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