- ---------
Net increase/(decrease) in cash and cash equivalents 5,720 (16,903)
--------------------------------------------------------- ------- ---------
Cash and cash equivalents at the beginning of the
year 8,042 28,215
--------------------------------------------------------- ------- ---------
Cash and cash equivalents at the end of the period 13,762 11,312
--------------------------------------------------------- ------- ---------
The accompanying notes are an integral part of these financial statements.
Unaudited condensed consolidated statement of changes in equity for the 6 months ended 30 June 2019
Share Foreign
Restricted based currency
Share Share Merger equity Un-denominated payment translation Retained Non-controlling Total
capital premium reserve reserve capital reserve reserve earnings Total interests equity
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
--------------- ------- ------- -------- ---------- -------------- ------- ----------- -------- ------- --------------- -------
Balances at 1
July 2018 2,105 67,647 (17,393) - 39 845 (5,329) 61,303 109,217 972 110,189
--------------- ------- ------- -------- ---------- -------------- ------- ----------- -------- ------- --------------- -------
Comprehensive
income:
Profit for the
period - - - - - - - 7,451 7,451 89 7,540
Other
comprehensive
income/(loss):
Foreign
currency
translation - - - - - - (692) - (692) - (692)
----------- -------- ------- --------------- -------
Total
comprehensive
income (692) 7,451 6,759 89 6,848
----------- -------- ------- --------------- -------
Non-taxable
income - - - 1,511 - - - - 1,511 - 1,511
Transactions
with
Shareholders:
Share-based
payments - - - - - 429 - - 429 - 429
Dividend
payment - - - - - - - (2,211) (2,211) - (2,211)
Balances at 31
December
2018 2,105 67,647 (17,393) 1,511 39 1,274 (6,021) 66,543 115,705 1,061 116,766
--------------- ------- ------- -------- ---------- -------------- ------- ----------- -------- ------- --------------- -------
Comprehensive
income:
Profit for the
period - - - - - - - 7,144 7,144 41 7,185
Other
comprehensive
income/(loss):
Foreign
currency
translation - - - - - - 878 - 878 - 878
----------- -------- ------- --------------- -------
Total
comprehensive
income 878 7,144 8,022 41 8,063
----------- -------- ------- --------------- -------
Non-taxable
income - - - (1,052) - - - - (1,052) - (1,052)
-----------
Transactions
with
Shareholders:
Equity-settled
share-based
payment 5 - - - - - - - 5 - 5
Share-based
payments - - - - - 432 - - 432 - 432
Dividend
payment - - - - - - - (2,210) (2,210) - (2,210)
Balances at 30
June 2019 2,110 67,647 (17,393) 459 39 1,706 (5,143) 71,477 120,902 1,102 122,004
--------------- ------- ------- -------- ---------- -------------- ------- ----------- -------- ------- --------------- -------
The accompanying notes are an integral part of these financial statements.
Notes to the consolidated interim financial statements
1 Reporting entity
Mincon Group plc ("the Company") is a company incorporated in the Republic of Ireland. The unaudited consolidated interim financial statements of the Company for the six months ended 30 June 2019 (the "Interim Financial Statements") include the Company and its subsidiaries (together referred to as the "Group"). The Interim Financial Statements were authorised for issue by the Directors on 08 August 2019.
2. Basis of accounting
The Interim Financial Statements have been prepared in accordance with IAS 34, 'Interim Financial Reporting', as adopted by the EU. The Interim Financial Statements do not include all of the information required for full annual financial statements and should be read in conjunction with the Group's consolidated financial statements for the year ended 31 December 2018 as set out in the 2018 Annual Report (the "2018 Accounts"). The Interim Financial Statements do, however, include selected explanatory notes to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the last annual financial statements.
The Interim Financial Statements do not constitute statutory financial statements. The statutory financial statements for the year ended 31 December 2018, extracts from which are included in these Interim Financial Statements, were prepared under IFRSs as adopted by the EU and will be filed with the Registrar of Companies with the Company's 2018 annual return. They are available from the Company website www.mincon.com and, when filed, from the registrar of companies. The auditor's report on those statutory financial statements was unqualified.
The Interim Financial Statements are presented in Euro, rounded to the nearest thousand, which is the functional currency of the parent company and also the presentation currency for the Group's financial reporting.
The financial information contained in the Interim Financial Statements has been prepared in accordance with the accounting policies applied in the 2018 Accounts.
3. Use of estimates and judgements
The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates. In preparing the Interim Financial Statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the 2018 Financial Statements.
4. Changes in significant accounting policies
Except as described below, the accounting policies applied in these interim financial statements are the same as those applied in the last annual financial statements.
The changes in accounting policies are also expected to be reflected in the Group's consolidated financial statements as at and for the year-ending 31 December 2019.
The Group has initially adopted IFRS 16, Leases, from 1 January 2019. A number of other new standards are effective from 1 January 2019 but they do not have a material effect on the Group's financial statements.
IFRS 16 introduces a single, on-balance sheet accounting model for lessees. As a result, the Group, as a lessee, has recognised right-of-use assets representing its rights to use the underlying assets and lease liabilities representing its obligation to make lease payments. Lessor accounting remains similar to previous accounting policies.
The Group has applied IFRS 16 using the modified retrospective approach. Accordingly, the comparative information presented for 2018 has not been restated - i.e. it is presented as previously reported under IAS 17 and related interpretations. The details of the changes in accounting policies are disclosed below.
A. Definition of a lease
Previously, Mincon determined at contract inception whether an arrangement was or contained a lease under IFRIC 4, Determining Whether an Arrangement contains a Lease. The Group now assesses whether a contract is or contains a lease based on the new definition of a lease. Under IFRS 16, a contract is, or contains a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration.
On transition to IFRS 16, the Group elected to apply the practical expedient to grandfather the assessment of which transactions are leases. Contracts that were not identified as leases under IAS 17 and IFRIC 4 were not reassessed. Therefore, the definition of a lease under IFRS 16 has been applied only to contracts entered into or changed on or after 1 January 2019.
At inception or on reassessment of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease and non-lease component on the basis of their relative stand-alone prices. However, for leases of properties in which it is a lessee, the Group has elected not to separate non-lease components and will instead account for the lease and non-lease component as a single lease component.
B. The Group's leasing activities and how these were accounted for
The Group leases many assets, including properties, production equipment, vehicles and IT equipment.
As a lessee, the Group previously classified leases as operating or finance leases based on its assessment of whether the lease transferred substantially all of the risks and rewards of ownership. Under IFRS 16, the Group recognises right-of-use assets and lease liabilities for most leases - i.e. these leases are on balance sheet.
However, on transition to IFRS 16, the Group has applied practical expedients under IFRS 16 not to recognise right-of-use assets and leases liabilities for some leases of low-value assets (e.g. IT equipment) and for operating leases with a remaining lease term of less than 12 months as at 1 January 2019. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.
The Group presents the right-of-use assets that do not meet the definition of investment property in 'property, plant and equipment', the same line item as it presents underlying assets of the same nature that it owns. The carrying amounts of right-of-use assets are as below:
EUR'000 Property, plant and
equipment
--------------------------- --------------------
Balance at 1 January 2019 4,401
Balance at 30 June 2019 4,472
--------------------------- --------------------
The Group presents lease liabilities in 'loans and borrowings' in the statement of financial position
i. Summary of new accounting policies
The Group recognises a right-of-use asset and a lease liability at the commencement date. The right-of-use asset is initially measured as:
-- The initial measurement of the lease liability; plus -- Initial indirect costs; plus -- Prepaid lease payments; plus -- Estimated costs to dismantle, remove or restore; less -- Lease incentives received.
The lease liability is initially measured at:
-- The present value of lease payments payable over the lease term plus the present value of expected payments at the end of the lease, discounted at the interest rate implicit in the lease, or the incremental borrowing rate, where the interest rate implicit in the lease cannot be readily determined.
Generally the Group uses its incremental borrowing rate as the discount rate. The lease liability is subsequently increased by the interest cost and decreased by the lease payment made. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, or as appropriate, changes in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised.
The Group has applied judgement to determine the lease term for some lease contracts which include renewal options. The assessment of whether the Group is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease liabilities and right-of-use assets recognised.
C. Adjustments recognised on adoption of IFRS 16 i. Impact on transition
On transition to IFRS 16, the Group recognised right-of-use assets and lease liabilities. The impact on transition is summarised below.
1 January
2019
EUR'000
------------------------------------------------- ----------
Right of use assets presented in property, plant
and equipment 4,401
Lease liabilities 4,401
-------------------------------------------------- ----------
ii. Impacts for the period
As a result of applying IFRS 16, in relation to the leases that were previously classified as operating leases, the Group recognised EUR4.5m of right of use assets and EUR4.5m of lease liabilities as at 30 June 2019.
Also, in relation to those leases under IFRS 16, the Group has recognised depreciation and interest costs, instead of operating lease expense. During the six months ended 30 June 2019, the Group recognised EUR0.9m of depreciation charges and interest costs, cumulatively, from these leases.
5. Revenue
H1 H1
2019 2018
EUR'000 EUR'000
---------------------------- ------- --------
Product revenue:
Sale of Mincon product 50,464 47,406
Sale of third party product 9,458 8,315
Total revenue 59,922 55,721
---------------------------- ------- --------
6. Operating Segments
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker (CODM). Our CODM has been identified as the Board of Directors.
Having assessed the aggregation criteria contained in IFRS 8 operating segments and considering how the Group manages its business and allocates resources, the Group has determined that it has one reportable segment. In particular the Group is managed as a single business unit that sells drilling equipment, primarily manufactured by Mincon manufacturing sites.
Entity-wide disclosures
The business is managed on a worldwide basis but operates manufacturing facilities and sales offices in Ireland, Sweden, South Africa, UK, Western Australia, the United States and Canada and sales offices in eleven other locations including Eastern and Western Australia, South Africa, UK, Finland, Spain, Namibia, Tanzania, 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):
H1 H1
2019 2018
EUR'000 EUR'000
----------------------------------------- ------- --------
Region:
Americas 12,773 10,229
Australasia 17,202 18,482
Europe, Middle East, Africa 29,947 27,010
Total revenue from continuing operations 59,922 55,721
----------------------------------------- ------- --------
Non-current assets by region (location of assets):
30 June 31 December
2019 2018
EUR'000 EUR'000
Region:
Americas 16,986 17,271
Australasia 7,962 8,795
Europe, Middle East, Africa 46,073 39,617
Total non-current assets(1) 71,021 65,683
---------------------------------------------------- ------- -----------
(1) Non-current assets exclude deferred tax assets.
7. Cost of Sales and operating expenses
Included within cost of sales, selling and distribution expenses and general and administrative expenses were the following major components:
Cost of sales
H1 H1
2019 2018
EUR'000 EUR'000
---------------------------------------- -------- --------
Raw materials 16,888 16,246
Third party product purchases 7,743 6,569
Employee costs 8,370 6,939
Depreciation 1,567 1,461
Impairment of finished goods inventory 1,992 -
Other 4,538 2,545
---------------------------------------- -------- --------
Total cost of sales 41,098 33,760
---------------------------------------- -------- --------
The level of finished goods inventory impairment within cost of sales amounted to EUR2 million (30 June 2018: EURNil). This write down in inventory in the period end 30 June 2019 arose on various non--Mincon and Mincon manufactured product that became obsolete due to the availability of more advanced products that have now become available on the market.
General and selling expenses
H1 H1
2019 2018
EUR'000 EUR'000
----------------------------------- -----------
Employee costs 8,564 8,771
Depreciation 984 418
Exceptional items (note 8) 2,978 -
Impairment of trade receivables 582 -
Other 4,329 4,953
------------------------------------ ----------- -----------
Total other operating costs 17,437 14,142
------------------------------------ ----------- -----------
The Group provides for all receivables where there is objective evidence, including historical loss experience, that amounts are irrecoverable. The Group now considers that receivables of EUR582,000 million from various customers are no longer recoverable.
Employee information
H1 H1
2019 2018
EUR'000 EUR'000
--------------------------------------------- -------- --------
Wages and salaries 13,670 13,255
Social security costs 1,592 1,318
Pension costs of defined contribution plans 985 669
Redundancy payments (note 8) 1,241 -
Share based payments (note 13) 432 333
--------------------------------------------- -------- --------
Total employee costs 17,920 15,575
--------------------------------------------- -------- --------
The Group capitalised payroll costs of EUR30k in H1 2019 in relation to research and development.
The average number of employees was as follows:
H1 H1
2019 2018
Number Number
------------------------------------------------- ------- -------
Sales and distribution 129 124
General and administration 51 61
Manufacturing, service and development 312 309
------------------------------------------------- ------- -------
Average number of persons employed 492 494
------------------------------------------------- ------- -------
8. Exceptional Items
H1 2019 H1 2018
EUR'000 EUR'000
--------------------------------------------------------------------------------------------------- ------- --------
Operating costs
Reorganisational (2,842) -
costs..............................................................................................
.....................................
Acquisition and related
costs.............................................................................................
............................. (136) (268)
--------------------------------------------------------------------------------------------------- ------- --------
Total operating costs
..................................................................................................
................................. (2,978) (268)
--------------------------------------------------------------------------------------------------- ------- --------
Profit from discontinued 7,261 -
operations.........................................................................................
.....................
--------------------------------------------------------------------------------------------------- ------- --------
Total exceptional items
..................................................................................................
.............................. 4,283 (268)
--------------------------------------------------------------------------------------------------- ------- --------
The Group has undertaken a reorganisation of its activities across all regions and, in H1 2019, incurred costs of EUR2.8 million (30 June 2018: EURNil). The reorganisation includes relocation of activities; closing of regional offices; and redundancies where necessary. Redundancy costs amounted to EUR1.2m for H1 2019.
The Group considers acquisition and related costs as exceptional items. During the course of acquiring Pacific Bit of Canada, the Group incurred costs of EUR55,000, and during the sale of Härdtekno the Group incurred costs of EUR81,000.
In June 2019, Mincon sold Härdtekno i Kristinehamn AB, a heat treatment plant located in Kristinehamn, Sweden for a total consideration of EUR8.6 million and a profit of EUR7.3 million. This company was purchased by Mincon as part of the Driconeq Group acquisition in March 2018.
9. Acquisitions and disposals
Acquisitions
In January 2019, Mincon acquired 100% shareholding in Pacific Bit, a Canadian-based mining and construction product distributor, for a consideration of EUR1.9m. This was made up of a cash consideration of EUR0.8m and deferred consideration of EUR1.0m.
A. Consideration transferred for acquisitions
Pacific Total
Bit
EUR'000 EUR'000
----------------------------------- -------- --------
Cash 800 800
Deferred contingent consideration 1,001 1,001
----------------------------------- -------- --------
Total consideration transferred 1,801 1,801
----------------------------------- -------- --------
B. Goodwill
Goodwill arising from the acquisition of Pacific Bit has been recognised as follows:
Total
EUR'000
-------------------------------------- --------
Consideration transferred 1,801
Fair value of identifiable net assets (915)
-------------------------------------- --------
Goodwill 886
-------------------------------------- --------
C. Acquisition related costs
Acquisition related costs for the acquisition of Pacific Bit amounted to EUR55,000 and were included in "operating expenses" in the income statement for the 6 months to the 30 June 2019.
Disposals
In June 2019 Mincon disposed of its 100% shareholding in Härdtekno i Kristinehamn AB, a subsidiary that specialises in providing heat treatment services, based in Kristinehamn, Sweden, for a consideration of EUR8.6m. There was a cash payment of EUR8.1m at the date of disposal, with the remaining EUR0.5m being deferred for 18 months from the date of closing, subject to any unresolved claims as laid out in the Share Purchase Agreement.
A. Profit on Disposal
The profit from the disposal of Härdtekno amounted to EUR7.3m, and is set out as follows
H1
2019
EUR'000
---------------------------------------------------- -------
Cash 8,075
Deferred contingent consideration 450
Goodwill (715)
Carrying value of assets and liabilities at date
of disposal (549)
Profit on disposal 7,261
----------------------------------------------------- -------
Under the terms of the Share Purchase Agreement EUR0.5m is being held in escrow for 15 months to be offset against any unforeseen warranties or liabilities post acquisition. Mincon's Management team estimated the probability of receiving this deferred contingent consideration and calculated the fair value to be EUR450,000.
B. Disposal related costs
Disposal related costs for the disposal of Härdtekno amounted to approximately EUR81,000 and were included in "exceptional items" as laid out in note 8.
10. Income Tax
The Group's consolidated effective tax rate in respect of operations for the six months ended 30 June 2019 was 14.6% (30 June 2018: 19.3%). The effective rate of tax is forecast at 19% for 2019. The tax charge for the six months ended 30 June 2019 of EUR1.1 million (30 June 2018: EUR1.5 million) includes deferred tax relating to movements in provisions, net operating losses forward and the temporary differences for property, plant and equipment recognised in the income statement.
The net current tax liability at period-end was as follows:
30 June 31 December
2019 2018
EUR'000 EUR'000
------------------------ ------- ------------
Current tax prepayments 373 252
Current tax payable (1,871) (1,077)
------------------------ ------- ------------
Net current tax 1,498 825
------------------------ ------- ------------
The net deferred tax liability at period-end was as follows:
30 June 31 December
2019 2018
EUR'000 EUR'000
----------------------- ------- ------------
Deferred tax asset 527 672
Deferred tax liability (374) (1,613)
----------------------- ------- ------------
Net deferred tax 153 941
----------------------- ------- ------------
11. Share capital
Allotted, called- up and fully paid up shares Number EUR000 --------------------------------------------------------------------------------------------------------------------------------------------------------------------- ----------- ------ 01 January 2019........................................................................................................................................................... 210,541,102 2,105 Allotted in June 2019.................................................................................................................................................... 432,000 5 --------------------------------------------------------------------------------------------------------------------------------------------------------------------- ----------- ------ 30 June 2019................................................................................................................................................................ 210,973,102 2,110 --------------------------------------------------------------------------------------------------------------------------------------------------------------------- ----------- ------
Share issuances
On 26 November 2013, Mincon Group plc was admitted to trading on the Enterprise Securities Market (ESM) of the Euronext Dublin and the Alternative Investment Market (AIM) of the London Stock Exchange.
In June 2019, 432,000 Restricted Share Awards (RSAs) met the vesting conditions set down by the board of directors and were allotted to the recipients of the awards.
12. Earnings per share
Basic earnings per share (EPS) is computed by dividing the profit for the period available to ordinary shareholders by the weighted average number of Ordinary Shares outstanding during the period. Diluted earnings per share is computed by dividing the profit for the period by the weighted average number of Ordinary Shares outstanding and, when dilutive, adjusted for the effect of all potentially dilutive shares. The following table sets forth the computation for basic and diluted net profit per share for the years ended 30 June:
H1 2019 H1 2018
Numerator (amounts in EUR'000):
Profit attributable to owners of the Parent
...........................................................................................
.................. 7,144 6,122
Denominator (Number):Basic shares
outstanding.............................................................................
.........................................................
Restricted shares
awards..................................................................................
....................................................
Diluted weighted average shares
outstanding.................................................... 210,973,102 210,541,102
--------------------------------------------------------------------------------------------
2,037,176 2,469,176
213,010,278 213,010,278
-------------------------------------------------------------------------------------------- ----------- -----------
Earnings per Ordinary Share
Basic earnings per share, 3.39c 2.91c
EUR........................................................................................ 3.35c 2.87c
...........................................
Diluted earnings per share, EUR
........................................................................
----------- -----------
13. Share based payment
In June 2016, 500,000 Restricted Share Awards (RSAs) were granted to members of the senior management team, these RSAs were subject to certain vesting conditions being met. These vesting conditions 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.
Of the 500,000 RSAs that were granted in June 2016, 432,000 met the vesting conditions and were allotted to the recipients of the senior management team during the period. The remaining 68,000 RSAs that did not vest from the June 2016 grant were cancelled in 2018 due to members of the senior management team departing the Group.
Number of
Options
in
Reconciliation of outstanding share options thousands
-------------------------------------------------------------------------------------------------------------------------- ---------
Outstanding on 1 January
2019................................................................................................................... 2,469
Forfeited during the -
period....................................................................................................................
.....
Exercised during the
period...................................................................................................................
..... (432)
Granted during the -
period....................................................................................................................
.......
Outstanding at 30 June
2019..................................................................................................................... 2,037
-------------------------------------------------------------------------------------------------------------------------- ---------
14. Intangible Assets
Product development
Goodwill Total
EUR'000 EUR'000 EUR'000
----------------------------------------- -------------------- ----------- -------
Balance at 1 January 2019 3,377 27,376 30,753
----------------------------------------- -------------------- ----------- -------
Investments / Internally developed 589 - 589
----------------------------------------- -------------------- ----------- -------
Acquisitions - 915 915
----------------------------------------- -------------------- ----------- -------
Disposals - (715) (715)
----------------------------------------- -------------------- ----------- -------
Impairment of goodwill - (532) (532)
----------------------------------------- -------------------- ----------- -------
Foreign currency translation differences - 171 171
----------------------------------------- -------------------- ----------- -------
Balance at 30 June 2019 3,966 27,215 31,181
----------------------------------------- -------------------- ----------- -------
15. Property, Plant and Equipment
Capital expenditure in the first half-year amounted to EUR3.7 million (30 June 2018 EUR5.3 million). excluding the increase of ROU assets (note 4).
The depreciation charge for property, plant and equipment is recognised in the following line items in the income statement:
H1 H1
2019 2018
EUR'000 EUR'000
-------------------------------------------------- ------- --------
Cost of sales 1,567 1,461
Selling, general and administrative expenses 984 418
Total depreciation charge for property, plant and
equipment 2,551 1,879
-------------------------------------------------- ------- --------
16. Inventory
30 June 31 December
2019 2018
EUR'000 EUR'000
------------------------------------ ------- ------------
Finished goods and work-in-progress 37,312 36,158
Capital equipment 1,008 2,365
Raw materials 11,530 10,834
------------------------------------ ------- ------------
Total inventory 49,850 49,357
------------------------------------ ------- ------------
Write-down of inventories during the period ended 30 June 2019 amount to EUR2.0m (30 June 2018: EURNil and is explained in note 7).
17. Trade and other receivables
30 June 31 December
2019 2018
EUR'000 EUR'000
-------------------------------- ------- ------------
Gross receivable 25,520 21,519
Provision for impairment (1,911) (808)
Net trade and other receivables 23,609 20,711
-------------------------------- ------- ------------
30 June 31 December
2019 2018
EUR'000 EUR'000
Less than 60 days 18,277 14,451
61 to 90 days 2,846 3,437
Greater than 90 days 2,486 2,823
-------------------------------- ------- ------------
Net trade and other receivables 23,609 20,711
-------------------------------- ------- ------------
At 30 June 2019, EUR6.9m million (27%) of trade receivables balance were past due but not impaired (31 December 2018, EUR5.6m million (27%).
18. Loans, borrowings and lease liabilities
30 June 31 December
2019 2018
Maturity EUR'000 EUR'000
--------------------------------------------------------- ------- ------------
Loans and borrowings 2019-2026 11,778 4,576
Lease liabilities 2019-2026 4,586 2,620
---------------------------------------------- ----------
Total Loans, borrowings and lease liabilities 16,364 7,196
------- ------------
Current 2,019 2,735
------- ------------
Non-current 14,345 4,461
------- ------------
The Group has a number of bank loans and lease liabilities in Ireland, the United Kingdom, USA, Sweden, Chile, Peru, Australia and Namibia with a mixture of variable and fixed interest rates. The Group has been in compliance with all debt agreements during the periods presented. None of the debt agreements carry restrictive financial covenants.
19. Financial Risk Management
The Group is exposed to various financial risks arising in the normal course of business. Our financial risk exposures are predominantly related to changes in foreign currency exchange rates as well as the creditworthiness of our financial asset counterparties.
The half-year financial statements do not include all financial risk management information and disclosures required in the annual financial statements, and should be read in conjunction with the 2018 Annual Report. There have been no changes in our risk management policies since year-end and no material changes in our interest rate risk.
a) Liquidity and Capital
The Group defines liquid resources as the total of its cash, cash equivalents and short term deposits. Capital is defined as the Group's shareholders' equity and borrowings.
The Group's objectives when managing its liquid resources are:
* To maintain adequate liquid resources to fund its
ongoing operations and safeguard its ability to
continue as a going concern, so that it can continue
to create value for investors;
* To have available the necessary financial resources
to allow it to invest in areas that may create value
for shareholders; and
-- To maintain sufficient financial resources to mitigate against
risks and unforeseen events.
Liquid and capital resources are monitored on the basis of the total amount of such resources available and the Group's anticipated requirements for the foreseeable future. The Group's liquid resources and shareholders' equity at 30 June 2019 and 31 December 2018 were as follows:
30 June 31 December
2019 2018
EUR'000 EUR'000
-------------------------- -------- -----------
Cash and cash equivalents 13,762 8,042
Loans and borrowings 11,778 7,196
Shareholders' equity 120,902 115,705
-------------------------- -------- -----------
b) Foreign currency risk
The Group is a multinational business operating in a number of countries and the euro is the presentation currency. The Group, however, does have revenues, costs, assets and liabilities denominated in currencies other than euro. Transactions in foreign currencies are recorded at the exchange rate prevailing at the date of the transaction. The resulting monetary assets and liabilities are translated into the appropriate functional currency at exchange rates prevailing at the reporting date and the resulting gains and losses are recognised in the income statement.
The Group's global operations create a translation exposure on the Group's net assets since the financial statements of entities with non-euro functional currencies are translated to euro when preparing the consolidated financial statements. The Group does not use derivative instruments to hedge these net investments. The principal foreign currency risks to which the Group is exposed relate to movements in the exchange rate of the euro against US dollar, South African rand, Australian dollar, Sterling and Swedish krona.
Almost 63% of Mincon's revenue is generated in these currencies, compared to less than 27% of the Group's cost of sales. This had a significant translational impact on revenue when sales in local currency are converted into euro with a knock-on impact on the Group's gross margin and net margin. The majority of the group's manufacturing base has a euro, US dollar or Swedish krona cost base. While Group management makes every effort to reduce the impact of this currency volatility, it is impossible to eliminate or significantly reduce given the fact that the highest grades of our key raw materials are either not available or not denominated in these markets and currencies. Additionally, the ability to increase prices for our products in these jurisdictions is limited by the current market factors.
Currency also has a significant transactional impact on the group as outstanding balances in foreign currencies are retranslated at closing rates at each period end. The changes in the USD, South African Rand, Australian Dollar, Swedish Krona and British Pound have either weakened or strengthened, resulting in a foreign exchange gain being recognised in other comprehensive income and a significant movement in foreign currency translation reserve.
Average and closing exchange rates for the Group's primary currency exposures were as disclosed in the table below for the period presented.
30 June 31 December
2019 H1 2019 2018 H1 2018
Euro exchange rates Closing Average Closing Average
-------------------- ------- -------- ------------ --------
US Dollar 1.14 1.13 1.14 1.21
Australian Dollar 1.62 1.62 1.62 1.57
Sterling 0.89 0.89 0.90 0.88
South African Rand 15.97 16.16 16.46 14.86
Swedish Krona 10.56 10.59 10.21 10.15
-------------------- ------- -------- ------------ --------
There has been no material change in the Group's currency exposure since 31 December 2018. Such exposure comprises the monetary assets and monetary liabilities that are not denominated in the functional currency of the operating unit involved.
c) Fair values
Financial instruments carried at fair value
The deferred contingent consideration payable represents management's best estimate of the fair value of the amounts that will be payable, discounted as appropriate using a market interest rate. The fair value was estimated by assigning probabilities, based on management's current expectations, to the potential pay-out scenarios. The fair value of deferred contingent consideration is primarily dependent on the future performance of the acquired businesses against predetermined targets and on management's current expectations thereof.
Movements in the year in respect of Level 3 financial instruments carried at fair value
The movements in respect of the financial assets and liabilities carried at fair value in the period ended to 30 June 2018 are as follows:
Deferred
contingent
consideration
EUR'000
----------------------------------------- --------------
Balance at 1 January 2019 5,470
----------------------------------------- --------------
Arising on acquisition 1,073
----------------------------------------- --------------
Cash payment (500)
----------------------------------------- --------------
Fair value movement -
----------------------------------------- --------------
Foreign currency translation differences (50)
----------------------------------------- --------------
Balance at 30 June 2019 5,993
----------------------------------------- --------------
20. Commitments
The following capital commitments for the purchase of property, plant and equipment had been authorised by the directors at 30 June 2019:
Total
EUR'000
------------------- --------
Contracted for 709
Not contracted for 168
------------------- --------
Total 877
------------------- --------
21. Litigation
The Group is not involved in legal proceedings that could have a material adverse effect on its results or financial position.
22. Related Parties
We have related party relationships with our subsidiaries, directors and senior key management personnel. All transactions with subsidiaries eliminate on consolidation and are not disclosed.
As at 30 June 2019 and 31 December 2018, the share capital of Mincon Group plc was 56.84% owned by Kingbell Company which is ultimately controlled by Patrick Purcell and members of the Purcell family. Patrick Purcell is also a director and Chairman of the Company. In June 2019, the Group paid a final dividend of EUR2.1m (1.05 cent) to all shareholders on the register at 24 May 2019, of this dividend payment Kingbell Limited was paid EUR1.3m.
There were no other related party transactions in the half year ended 30 June 2019 that affected the financial position or the performance of the Company during that period and there were no changes in the related party transactions described in the 2018 Annual Report that could have a material effect on the financial position or performance of the Company in the same period.
23. Events after the reporting date
Dividend
On 9 August 2019, the Board of Mincon Group plc approved the payment of an interim dividend in the amount of EUR0.0105 (1.05 cent) per ordinary share. This amounts to a dividend payment of EUR2.2m which will be paid on 27 September 2019 to shareholders on the register at the close of business on 30 August 2019.
24. Approval of financial statements
The Board of Directors approved the interim condensed consolidated financial statements for the six months ended 30 June 2019 on 9 August 2019.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
IR LFFIITAILLIA
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